Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue

[2023] NSWCA 40

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40

Hearing dates:

3 March 2023

Decision date:

14 March 2023

Before:

Meagher JA at [1];
Leeming JA at [2];
Griffiths AJA at [75]

Decision:

Dismiss the summons filed 3 August 2022 seeking leave to appeal, with costs.

Catchwords:

TAXES AND DUTIES – payroll tax – taxable wages – relevant contracts – taxpayer operated medical centres – taxpayer contracted with medical practitioners to practise at centres on terms that medical practitioners would pay 30% of medicare benefits received to applicant – taxpayer made claims on Medicare on behalf of most medical practitioners and remitted 70% to them – whether amounts paid by taxpayer to medical practitioners deemed to be taxable wages – whether medical practitioners supplied services to taxpayer – whether payments made for or in relation to the performance of work relating to relevant contract – whether determination by NCAT that medical practitioners supplied services to taxpayer (as well as to patients) gave rise to any question of law

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW), ss 80(2)(b), 83

Health Insurance Act 1973 (Cth), s 20A

Payroll Tax Act 2007 (NSW), Pt 3, Div 7, ss 8, 10, 11, 31, 32, 33, 34, 35, Sch 1

Supreme Court Act 1970 (NSW), ss 48(1)(a)(vii), 48(2)(f)

Uniform Civil Procedure Rules 2005 (NSW), rr 50.4, 51.18(1)(e)

Cases Cited:

Accident Compensation Commission v Odco Pty Ltd [1990] HCA 43; 64 ALJR 606

Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139

Booth v Fourmeninapub Pty Ltd [2020] NSWCA 57

Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197; 110 ATR 651

Da Costa v The Queen (1968) 118 CLR 186; [1968] HCA 51

Federated Engine-Drivers and Firemen's Association of Australasia v Broken Hill Proprietary Co Ltd (1911) 12 CLR 398; [1911] HCA 31

Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378; 96 ATR 875

Homefront Nursing Pty Ltd v Chief Commissioner of Statute Revenue [2019] NSWCATAD 145

Orr v Cobar Management Pty Ltd (2020) 103 NSWLR 36; [2020] NSWCCA 220

Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2017] NSWCA 223

Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470; 97 ATR 904

Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2022] NSWCATAP 220

Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 259

Category:

Principal judgment

Parties:

Thomas and Naaz Pty Ltd (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Counsel:
R L Seiden SC with P R Glissan (Applicant)
S Balafoutis SC with A Gerard (Respondent)

Solicitors:
Roderick Storie Solicitors (Applicant)
Crown Solicitor’s Office (Respondent)

File Number(s):

2022/00228050

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Civil and Administrative Tribunal

Jurisdiction:

Appeal Panel

Citation:

[2022] NSWCATAP 220

Date of Decision:

06 July 2022

Before:

Armstrong J, President
E Bishop, Senior Member

File Number(s):

2021/00279010

JUDGMENT

1. MEAGHER JA: I agree for the reasons given by Leeming JA that the summons seeking leave to appeal should be dismissed with costs.

2. LEEMING JA: The applicant, Thomas and Naaz Pty Ltd, seeks leave to appeal from a decision of the Appeal Panel of NCAT (Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2022] NSWCATAP 220), itself dismissing an appeal from NCAT constituted by a Senior Member who confirmed payroll tax assessment notices for years between 2013 and 2018: Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 259. The application for leave was heard concurrently with the substance of the appeal. The application lies to this Court, rather than the Common Law Division, because the Appeal Panel included a judicial member: Supreme Court Act 1970 (NSW), ss 48(1)(a)(vii), 48(2)(f).

Uncontroversial factual background

3. Payroll tax is assessed on “taxable wages” above a threshold. The threshold rose from $750,000 to $1,200,000 over the period 2013 to 2020: see definition of “Threshold amount” in Schedule 1 of the Payroll Tax Act 2007 (NSW) read with s 8. The tax is calculated at a rate of 5.45% for the years which are the subject of this litigation (see the definition of “R” in the same Schedule).

4. The applicant operates medical centres in western Sydney. It employs nurses, reception and administrative staff, and there is no doubt that their salaries or wages contribute to “taxable wages”. The medical practitioners who work at the medical centres do so in accordance with a written agreement, supplemented by some informal arrangements. The litigation proceeded on the basis that the written agreement between the applicant and Dr Jimin Chen was representative. The main issue in this appeal is whether payments made by the applicant to medical practitioners working at its centres should also contribute to “taxable wages” and thereby increase the burden of payroll tax levied upon the applicant.

5. It will be necessary to refer in due course to some of the details in the agreement, but it is convenient to note at the outset that Dr Chen agreed to “bulk bill” in respect of all services provided at the premises, and would pay 30% plus GST of the total billings to the applicant. In practice, “bulk billing” meant that Medicare would pay to the medical practitioner (or at his or her direction) the entirety of the benefit for the services rendered to the patient, in complete discharge of the patient’s liability to the medical practitioner. In law, this was effected by an assignment by the patient pursuant to s 20A of the Health Insurance Act 1973 (Cth).

6. It was common ground that in most cases administrative staff employed by the applicant dealt with Medicare in respect of the services provided by the medical practitioners, with the result that the payments from Medicare were paid into a bank account in the applicant’s name. The applicant’s administrative staff then identified which payments were attributed to each medical practitioner, and paid 70% of the amounts received to the particular practitioner, retaining the other 30% for itself.

