DRAKE PERSONNEL LTD & ORS v COMMR OF STATE REVENUE (VIC)
Judges: Ormiston JAPhillips JA
Buchanan JA
Court:
Victorian Court of Appeal
MEDIA NEUTRAL CITATION:
[2000] VSCA 122
Phillips JA
8. These are five appeals (and three cross- appeals) which were heard together, as were the proceedings out of which the appeals arise. All concern the liability or otherwise of Drake Personnel Ltd. (``Drake'') to tax under the Pay- roll Tax Act 1971 (``the Act'') over a number of years commencing in 1984. The first of the five proceedings also concerns a similar liability over part of this time of two related companies, Office Overload Pty. Ltd. and Hartmann & Associates Pty. Ltd., which ceased business on 30 June 1992. All three companies carried on a like business, being the supply to clients of theirs of the services of workers of one kind or another on a temporary basis (``temporaries'') for which the temporaries were paid by the companies and the companies were paid by their clients. These proceedings are focused principally on whether by virtue of the provisions of the Act pay-roll tax was attracted to the payments made by the three companies, including Drake, to the temporaries. Save for the time during which they carried on business, no distinction was drawn between the three companies at trial or on these appeals and so, for convenience, in what follows I shall refer simply to ``Drake'' as meaning all three, unless there is a need to distinguish between them.
9. The five proceedings can be broken into two groups: the recovery proceedings (the first and second proceedings) and the objection proceedings (the third, fourth and fifth proceedings). The common trial commenced on 18 May 1998 in the Trial Division. After more than six days of evidence and argument, the judge took time for consideration. On 23 June her Honour delivered careful and comprehensive reasons for judgment and on 7 September 1998 made orders disposing of all five proceedings accordingly. The first and second were dismissed with costs; in the third, fourth and fifth Drake's objections to assessment were upheld in part and the amount of ``taxable wages'' reduced accordingly, with costs in favour of Drake. On these appeals, Drake contends that it ought to have succeeded wholly in all five proceedings. The Commissioner submits the contrary, contending on the cross-appeals that Drake's objections to assessment ought not to have been upheld even in part.
The appeals
10. The first proceeding was commenced by writ filed on 11 April 1994. By it Drake was seeking the refund by the Cornrnissioner of pay-roll tax allegedly overpaid in respect of the period from 1 January 1984 to 30 June 1991 and also in respect of the financial year from 1 July 1991 to 30 June 1992. In fact until 30 May 1992 Drake was paying tax on the amounts paid by it to temporaries (allegedly while under the mistaken belief that it was obliged by the Act to pay such tax); it did not resume paying pay-roll tax until 1 January 1994.
11. The first proceeding failed altogether because the judge was of opinion that the claim to refunds was statute-barred by reason of s. 20A of the Limitation of Actions Act 1958, which in certain circumstances bars a proceeding for a refund of tax paid by mistake unless commenced within 12 months after the date of payment. On appeal, as below, Drake contends that that bar did not apply in the circumstances and it relies in particular upon a transitional provision, s. 6 of the Limitation of Actions (Amendment) Act 1993 (Act No. 102 of 1993).
12. Alternatively, if s. 20A did apply, Drake argues that when by letter dated 26 July 1993 the Commissioner refused the refunds it was seeking, it was entitled under s. 32 of the Act to lodge notices of objection (which it did on 3 September 1993) and to have them considered by the Commissioner in the usual fashion. This was denied by the Commissioner who declined to entertain the objections on the ground that they were not authorised by the Act. Accordingly, in the first proceeding Drake sought, by way of alternative relief, to have the Commissioner directed to consider the objections which Drake had lodged against the refusal of any refund or to have those objections referred to Court for determination. The judge agreed with the Commissioner that the objections were not authorised by the Act and refused the relief sought. On the appeal Drake says that this was error.
13. The objections just mentioned were precipitated by the Commissioner's letter dated 26 July 1993. There was, however, an earlier letter dated 25 March 1993 written to Drake by one Reinisch, an investigator working at the time for the Commissioner, and, according to
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Drake, promising a refund. This was said by Drake to be binding on the Commissioner in some way and there was debate at trial over Reinisch's authority to write such a letter. In the end the judge held that the letter did not bind the Commissioner and Drake challenges that, too, on the appeal.14. The second proceeding was commenced by originating motion on 15 January 1997. By it, Drake sought the refund of pay-roll tax allegedly overpaid in respect of the four years from 1 July 1992 to 30 June 1996. The claim was rejected at trial principally because of the prohibition, found in s. 22 of the
Taxation Administration Act
1997
[6]
15. The third proceeding (the first of the three objection proceedings) arose out of an assessment of Drake to pay-roll tax in respect of the two years from 1 July 1991 to 30 June 1993. Drake's notice of objection was dated 24 January 1994 and, when the objection was disallowed, a request was made to have the objection forwarded to the Court and treated as an appeal. The fourth and fifth proceedings are similar, save that in the fourth, the assessment issued for the period from 1 July to 31 December 1993 and the notice of objection was dated 17 August 1994; and in the fifth, the assessment issued in respect of the period from 1 January 1994 to 30 June 1996, and the notice of objection was dated 14 March 1997. The judge upheld the objections in part, ordering that each of the assessments be reduced by deducting from the ``taxable wages'' paid by Drake a sum certain, being the amount paid by Drake to those temporaries who provided their services to clients of Drake for a period not exceeding 90 days in a given financial year. Drake now contends, as it did below, that its objections should have been upheld in full and the assessments not reduced but set aside altogether. The Commissioner contends that the assessments ought to have been confirmed.
Employment as the fundamental issue
16. Despite the differences in procedure, the same fundamental issue underlies all five proceedings; that is, the liability of Drake to pay-roll tax in the first place, according to the Act. It is true that the alleged liability spanned a good number of years (in the case of Drake itself) and that the Act underwent more than one change in that time. But during argument we were referred to the Act as reprinted to 19 August 1992 (Reprint No. 4) and as reprinted to 13 July 1995 (Reprint No. 5) and the former seemed a sufficient guide to at least the early sections of the legislation affecting primary liability. The occasional differences which emerged in argument did not appear to be of any great significance and so in what follows Reprint No. 4 is the most helpful.
17. In each case the primary liability of Drake turned on the definition of ``wages'' in s. 3, for under s. 6 wages paid or payable by an ``employer'' (which incudes a deemed employer) are liable to pay-roll tax and ``employer'' is itself defined by s. 3 as one ``who pays or is liable to pay any wages...''. According to s. 3:
```wages' means any wages, remuneration, salary, commission, bonuses, allowances or other benefits [7]
The reference to ``other benefits'' was removed by the paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to or in relation to an employ é as such or to or in relation to any person deemed by section 3C to be an employ é and, without limiting the generality of the foregoing, includes -Pay-roll Tax (Amendment) Act 1993 (Act No. 9 of 1993) s. 4 which dealt with fringe benefits.
- ...
- (ba) any amount deemed to be wages by section 3C;
- ...''
