The Muir Electrical Co Pty Ltd v Commissioner of State Revenue (No 2)
[2002] VSC 224
•17 June 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
VICTORIAN TAXATION APPEALS LIST
No. 7634 of 2001
| THE MUIR ELECTRICAL COMPANY PTY LIMITED & ORS. | Plaintiffs |
| v | |
| THE COMMISSIONER OF STATE REVENUE (in his capacity as Commissioner of Pay-roll Tax) | Defendant |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 March 2002 | |
DATE OF JUDGMENT: | 17 June 2002 | |
CASE MAY BE CITED AS: | The Muir Electrical Co. Pty Ltd v The Commissioner of State Revenue (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 224 | |
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REVENUE LAW – Pay-roll tax – employees of company employed to perform duties for retailers – whether company and retailers a “group” – Pay-roll Tax Act 1971, s.9A
STATUTES – “a business”- whether singular includes plural – Interpretation of Legislation Act 1984, s. 37(c)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms J Batrouney SC with Mr N Flynn | Hall & Wilcox |
| For the Defendant | Mr R Berglund QC with Ms F Alpins | Solicitor for the Commissioner of State Revenue |
HIS HONOUR:
By originating motion dated 19 September 2001 the plaintiffs seek leave to appeal, pursuant to s. 148 of the Victorian Civil and Administrative Tribunal Act 1998 (“the VCAT Act”), from a decision of that Tribunal constituted by Member Geoffrey Gibson made on 23 August 2001. The proposed appeal raises issues of law arising under or in relation to the provisions of the Pay-roll Tax Act 1971 (Vic) (“the Act”).
History
There are 19 plaintiffs. By a notice of decision dated 23 June 1997 the defendant, the Commissioner of State Revenue (in his capacity as Commissioner of Pay-roll Tax), grouped the plaintiffs and, in particular the first plaintiff (“MEC”) with other plaintiffs for the purposes of the Act. The Commissioner then issued notices of assessment dated 23 June 1997 to each relevant member of the group. The plaintiffs lodged objections to the assessments on 22 August 1997. By notices of determination dated 21 November 1997, the Commissioner disallowed the objections. The plaintiffs referred the disallowances for review under s. 106 of the Taxation Administration Act 1997 (Vic) to the Tribunal. The Tribunal constituted by Mr Gibson heard the matter and, by a decision on 2 October 1998, reduced the level of additional tax, otherwise affirmed the assessments and ordered the plaintiff to pay certain costs. The plaintiffs sought leave to appeal from this Court. On 1 July 1999 Balmford J granted leave to appeal, allowed the appeal against the Tribunal’s order for costs and otherwise dismissed the appeal with costs. The plaintiffs appealed to the Court of Appeal. On 12 June 2001 the Court of Appeal (Ormiston, Callaway, Buchanan JJA) allowed the appeal with costs and made various consequential orders. The Court of Appeal declared that no two or more of the plaintiffs constituted a group within the meaning of s. 9A(1A)(d) of the Act, it set aside the order of the Tribunal but remitted the matter to the Tribunal for further hearing. The Tribunal constituted by Mr Gibson heard the matter and thereafter handed down its decision on 23 August 2001. The decision again affirmed the assessments, this time based upon other parts of s. 9A of the Act. It is from that decision that the plaintiffs now seek leave to appeal.
The notice of decision dated 23 June 1997
The plaintiffs were notified that, having considered their relationship under the provisions of the Act, the Commissioner had decided that the persons specified in the attached schedule were members of a group under s. 9A(1) and s. 9A(1A)(b) or s. 9A(1A)(d); and/or s. 9A(1B); and/or s. 9A(1E) and that he was not satisfied in terms of the qualifying provision contained in s. 9A(1J) of the Act; alternatively, because they were members of a group under s. 9A(1A)(a) of the Act and that he must not by virtue of s. 9A(1K) of the Act exclude any person or persons from the group.
An attached schedule listed the members of the group as MEC and certain other companies as from 1 July 1993. In addition, certain companies were listed as members of the group from various dates after 1 July 1993. Also attached to the notice was a non-exhaustive list of “dependency and connection factors” which outlined the factual selling as the Commissioner saw it. It is unnecessary to reproduce this list but I note that the nature of the business was described as follows:
“Victorian operations are conducted via 14 stores which trade under the common banner ‘The Good Guys Discount Warehouses’. Each store operates predominantly as a discount electrical houseware retailer.”
The list referred to significant advertising expenditure incurred in establishing the brand name “The Good Guys Discount Warehouses”, the costs of which were shared by the stores, and common advertising and promotional literature. The document went on to examine the common constitutive elements of a number of separate trustee companies which in that capacity operated various stores for their respective trusts and to analyse various financial arrangements and sharing of resources between the entities involved.
The disallowance of objections to the assessments
Assessments under s. 18 of the Act were raised on 23 June 1997 and sent to “each wage paying connected/associated Muir entity not registered as a group member” setting out the taxable wages and the amount of pay-roll tax and additional tax assessed. As above stated, objections were lodged and disallowed. The notices of determination disallowed the objections in full on the following grounds:
“(i)the businesses carried on by the companies listed in Column A of Appendix 1 constitute a group (‘the Muir group’) for pay-roll tax purposes under 9A(1) and 9A(2) of the Pay-roll Tax Act 1971 (‘the Act’) for the period specified in Column B of Appendix 1;
(ii)I am unable to exercise the Commissioner’s discretion under section 9A(1J) of the Act to exclude any of the businesses carried on by the companies listed in Column A of the Table appearing in Appendix 1 from the group;
(iii)in the alternative, all of the businesses carried on by the companies listed in Column A of the Table appearing in Appendix 1 constituted a group under section 9A(1A)(a) of the Act for the period mentioned in Column B of Appendix 1. By virtue of section 9A(1K) of the Act I must not exclude any company from the group; …”
The notices stated the reasons for determination as follows (re-numbered for convenience):
“1.Pay-roll tax is a State tax charged on wages paid or payable by an employer. It is payable when an employer’s (group of employers) total Australian wages exceed a prescribed threshold.
2.Employers are a group for pay-roll tax purposes when –
(i)they are related companies under Section 50 of the Corporations Law [Section 9A(1A)(a)]; and/or
(ii)they share or inter-use employees [Sections 9A(1A(b), (c) and/or (d)] and/or
(iii)they are controlled by the same person(s) [Section 9A(1B)].