7. The precise legal nature of what occurred is unclear. Quite possibly, the medical practitioners appointed the applicant as their agent for claiming and receiving the medicare benefit assigned to the medical practitioner by the patient. It might be possible to debate whether the applicant enjoyed full beneficial ownership of the funds in its bank account (which would be important if the applicant were wound up or one of the medical practitioners were made bankrupt), but in the absence of details about the informal arrangements it would be difficult to reach a firm conclusion. Nothing turns on this for present purposes, for it is clear that the deeming provisions upon which the Chief Commissioner’s assessments were based turn upon payments from the applicant to the medical practitioners, and that even if the payments were of money which was already owned beneficially by the medical practitioners, that does not stand in the way of the operation of the “relevant contract” provisions: see Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197; 110 ATR 651 at [64]-[68], where the Victorian Court of Appeal concluded that the ordinary meaning of “payment” readily embraces a payment of money to a person beneficially entitled to that money. (It will be necessary in due course to address a submission advanced contrary to that proposition.)

8. The administrative steps referred to above were not documented in the contract between the applicant and the medical practitioners. Rather, findings of fact were made that they occurred (there seems to have been little or no dispute about this) and they formed part of the factual foundation upon which the hearings before the Appeal Panel and this Court were conducted. There was no dispute that those steps amounted to an “arrangement”, which might be “formal or informal”, so as to fall within the extended definition of “contract” in Division 7 of Part 3 of the Act (as to which see below).

9. Exceptionally, there were three medical practitioners who made their own claims to, and received money directly from, Medicare, from which they then paid 30% to the applicant.

10. The Chief Commissioner assessed payroll tax on the basis that the 70% paid by the applicant to medical practitioners contributed to “taxable wages”. The Chief Commissioner accepted that the medical practitioners were not employees, but contended that the deeming provisions in Division 7 of Part 3 of the Act applied. The applicable provisions are reproduced below. By way of summary, if there is a “relevant contract” within the meaning of s 32, then the applicant is taken to be an employer (s 33) and the medical practitioner is taken to be an employee (s 34) and amounts paid or payable by an employer for or in relation to the performance of work relating to a relevant contract are taken to be wages paid or payable (s 35), and therefore taxable wages (ss 10 and 11).

11. NCAT constituted by a Senior Member rejected the applicant’s challenge to the assessments, finding in accordance with the basis upon which the Chief Commissioner had assessed payroll tax that there were relevant contracts between the applicant and the medical practitioners, and that the payments of 70% of the medicare benefits by the applicant to those practitioners were payments which were deemed by s 35 to be wages which contributed to the applicant’s taxable wages. The Appeal Panel dismissed an appeal on the basis that the challenges did not give rise to questions of law. The present application for leave to appeal is brought from the Appeal Panel’s decision.

12. Exceptionally, the Chief Commissioner did not assess the amounts paid directly to the three medical practitioners who administered their own claims and did not participate in the administrative arrangement summarised above as contributing to taxable wages. This formed one strand of the applicant’s submissions on appeal.

Applicable legislative regime

13. Division 7 of Part 3 of the Act expands the scope of “employer”, “employee” and “wages” so as to extend to cases where there is a “relevant contract”. The starting point is the definition of “relevant contract” in s 32(1), which relevantly provides:

In this Division, a relevant contract in relation to a financial year is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person—

…

(b) has supplied to the designated person the services of persons for or in relation to the performance of work, or …

14. There was an issue in the Tribunal whether the exception in s 32(2)(iv) applied, but this may be passed over as it did not form part of the appeal. References to a “contract” in Division 7 were defined, in s 31, to include “an agreement, arrangement or undertaking, whether formal or informal and whether express or implied”. The Chief Commissioner contended that the written agreements between the applicant and medical practitioners, together with the informal arrangements whereby administrative staff employed by the applicant would claim medicare benefits on behalf of the medical practitioner and pay 70% of them to the practitioner, constituted a relevant contract. In that event, the deeming provisions in ss 33 and 34 applied:

33 Persons taken to be employers

(1) For the purposes of this Act, a person—

(a) who during a financial year, under a relevant contract, supplies services to another person, or

(b) to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work, or

(c) who during a financial year, under a relevant contract, gives out goods to other persons,

is taken to be an employer in respect of that financial year.

(2) If a contract is a relevant contract under both section 32(1)(a) and (b)—

(a) the person to whom, under the contract, the services of persons are supplied for or in relation to the performance of work is taken to be an employer, and

(b) despite subsection (1)(a), the person who under the contract supplies the services is taken not to be an employer.

34 Persons taken to be employees

For the purposes of this Act, a person who during a financial year—

(a) performs work for or in relation to which services are supplied to another person under a relevant contract, or

(b) being a natural person, under a relevant contract, re-supplies goods to an employer,

is taken to be an employee in respect of that financial year. (Emphasis added.)

15. The Chief Commissioner submitted that the applicant was a person to which, and under a relevant contract, the services of the medical practitioners were supplied for or in relation to the performance of work, with the result that the applicant was taken to be an “employer”, and that the medical practitioners performed work for or in relation to which services were supplied to the applicant under a relevant contract, with the result that the medical practitioners were taken to be “employees”.

16. Relevantly, s 35(1) provided:

35 Amounts under relevant contracts taken to be wages

(1) For the purposes of this Act, amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract are taken to be wages paid or payable during that financial year.

17. If by reason of the deeming provisions in ss 33 and 34 the applicant was an employer and the medical practitioners were employees, then the Chief Commissioner submitted that the 70% of the medicare benefits paid by the applicant to the medical practitioners (save for the three who made their own claims) were amounts falling within s 35(1) and were deemed to be wages, thereby contributing to the applicant’s taxable wages.

The decision of NCAT at first instance

18. Because it was said that the Appeal Panel erred in concluding that the appeal from the Senior Member gave rise to no question of law, it is necessary to summarise the Senior Member’s decision in detail.

19. The Senior Member at [24] divided the analysis into two questions: whether there were “relevant contracts” for the purposes of s 32, and if so whether the payments made by the applicant representing 70% of the medicare benefits claimed on behalf of each medical practitioner were “for or in relation to the performance of work relating to” the agreements for the purposes of s 35.