As these matters were argued, this definition might have been attracted for either of two reasons: (1) employment of the temporaries by
ATC 4506
Drake according to ordinary concepts (i.e., of master and servant in the common law) so that payments made by Drake to the temporaries were payments ``to... an employee as such'' and on that ground ``wages'' as defined; or (2) engagement of the temporaries by Drake under a ``relevant contract'' according to s. 3C of the Act, if thereby the temporaries were deemed by that section to be employees, Drake to be their employer and the payments made by Drake to be wages (and thus within paragraph (ba) of the definition).18. After careful consideration, the judge ruled that the temporaries were not employees of Drake according to ordinary concepts, but that they were engaged by Drake, at least prima facie, under a ``relevant contract'' within the meaning of s. 3C of the Act. The latter was accepted by the parties as flowing directly from the decision of the High Court in
Accident Compensation Commission v. Odco Pty. Ltd.
[8]
19. On these appeals, Drake contends that paragraphs (e)(iii) and (e)(v) covered the whole field so that all amounts it paid to temporaries were exempt from pay-roll tax and (subject to the other arguments raised in the first and second proceedings) it was entitled to the refunds it was seeking and to have the assessments in question set aside. Alternatively, if in the objection proceedings there was, as the judge said, insufficient evidence to justify a finding of the precise extent to which paragraph (e)(v) applied, Drake contends that the judge ought to have remitted the matter to the Commissioner to make further findings.
20. On the other hand, the Commissioner submits that while the judge's conclusions about s. 3C were perfectly correct, her Honour fell into error in deciding that the temporaries were not employees of Drake according to ordinary concepts. This was the subject of a notice of contention in the two recovery proceedings and the subject of the cross-appeal in the three objection proceedings; and, if the submission is correct, Drake should have failed wholly in all five proceedings.
21. One final point of procedure. In the objection proceedings, the argument at trial focused almost wholly on paragraph (e)(v), yet it was not mentioned in Drake's notices of objection. At the commencement of the trial, Drake sought leave to amend its notices by adding complaint by reference to paragraph (e)(v) and leave to amend was granted, the Commissioner making no objection. We therefore proceed, as the trial judge did, upon the amended notices. If it might have told against the late amendment of the notices that paragraph (e)(v) refers to the satisfaction of the Commissioner, that was not a point taken below and I offer no opinion on it. At trial and on these appeals, the parties have proceeded alike upon the footing that the Court now stands in the shoes of the Commissioner for the purposes of paragraph (e)(v)
[9]
The findings at trial
22. At the outset, it is important to be clear about the extent to which and the basis upon which the parties to the present dispute seek to have the Court generalise about the relevant relationship between Drake and the temporaries on the one hand and on the other hand between Drake and its clients. The judge dealt with this in her reasons for judgment [ reported at 98 ATC 4915 at 4919-4920]:
``12. Drake operates its business in four divisions. They are Drake Overload, concerned with office staff, Drake Medox, concerned with nurses and medical secretaries, Drake Executive, concerned with professional people such as accountants, and Drake Industrial, concerned with labourers and tradesmen. Evidence was given on behalf of Drake by one permanent staff member from each
ATC 4507
division at the level of consultant (see paragraph 14 below) or higher, by four or five temporaries from each division, and by senior executives of Drake. Large numbers of documents were tendered in evidence as indicating the nature of the relationship between Drake and the temporaries. It is clear that, with minor variations, all divisions operate in the same way. And it is not in issue that, while matters of detail have changed over the period with which these proceedings are concerned, essentially the operations have been the same.13. It was tacitly assumed that the Court would be able to form a proper view of the relationship between Drake and the temporaries from the material before it. Save as to one matter, considered in paragraph 46 below, no issue was taken by Mr Berglund for the Commissioner as to whether the situations described by the witnesses were typical, and were an appropriate basis upon which to characterise the relationship as a whole. I can only characterise the relationship as a whole if I assume that to be the case. Mr Smith, regional controller of Drake for the Pacific Rim, said that Drake would have over 5,000 temporaries on its books. The consultant staff members of Drake, who also described the relationship, were in a better position to generalise than the individual temporaries.''
23. That makes clear the limits attending any generalisation; there was no consideration of individual cases and the documents relied upon covered a variety of particular situations, persons and periods. That was the source of the problem encountered by the judge when considering the exemption in paragraph (e)(v) of s. 3C(1); there was not sufficient detail to allow her Honour to make with any precision what she regarded as the necessary findings. (This was the submission of Mr Berglund in paragraph 46 of the reasons for judgment, mentioned in what I have just quoted, a submission which the judge accepted.)
24. Instead of attempting now to restate the relevant findings below it is simpler to quote what followed in her Honour's reasons for judgment; for it sets out the findings in some detail and in the manner which is most convenient [ at 4920-4921]:
``14. A person seeking to be placed on Drake's books as available to provide services on Drake's terms will apply to the appropriate division and will be interviewed and assessed as to such matters as qualifications and personality, before acceptance and induction. Such a person may well be on the books of other similar agencies, or, having been placed on Drake's books, may later apply to and be accepted by, other such agencies. In any case, the person is completely at liberty, so far as Drake is concerned, to be on the books of, and to accept work from, those other agencies. Drake does not train its temporaries, although they may attend, as may other people, at courses conducted by Drake as another aspect of its overall business. The temporary completes various documents, including a health assessment form, an agreement as to confidentiality and a general agreement as to the terms of the arrangement. The title and detailed terms of this document have varied over the years. The substance of it is incorporated in these findings as to the nature of the relationship.
15. Ms Beazley, the operational supervisor of Drake Overload, said that Drake devotes substantial resources to trying to generate some form of loyalty in the temporaries, by the tone and style of the material handed to them, by monitoring their performance to enable the giving of awards, by organising happy hours and film nights, and by sending out newsletters and birthday cards. They are told that they must be punctual in attendance at the client's workplace, must introduce themselves as coming from Drake, must dress in a manner appropriate to the assignment, must perform the assignment as directed by the client in all respects, and must complete the assignment which has been undertaken. It is emphasised that in the client's workplace they will be perceived as coming from Drake, and that Drake will be judged by their behaviour and performance.
16. Temporaries are told that if they are likely to be late or absent they should ring Drake and not the client; Drake would notify the client. However, a number of the temporaries said that in an assignment where they had been working for some time they would, in such a situation, ring the client, rather than Drake. One temporary said that there had been an occasion when he had rung Drake, who had not notified the client
ATC 4508
of his potential absence, and since then he had always notified the client rather than Drake.17. Many temporaries stay with Drake for periods of less than one year. Individual temporaries do not have any cause to visit Drake's premises after the initial interview, although occasionally might do so to collect a cheque. (There was no evidence as to the attendance at the happy hours and film nights referred to by Ms Beazley in paragraph 15 above.) Their contact with Drake is through the consultant, with whom they deal by telephone. One temporary commented that in his field consultants changed frequently, and he had found it necessary to ring regularly so as to establish contact with new consultants. Temporaries would ring and enquire about available work, and in Drake Medox and Drake Industrial are encouraged to ring each morning and advise of their availability for the day. It appears that the work of Drake Medox is largely the provision of nurses for single shifts, rather than for longer periods. In the other divisions, while assignments of one day or even less do not appear to be unusual, an assignment might last as long as a year or even more. In Drake Overload the average length of an assignment would be three to four weeks.