3.The grouping provisions in section 9A of the Act apply to group all of the businesses carried on by the companies listed in Column A of Appendix 1. This is because:
(i)The Muir Electrical Service Company Pty Ltd and The Muir Finance Company Pty Ltd are related under section 9A(1A)(a) of the Act.
(ii)MEC and the businesses carried on by the following trusts are related under section 9A(1A)(b) and/or (d) of the Act:
[Names of 14 unit trusts omitted]
because:
(a)employees of MEC perform duties for or in connection with all of the businesses carried on by the above trusts; and/or
(b)there is an agreement/arrangement between the businesses carried on by the above trusts and MEC for the employees of MEC to provide administrative services to each of the above companies.
(iii)Ian Muir has a controlling interest in all of the following businesses under section 9A(1B) of the Act, as:
(a)under section 9A(1C)(b) and/or (c) of the Act, he has a controlling interest in the businesses carried on by the following companies:
(aa)MEC; and;
(bb)The Muir Finance Company Pty Ltd
(b)under section 9A(1E) of the Act, he is deemed to have a controlling interest in The Muir Investment Trust.
(c)under section 9A(1G) of the Act, he is deemed for the purposes of sub section (1C) to have a controlling interest in the businesses carried on by the Muir Investment Unit Trust, as:
(aa)under section 9A(1E) of the Act, he is deemed to have a controlling interest in The Muir Investment Trust; and
(bb)under section 9A(1C)(e) of the Act, The Muir Investment Trust has a controlling interest in the businesses carried on by Muir Investment Unit Trust.
(d)under section 9A(1G) of the Act, he is deemed for the purposes of sub section (1C) to have a controlling interest in all of the businesses carried on by the following trusts:
(aa)Finch Muir Unit Trust;
(bb)Heaslip Muir Unit Trust; and
(cc)Alexander Muir Unit Trust
as:
(1)under section 9A(1G) of the Act, he is deemed for the purposes of sub-section (1C), to have a controlling interest in The Muir Investment Unit Trust; and
(2)under section 9A(1C)(e) of the Act, The Muir Investment Unit Trust has a controlling interest in the businesses carried on by the trusts listed in (aa) to (cc) above.
4.All of the members of the groups mentioned… above constitute one group (‘the group’) under section 9A(2) of the Act because of the commonality of members.
5.The Commissioner may exclude a member from the group by exercising his discretion under section 9A(1J) of the Act. This provision requires the Commissioner to determine whether a business carried on by a member of the group is carried on independently of, and not connected with, the carrying on of the business by any other member of the group. By virtue of section 9A(1K) of the Act, the Commissioner cannot exclude any member that is related to another member of the group because of section 50 of the Corporations Law.
6.In making a determination under section 9A(1J) of the Act, the Commissioner must consider –
(i)the nature and degree of ownership and control of the businesses;
(ii)the nature of the businesses; and
(iii)any other relevant matters.
7.In accordance with section 9A(1K) of the Act I am unable to exclude The Muir Finance Company Pty Ltd and The Muir Electrical Service Company Pty Ltd from their group.
8.Having regard to the above, I am not satisfied that the businesses carried on by all of the members of the Muir group are independent of, and not connected with, each other. This is because during the assessment period –
(i)… all of the companies are owned and controlled either by MEC or Muir Investments Pty Ltd;
(ii)by the Supplemental Deed it is agreed between the parties that Ian Muir and/or Andrew Muir, who is a representative of MEC, shall have equal say in the overall management of the business. This is achieved through the appointment of Ian Muir and/or Andrew Muir as director and Secretary of the companies.
(iii)50% of the Board of Directors of each company is comprised by either Ian Muir and/or Andrew Muir or both. Under the Deed, ‘No board resolution of the company… and no action taken… without the prior majority approval of the directors…’.
(iv)the nature of the businesses carried on by MEC and the companies are similar. The ‘Good Guys’ is a chain of discount white goods stores;
(v)there is substantial intercompany lending from MEC to the companies;
(vi)one central bank account in the name of MEC is used by all companies;
(vii)all the businesses have assumed dependent financial obligations through the financing arrangement with the NAB;
(viii)all stock is purchased by MEC on behalf of all the stores. Payments to suppliers are made from the central bank account and debited against each store’s loan account;
(ix)all of the financial statements for MEC and the companies are prepared by the same firm of accountants which charges MEC for the services performed for all of the entities in the group;
(x)MEC provides administrative, financial and accounting services to each company.
(xi)all of the majority of the income of The Muir Investment Trust and The Muir Investment Unit Trust during the relevant period is derived from trust distributions from related companies/trusts in the Muir group.
9.In the alternative, all of the business carried on by the companies listed in column A of the Table in Appendix 1 constitute a group under section 9A(1A)(a) of the Act for the period mention in Column B of the said Table. By virtue of section 9A(1K) of the Act, I am unable to exclude any of the businesses carried on by the companies listed in Column A of the said Table.”
The relevant provisions of the Act
At this point, before going to the first Tribunal decision, it is convenient to refer to the relevant provisions of the Act. The essential scheme of the Act is that wages liable to pay-roll tax are wages paid or payable by an employer for services performed or rendered by an employee[1] (taxable wages). Specified rates of tax are levied upon taxable wages[2] and the tax must be paid by the employer[3]. Section 9B of the Act provides for deductions from taxable wages and has the effect of reducing the tax payable at various wage thresholds. However, deductions under s.9B are not available in relation to wages paid or payable by a member of a group under s.9A[4]. Members of groups under s.9A, whether or not employers, are jointly and severally liable for tax payable by members of the group in a relevant period[5]. Section 9A(1) excludes from the taxable wages reduced or affected by s.9B all wages paid by employers who are members of a group as defined by the “grouping provisions” of s.9A, unless the employer is excluded in the discretion of the Commissioner pursuant to the “de-grouping provisions” of s.9A(1J). The provisions of the Act of particular relevance are as follows:
[1]Section 6.
[2]Section 7.
[3]Section 8.
[4]Section 9B(10).
[5]Section 8A.
"9A.General exemption where two or more employers related etc.
(1)A reference in section 9B to taxable wages does not include a reference to any wages paid or payable by an employer if the employer and another person or other persons together constitute a group, unless the employer is excluded from the group under sub-section (1J).