20. After summarising the parties’ submissions, the Senior Member referred at [30]-[35] to the rights and obligations under the representative agreement, including at all times to act to promote the interest of the medical centre, the fact that the records of all services were the sole property of the applicant, with the medical practitioner having a right to access records for a period of six months after the contract ended, the medical practitioner was to abide by operating protocols issued by the applicant from time to time, to meet roster commitments, sign on and sign off and be physically present during rostered sessions, and not take any action to channel patients away from the centre, and to give notice before taking any leave, which was restricted to a maximum of four weeks each year. Finally, he referred to a restrictive covenant which provided that an exclusion zone of five kilometres from the centre would be expected for a period of two years after the medical practitioner left the centre.

21. The Senior Member then said at [36]-[41] (I have emphasised two portions of the reasons):

36. As noted above, the “Services”, as defined, were “medical services normally provided in most general practices and shall not include services of a special nature provided by some GP’s, such as, acupuncture, cosmetic services etc...”. Such services are most directly supplied to patients of the particular Doctor providing them, rather than to the applicant.

37. However, this does not prevent a conclusion that the Doctors provided services to the applicant, as is illustrated by Levitch Design Associates at [54] and the authorities there cited, namely Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue (2005) 222 ALR 599 at [223]-[226] and Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470; (2013) 97 ATR 904 at [56].

38. The terms of the Agreement indicate that the Doctors agreed to:

(1) provide the Services on a five day per week basis, including weekend rotation (cl 2) and in this regard agreed to meet roster commitments (cl 3.8) and to provide advance notice of planned vacations (which were limited to four weeks in a 12 month period and which had to be approved by the applicant (cl 6));

(2) promote the interests of the applicant (cl 3.4) including not channelling patients away from the applicant (cl 3.8);

(3) abide by the applicant’s operating protocols and to complete all necessary documentation for that purpose (cl 3); and

(4) a restrictive covenant, which would become operational upon the Doctor leaving the particular medical centre owned by the applicant, with such covenant to have an “exclusion zone” of 5 kilometres from that medical centre and to be in place for two years after the Doctor’s departure (cl 7).

39. These clauses indicate that the Agreement secured the provision of the Services provided by the Doctors to the patients of applicant’s medical centres. In circumstances where such services were a necessary part of the applicant’s medical centre business, the Doctors provided them not only to the patients but also to the applicant.

40. Section 32(1)(b) of the [Act] requires that the services provided were provided for or in relation to the performance of work. This requires only that the services supplied under the Agreement are work-related: see Accident Compensation Commission v Odco at 612 and Smith’s Snackfood Company Ltd v Chief Commissioner of State Revenue at [32] and [60]. Neither party contended that the services provided under the Agreement were other than work-related and the Tribunal is satisfied that this criterion is met.

41. For the reasons set out above, the Agreement is a relevant contract within the meaning of s 32(1)(b) of the PT Act.

22. When dealing with whether the payments were “for or in relation to the performance of work relating to” the agreements under s 35(1) of the Act, the Senior Member readily concluded that the provision of medical services was the performance of work, and that performance related to the agreements. The real issue was whether the payment of 70% of the medicare benefits was “for or in relation to” that performance of work. The Senior Member cited this Court’s decision in Smith’s Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470; 97 ATR 904 at [57]-[59] for the proposition that the words “in relation to” required no more than a relationship, direct or indirect, and then held at [67]-[68]:

67. The relationship between the performance of the work and the Payments in the present case is that, as described above: (1) the Doctors provided the services to patients; (2) the patients assigned their medical benefits to the Doctors; (3) the applicant, on behalf of the Doctors, submitted the assigned claims for the medical benefits to Medicare; (4) Medicare paid those benefits to the applicant; and (5) the applicant retained 30 per cent of the amounts received from Medicare and paid the remaining 70 per cent to the Doctors as the Payments.

68. There is a clear relationship between the provision of the services and the Payments. The availability of the Medicare benefits to the Doctors was a direct consequence of the provision of the services. The Payments were the amount of those benefits less a 30 per cent deduction. Whilst the relationship between the provision of the services and the Payments was not direct, there was a clear indirect relationship sufficient to satisfy the terms of the section. There is nothing in the context of the section nor its legislative history to suggest that such a relationship is insufficient.

23. Finally on this point, the Senior Member rejected the applicant’s reliance upon Homefront Nursing Pty Ltd v Chief Commissioner of Statute Revenue [2019] NSWCATAD 145 because the Tribunal in that case placed weight on the fact that the funds received by the medical practitioners were funds belonging to them, this being something which was regarded as irrelevant by the Victorian Court of Appeal in Optical Superstore at [63]-[67].

The decision of the Appeal Panel

24. At the forefront of argument in the Appeal Panel was the Chief Commissioner’s contention that the appeal went beyond the limited right in s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW), expressed as follows: “[a]ny internal appeal may be made … as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds”. No application was made for leave and so the only matter within the jurisdiction of the Appeal Panel was an appeal “on any question of law”.

25. During the hearing before the Appeal Panel, the applicant made written and oral submissions which went beyond the three grounds in its original notice of appeal. The Chief Commissioner submitted that much of what was advanced went beyond (a) the notice of appeal as formulated and (b) the limited right of appeal. At the conclusion of the hearing, the applicant was directed to supply an amended notice of appeal, reflecting the submissions it had advanced. The result was a notice in the following form, which was reproduced by the Appeal Panel at [47]:

(1) The Tribunal below erred in construing and applying Section 35(1) of the Payroll Tax Act 2007 (‘the PTA’) to payments by the Appellant to doctors who practised medicine at its medical centres of amounts equal to 70 per cent of Medicare benefits assigned by patients to those doctors and collected by the Appellant on their behalf.