18. A client in need of the services of a temporary will approach an officer of the appropriate division of Drake, who is referred to as a `consultant' and explain what kind of person is required, what services are to be performed, and for what period, and agrees to pay Drake. The consultant will undertake to provide an appropriate person from those people currently on Drake's books as able to provide relevant services. The consultant will then contact temporaries on its books by telephone to offer them the assignment.
19. No person so contacted is obliged to accept the assignment, and there is no embarrassment in refusing. Nor is Drake bound to contact any individual temporary. Drake cannot compel a temporary to accept an assignment, and a temporary cannot compel Drake to provide an assignment. Thus there is no ongoing relevant legal relationship between Drake and the temporaries. Whatever the legal relationship may be, it is established at the time when a temporary is offered and accepts an assignment with a client of Drake, and continues only for the actual period of that assignment (which may be longer or shorter than was anticipated at the outset).
20. When a temporary accepts an assignment, that person will be told by the Drake consultant what kind of work is involved, where to go and when, and the expected duration of the assignment. The temporary may not delegate the assignment. Normally the temporary will not be required to supply any equipment, although some nurses prefer to carry their own stethoscopes and other equipment, and one accountant temporary who gave evidence said that he found it convenient to use his own computer.
21. The consultant will ring the client during the first four hours of the assignment to ascertain whether all is going well or whether there are any problems, and will make a similar call at the end of each week and at the end of the assignment. Responses from clients are recorded on the temporary's file with Drake.
22. During the assignment, the temporary fills in a weekly time sheet of hours actually worked, and this is countersigned by the client and sent by the temporary to Drake. There is no payment in respect of meal breaks, public holidays, or time absent through illness. If the assignment is terminated early by the client, the temporary is not paid for the time which would have been worked had the assignment run to full term. The time sheet must be submitted by Tuesday, and the temporary is paid by Drake on the next Friday. Drake bills the client, but the temporary is paid before the fee is received from the client. The temporary is paid by Drake at the appropriate casual worker's rate, fixed by award, enterprise agreement or otherwise, that being a rate intended to compensate for the absence of holiday pay, sick pay and the like for casual workers.
23. The fee paid by the client to Drake in respect of each week of the assignment is made up of the amount paid to the temporary, and an amount to cover Drake's
ATC 4509
profit as well as income tax instalment deductions, WorkCover premiums, the superannuation guarantee charge and pay- roll tax in respect of the temporary, all of which are paid by Drake to the relevant authorities.''
25. Apparently the Commissioner sought to make something at trial of the payment by Drake of income tax instalment deductions, WorkCover premiums and the superannuation guarantee charge in respect of the temporaries. From the documents to which we were taken by counsel, it does appear that Drake told not only the temporaries but also the clients that it (Drake) would be making these payments (as well as paying pay-roll tax) for them, as it were; but it was submitted for Drake at trial that the payments were made simply because of Drake's own understanding of the requirements of the relevant legislation which was not necessarily correct. This was accepted by the judge and on that account the fact that Drake made those payments was treated as ``of less significance for present purposes than it might otherwise be''. As the judge commented, it was not necessary for her to decide whether Drake was in fact required by the other statutes to make the payments and so she expressed no opinion thereon.
26. An important fact emerges from the finding which the judge next made. Her Honour said [ at 4921]:
``25. Some of the professional people who deal with Drake Executive provide their services through contracts made with companies which they control and which in turn supply their services. Drake has not been paying pay-roll tax in respect of the services of such people.''
It seems to me that where temporaries made their services available to Drake through their own proprietary companies, they might have been in a position quite different from those who dealt personally with Drake. The contrast is demonstrated by the different treatment of the two categories in
Odco
[10]
27. One other finding remains to be mentioned. In her reasons for judgment, the judge then continued [ at 4921-4922]:
``26. If a difficulty arose between the temporary and the client, most temporaries said that they would attempt to resolve it directly with the client. An example was a nurse required to operate a piece of equipment with which she was unfamiliar. If a dispute arose, the client would normally contact Drake, and the Drake consultant would adopt a mediating role. If the client asked for the temporary to be withdrawn and replaced, this would be done. As a supervisor from Drake Overload said, the aim of the consultant in that situation would be for the client to be `100% satisfied'. The ultimate sanction is for the temporary to be taken off Drake's books altogether.''
28. No challenge was made to any of these findings; the debate on these appeals was only over the conclusions to be drawn from them. In addition, however, we were taken by Mr. Berglund through a great number of the documents in evidence, which served to flesh out, as it were, the findings of the judge and assisted us to understand the wide variety of situations, persons and times from which the parties were seeking to generalise. I mention that again because it is important to understand the limits of this judgment.
Section 3C
29. The business of Drake was that of an ``employment agency'' as that term is commonly used. It does not mean that Drake was in any sense an agent bringing its client (for whom the temporary was to work) into a direct contractual relationship with the temporary (who did the work); rather Drake entered into a contract with the client to supply the services of a temporary and Drake also entered into a contract with the temporary to
ATC 4510
work for the client. So much seems to flow from the method of payment described by the judge: the client paid Drake for the services of the temporary and Drake paid the temporary for working for the client. It was common ground on these appeals that there was no direct contractual relationship between the client and the temporary. It is in that context that s. 3C of the Act fell to be applied, once the judge was satisfied that the temporaries were not employees of Drake according to ordinary concepts. In the application of s. 3C, Drake had some success in avoiding the deeming provisions of s. 3C: it complains on these appeals that its success should have been greater. This was the primary focus of Drake's submissions and I deal first with that.30. When it is called into play, s. 3C operates, in short, to deem a person to be an employer and another to be an employee in respect of a financial year and to deem the payments by the one for the work of the other to be wages, thereby attracting the definition of ``wages'' and thus the tax levied under the Act on wages (subject to limitations found in s. 6 and elsewhere that are not presently relevant). The scheme of s. 3C is to determine, first of all, what is a ``relevant contract'', and the definition is found in sub-s. (1). It is a long sub- section but the following is sufficient for present purposes:
``(1) For the purposes of this section, a reference to a relevant contract in relation to a financial year is a reference to a contract under which a person during that financial year, in the course of a business carried on by him -
- (a) supplies to another person services for or in relation to the performance of work;
- (b) has supplied to him the services of persons for or in relation the performance of work;...
- ...
but does not include a reference to a contract of service or a contract under which a person during a financial year in the course of a business carried on by him -
- ...
- (e) has supplied to him services for or in relation to the performance of work where -
- ...
- (iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year...; [ or]
- ...