(1A)For the purposes of this Act, if--
(a)an employer that is a body corporate and another body corporate (in this section called a "related person") are, by reason of section 50 of the Corporations Act related to each other; or
(b)an employee of an employer performs, or two or more employees of an employer perform, duties for or in connection with a business carried on by the employer and another person (in this section called an "associate"), whether or not with another person or persons; or
(c)an employee of an employer is, or two or more employees of an employer are, employed solely or mainly to perform duties for or in connection with a business carried on by another person or other persons (which other person is, or other persons are, in this section, called an "associate"); or
(d)an employer has, in respect of the employment of, or the performance of duties by, one or more employees, an agreement, arrangement or undertaking, whether formal or informal and whether expressed or implied, with another person or other persons (which other person is, or other persons are, in this section, called an "associate") relating to a business carried on by the associate or by the associate and another person or persons--
the employer and all persons who are related persons or associates in relation to that employer together constitute a group and each is a member of that group.
(1B)If the same person has, or the same persons have together, a controlling interest under sub-section (1C) in each of two businesses, the persons who carry on those businesses constitute a group and each is a member of the group.
(1C)For the purposes of sub-section (1B), 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--
(a)a person has, or persons have together, a controlling interest in a business, being a business carried on by a corporation, if the directors, or a majority of the directors, or one or more of the directors, being a director or directors who is or are entitled to exercise a majority in voting power at meetings of the directors, of the corporation are or is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person or of those persons acting together;
(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, or any class of voting shares, issued by the corporation; (c) a person has, or persons have together, a controlling interest in a business if that person, or those persons together--
(i)constitute more than 50 per centum of the board of management (by whatever name called) of the body corporate or unincorporate carrying on the business; or
(ii)control the composition of that board;
(d)a person has, or persons have together, a controlling interest in a business, being a business carried on by a partnership, if that person or those persons--
(i)owns, or own together, (whether or not beneficially) 50 per centum or more of the capital of the partnership; or
(ii)is, or are together, entitled (whether or not beneficially) to 50 per centum or more of any profits of the partnership;
(e)a person has, or persons have together, a controlling interest in a business, being a business carried on under a trust, if that person (whether or not as the trustee of, or beneficiary under, another trust) is the beneficiary, or those persons (whether or not as the trustees of, or beneficiaries under, another trust) are together the beneficiaries, in respect of 50 per centum or more of the value of the interests in the trust first-mentioned in this paragraph;
(f)a person has a controlling interest in a business if, whether or not the person is a trustee of a trust, the person is the sole owner of the business or persons, being two or more trustees of a trust, have a controlling interest in a business if they are the owners of the business.
(1E)A person who, as the result of the exercise of a power or discretion by the trustee of a discretionary trust or by any other person or by that trustee and other person, may benefit under that trust is deemed, for the purposes of this Act, to be a beneficiary in respect of 50 per centum or more of the value of the interests in that trust.
(1F)If a body corporate has a controlling interest under sub-section (1C) in a business, it is deemed, for the purposes of sub-section (1C), to have a controlling interest in any other business in which another body corporate that is, by reason of section 50 of the Corporations Act, related to it, has a controlling interest.
(1G)If--
(a)a person has, or persons have together, a controlling interest under sub-section (1C) in a business; and
(b)the person or persons who carries or carry on that business has or have such a controlling interest in another business--
the person or persons referred to in paragraph (a) are deemed, for the purposes of sub-section (1C), to have a controlling interest in the business referred to in paragraph (b).
(1H)If--
(a)a person is a beneficiary under a trust; or
(b)two or more persons together are beneficiaries under a trust--
in respect of 50 per centum or more of the value of the interests in that trust and the trustee or trustees of that trust has or have under sub-section (1C) a controlling interest in a business, that beneficiary or those beneficiaries are deemed, for the purposes of sub-section (1C) to have a controlling interest in that business.
(1I)For the purposes of this Act, if a person is an employer who is a member of a group, a reference to an employer does not have effect in relation to that person otherwise than as a member of that group.
(1J)If the Commissioner is satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Commissioner considers relevant, that a business carried on by a member of a group, including a group constituted by reason of section 9A(2), is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group, the Commissioner may exclude the member from that group.
(1K)The Commissioner must not, under sub-section (1J), exclude a person from a group if the person is a body corporate that, by reason of section 50 of the Corporations Act, is related to another body corporate that is a member of that group.
(2)If a person is a member of two or more groups (whether or not by reason of this sub-section), all the members of those groups constitute one group for the purposes of this Act. "
The first Tribunal decision
The Tribunal, in its reasons, first recited a number of agreed facts:
“…
3.Each of the relevant companies is a trustee of a separate unit trust. Each of those trusts conducts a discount electrical store in different localities throughout Victoria under the name The Good Guys Discount Warehouses – in addition to its individual trading name. Muirs operates two discount electrical stores under the name Mighty Muirs in addition to The Good Guys Discount Warehouses. Each of those retailers stocks electrical goods, mainly white goods. Muirs has entered into a separate supplemental deed with each of the retailers which provide for certain services to be performed by Muirs for that retailer.
4.As part of the services provided by Muirs pursuant to those supplemental deeds Muirs provides a banking facility to each of the individual retailers who all bank their particular receipts into a specific bank branch of the National Australia Bank Limited (NAB). Muirs pays for the stock purchased as authorised by an individual retailer, the salaries and wages upon authorisation, and any accounts authorised by the retailer.
5.Each retailer is constituted by a unit trust. Each of the supplemental deeds provides that the unit holders shall be equally represented on the board of directors of the trustee of the unit trust.
6.All of the retailers advertise in their own local areas without reference to the other retailers or to Muirs. Occasionally advertisements are placed in the White or Yellow Pages of the telephone directory or upon a national advertising campaign. The retailers are also listed individually in the White and Yellow pages.
7.Harper Wootton are the auditors and prepare the end of year accounts for each of the retailers. Muirs pays the account of Harper Wootton which is an expense against the administration fee.
8.The financial statements of Muirs show the loan accounts over the relevant period as follows:
[Table omitted]
9.Upon a retailer purchasing stock, Muirs pays the suppliers and debits the particular retailer’s loan account. When the particular retailer sells the stock, the retailer banks the proceeds in Muirs and its loan account is appropriately credited.
The Tribunal made additional fact findings as follows:
“…
14.In addition to Muirs carrying on the business of a retail outlet, it also employs approximately 36 people. Some of those provide administration and accounting services to the relevant companies, including the retailers. The provision of these services to the retailers is governed by an individual supplemental deed existing between each company and Muirs. These deeds state that Muirs will provide the following services:
· all accounting services;
· preparation and dissemination of monthly management accounts and profit and loss statements;
· financial control;
· accounts payable functions;
· payment of all stock ordered by the stores in the name of and approved by Muirs;
· administrative services and advice in respect of the businesses; and
· stocktaking from time to time.