(2) The Tribunal below erred in law in finding at [39] that, for the purpose of construing and applying Section 35(1) of the PTA, under written agreements between those doctors and the Appellant, the doctors provided their medical [services] as GP’s not only to their patients, but to the Appellant;

(3) The Tribunal below erred in law in finding at [41] that the agreement between the Appellant and each doctor was ‘a relevant contract’ within the meaning of Section 32(1)(b) of the PTA;

(4) (With the leave of the Appeal Panel) the Tribunal below erred in law in finding at [52] that each such agreement is not exempt from being ‘a relevant contract’ pursuant to section 32(2)(b)(i) of the PTA;

(5) The Tribunal below erred in law in finding at [68] that the 70 per cent payments were ‘for or in relation to the performance of work relating to a relevant contact’ within the meaning of section 35(1) of the PTA.

(6) The Tribunal below erred in law by finding that under section 35(1) of the PTA such payments are deemed to be wages paid by the Appellant to the doctors.

(7) The Tribunal below erred in law in not following and applying the Tribunal’s decision in Homefront Nursing Pty Ltd v Chief Commissioner of State Revenue [2019] NSWCATAD 145, the facts of which were relevantly indistinguishable from the facts which were before the Tribunal below.

26. The Appeal Panel reproduced at [58] what has been said in this Court concerning the need to identify the questions of law which were a condition of its jurisdiction and the subject matter of the appeal, citing Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378; 96 ATR 875 at [6] and [22]. The Appeal Panel said that it was “not enough to simply assert (as the appellant did), that the Tribunal erred in its construction and application of certain provisions of the [Act] without also identifying how that purportedly occurred”. No submissions were made that that statement was wrong, or the numerous decisions of this Court to the same effect were wrong. However, it will be seen that formulation of the applicant’s further appeal to this Court suffered from the same deficiency.

27. Ground 1 before the Appeal Panel, which was read together with grounds 2 and 3, underlay the main ground the subject of submissions in this Court. The Appeal Panel addressed these grounds concisely, and it is convenient to reproduce the entirety of its reasoning at [65]-[69].

65. As noted above, the Tribunal found at [39] that under the terms of the Agreement, the doctors provided services to the appellant. This was a finding of fact.

66. The appellant argued that:

(1) the doctors provided their medical services to their bulk-billed patients, not to the appellant for which they were remunerated by Medicare, not the appellant;

(2) the appellant is a company and therefore incapable of receiving, directly or indirectly, any medical services normally provided in most general practices;

(3) the Tribunal erroneously held that the authorities do not prevent a conclusion that the doctors provided services to the appellant.

67. Consequently, it was argued, the conclusion that there was [a] relevant contract for the purposes of s 32 was an error.

68. However, these submissions amount to nothing more than an attack on the Tribunal’s findings of fact and are directed to the conclusion that the contract was a relevant contract, which is a conclusion of fact.

69. In any event, the Tribunal’s approach was entirely orthodox and in accordance with binding authority. As no question of law has been raised, we reject the appellant’s appeal on these grounds.

28. The Appeal Panel dismissed grounds 4 and 7 for reasons that need not be summarised, because they formed no part of the appeal to this Court.

29. Grounds 5 and 6 separately challenged the application of s 35(1). The Appeal Panel addressed these at length. In large measure, this was based on the reasoning in Homefront Nursing, upon which the applicant relied, but which predated the decision of the Victorian Court of Appeal in Optical Superstore which held that the payment of money beneficially owned by the payee (in that case, optometrists) did not prevent the payments from falling within the equivalent of s 35(1). After dealing with the divergence between the applicant’s written and oral submissions, the Appeal Panel noted that there was no dispute that the amounts paid by the applicant to the medical practitioners (representing 70% of the amounts bulk billed to Medicare) were “paid or payable”: at [89]. The Appeal Panel noted that the issue was whether they were payments “for or in relation to” the performance of work relating to a relevant contract. The Appeal Panel reasoned at [90]-[91]:

90. The appellant argued that similarly to Homefront Nursing, the Tribunal should have determined that the relationship (being an indirect relationship) was too remote to fall within s 35(1). This is despite also arguing that there was no relationship and that the finding at [39] was erroneous.

91. For the reasons already expressed above, the finding at [39] is a finding of fact. We have already concluded that no question of law arises in respect of this finding. Our conclusion is fatal to the appellant’s argument.

30. The Appeal Panel went further. It referred to the finding made by the Senior Member at [68], which is reproduced above, and said at [92]-[93]:

92. … the finding at [68] was conclusion of fact and not appealable as of right on this appeal. It was different from the conclusions of fact reached by the Tribunal in Homefront Nursing.

93. We also note that the appellant did not articulate a question of law as to the proper construction of s 35, such that there is no occasion on this appeal to consider the breadth of relationship by the use of the words “in relation to” or “relating to”.

The limited scope of the appeal to this Court

31. This Court’s “first duty” is to consider its jurisdiction: Federated Engine-Drivers and Firemen's Association of Australasia v Broken Hill Proprietary Co Ltd (1911) 12 CLR 398 at 415; [1911] HCA 31. The applicant’s appeal to this Court is a creature of statute. It is conferred by s 83 of the Civil and Administrative Tribunal Act. There is no appeal as of right, but rather it is necessary for the applicant to make out a case for leave. Further, and importantly for present purposes (and just as it was dispositive to the appeal to the Appeal Panel), the appeal in this Court is confined to being “[an] appeal on a question of law”. Those constraints are elements of the limited grant of jurisdiction conferred by the statutes creating the rights of appeal.

32. As has been said on a large number of occasions, it is not sufficient merely to assert that the Tribunal erred in law in order to satisfy the limited conferral of jurisdiction. Authorities to that effect are collected in Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2017] NSWCA 223 at [13], as well as in Ferella at [6] and [22] to which the Appeal Panel referred. More recently, it was said in Booth v Fourmeninapub Pty Ltd [2020] NSWCA 57 at [21] by me, with the agreement of Bell P and White JA, that “[a]n appellant cannot convert a challenge which is wholly or partly factual to one which is on a ‘point of law’ merely by including those words in the formulation of a ground”. The proposed grounds of appeal in this Court do not suffer from that deficiency. However, they suffer from a different defect. Rather than identifying a question of law, in large measure they simply assert error.