- (v) those services are supplied under a contract to which sub-paragraphs (i) to (iv) do not apply and the Commissioner is satisfied that those services are rendered by a person who ordinarily renders services of that kind to the public generally...''
31. At trial the Commissioner conceded that if the temporaries were not employees of Drake according to ordinary concepts of master and servant in the common law, then paragraph (e)(iii) served to deny the character of a ``relevant contract'' to those contracts made by Drake with temporaries under which the temporaries worked for the clients of Drake for less than 90 days in a given year. So much having been conceded, there was no further discussion of paragraph (e)(iii) in the reasons for judgment of the trial judge and the argument on these appeals centred on paragraph (e)(v). Drake argued that, to the extent that paragraph (e)(iii) did not apply, the contracts made by Drake with the temporaries fell within paragraph (e)(v).
32. Having identified what is a ``relevant contract'' under sub-s. (1), s. 3C proceeds to determine who shall be deemed an employer and who an employee, and then in consequence what payments shall be deemed ``wages''. That is the task of sub-s. (2) which, so far as presently relevant, reads thus:
``(2) For the purposes of this Act -
- (a) a person -
- (i) who during a financial year under a relevant contract supplies services to another person; [ or]
- (ii) to whom during a financial year, under a relevant contract, the services
ATC 4511
of persons are supplied for or in relation to the performance of work;...- ...
shall be deemed to be an employer in respect of that financial year; and
- (b) a person who during a financial year -
- (i) performs work for or in relation to which services are supplied to another person under a relevant contract;...
- ...
shall be deemed to be an employee in respect of that financial year; and
- (c) 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... shall be deemed to be wages paid or payable during that financial year...''
33. It will be apparent from this that if A makes a contract with B under which A ``supplies'' to B ``services for or in relation to the performance of work'', then the contract is a ``relevant contract'' by reason of both paragraphs (a) and (b) of sub-s. (1) (assuming that the exceptions do not apply) and under sub- s. (2)(a)(i) and (ii), both the person supplying the services and the person to whom the services are being supplied under the contract are, prima facie, ``deemed to be an employer''. This apparent duplication is denied by sub-s. (3) which provides as follows:
``(3) Where a contract is a relevant contract pursuant to both sub-sections (1)(a) and (1)(b) -
- (a) the person to whom, under the contract, the services of persons are supplied for or in relation to the performance of work shall be deemed to be an employer; and
- (b) notwithstanding sub-section (2)(a)(i) the person who under the contract supplies the services shall not be deemed to be an employer.''
Accordingly, it will be B (the person to whom the services are supplied) who is deemed to be an employer, not A (the person supplying the services); and by virtue of sub-s. (2)(b), the person who performs the work for or in relation to which the services are supplied is deemed to be an employee.
34. At trial as on appeal, the argument appears to have concentrated, not surprisingly, on the contract between Drake and the temporaries. On the judge's findings, each temporary made application to Drake to be put on Drake's books; there was a vetting process and acceptance by Drake led to the step called ``registration''. At that stage, an arrangement was made about the terms and conditions which were to apply if and when work was provided by Drake for the temporary and the temporary accepted the assignment. There was some argument over whether that arrangement itself amounted to a contract: but the better view is, I think, that the contract between Drake and the temporary arose at the point at which the temporary, who was not bound to accept work offered by Drake, accepted the assignment and embarked upon the job. Subject to a right in the client to terminate without charge within the first four hours of the temporary starting work, once the temporary embarked upon the work to which he or she was assigned by Drake, the client became obliged to pay Drake for the services of a temporary and the temporary was entitled to be paid by Drake for the work. That the contract between Drake and the temporary arose only as and when work was accepted by the temporary is consistent with what was said by the High Court in
Odco
[11]
35. Before turning to the application of s. 3C to the contract between Drake and a temporary, I consider the application of that section to the contract between Drake and a client; for that seems to me instructive. The contract which Drake made with each client was surely for the supply by Drake to the client of the services of a temporary. On the face of it, the contract was therefore a relevant contract under sub-s. (1)(a) and (b) for the reasons already given: Drake was supplying the services and the client was having the services supplied to it. As already explained, in those circumstances it is the client who is deemed by sub-s. (3) to be an employer, not Drake; and under sub-s. (2)(b), the temporary, who performed the work for or in relation to which the services were supplied ``to another person
[
that is, the client] under a relevant contract'' is deemed to be an employee.
[13]
ATC 4512
only Drake, but under sub-s. (2)(c) amounts paid by the deemed employer (the client) ``for or in relation to the performance of work relating to a relevant contract'' are deemed to be ``wages'' - which would appear to include amounts paid by the client to Drake. If that be so, pay-roll tax would be attracted (though in that case, payable by the client not Drake).36. That is, of course, all subject to the exceptions in s. 3C(1) which, if any of them applied, would deny the character of ``relevant contract'' to the contract between Drake and its client, thereby rendering inapplicable the multifarious deemings to which I have been referring. For example, the exception in paragraph (e)(iii) might be called into play if the client in question was being supplied by Drake with the services of temporaries for not more than 90 days in the financial year; and paragraph (e)(v) would be called into play if the services being supplied under the contract were being ``rendered by a person who ordinarily renders services of that kind to the public generally''. There is a nice question whether the ``person'' referred to in the phrase ``rendered by a person'' should be taken to be Drake or the temporary, but that might perhaps not matter to the result. My only point in referring to this is that the exceptions seem to make better sense in the context of the contract between Drake and the client.
37. In describing how s. 3C might apply to the contract between Drake and the client, I am venturing on ground not argued before us and the foregoing views must be understood as only tentative.
[14]
38. Much of the foregoing has been said because of the contrast that can be drawn between the contract which Drake makes with its clients and that which it makes with the temporaries. The latter may perhaps be described as a contract under which Drake ``supplies to another person'' (the temporary) services ``for or in relation to the performance of work'', if it is relevant to look to Drake's finding of work for the temporary and to its equipping of the temporary to present satisfactorily to the client for the purpose of performing the work to be done. I mention this last because although Drake does not train the temporaries in any formal sense, it does give them directions, sometimes supplies uniforms, and instils into them that Drake will be judged on their performance. As the documents disclose, Drake does much to designate the temporaries its ``employees'' in both the material it presents to clients and in the material it provides to temporaries. Drake does much, I think, to ensure that its image shall be enhanced by any temporary it refers to a client. Of course it is an important part of the arrangement made between Drake and the temporaries that the latter may refuse any engagement which is offered, but in readying the temporary for undertaking work for a client Drake might be thought to be supplying services to the temporary.
39. The difficulty with this analysis, however, lies in the nature and extent of the contract between Drake and the temporary. If, as I have said, that contract arises only if and when the temporary undertakes the employment which is offered by Drake to the temporary, then steps taken to find the work and steps to ready the temporary to undertake the work are both preparatory - done before the contract and not under it. Therefore it is probably better to put aside altogether paragraph (a) of sub-s. (1) and concentrate on paragraph (b).