15.In addition to those services Muirs has undertaken to provide the following services:
· administration of the central bank account;
· processing of salaries and wages from timesheets completed and approved by the stores;
· maintenance of stock and sales information, receipt information, price lists, company secretarial records and payroll records; and
· effecting the payment of accounts approved by the stores.
16.An administrative charge is paid by the retailers to Muirs in consideration of the provision of the above administrative services. The monthly charge is equal to 2% of the first $60,000 of gross weekly sales and 1% of gross weekly sales in excess of $60,000 in respect of each store.
17.Under the deeds, it is agreed that the directors of each retailer shall consist on an equal number, half of whom will be representatives of Muirs. Ian Muir or Andrew Muir are the Muirs representative appointed as directors. Also under the deeds, no Board resolution of each retailer shall be passed and no action shall be taken or authorised in respect of specific matters set out in clause 6.5 of the deed without the prior majority approval of the directors.
18.Muirs shares its employees with the retailers. Rod Harding acts as the WorkCover contact person for all the retailers. Rod Harding is the administration Manager at Muirs. Harper Wootton Accountants are the auditors of and prepare all the financials for all the appellants, including the retailers. The cost of the professional services provided by Harper Wootton is paid on one account by Muirs.
19.Muirs provide funding to all the retailers for the initial fit out of premises and for working capital. Muirs created and registered debenture charges over the assets of the retailers in order to secure trust borrowings.
20.The NAB holds the following securities in support of Muirs’ borrowing:
· registered mortgages over commercial freehold property situated in Airport West which is owned and occupied by Muirs, and Thomastown which is owned by Muirs and occupied by Crocket Muirs; and
· guarantees and indemnities from Ian and Joan Muir, Muir Investments Pty Ltd as a trustee for The Muir Family, The Muir Investment and The Muir Investment Unit Trusts, The Muir Electrical Service Company and The Muir Finance Company Pty Ltd.
21.A condition of the NAB’s continued financing arrangements was for Muirs to provide quarterly trading statements incorporating each of the companies and a schedule of trust distributions by the retailers. The NAB also required consolidated financial and cash flow statements incorporating all of the retailers.
22.One central bank account in the name of Muirs is used, on behalf of itself and the retailers, for all transactions. Muirs pays for the wage on stock of each retailer and receives from them the sales for each month. Interest is charged at commercial rates. Two of the three cheque signatories are Ian and Andrew Muir and the third signatory is a Muir employee. The retailers do not have separate bank accounts.
23.All stock is purchased by Muirs on behalf of all the retailers. Payments to suppliers are made from the central bank account and debited against each retailer’s loan account. Any rebates received from suppliers by Muirs are credited to each retailer’s loan account. Payment for orders is made out of the central bank account and debited against the account of each retailer. Stock is delivered by the manufacturer either to Muirs or directly to the retailer.
24.The Muir Investment Trust during the relevant period received the majority or all of its income in the form of trust distributions from the Muir Investment Unit Trust. The Muir Investment Unit Trust during the relevant period received the majority of its income in the form of trust distributions from the unit trusts conducted by each retailer.
25.In light of the evidence that I will refer to below, I am satisfied I should make findings in terms of these contentions, [ie. In paras 14-24 above] except that it is not correct to say that Muirs purchases stock on behalf of the retailers, and I do not know if Muirs funded all of the retailers for the initial fit-out of the premises or working capital. Mr Muir thought working capital after the first twelve months was supplied by unitholders according to their equity. It also appeared that in each retailing unit trust, the Muir interests only had 49% after the supplemental deed, as 1% was held by some third party.
The Tribunal then summarised the evidence given before it, including the following aspects:
28.Mr Ian Muir is the Managing Director of the Muir Electrical Company Pty Ltd. To his knowledge it was always envisaged that Muirs would expand its business by entering into joint venture agreements with other participants in the electrical whitegoods market. Under the terms of the supplemental deed between Muirs and the joint venturer, Mr Muir becomes the secretary of the trustee company and he or his father a director, but he does not believe he controls the business of the trust which he believes is run and controlled by the owner or manager of the trust. Those owners or managers have a meeting with suppliers every two months. Mr Muir attends as Muirs runs a store in its own right. He has no influence on the stock they purchase. The advertising is done mainly on a joint basis because of economies of scale. All the joint venturers agree on prices and goods that are displayed in the Good Guys catalogue. Mr Muir has no input on price, order or layout of the catalogues.
29.Mr Muir said that each of the owners controls its own staff without interferences from Muirs. Each sets staff levels, wage rates, commissions and bonus rates. Each is separately registered as a group employer and looks after his own stocktake. There is no reporting requirements to Muirs. Each owner authorise payment of accounts when he decides. There are no stock transfers or stock sharing. Muirs and the other stores use the same firm of auditors and the same legal firm as a matter of convenience only. Each store has its own computer system which is not shared with the other stores. Confidential stock movements is a key in the running of each store.
30.Mr Muir also said that except for the statutory meetings for the trustee company for each of the retailers there were no meetings of boards of directors as such. He said that the provisions of the supplemental deeds requiring affirmation by both directors were never invoked. He agreed that the association of retailers as a whole was able to derive some small benefit from rebates or discounts from the fact that they are bought in bulk as an association, but he stressed that each retailer deals with his own suppliers and sets his own level of purchases and prices. He said he only attended meetings of members since Muirs itself had two retail stores.
…
33.Each of the retailers called regarded Muirs in terms as either a joint venturer or a partner or both. As I indicated, Mr Muir saw Muirs as a joint venturer with the retailers. Mr Sheedy said that Mr Ian Muir is my partner in the store and that the supplement deed was executed as part of the normal practice of the partnership. Mr Finch described Muirs as an equal partner. Mr Clarke said that it was a joint venture proposition that started as an equal partnership.
34.No attempt was made to impeach the credit of any of the witnesses. It would I think be fair to generalise about them that each was hazy about the formalities of the arrangement, about the nature of the security interests held over any of the assets of the trust by Muirs, about the way in which the unit trust was established, about their obligations as directors, or about the way in which profits were distributed.
35.In particular, none of the three gentlemen had any real knowledge of or interest in the identity of the unitholder, the reasons why the third unitholder was introduced, or whether that unitholder had any and if so what rights. Each of them appeared to be concerned only that he (or his company and trust) had 50%, and he was not concerned with how the other 50% may be distributed. It would, to put it softly, require a degree of unreality to attach any practical significance to the third man who – without any disrespect to the persons nominated – seemed about as difficult to pin down as the character played by Orson Wells in the film of that name.”