33. The grounds were as follows:

1. The Appeal Panel erred in concluding that the Appellant’s Amended Grounds of Appeal 1-3 were nothing more than challenges to the Tribunal’s findings of fact (that the Services as defined at [7] of the Decision were supplied to the Appellant and that there was a relevant contract) which raised no questions of law; and failed to exercise its jurisdiction.

2. The Appeal Panel erred in failing to consider the questions of law raised in Grounds 1-3 of the Amended Notice of Appeal and in failing to find that the Tribunal at first instance (at [39] and [41]) had erred in concluding that the Services were supplied to the Appellant and that there was a relevant contract by:

(a) making findings which were not open:

(i) that the Services were provided to “patients of applicant’s medical centres”;

(ii) that the provision of the Services to patients of applicant’s medical centres “were a necessary part of the applicant’s business”;

(iii) the Services were provided to the applicant; and if they be findings of fact

(iv) the Services were supplied to the applicant;

(v) there was a relevant contract.

(b) misconstruing the Agreement (as defined at [4] of the Decision); 

(c) misdirecting itself by applying distinguishable authorities and ignoring relevant context including the objects of the amendments to the Act; and

(d) misconstruing the ambit of the expression “has supplied to the designated person the services of persons for or in relation to the performance of work” in s 32(1)(b) of the Act.

3. Further or in the alternative to 2 hereof, the Appeal Panel erred in failing to consider and in failing to find that, on the facts as found by or open to the Tribunal at first instance, the definition of “relevant contract” in s 32(1) the Act was incapable of being satisfied.

4. In the event that there is a relevant contract as defined in s 32 of the Act, then with respect to s 35 of the Act, the Appeal Panel erred in failing to consider questions of law raised by Grounds 5 and 6 of the Amended Notice of Appeal and in failing to find that the Tribunal at first instance, in concluding that amounts were paid by the Appellant to doctors “for or in relation to the performance of work”, erred by:

(a) misconstruing the ambit of the expression “for or in relation to the performance of work”;

(b) misdirecting itself by applying distinguishable authorities and ignoring relevant context including the objects of the amendments to the Act; and

(c) failing to find on the facts as found or open to be found by the Tribunal at first instance, that the statutory test in s 35 was not capable of being satisfied.

34. It may be seen immediately that the notice of appeal elaborated a large number of bases upon which, so it was said, the Appeal Panel had erred. It will also be seen that the notice of appeal fell short of squarely identifying a question of law.

The principal issue on appeal

35. The applicant advanced submissions extending to most aspects of its notice of appeal. Indeed, it advanced submissions which went beyond the notice of appeal. I shall address them below. However, the most convenient course is to commence with what the Appeal Panel regarded as dispositive, and what senior counsel for the applicant regarded as the “very first step” of the analysis.

36. To reiterate, NCAT constituted by the Senior Member found that the medical practitioners not only provided medical services to patients, but also supplied services to the applicant. That was necessary to the conclusions that there was a relevant contract in respect of which the applicant was deemed to be an employer and the medical practitioners were deemed to be employees.

37. NCAT constituted by the Appeal Panel held that that those findings were findings of fact, outside the scope of the limited appeal which the applicant brought.

38. Senior counsel made the following submission after being confronted, more than once, with those findings, and their seemingly factual nature.

SEIDEN: Your Honour, this is the point that we say was simply not open and the question was whether it is possible to say that the services were supplied in the statutory sense under section 32 to the applicant, and we say the very first step of the appeal is whether it was right or not to say that the services were supplied in the statutory sense to the applicant. And we say it just can’t be and therefore, because we say the statute cannot be satisfied, a question of law arose that required construction of the statute and engages with the very difference between a finding of fact and a finding of law.

The Appeal Panel, your Honours, really identified that – really cavilled with the notice of appeal and the way the appeal grounds had been articulated. I think I’d be repeating myself to say that – we say the very first step was requirement to identify what does a supply to somebody mean and whether that was necessarily not satisfied in that case. And we say for the reasons that the services are medical services, doctors are the only ones that can provide them, and the applicant did not contract with customers. It was simply not open to find that the services were supplied to the applicant.

39. This submission involves two propositions. One is that there was error in the finding that the medical practitioners supplied services to the applicant. The second is that the error gives rise to a question of law. I accept neither.

No error in finding that services were provided by the medical practitioners to the applicant

40. Ordinarily I would attend to whether or not the questions of law raised by the applicant are in fact question of law which engage this Court’s limited appellate jurisdiction at the outset. The drafting of the notice of appeal presents difficulties in doing so (because no question of law is explicitly identified) and the oral submissions ranged widely in attempting to identify such a question. Although it is a little unusual, I think it is clearer and more convenient to adopt the course proposed by the applicant, and proceed directly to what the applicant contended was the “very first step” in the analysis.

41. Contrary to the applicant’s submissions, it seems perfectly plain that the medical practitioners provided services to the applicant. It is true, of course, that they provided medical services to the individual patients, who assigned their rights to medicare benefits to the practitioners. But that does not prevent the medical practitioners from at the same time being regarded as supplying services to the applicant.

42. The applicant was running a business. Central to its business was the notion that people would attend its centres in order to receive medical treatment. To that end the applicant provided the premises, and employed administrative and receptionist staff. It was also to that end that the applicant employed nurses who also provided services to patients.

43. To the extent that part of the applicant’s business used the services of the nursing and reception and administrative staff employed by the applicant, the medical practitioner’s attendance at the applicant’s medical centre in order to provide medical services to patients was an important aspect of the business. Indeed, so far as the evidence disclosed, there was no source of income for the wages of nursing and reception and administrative staff other than the 30% of the receipts from Medicare (and other government agencies) generated by the medical practitioners.