40. It was not in dispute at trial that the contract between Drake and the temporary was a ``relevant contract'' within s. 3C(1) (subject always to the exceptions in that subsection and if, of course, the temporaries were not employees according to ordinary concepts). I suppose that that was common ground because
ATC 4513
of sub-s. (1)(b): that is to say, because the contract was one under which Drake, in the course of its business, had supplied to it ``the services of persons for or in relation to the performance of work''. The use of the plural in that expression and the apparent division in sub-s. (2)(b)(i) between the person who ``performs work'' and the services which are ``supplied to another person'' led the Full Court in Odco [16]``Once it is accepted that there was (1) an agreement between TSA and the builder for the supply of a tradesman to the builder to do certain work on terms that the builder was to remunerate TSA for supplying the tradesman and for the work which he did, and (2) an agreement between TSA and the tradesman whereby the tradesman agreed to perform work at the site at the builder's direction for remuneration to be paid by TSA, it follows as a matter of plain language that the tradesman supplies services to TSA by attending at the site and doing work there. By attending there and doing work, he supplies services to TSA for the purposes of its business, notwithstanding he also at the same time supplies the same services to the builder for the purposes of its business.
TSA argues that this analysis is flawed because it treats as the supply by the tradesman of services to TSA the performance, or part of the performance, of the work itself. However, for reasons which have been stated already, there is no necessary separation between the supply of services and the performance of the work.''
41. This was said in the context of a partnership which made available to Troubleshooters one of its partners to do the work for the client, and a company which made available to Troubleshooters its key man for the same purpose. Nonetheless, what the High Court said appears in this case to have been applied (rightly or wrongly I might say) to the position of the temporary who, as an individual, personally supplies the services and performs the work - if, as I have suggested, it was on that basis that the contract was treated as a ``relevant contract'' under sub-s. (1)(b), subject only to the exceptions. Those exceptions are in terms which appear to apply more readily to a relevant contract under paragraph (b) of sub-s. (1), than a relevant contract under paragraph (a). As the authorities stand, it seems still to be an open question whether the exceptions apply to a contract which is a relevant contract by virtue of paragraph (a), but that question was not even raised in this proceeding. I proceed then upon the footing that the contract between Drake and the temporary is a relevant contract by virtue of sub-s. (1)(b), with the consequence that Drake, being a person to whom the services are supplied, is deemed an employer by virtue of sub-s. (2)(a)(ii) to the exclusion of the temporary by virtue of sub-s. (3)(b); and by virtue of sub-s. (2)(b)(i), the temporary is deemed to be an employee.
42. The conclusion just expressed is, of course, subject to the operation of the exceptions in paragraph (e). I have mentioned already the concession made by the Commissioner that, if the temporaries were not employees of Drake according to ordinary concepts, then paragraph (e) applied in the case of any contract made with a temporary under which the temporary did not provide services for more than 90 days. This was understood to mean, I think, did not provide services to clients of Drake for more than 90 days in the financial year. (The meaning and application of sub- subparagraphs (A) and (B) of exception (e)(iii) did not rate a mention.) Of course on these appeals, Drake did not challenge the view that paragraph (e)(iii) applied; it argued only that paragraph (e)(v) also applied to deny the character of ``relevant contract'' to the contract which it, Drake, made with the temporaries.
43. In essence, the question under paragraph (e)(v) came down to this: was the contract made by Drake with a temporary one under which the services which were being supplied by the temporary to Drake -
ATC 4514
``are rendered by a person who ordinarily renders services of that kind to the public generally.''
This is where the judge found the evidence unsatisfactory. As Mr. Shaw put it to us, there were three positions that fell for consideration. First, there was the temporary who worked only for Drake and who, he submitted, could be seen to satisfy the necessary description simply because Drake itself was servicing members of the public, to wit its clients. (This was his primary submission.) Secondly, there was the temporary who, though on the books of Drake, was also on the books of other like employment agencies, working for one or the other as chance or choice would have it. (Mr. Shaw was disposed to accept, I think, that if in the first case the temporary did not answer the necessary description of one who ``ordinarily renders services of that kind to the public generally'' because he or she only worked for Drake, working for more than one employment agency did not advance the case much, if at all.) Thirdly, there was the temporary who, although on the books of Drake (and whether or not on the books of some other employment agency), also worked from time to time otherwise for members of the public without the intervention of an employment agency. It is not difficult to see how these temporaries might be characterised as rendering services of a kind ordinarily rendered by them to the public generally.
44. Of the evidence the judge said this [ at 4925]:
``44. There is ample evidence that many of the temporaries are also on the books of other agencies. Miss Williams, the account manager for Drake Medox, said that most of the nurses on Drake's books were registered with other agencies. She herself, as a registered nurse, was on the books of seven agencies, and this was not unusual. The same applied to medical secretaries. Ms Beazley estimated that over ninety per cent of the temporaries registered with Drake Overload would be on the books of other agencies. Several of the temporaries indicated that they were registered with other agencies. Where a person is registered with a number of other agencies for the supply of the same services as that person is registered with Drake to supply, it would, in my view, be difficult to deny that that person `ordinarily renders services of that kind to the public generally'. There is no evidence before me that Drake or the other agencies do not supply the services of their temporaries to the public generally, and it was not suggested that the expression `the public generally' was inappropriate to describe the clients of Drake and the other agencies.
45. Further, there is no evidence from which I could find that any of the temporaries who gave evidence would provide their services only to clients of Drake. The evidence indicates that they are registered with Drake as a means of obtaining work, not because of any particular quality applicable to the kind of work available through Drake, as opposed to any other kind of relevant work. Not only are many of them registered with other agencies, but some, at least, indicated that they also rendered services, of the same kind as they rendered to the clients of Drake, to people to whom they had become known directly, rather than through the intervention of any agency.''