The Tribunal decided that s.9A(1A)(d) of the Act was applicable. The Court of Appeal rejected that conclusion for the reasons referred to below. The Tribunal also refused to apply the de-grouping provision, s.9A(1J), and reduced the penalty imposed by the Commissioner (35%) to 10%.
The Court of Appeal decision[6]
[6]The Muir Electrical Co. Pty Ltd v The Commissioner of State Revenue [2001] VSCA 86.
The reasons of the Court of Appeal are contained in the judgment of Callaway JA, with which Ormiston and Buchanan JJA agreed. His Honour decided that the agreement relating to another person's business referred to in s.9A(1A)(d) must be an agreement in respect of performance of duties by one or more of the employer’s employees. It was not sufficient if the result of the agreement was the performance of duties by such employee or employees. That conclusion was reached both upon the basis of the natural meaning of the words and upon a number of other considerations which were stated, in part, as follows:
“I foreshadowed that there were other considerations supporting the construction advanced on behalf of the appellants. One of them is that that construction sits well with the other paragraphs of s.9A(1A). Each of them describes circumstances in which an employer and another person together constitute a group. It is sufficient to summarise their effect. Paragraph (a) refers to the case of related corporations within the meaning of s.50 of the Corporations Law. Paragraph (b) refers to the case where an employee of an employer performs duties for or in connection with a business carried on by the employer and another person. Paragraph (c) refers to the case where an employee of an employer is employed solely or mainly to perform duties for or in connection with a business carried on by another person. None of those paragraphs has the wide sweep that paragraph (d) would have it were sufficient that an agreement to which it refers had the result that employees of one person perform duties in relation to the business of another.
Another consideration favouring [the appellants’] construction is that acceptance of the [respondent’s] argument drives one to the conclusion, as it did the learned trial judge, that Parliament has cast the net in paragraph (d) with the deliberate intention of catching a large number of everyday business and professional arrangements, leaving the taxpayer’s relief solely to the discretion of the Commissioner under sub-section (1J). Such a mode of taxation should not too readily be attributed to the legislature. That is especially true where it has described three other cases, in paragraphs (a) (b) and (c), with reasonable precision.”
The Court of Appeal referred the matter back to the Tribunal for further hearing.
The second tribunal decision
I will refer only to those parts of the Tribunal’s decision dealing with s. 9A(1A)(b), s. 9A(1A)(c) and 9A(1C)(e) which read as follows:
“5.There was a question whether further evidence should be now permitted but, in the event, two witnesses were called. Mr Belleville is the auditor for the group. He gave evidence about the history of the trust structures and the impact of those structures on the way in which members of the group carried on and valued their businesses. Of the 36 people who worked for Muirs, he guessed that about 15 would have been employed in administration within the group. Mr Burgess is one of the retailers who had sworn an Affidavit. He gave further evidence about why he regards himself as running a business free of control from his partner, Muirs. He said that if Muirs withdrew their services for his administration, he thought he would have to employ about five to six people or outsource the work elsewhere.
6.Counsel for each side put in detailed written submissions and addressed them very helpfully. It is not out of discourtesy to them that I do not endeavour to summarise those submissions. On the contrary, it is only because the case was crystallised so capably that I feel able to go straight to the issues, referring as I do to the previous decision for a statement of the evidence, findings, and relevant law.
7.…
8.The next point was s.9A(1A)(b). To succeed here the Commissioner had to show that the relevant administration employees were performing their duties for or in connection with a business carried on by Muirs and the retailers. This is not what happens as a matter of law according to the contractual and trust arrangements entered into between the parties. The Commission said I should go behind appearances and look at the reality and find in substance that Muirs (the employer) was carrying on the business which each retailer. I do not think I should do that. In my view the assessment would not be sustained under s.9(A)(b). It may be one thing to say that Muirs and the retailers are involved in carrying on businesses that are connected; it is altogether a different thing to say that Muirs is carrying on each business with each retailer.
9.It is in my view clear from the evidence that a number of the employees at Muirs are employed mainly in relation to the administration requirements of the group. The question under s.9(1A)(c) is whether one of those employees at Muirs is employed “mainly to perform duties for or in connection with a business carried on by” a retailer or retailers. At first blush, this would appear to be the case. Senior Counsel for the taxpayers said the provision does not apply because the employee is working for Muirs, and not for the retailers, and because it does not apply where there is more than one business. She referred to some observations in the Court of Appeal in support of her argument on this point:
“Returning to the facts of the present case, it cannot be said that the supplemental deed is an agreement in respect of the performance of duties by one or more of Muirs employees. It is an agreement for the provision of services by Muirs, leaving Muirs free to choose how it will provide those services. It was not denied on behalf of the Respondent that the provision of the services could be subcontracted to another company, nor was it suggested that the retailers have stipulated a performance by Muirs, ie performance by its own officers or employees. Importantly, it was not suggested that the agreement was a sham or it did not represent the true agreement between the parties.”
Muirs, it was said, was providing services, not employees, to the group.
10.The Court of Appeal, was dealing with s.9A(1A)(d) and the characterisation of an agreement relating to the performance of duties by employees for more than one entity s.9A(1A)(c) directs attention to what the employees are in fact doing. I do not see how the decision of the Court of Appeal on one provision can determine the proper construction or effect or another. s.9A(1A)(c) starts with the assumption that one employer employs an employee, and then directs attention to what the employee is doing for someone else. In my view, what is happening here is that a number of employees of Muirs are employed by Muirs mainly to perform duties in connection with the businesses of members of the group.
11.That leaves the point about the number – it is said that the reference to “a business” is determinative. Unless ordinary principles, a reference to the singular includes a reference to the plural unless the context suggests the contrary. It would in my view be curious in the extreme if this reference to “a business” had to be a reference to one business only and not the businesses of a group of people. There is nothing in the context of legislation dealing with the grouping of businesses to suggest that such a technical interpretation should be applied.
12.It follows in my view that neither of the contentions put forward by Senior Counsel for the applications is adequate to avoid the conclusion that the applicants should be regarded as a group because of the provisions of s.9A(1A)(c).
13.On the trust arising under s.9A(1C)(e), I would have found against the Commissioner on the footing that it is not open to the Tribunal to find that the subject of the provision is a beneficiary in respect of 50% of the value of the interests of the relevant trust. I would however, I think, have been inclined to find in favour of the Commissioner in respect of the discretionary trust arguments set out in paragraphs 32 and 33 of his contentions. I have to say that I had a lot of difficulty following this smorgasbord of turgid exotica, but I think I can truthfully report that I was not alone. I am making these observations on alternative grounds of liability simply in case the case goes further.”