44. The position may also be examined from the perspective of a prospective purchaser of the medical centre business operated by the applicant (or, more likely, of 100% of the applicant’s shares). The purchaser would be acquiring the valuable contractual rights enjoyed by the applicant in respect of the contracts with medical practitioners. They included promises by the practitioners to attend at the premises in accordance with a roster (ordinarily, five days each week), to adhere to guidelines issued by the applicant, not to solicit patients away from the applicant’s centres, and a non-compete covenant after the contract came to an end. All of those promises added to the value of the business.

45. Unquestionably the medical practitioners provided valuable contractual promises to the applicant, which were conducive to the conduct of the applicant’s business. The performance of those promises required positive actions by the medical practitioners on a continual basis while the contract was in force. It is no strain of language to regard the totality of the performance by the medical practitioners (including the provision of medical services to patients, but extending to the other promises in the contract such as attending the medical centre, adhering to its protocols and taking leave as permitted) as amounting to the provision of services to the applicant. Indeed, it does not strain language to regard the provision of medical services to patients as amounting also to the provision of a service to the applicant, in order to permit it to operate its medical centre business (and without which services the applicant would be unable to operate its business).

46. It was submitted that the medical practitioners could not provide a service to the applicant in circumstances where medical treatment was “incapable of being supplied to the applicant” and where there was no way to “characterise the patients as customers or patients of the applicant”. But the foregoing analysis does not involve a conclusion that the applicant received medical treatment, or that the patients were patients “of the applicant”. Neither of those propositions are fatal to the conclusion that the medical practitioners provided a service to the applicant. Nor does anything turn on the fact that “supply” is given an expanded definition in the Act.

47. Thus even if it be accepted, favourably to the applicant, that there is one or more questions of law which underly the critical finding that the medical practitioners supplied services to the applicant, I do not accept that the substance of the applicant’s point is made out. The outcome of the main issue in this appeal (grounds 1, 2 and 3) does not turn on the narrowness of this Court’s jurisdiction, nor upon the way in which the notice of appeal has been drafted. I respectfully agree with the Appeal Panel which stated at [69] that, putting to one side the need to identify a question of law, the Tribunal’s approach was entirely orthodox.

No question of law

48. I am also unpersuaded that any question of law arises from the finding by the Senior Member that the medical practitioners provided services to the applicant.

48. The applicant maintained that such a finding was not open, or that there was no evidence to support such a finding. Its basis for doing so was that the medical services undertaken by the medical practitioners were supplied to the patients, and could not be supplied to the applicant (which was a corporation). Thus it was said, “We say that there were some facts that were not open to be found and that also raises a question of law and for instance that the applicant had patients and we say that that as a matter of law could not have been found”. That led to this exchange:

SEIDEN: … But when there is only one answer to the question of whether the circumstances could or could not satisfy the relevant definition and the trier of fact has got it the other way around, we say that raises a question.

MEAGHER JA: All right, well then - -

LEEMING JA: In short, a perverse finding of fact, you say, is a question of law?

SEIDEN: Yes, indeed.

50. In elaboration, counsel continued:

Your Honour Justice Leeming asked me about a perverse finding of fact and it’s in this sense that we raise the question of – we say this is what the submission means, that it wasn’t open to find – we say necessarily on the facts, capable of being found, they necessarily fall outside s 32. And the fact that the Tribunal found that they fell within s 32 means there must have been an error of law raising a question of law.

51. After the luncheon adjournment, and further submissions about whether a finding was “open”, the exchange continued:

LEEMING JA: That seems contrary to paragraph 55 of Orr v Cobar, by reference to Azzopardi which is what I had in mind when I used “perverse” in the question to you before lunch.

SEIDEN: Yes, I did adopt your Honour’s language of “perverse” and then tried to walk that back, and the reason we say it’s not contrary to 55 is because we say it’s a question of statutory construction whether those facts could satisfy the definition of supply or the definition of payment for or in relation to. So I don’t think I’m putting that very well, but that is - -

LEEMING JA: It sounds like a question of the application of the statute to the facts, rather than a question of statutory construction.

SEIDEN: Well, we would say that on that application in the Sharp sense, it couldn’t – it would stretch the reading of the statute too far and therefore there must be an error in statutory construction for the question for it to be said to fall within the statute, your Honour.

LEEMING JA: Thank you.

52. True it is that the distinction between what is or is not a question of law is vexed and context dependent. Windeyer J introduced his reasons for judgment in Da Costa v The Queen (1968) 118 CLR 186 at 194; [1968] HCA 51 as follows:

The distinction between questions of fact and questions of law, like the different but in some ways similar distinction between mistakes of fact and mistakes of law, has been productive of a multitude of cases and of numerous judicial statements which, especially in the field of taxation, are not all easily reconciled. I need do no more than refer to what was said in New Zealand by Gresson P in Commissioner of Inland Revenue v Walker [1963] NZLR 339 at 353 and in this Court in Commissioner of Taxation v Miller (1946) 73 CLR 93. The topic has excited learned academic commentary – more so in America than in England or here: see Wilson, “A Note on Fact and Law” (1963) 26 Modern Law Review 609. It is now commonly said that the distinction between matters of fact and of law depends upon, is influenced by, and differs with the circumstances in which the question arises. When the distinction determines whether or not in a particular case an appeal lies, there is room for questioning whether it has in philosophy or logic an essential and abstract and universal character.