45. Thus, according to the evidence there was nothing special or particular about the clients of Drake and it could not be said that they were other than members of the public at large. Mr. Shaw submitted that, given the findings made, her Honour ought to have held that paragraph (e)(v) was available to Drake, denying the character of ``relevant contract'' to all of the contracts it made with temporaries. But the judge withheld this conclusion, finding instead that although there ``will be many temporaries of whom it can be said'' that paragraph (e)(v) is satisfied, ``the evidence before me does not enable me to make any finding as to whether or not any individual temporary, other than those who gave evidence, in fact meets [ the statutory description]''. This points up the difficulty inherent in this type of proceeding where particular cases are not chosen by way of test or example and the Court is asked to generalise from a mass of evidence, both oral and documentary, on the false footing that all cases are the same. Once it emerged below that there were differences between individual cases bearing upon the problem to be resolved, I do not see how the judge could have proceeded further, save perhaps by directing further enquiry. Yet in the two recovery proceedings the onus lay on Drake to establish its
ATC 4515
entitlement and in the three objection proceedings the objector had not relied upon paragraph (e)(v) before the Commissioner; the point was taken only before the judge, and then by late amendment to the notice of objection, [18]46. It is implicit in this that I reject Mr. Shaw's primary submission, that working for Drake was sufficient without more to attract the exception in paragraph (e)(v) because Drake itself was servicing members of the public (to wit its clients). Were that submission correct, paragraph (e)(v) would be taken to apply on the ground that each temporary, by supplying services to Drake under the contract between them, was ordinarily rendering services of that kind to the public generally because Drake , under the contracts which it had with its clients, was ordinarily supplying services to the public generally. That is not the enquiry posed by the paragraph. That paragraph does not enquire after the performance of the work; it refers only to the supplying of services (and ``services'' are defined in s. 3C(6)(d) to include ``the results of work performed'', not its performance as such). Paragraph (e)(v) enquires of the services supplied by the temporary to Drake under the contract between them (which is a ``relevant contract'' unless the exception applies), asking whether those services are of a kind which the temporary ordinarily renders to members of the public - thereby distinguishing between the public and Drake and asking, it seems, after the rendering of services otherwise than under the contract between the temporary and Drake. On my reading of the Act, the temporary who generally arranges his or her own work engagements directly with members of the public (that is, without the intervention of an employment agency) but on occasion obtains an engagement through Drake, may well be one who attracts the operation of paragraph (e)(v). In contrast paragraph (e)(v) will not be called into play where the temporary is regularly working only through Drake. Such a temporary cannot be said to be supplying to Drake services of such a kind as are ordinarily supplied by that temporary to the public generally; that temporary is ordinarily supplying such services only to Drake.
47. It is true that in
Odco
the High Court said that ``there is no necessary separation between the supply of services and the performance of the work'', but that was in a different context. In
Odco
the High Court was concerned to establish (contrary to the decision of the Full Court then under appeal
[19]
48. Were it otherwise every employment agency hiring workers to the public at large would escape the net of s. 3C because of paragraph (e)(v); yet if that were its purpose, it would surely be more plainly directed to the relationship of the agency to ``the public generally'', rather than that of the temporary - or at the very least it would be more plainly directed to the work being performed rather than the services being supplied (or ``rendered''). The point is not an easy one; but on the paragraph as it stands I think that Mr. Shaw's primary submission should be rejected. The purpose of paragraph (e)(v) is then seen as denying the character of ``relevant contract'' where the temporary is ordinarily working for the public but from time to time finds an engagement through an employment agency. Of
ATC 4516
course if those occasional interventions by the agency do not yield employment in excess of 90 days in a financial year, paragraph (e)(iii) may be called into play; but if such engagements through Drake do exceed 90 days, then paragraph (e)(v) may be the relevant exception. That is how I read the exceptions and on that footing those differences which the judge perceived in the evidence became material to the application of paragraph (e)(v) and, with respect, I agree in her Honour's treatment of them.49. For these reasons I am not persuaded that Drake should have succeeded at first instance by reference to s. 3C. As will be seen, however, that is of now of secondary importance because, for the reasons I shall give, I consider that the temporaries were employees of Drake according to ordinary concepts of the common law, so that s. 3C was not called into play at all.
Ordinary concepts
50. This was, of course, the principal submission of the respondent on these appeals and in my opinion it should be accepted. None the less I have dealt first with Drake's principal contention that it escaped taxation under s. 3C because any consideration of that section requires a precise analysis, in some respects at least, of the contracts made by Drake with its own clients and with the temporaries. Thus in the course of the foregoing I have said much about those contracts which will be relevant now. By the same token, perhaps some of the difficulties I encountered in considering how s. 3C might operate in these five appeals stemmed from the factors which in the end have led me to conclude that the temporaries were in truth employees of Drake according to ordinary concepts; for of course s. 3C is called into play to deem the temporaries employees and Drake their employer only when that is not so according to ordinary concepts of the common law. In the circumstances of these five appeals, I think that those ordinary concepts determine Drake's liability.
51. At the outset, the contrast should be noted between this case and that of
Odco
. The contract which Troubleshooters, the employ- ment agency in that case, made with its tradesmen was very different from the contract which came into being here when a temporary accepted assignment from Drake. Before a tradesman's name was listed on the books of Troubleshooters, the tradesman was required to sign a document the terms of which are set out in the report.
[21]
52. That is sufficient to point up how different is the contract which came into existence here between Drake and the temporary upon the temporary accepting an assignment from Drake. True it is, like the tradesman in Odco a temporary was not bound to accept work offered by Drake and agreed to work for a price per hour for actual on-site hours, without payment for long service leave, holiday pay or sick pay. But unlike Troubleshooters, Drake undertook respons- ibility for income tax instalment deductions, WorkCover premiums, superannuation guarantee charge and, as it happened, pay-roll tax in respect of the temporary; all of these were paid by Drake to the relevant authorities (and Drake apparently told the temporary and its own client that that would be so). As already mentioned in paragraph [ 25], it was contended that this arose simply from Drake's own
ATC 4517
understanding of the relevant statutory requirements and that too much significance ought not to be placed upon its undertaking to make these payments. By the same token, the position was plainly in contrast with that which obtained in Odco . Whatever the reason for Drake's undertaking these other obligations, its doing so was certainly consistent with the temporaries being its own employees according to ordinary concepts; there was not that inconsistency with the conclusion which, obviously enough, was relied upon in Odco .53. The mere fact that Drake was obliged to pay the temporary for the work done for the client of Drake is also consistent with a contract of employment, according to ordinary concepts, existing between Drake and the temporary. What is urged against that conclusion was (i) that the work was not being performed for Drake and (ii) that day-to-day control of the temporary lay with the client, not with Drake. As for the first, that the temporary was working for the client rather than Drake, that perhaps sits ill with the equating of services being supplied by the temporary to Drake with the work which the temporary performs, by way of ``supplying the same services to'' the client. (That is the equation drawn in
Odco
.
[22]
``We should not have thought the words of section 8... lend themselves to the interpretation that the work which the tradesman agrees to perform is work to be done for the principal [ i.e. the other contracting party] rather than someone else or that the principal is to be the beneficiary of the work. True it is that there is a stronger reason for deeming the contract to be one of service in such a case, but we do not consider that this is a sufficient ground for confining the ordinary meaning of the statutory language when, according to that meaning, the words have a sensible operation.
Moreover, on the view which we take of the contractual arrangements with [ Trouble- shooters], the tradesman agrees to perform work for [ Troubleshooters], even though the builder [ that is the client of Troubleshooters] is the ultimate beneficiary of that work.''
Their Honours then made reference in detail to the arrangements entered into between Troubleshooters and the tradesman, the contract arising when the tradesman accepted the offer of work. After referring to the guarantee against faulty workmanship and the obligation of the client to pay Troubleshooters for the work done, the Court returned to the agreement between Troubleshooters and the tradesman, saying:
[25]
``That agreement is one whereby the tradesman agrees with TSA to perform work for the benefit of TSA in the sense that the work is done for the purposes of TSA's business and enables TSA to derive a remuneration from the relevant builder which will enable TSA to pay the tradesman for his services.''