Leave to Appeal
Section 148(1) of the VCAT Act provides so far as relevant, that a party to a proceeding may appeal, on a question of law, from an order of the Tribunal in the proceeding to the Trial Division of the Supreme Court, if the Trial Division gives leave to appeal.
In Secretary to the Department of Premier v Hulls[7], Phillips JA (with whom Tadgell and Batt JJA agreed) said, concerning the granting of leave to appeal:
“The decision to grant leave, which is conferred by the statute in untrammelled terms, cannot be fettered, and should not be fettered by judicial decision… In the end, whether leave is granted or not must always depend upon the justice of the case, as it appears to the Court from whom leave is sought.
As the leave is sought under s. 148, that section must be the starting point… it follows that if leave is to be granted the applicant must at least identify a question of law… which is important to the appeal’s succeeding or failing…
There is an obvious danger in seeking to summarise the considerations which bear upon the granting of leave to appeal. Ultimately what must govern is the justice of the case as it appears to the court from which leave to appeal is sought, and that means justice to all parties, not just the applicant. As I said at the outset, it is not appropriate for us to do any more than lay down guidelines and any guidelines will sometimes be found inadequate; but with that rider, the foregoing might be summarised along the following lines. When leave is sought to appeal under s. 148, it will be necessary for the applicant to identify a question of law which is relevant to the granting of the relief sought on appeal. The importance of the question, either generally or to the would-be appellant in the particular case, will probably be relevant. The applicant must show that there is a real or significant argument to be put on that question of law at least to this extent: that there is sufficient doubt about it to justify the grant of leave. Moreover, it may have to be shown that to allow the error to go uncorrected would impose substantial injustice, although, where the order below is final, that injustice will often be more readily discernible.”
[7][1999] 3 VR 331, 335-337.
In this proceeding, Hansen J ordered on 23 November 2001 that should the Judge be of the opinion that leave to appeal should be granted, then the application for leave to appeal be treated as if it were the appeal and determined in accordance with law.
In the event, there was no dispute (and I agree) that leave to appeal should be granted in relation to the first two of the following three questions :
(a)Whether section 9A(1A)(c) of the Act may be construed as applying to a situation where an employee of an employer is, or two or more employees of an employer are, employed solely or mainly to perform duties for or in connection with several businesses carried on by other persons.
(b)Whether section 9A(1A)(c) of the Act may be construed as applying to treat two businesses as related where the employees of one business are used for the performance of the activities of that business in the discharge of obligations which that business has contracted to perform for the other.
(c)Whether section 9A(1C)(e) can apply to a trust that does not carry on a business.”
I note that although the Commissioner was content that leave to appeal be granted also in relation to question (c) above, it was submitted on his behalf that the question as worded did not state the real question which arose under s.9A(1C)(e). I also deferred the matter of leave to appeal on questions other than the foregoing but heard full argument upon all questions sought to be raised.
Section 9A(1A)(c)
It was submitted on behalf of the Commissioner that the decision of the Tribunal was correct. The Tribunal found that a number of the employees of MEC were employed mainly in relation to the administration requirements of those plaintiffs who, as corporate trustees for unit trusts, were each running a particular retail store. Those employees were therefore employed by MEC “mainly to perform duties for or in connection with a business” (a retail store) “carried on by another person” (the retailer, being the corporate trustee of the unit trust operating that retail store). The Tribunal rejected the plaintiffs’ submission that these employees were “working for [MEC] and not for the retailers”. The Tribunal rejected the plaintiffs’ further submission that the reference to “business” did not extend to the factual situation which involved a number of businesses each operated for a separate unit trust by a trustee for that trust. The Tribunal said that “[u]nder ordinary principles, a reference to the singular includes a reference to the plural unless the context suggests to the contrary” and went on to say:
“It would in my view be curious in the extreme if this reference to “a business” had to be a reference to one business only and not the businesses of a group of people. There is nothing in the context of legislation dealing with the grouping of businesses to suggest that such a technical interpretation should be applied.”
The plaintiffs submitted that the Tribunal was in error. The argument in essence ran as follows. Section 9A(1A)(c) covered the case where one or more employees were employed solely or mainly to perform duties for or in connection with a business. The draftsman was extremely careful to refer explicitly to the plural where that was intended. It was said that there were a large number of explicit references to the plural: “an employee… or two or more employees[8]”, “another person or other persons[9]”, “one or more employees[10]”, “a person has, or persons have[11]”, and to “the trustee or trustees[12]” and so on. That was to be contrasted with the words “a business” in s.9A(1A)(c) which evinced an intention to refer only to a single business. Reference might also be made to the contrast in s.9A(1B) and (1C) between “each of two businesses” and “a business”: a clear distinction between plural and singular is made.
[8]See s. 9A(1A)(b) and (c).
[9]See s. 9A(1A)(c) and (d).
[10]See s. 9A(1A)(d).
[11]See s. 9A(1C)(a)(b)(c)(d)(e), (1G)(a) and (b).
[12]See s. 9A(1H).
The plaintiffs accepted that words in singular included the plural unless the contrary intention appeared[13]. The plaintiffs referred to Blue Metal Industries Ltd v Dilley[14]. In that case the Privy Council rejected a submission that the reference to an offeror company in the take-over provisions of the Companies Act 1961 included more than one offeror company because that was an entirely different thing which, had it been intended by the legislature, would not have been left to the application of the general rule that the singular included the plural. The Judicial Committee observed[15]:
“The language of s. 185 is consistently phrased in the singular. It speaks of "transferor company" and "transferee company". The section is in Pt VII of the Act which is dealing with "Arrangements and Reconstructions". In the same part (vide, s. 181, sub-s. (7) and s. 183, sub-s. (1)) there are references to a "scheme for the reconstruction of any company or companies". But the mere fact that a word in the singular is used does not in any way solve the problem which now arises. It merely gives rise to it. It may be thought that in an enactment which provides a careful and detailed and precise code of the law relating to companies there would be found at least some indication of or some reference to take-over offers by groups of companies or some regulatory provisions if such offers were to be recognized. But this reflection affords no complete answer to the argument presented by the appellants. By s. 21 of the Interpretation Act, 1899 (N.S.W.) it is enacted that in all Acts, unless the contrary intention appears, words in the singular shall include the plural and words in the plural shall include the singular. Such a provision is of manifest advantage. It assists the legislature to avoid cumbersome and over-elaborate wording. Prima facie it can be assumed that in the processes which lead to an enactment both draughtsman and legislators have such a provision in mind. It follows that the mere fact that the reading of words in a section suggests an emphasis on singularity as opposed to plurality is not enough to exclude plurality. Words in the singular will include the plural unless the contrary intention appears. But in considering whether a contrary intention appears there need be no confinement of attention to any one particular section of an Act. It must be appropriate to consider the section in its setting in the legislation and furthermore to consider the substance and tenor of the legislation as a whole. (See Sin Poh Amalgamated (H.K.) Ltd. v. Attorney-General of Hong Kong [1965] 1 W.L.R. 62.) In that case a test was indicated which often may be helpful. In the judgment of the Board delivered by Lord Pearce it was said:
‘The Interpretation Ordinance was intended to avoid multiplicity of verbiage and to make the plural cover the singular except in such cases as one finds in the context of the legislation reason to suppose that the legislature, if offered such amendment to the bill, would have rejected it.’ “
[13]Section 37(c) Interpretation of Legislation Act 1984.