53. The ensuing decisions over more than half a century have not altered the position, as is plain from the discussion in Orr v Cobar Management Pty Ltd (2020) 103 NSWLR 36; [2020] NSWCCA 220 at [31]-[61]. I do not think it is possible to enunciate a clear test of what is, or is not, a question of law for the purposes of s 83 of the Civil and Administrative Tribunal Act, and in the absence of anything like full submissions on the point there is no occasion to do so. However, to focus upon the points which were addressed in oral submissions, it is well settled in relation to statutes conferring limited rights of appeal from tribunals (which are often of a specialist nature) to a court that a particular finding which is “perverse” or “unreasonable” or “not reasonably open” is not ordinarily a question of law. In Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 157, Glass JA, with whom Samuels JA agreed, said that:

…when the law correctly stated is applied to the facts found in order to produce a conclusion error may intrude again. An erroneous conclusion that facts properly determined fail to satisfy a statutory test, for example, injury arising out of the [course] of employment, substantial interruption to journey, or failure to provide suitable employment will ordinarily be an erroneous conclusion of fact. It is only in marginal cases that the statutory test is satisfied or not satisfied as a matter of law, because no other application is reasonably open: Hope v Bathurst City Council; Australian Gas Light Co v Valuer-General.

54. It is one thing for a finding to be expressed in terms which bear an ordinary, familiar meaning (such as Glass JA’s example of something which did not disclose a question of law, namely, it being “not open to find that the applicant had not suffered an injury to his right knee”). It is another thing where the finding is framed in terms of statutory language which bears a particular legal meaning. To that end, the applicant emphasised the expanded meaning of “supply”, and the fact that “for or in relation to” was a statutory term in a particular statutory context. It was said that these terms must first be interpreted in light of the legislation and that involves a process of statutory construction. That much may be accepted, but the ultimate difficulty, which is well reflected by the difficulties encountered by the applicant in attempting to formulate any question of law, is that the finding that the medical practitioners supplied services to the applicant does not give rise to a question of law.

55. Another way of testing this is to posit that if “supply” for the purposes of Division 7 of Part 3 of the Act bore a legal meaning that meant that a service provided by a person to a human being could never be supplied to a corporation, then there might be a question of law to which the Senior Member’s finding gave rise. But I do not accept that that is a possible construction, and indeed I doubt that it was propounded. A medical practitioner who, pursuant to an arrangement with his or her employer, attends to a patient, who is an employee and unable to work is, in a natural sense, providing a service both to the patient and to the employer. The position is not greatly different from an organisation which retains a yoga instructor, local sporting clubs who employ coaches, or a performance theatre which retains artists. In each example, the instructor, coach or artist provides service to customers pursuant to an arrangement with their employer, as well as to their respective employer.

56. In response to this, the applicant submitted that it was necessary in such cases for there to be a contract:

And not only do we say they were supplied directly to the patients, were incapable of being provided by the applicant, we say critically in order to engage that orthodox proposition that Odco stands for, there needs to be a contract between the applicant and the patient which is missing here.

57. Accident Compensation Commission v Odco Pty Ltd [1990] HCA 43; 64 ALJR 606 does not hold that in order for services to be supplied to a person in the position of the applicant – a person which benefits from the supply of services to individuals – there must be a contract between each individual and that person. I see no reason for any such requirement. A barbershop quartet may be retained by a shopping centre operator to sing carols at Christmas time. By doing so, the quartet provide a service to customers of the centre, as well as providing a service to the shopping centre itself, but without there being a contract between customer and shopping centre.

58. All these considerations combine to lead to my conclusion that there was no question of law raised before the Appeal Panel. Further, there is no question of law which arises in the present case, save for what is identified in ground 1, namely, the assertion that the Appeal Panel failed to exercise its jurisdiction. But while that is capable of amounting to a question of law, there is nothing in the ground. The Appeal Panel addressed each and every one of the grounds of appeal in the amended notice of appeal. This is far removed from cases of constructive failure of jurisdiction.

Other submissions

59. Proposed ground 4 is separate from the above. The opening words of this ground, asserting that “the Appeal Panel erred in failing to consider questions of law raised by Grounds 5 and 6”, fall short of articulating a question of law. The Appeal Panel explicitly considered those grounds at [78]-[94] and regarded them as not giving rise to a question of law. If indeed they raised a question of law and it could be said that the Appeal Panel constructively failed to exercise its jurisdiction, it may be accepted that the decision gave rise to a question of law. But even that formulation (which was not contained in this proposed ground of appeal) goes nowhere unless there be first identified a question of law in the challenge to the Senior Member’s decision.

60. The second half of proposed ground 4 asserts error on the part of the Appeal Panel in failing to find that the Senior Member had misconstrued the legislation and the authorities, and in failing to find that the test in s 35 was not capable of being satisfied. That also falls short of enunciating a question of law. It does so for the good reason that there is none.

61. The premise of this ground is that there is a relevant contract between the applicant and the medical practitioners. The issue is whether the payment of money from the applicant to the medical practitioner (being 70% of the medicare benefits assigned by the patients to the practitioner which the practitioner directed the applicant to claim) is a payment “for or in relation to the performance of work relating to a relevant contract”. The provision of medical services by the practitioner to a patient is plainly the performance of work, and equally plainly it is work relating to the relevant contract. The contract requires the medical practitioner, inter alia, to attend the centre, to attend patients and to bulk bill.

62. I mentioned at the outset that the applicant sought to deflect the force of what was held in Optical Superstore as to the character of a payment from the (deemed) employer to the (deemed) employee not being of any moment. At the beginning of her oral submissions, counsel said:

I’ll need to take your Honours through Optical Superstore for the reason that the Court of Appeal of Victoria decided that a payment is a payment and it doesn’t matter where it comes from and there’s no necessity for the applicant in the sense to have earned it itself. However, we say that the way that came to the Court of Appeal of Victoria was in a very disjointed, truncated fashion and that the compendious expression wasn’t really the subject of that decision and the submission that we’re now putting is akin to the way it came out in [Hope v Bathurst City Council] that whether something was a business had to be construed in light of the expression “carrying on a business”.

63. It is clear from the decision of the Victorian Court of Appeal that even if 70% of the amounts received by the applicant were owned beneficially by the medical practitioner, that would not prevent their being payments for the purposes of s 35(1).