Accordingly, the agreements with the two individuals whose cases were taken by way of test were held to fall within s. 8 of the Accident Compensation Act . Neither of them was considered by the Court as carrying on a trade or business himself independently of the work which each of them did for Troubleshooters (a fact which, had it existed, would have brought them within an exception in s. 8).
54. All of this is very helpful here, for it indicates that in a case like the present where A makes an agreement with B under which A supplies to B the services of C for the performance of work and A also makes a contract with C for C to perform the work for B, it can be said, readily enough, that in performing the work C not only benefits B but is also advancing the business of A, to the benefit of A. It is true that the High Court was considering a statutory definition serving to extend the concept of employment; but it seems to me to follow that a temporary, in accepting an engagement to perform work for Drake's
ATC 4518
clients, is doing the work as much for Drake as for the client. The temporary is, in a relevant sense, working for Drake while working for the client. In the one case he or she is working pursuant to a contract (with Drake) and in the other that is not so (the temporary making no contract with the client). But the contract between Drake and the temporary should not, I think, be denied the character of employment according to ordinary concepts of the common law simply because when the work is done it is done for the immediate benefit of a client of Drake.55. Then there is the second question of day- to-day control. Mr. Shaw rested much of his argument on this factor, contending that with the day-to-day control vested in the client of Drake, rather than in Drake, there could be no employment between Drake and the temporary. The Solicitor-General took issue with this, pointing to the control which Drake still exercised in relation to the temporary's remaining on site, and its powers of discipline and the like, but I say nothing about those: they appeared to me to be inconclusive. Rather, in a case like this, it may be that control, day-to-day, is not as significant as it was in the cases cited to us. Those cases were
Stevens v. Brodribb Sawmilling Co. Pty. Ltd.
,
[26]
56. In cases like these, we are often instructed to stand well back to assess the situation, after first having regard to the detailed facts. Standing back, it seems to me that in this case the subject matter of the contract between Drake and the temporary is casual employment. Once that step is taken, the rest falls into place. Drake can be seen, in a relevant sense, to be employing the temporaries to do casual work, albeit that the contract between the temporary and Drake arises only upon the temporary accepting the offer of work through Drake. The arrangement made with Drake is for casual work: the temporary is to go to the designated work-site and perform work according to the directions of the designated employer for the day; that all flows from the contract made by the temporary with Drake. Tomorrow
-
or next week or next month
-
it will be a different work-site and a different temporary employer, but again that will be the consequence of the temporary accepting an offer from Drake and a contract arising between Drake and the temporary. Under that contract, Drake is employing the temporary to do the very thing which the temporary is doing: that is to work for the client. I see no reason, then, to withhold the conclusion that in those circumstances the temporary is working for Drake under a contract of employment, albeit a contract for casual employment. If we must generalise as the trial judge was asked to do, there is little in the evidence to gainsay the conclusion I have just expressed. That was not so in
Odco
(and no doubt it was on that basis that it was common ground there
-
at least by the time the case reached the Full Court
[31]
ATC 4519
were all factors preceding the making of the contract by the temporary with Drake if, on the analysis I have suggested, that contract arises only upon the temporary's accepting an offer of work through Drake.57. Accordingly, if one looks at the matter ``from a distance'' as it were, the conclusion that the temporaries are employees of Drake according to ordinary concepts of the common law is one which not only can be supported but is I think required: the temporaries are engaged by Drake to perform casual work and the difficulties inherent in this case arise, first, from the very nature of casual work as impermanent and, secondly, from the fact that the contract between Drake and the temporary involves the temporary's doing work for and at the direction of a third party, Drake's own client. But given the contract made by the client with Drake and the contract made by Drake with the temporary, it seems to me perfectly consistent to conclude that the temporary is the employee of Drake in the relevant sense at common law. This makes the payments made by Drake to the temporary ``wages'' as defined in s. 3 on the ground that they are amounts paid by Drake to ``an employee as such'', without the need to have recourse to s. 3C. It means that pay-roll tax was payable on those amounts as ``taxable wages'' and that Drake was not entitled to any refund of what was paid or to have its objection to assessment upheld, even in part.
Limitations
58. In case I am wrong in my principal conclusion, I deal with the other issues raised in the first and second proceedings. The first is the issue of s. 20A of the Limitation of Actions Act 1958: does that bar the first proceeding because it was not brought by a writ filed within 12 months of the payment in respect of which refund is now sought? Section 20A, as it was from 15 October 1993, read as follows:
``20A. Limitation on proceeding for recovery of tax [ER ILA]
(1) Subject to sub-section (2), a proceeding for the recovery of money paid by way of tax or purported tax under a mistake (either of law or of fact) must be commenced -
- (a) within 12 months after the date of payment; or
- (b) in the case of a proceeding in accordance with another Act that provides for the refund or recovery of the money within a longer period, within that longer period.''
This section, which replaced an earlier version of s. 20A, was enacted by the
Limitation of Actions (Amendment) Act
1993
[32]
``6. Transitional provision
Section 20A of the Principal Act, as substituted by this Act, applies to payments made before, on or after the commencement of this section, other than payments in respect of which proceedings have been brought before that commencement.''
Mr. Shaw argued that s. 6 applied in this case so that s. 20A did not. The argument depended upon whether, in respect of the payments for which refund was sought in the first proceeding, it could be said that ``proceedings have been brought before'' 15 October 1993.
59. Mr. Shaw submitted that proceedings for a refund had been brought before 15 October 1993 because, although the writ was filed on 11 April 1994, the relevant applications for a refund were made on 30 June 1992 (for the period until 30 June 1991) and on 21 July 1992 (for the year ended 30 June 1992). There was of course, strictly speaking, an antecedent question under s. 20A, which was whether the refund sought was ``of money paid by way of tax or purported tax under a mistake (either of law or of fact)'', but supposing that it was, the argument was that s. 6 denied s. 20A operation in this case. In my view it did not. I cannot see how an application for a refund, by letter dated 30 June 1992 or 21 July 1992, can be said to be ``proceedings... brought'' within the meaning of s. 6.
60. This conclusion depends of course upon the meaning of the word ``proceedings'' in s. 6. Section 6 is designed to alleviate against the immediate operation of s. 20A and in s. 20A, the word ``proceeding'' is used to mean a proceeding in the Court. By extension (according to subs. (5)), ``proceeding'' includes the seeking of relief or remedy in the nature of certiorari and so on, or the seeking of an order under the
Administrative Law Act
1978, but that does not gainsay that a ``proceeding'' means a proceeding in the Court. No doubt money paid ``by way of tax or purported tax'' may become recoverable at common law when paid under a mistake; but this statute, the
Limitation of
ATC 4520
61. Perhaps because s. 20A(1)(b) refers to ``another Act that provides for the refund or recovery of the money'' paid by way of tax or purported tax, there was much debate at trial over the meaning and operation of s. 19 of the Act (the Pay-roll Tax Act ) as in force at 30 June 1992. That provision (which, like the judge, I shall call ``the original s. 19'') read as follows:
``19. Where the Commissioner finds in any case that tax has been overpaid he may refund to the employer who paid the tax the amount of tax found to be overpaid.''