[14](1969) 117 CLR 651.
[15](1969) 117 CLR 651 at 656.
The plaintiffs submitted that it was not intended that s.9A(1A)(c) should catch franchises, or should catch outsourcing arrangements where one business provided services (such as secretarial, pay-roll, cleaning or catering services) to a number of other separate businesses[16]. Yet such arrangements, “everyday business and professional arrangements[17]”, would be caught by the inclusion of the plural in the singular “business”. It was submitted that such arrangements were not intended to be left to the discretion of the Commissioner under the “de-grouping provisions”.
[16]The plaintiffs referred to the legislative history – see the Pay-roll Tax Act 1974 and the Taxation Acts Amendments Act 1987 – and to associated explanatory memoranda, but I do not derive much assistance from them.
[17]The words used by the Court of Appeal in The Muir Electrical Co Pty Ltd v The Commissioner of State Revenue [2001] VSCA 86 at [14] per Callaway JA.
The plaintiffs said that the construction of s.9A(1A)(c) which they urged did not catch the plaintiffs because no particular employee of MEC was employed to perform duties mainly for any one retailer, that is, for or in connection with "a" business.
In answer on behalf of the Commissioner, it was submitted that it was clear, as found by the Tribunal, that a number of employees of MEC were employed mainly to perform duties "in connection with" the businesses (plural) of the retailers. The words "in connection with" were of wide compass. The only real point, therefore, which the plaintiffs had to argue, was that the words "a business" did not include the plural. In that regard, the Commissioner submitted that there was no showing of a contrary intention, that is, an intention to exclude the plural, as required by the Interpretation of Legislation Act. It was further submitted that the presence in s.9A of many express references to the plural did not show that "businesses" were not intended to be covered or included by the words "a business" because an express reference to the plural here would have led to clumsy drafting. Section 9A(1A)(c) would have had to refer, in effect, to a business carried on by another person or other persons and to businesses carried on by another person or persons. That submission, it seemed to me during the course of argument, raised a question which I put to senior counsel for the Commissioner and which I will now endeavour to explain.
If the words "a business" include the plural, s.9A(1A)(c) might be seen as constituting three categories of groups as follows:
(1)the employer of an employee (or employees) who is (or are) employed solely or mainly to perform duties for or in connection with a business carried on by another person or a number of other persons, and that other person or those other persons;
(2)the employer of an employee (or employees) who is (or are) employed solely or mainly to perform duties for or in connection with a number of businesses carried on by the same other person or persons, and that other person or those other persons;
(3)the employer of an employee (or employees) who is (or are) employed solely or mainly to perform duties for or in connection with a number of businesses carried on by a number of different other persons, and those other persons.
It can be seen that the focus in category (1) is directed to the performance of duties solely or mainly for a particular business carried on by a person or persons other than the employer. Once the particular business is identified, one must examine the duties (or tasks) performed by the employee and assess whether they are performed "solely or mainly" for that particular business. In the case of category (2) the focus shifts. The various businesses, all carried on by the same person or persons, must be identified. I note that these businesses need not be the same: each of them may be in a different industry, trade or profession. One must then examine the duties (or tasks) performed by the employee, not to assess whether they are performed solely or mainly for any one of those businesses, but to assess whether they are performed solely or mainly for those businesses looked at together. I note that, just as each business may be different, the duties or tasks performed by the employee for or in connection with each of them may be quite disparate both as to nature and duration. The only "unifying factor" is that the businesses are carried on by the same person or persons. In the case of category (3), the same considerations mentioned in relation to category (2) are applicable but the "unifying factor" is no longer present. Each business may not only be different, and the duties and tasks performed for or in connection with it different, but the persons carrying on each business are different persons. Of course in a given case, the facts might throw up a mixture of categories (2) and (3).
It was submitted on behalf of the Commissioner, in effect, that there was no reason to think that Parliament intended to exclude or would, if presented with the question, have excluded either of categories (2) and (3) above. Parliament was concerned to prevent the avoidance or minimisation of pay-roll tax by the splitting up of businesses and employers. The Commissioner was given a wide discretion by s.9A(1J) to "de- group" a member of a group carrying on a business independently of and not connected with a business carried on by another member of the group.
The Commissioner pointed out that the plaintiffs conceded that if MEC had been found to have employed a person mainly to perform duties "in connection with" the business of one of the retailers, then MEC and that retailer would have constituted a group under s.9A(1A)(c). So the Commissioner argued that it would be an absurd result, on the plaintiffs’ construction, that if MEC employed that person or a number of persons mainly to perform the same tasks equally for two (or more) of the retailers, no group would be constituted because no employee "mainly" performed duties for any one of them. The result would be otherwise if each employee was allocated to a particular retailer, further demonstrating the absurdity of the plaintiffs’ construction.
Before dealing with the "singular includes plural" argument, I will dispose of the plaintiffs’ further or alternative submission, which logically comes first. The plaintiffs submitted that the employees of MEC were employed solely or mainly to perform duties for or in connection with its business and not the businesses of the retailers and thus s.9A(1A)(c) was not attracted. It was MEC itself which provided services to the retailers. The plaintiffs said that this submission was supported generally by the approach taken by the Court of Appeal to the construction of s.9A(1A)(d). In essence, the plaintiffs contended that the words "employed … to perform duties" referred to what their contract or terms of employment required them to do and did not simply refer to how they were in fact employed. Support for that construction might be gained by comparison with s.9A(1A)(b) which used the phrase "if…employees...perform...duties" rather than "if employees are employed to perform duties". I do not accept the plaintiffs’ submission which is in my view pedantic, artificial and unduly restrictive. It is unrealistic to think that paragraph (c) was intended to refer only to the relatively rare cases in which the purpose of employees’ duties is laid down in their contracts or terms of employment. In my opinion paragraph (c) is concerned with the duties employees are factually, not contractually, employed to perform, ie how in fact they are employed.