64. The applicant contended that there needed to be something more, a “quid pro quo”, in order for the payments to fall within s 35. I do not agree. That is to place a gloss on the section. It is difficult to see how it would not produce an inconsistency with the decision of the Victorian Court of Appeal, as counsel with respect correctly acknowledged. Far from there being a compelling reason to depart from that decision, I respectfully agree with the reasoning of the Victorian Court of Appeal that “payable” or “paid” in this context does not exclude payments to which the payee is contractually or even beneficially entitled.

65. This leads to my conclusion that there was no question of law raised before the Appeal Panel in respect of grounds 5 and 6 before it. The consequence of this is that proposed ground 4 before this Court must also fail, with the result that there was no failure on behalf of the Appeal Panel to exercise its jurisdiction.

66. Another submission was that the Appeal Panel needed to go beyond the terms of the amended notice of appeal, and have regard to the submissions which were made orally during the hearing. In particular, because from time to time counsel who then appeared for the applicant submitted that the facts were “incapable” of engaging ss 32 and 35 of the Act, that needed to be considered by the Appeal Panel and failing to do so was a constructive failure to exercise jurisdiction. I do not agree. I am sceptical that it is necessary, in a case where an appellant had leave to amend its notice of appeal after the conclusion of the appeal in order to reflect the submissions, for the Appeal Panel to look behind the document which is meant to encapsulate the questions of law which engage the Appeal Panel’s jurisdiction. But even if that were not so, the submission is not made out for the reasons which have already been given.

67. It was further said that the fact that the three medical practitioners who processed their own claims for medicare benefits, and who therefore did not receive 70% paid to them by the applicant, but instead remitted 30% of what they received to the applicant, were not included in the calculation of assessable wages, showed that the construction adopted by the Chief Commissioner was absurd or capricious. I do not agree. Division 7 of Part 3 extends the scope of the concepts of “employer”, “employee” and “wages” so as to expand the basis upon which payroll tax is assessed. It does so in quite artificial ways. One of the elements upon which the deeming provisions operate is the making of a payment by the (deemed) employer to the (deemed) employee. The administratively convenient approach adopted by the majority of medical practitioners meant that there was a payment made by the applicant to those medical practitioners. The approach taken by the other three meant there was no payment, and so the deeming provisions were not engaged. That result does not bespeak error in the application of Division 7 to the majority of medical practitioners who did receive payments from the applicant.

68. A related submission concerned the mischief of the Act. It was said that the extrinsic materials made clear that Division 7 of Part 3 was directed to combatting tax avoidance schemes, which pointed towards s 35(1) being given a narrower construction so as not to capture the arrangements in the present case, as it could not reasonably be said that there was any tax avoidance here. I do not accept this submission. It amounts to the assertion that the scope of the Division is confined to “tax avoidance”. Even assuming that concept had some precise legal meaning, to accept the applicant’s submission amounts to placing a gloss on the statutory text.

Orders

69. For those reasons, the applicant’s submissions lack substance. Moreover, the draft notice of appeal falls far short of identifying one or more questions of law. In the absence of identifying a question of law, I propose refusing leave, with the applicant to pay the respondent’s costs.

70. Two further points may be made.

71. First, this application illustrates the importance of those contemplating bringing an appeal which is confined to a question of law attending to the statute and identifying the question of law. That obligation is not satisfied by rolled up allegations asserting error of law, still less by grounds which merely allege “error”. It should be possible for the reader of a notice of appeal to apprehend what the question or questions of law are. During the hearing of the appeal, Griffiths AJA said this:

Permit me to observe that it seems to me that much of the problem that has arisen in this litigation stems from the fact that there wasn’t a clear identification of the questions of law in the original application to the tribunal, or indeed, in the amended notice of appeal referred to at para 47. And part of the reason for that may well be – and this is not the fault of the applicant – the omission, in the pro forma of the notice of appeal, to require an applicant to identify a question of law.

72. Counsel responded by referring to the informal nature of litigation in NCAT and the fact that some litigants are unrepresented. I do not disagree with those observations, but that is not the present case, and even if it was, those considerations would seem to favour the course proposed by Griffiths AJA, of altering the prescribed form for the originating process where an appeal is confined to a question of law so as to require the putative applicant to formulate the question or questions of law which, so it is said, arise and are the foundation of the appellate court’s jurisdiction. Part of the difficulty is that many practitioners are more familiar with drafting grounds of appeal in appeals which are by way of rehearing, like most appeals to this Court, and, to be fair, the Uniform Civil Procedure Rules 2005 (NSW) as presently drafted require a notice of appeal to state “briefly, but specifically” the grounds (UCPR rr 50.4, 51.18(1)(e)). That requirement is apposite for such appeals but inapt for appeals confined to questions of law.

73. Secondly, some submissions were made, directed to the question of leave, as to the general application and public importance of this particular decision. It may be that persons operating other medical practices have adopted similar administrative arrangements whereby medicare benefits which have been assigned by patients to the practitioners are collected by the operators of the centre and distributed to the practitioner. It may readily be seen how this might suit the operator (which will not have to rely upon the efforts of a practitioner to process claims and remit a percentage entitlement to the operator if the position resembles that in the present case). However, taking that course runs the risk of the deeming provisions in Division 7 of Part 3 of the Act being engaged. As is clear from the position of the three practitioners who processed their own claims for medicare benefits, there is a ready mechanism to avoid that result which is available. That tends against the conclusion that an important question of general application is thrown up by this litigation.

74. For those reasons, I propose the following order: “Dismiss the summons filed 3 August 2022 seeking leave to appeal, with costs.”

75. GRIFFITHS AJA: I agree with Leeming JA.

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Amendments

20 April 2023 - "Pt 2, Div 7" in coversheet changed to "Pt 3, Div 7"

- "Division 7 of Part 2" amended to "Division 7 of Part 3" at [8], [10], [13], [55], [67] and [73]

Decision last updated: 20 April 2023