Returning to the "singular includes plural" argument, I have concluded, not without hesitation, that the legislation evinces a contrary intention, that is, an intention to exclude the plural in relation to the words "a business". There is considerable force in the plaintiffs’ argument based upon the many express uses of the plural in s.9A[18]. In distinct contrast, the words "a business" are used in each of paragraphs (b) (c) and (d) of s.9A(1A), and not the words "a business or businesses". In the case of paragraph (b), there will be a separate question in relation to any and each business carried on by the employer and another person, whether the employees of the employer perform duties for that business. No plural inclusion is appropriate or necessary. In the case of paragraph (d), there will be a separate question in relation to any and each business carried on by other persons, whether the employer has an agreement, arrangement or undertaking with those other persons (or those persons and others) in respect of the employment of, or the performance of duties by, employees of the employer. Again no plural inclusion is appropriate or necessary. In the case of paragraph (c), there will be a separate question in relation to any and each business carried on by another person or other persons, whether the employee or employees are employed solely or mainly to perform duties for or in connection with that business. No plural inclusion is necessary and in my view none is appropriate for paragraph (c) to have efficacy. Moreover, the extension of paragraph (c) by the inclusion of the plural (as I have mentioned in para [28] above) has the effect of expanding the scope of paragraph (c) in ways in which I think the tenor and context of the legislation shows were not intended. Indeed, the test contemplated by paragraph (c), namely whether an employee is employed "solely or mainly" to perform duties for "a" business tends, depending on the facts, to become a quite different test if the question is whether the employee is employed "solely or mainly" to perform duties for a number of businesses looked at together.
[18]See Pearce & Geddes: Statutory Interpretation in Australia (5th ed., Butterworths) p.178: “It may be that there will have been a deliberate reference to both singular and plural in some provisions, for example, ‘person or persons’, which may indicate that there has been a deliberate intention to mean the singular where it appears on its own elsewhere.”
In summary, each of paragraphs (b), (c) and (d) is capable of applying to any number of businesses but the criteria in each paragraph have to be met separately by each individual business, as "a business". The inclusion of the plural is thus inapposite. In that regard, I note also that, if a number of businesses separately satisfy the relevant criteria, then “the employer and all persons who are related persons or associates in relation to that employer together constitute a group and each is a member of that group[19]”.
[19]Section 9A(1A) of the Act.
For those reasons, I think that the Tribunal was wrong in law and that no two or more of the plaintiffs constituted a group within the meaning of s.9A(1A)(c) of the Act.
Section 9A(1A)(b)
It was submitted on behalf of the Commissioner that the Tribunal was in error in its interpretation of the above section and that the actual decision of the Tribunal could in any event be supported upon a proper interpretation of paragraph (b) of s.9A(1A). Paragraph (b) deals with cases where a business is carried on by the employer and another person. The plaintiffs simply say that none of the retail businesses are carried on by the employer, MEC, at all. The Tribunal agreed saying that this was not what happened as a matter of law according to the contractual and trust arrangements entered into between the parties. I agree. The Tribunal rejected the Commissioner's submission that it should go behind appearances and look at "the reality". The latter submission was repeated to the court on behalf of the Commissioner. In my opinion, it is not supported by the facts or by the authorities cited[20]. I do not accept the Commissioner's submission.
[20]Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254; Dennis Willcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267.
Section 9A(1C)(e) (together with ss. 9A(1B), 9A(1E), and 9A(1H) )
In para 13 of the Tribunal’s reasons, the Tribunal said:
“On the trust arising under s.9A(1C)(e), I would have found against the Commissioner on the footing that it is not open to the Tribunal to find that the subject of the provision is a beneficiary in respect of 50% of the value of the interests of the relevant trust. I would however, I think, have been inclined to find in favour of the Commissioner in respect of the discretionary trust arguments set out in paragraphs 32 and 33 of his contentions. I have to say that I had a lot of difficulty following this smorgasbord of turgid exotica, but I think I can truthfully report that I was not alone. I am making these observations on alternative grounds of liability simply in case the case goes further.”
As I understand it, these points relate to MEC and six only of the retailers, all of whom are discretionary beneficiaries under the Muir Investment Trust and are also said to have a controlling interest in the Muir Investment Unit Trust.
The Tribunal did not decide against the seven plaintiffs involved on any basis under the above provisions. It merely said as to one argument that it "would have been inclined to find in favour of the Commissioner".
Furthermore, in order to support a decision in the Commissioner's favour on any basis under the above provisions, senior counsel for the Commissioner put forward an elaborate and complex argument partly of law and partly based on factual matters concerning which, in essential respects, no fact findings had been made by the Tribunal in either of its two decisions.
In my opinion, there is therefore no question of law properly raised by any decision of the Tribunal in relation to these provisions partly because there is no decision upon them. The result is that the challenge to the assessments by these seven plaintiffs is still unresolved and that this aspect of the matter, involving seven plaintiffs only, should be referred back to the Tribunal for further hearing on all aspects (including de-grouping under s.9A(1J).
Orders
I will hear the parties on the question of the precise orders to be made and as to costs.
Provisionally, I would propose to make the following orders:
1. Leave to the plaintiffs to appeal in relation to the following questions of law:
(a)Whether section 9A(1A)(c) of the Act may be construed as applying to a situation where an employee of an employer is, or two or more employees of an employer are, employed solely or mainly to perform duties for or in connection with several businesses carried on by other persons.
(b)Whether section 9A(1A)(c) of the Act may be construed as applying to treat two businesses as related where the employees of one business are used for the performance of the activities of that business in the discharge of obligations which that business has contracted to perform for the other.
2. Appeal allowed.
3. Orders of the Tribunal made 23 August 2001 set aside.
4. All assessments set aside save those against the following seven plaintiffs:
The Muir Electrical Company Pty Ltd
Heaslip Muir Holdings Pty Ltd
Mordialloc Electrical Warehouse Pty Ltd
Burgess Thomson Muirs Pty Ltd
Finch Muirs Pty Ltd
Clarke Muirs Pty Ltd
McLean-Muirs Pty Ltd.
5.The matter of the assessments against the above seven plaintiffs only be remitted to the Tribunal, if possible constituted by the same member, for the assessments to be adjusted so far as necessary in accordance with these reasons and further for the matter to be heard in the light of these reasons.
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