62. As from 15 August 1992, there was a new s. 19, enacted by s. 27 of the
State Taxation (Amendment) Act
1992.
[33]
``19. If the Commissioner -
- (a) receives an application for a refund of overpaid tax not more than 3 years after the overpayment; and
- (b) finds that tax has been overpaid by the applicant -
the Commissioner must -
- (c) refund the amount of the overpaid tax; or
- (d) apply the amount of the overpaid tax against any liability of the applicant to the Crown, being a liability arising under, or by virtue of, an Act of which the Commissioner has the general administration, and refund any part of the amount that is not so applied.''
63. As from 15 October 1993 (the same date as that from which s. 20A of the
Limitation of Actions Act
1958 was amended), there was yet a further version of s. 19 (``the 1993 version'') enacted by s. 32 of the
State Taxation (Further Amendment) Act
1993.
[34]
64. By s. 36, however, of the
State Taxation (Further Amendment) Act
1993,
[35]
65. Mr. Shaw, however, argued that the 1992 version of s. 19 did not apply either, because the applications for refund (relevant to first proceeding) were made in June and July 1992 and so were received by the Commissioner before the 1992 version of s. 19 came into force (which was in August 1992). That meant, said Mr. Shaw, that the claims made in the first proceeding were governed by the original s. 19,
[37]
66. If this submission is correct and the original s. 19 applied to the claims in the first proceeding, it may be significant that s. 19 imposes no obligation upon the Commissioner to refund tax to the employer. In
Commr. of State Revenue (Vic.) v. Royal Insurance Aust. Ltd.
,
[38]
ATC 4521
not unlike s. 19 empowered the Commissioner to refund overpaid tax, but did not oblige him to do so: he was obliged to do so only by the general law of unjust enrichment. That seems applicable to the original s. 19. If counsel for Drake was referring to the original s. 19 to aid in his argument that before 15 October 1993 (the commencement of the Limitation of Actions (Amendment) Act 1993) ``proceedings'' for the recovery of tax had ``been brought'' within the meaning of s. 6 of that amending Act, then s. 19 does not in my opinion assist him; in my view, an application for a refund by letter to the Commissioner was not a proceeding in the sense relevant to s. 6 (or importantly, s. 20A of the Limitation of Actions Act itself), even if the original s. 19 bore upon the refunds being sought.67. Nor does Drake derive any other assistance in respect of the limitation problem from the original s. 19. In that form s. 19 did not ``provide for the refund or recovery of the money within a longer period''. It is s. 20A of the Limitation of Actions Act 1958 which bars the appellant's claim and it will be recalled that s. 20A fixes a time limit of 12 months after the date of payment for a proceeding for the recovery of money paid by way of tax or purported tax unless the proceeding brought is ``a proceeding in accordance with another Act that provides for the refund or recovery of the money within a longer period''. Even if the original s. 19 could be said to satisfy the description of ``another Act that provides for the refund or recovery of the money'' (and that may be doubted), s. 19 does not provide for its refund or recovery ``within a longer period'' - and so s. 20A(1)(b) has no application. (Nor, it may be added, does the original s. 19 - or indeed the 1992 version of s. 19 - make any reference to the institution of proceedings, which may provide another reason for concluding that sub-s. (1)(b) does not apply.) It follows that because s. 20A(1)(a) fixes a 12 month limitation period from the date of payment the appellant is barred unless saved under s. 6 of the amending Act - which, as I have said, is not the case.
68. This was in essence the reasoning of the trial judge and I must say, despite Mr. Shaw's eloquent argument, I can see no error in it. Below, counsel for the Commissioner pointed out that although s. 20A in its present form had only been introduced in 1993, the previous s. 20A, enacted by the
Limitation of Actions (Recovery of Imposts) Act
1961,
[39]
The express prohibition on refunds
69. In relation to the second proceeding in particular in which Drake was seeking to recover tax paid in respect of the four years from 1 July 1922 to 30 June 1996, the judge went on to consider whether a refund of tax was prohibited because of the injunction directed to the Commissioner in s. 22 of the
Taxation Administration Act
1997, as successor to s. 19A of the
Pay-roll Tax Act
: see Reprint No. 5. Section 19A was introduced into the latter Act by s. 27 of the
State Taxation (Amendment) Act
1992
[41]
``19A. Refunds to be paid to persons entitled [ER ILA]
(1) The Commissioner must not make a refund of tax unless satisfied that the employer to whom the refund is payable (in this section called `the applicant' ) -
- (a) has not charged to, or recovered from, and will not charge to, or recover from, any other person any amount in respect of the whole or any part of that tax; or
- (b) if the applicant has so charged or recovered any such amount, will reimburse, or will take all reasonable steps to reimburse, each other person for the amount charged or recovered.''
By an amendment made by s. 33 of the
State Taxation (Further Amendment) Act
1993
[42]
ATC 4522
of that Part''. The question was whether s. 19A or s. 22 had any application had Drake ``charged to or recovered from... any other person any amount in respect of the whole or any part of that tax'' in respect of which a refund was now being sought?70. The question whether Drake charged the tax to its client, or recovered the tax from the client is not easy. It is not made easier by the amendment in 1993 which defined ``charge'' to include ``pass on'' (a definition included in s. 22 when enacted in 1997). It was strenuously argued by Mr. Shaw that on the facts found it could not be said that Drake had charged its client with the pay-roll tax it paid, nor had it passed on to the client the amount of that tax. True it was, he was bound to concede, the payment of such tax had been included in the computation of the charge made by Drake to its client, but so had profit, the WorkCover levy, the superannuation benefit and so on; every business, he argued, included such imposts when calculating its mark-up in order to ensure that it maintained a sufficient profit level to justify its continuing to trade. That is what was done here, he said, neither more nor less; and unless every business must fall foul of s. 19A and s. 22, Drake did not. On that account, he submitted, neither s. 19A of the Pay-roll Tax Act nor s. 22 of the Taxation Administration Act provided any inhibition on the recovery of tax. (In each statute it is specifically provided by the next following section that s. 19A or s. 22, as the case may be, applies equally to the Court when a proceeding is brought for a refund.)
71. There was evidence at trial to the effect that there was included in the market rates struck by Drake a generalised margin to cover all on-costs and that, as increases occurred from time to time in the amount of imposts, those increases tended to be absorbed in what otherwise would be the profit margin. To my mind that emphasises what Mr. Shaw said, that reference to the pay-roll tax was but one consideration in striking the mark-up. Only at the end of each year, presumably, would Drake learn whether its mark-up had proved sufficient to yield a profit that made the carrying on of business worthwhile. The impact of pay-roll tax on what otherwise would have been profit would then be one consideration; but that does not seem to me to mean, even if Drake's only source of income were the amounts paid by the clients, that the clients were ``charged'' the pay-roll tax within the meaning of s. 19A or s. 22, or that the amount of pay-roll tax was ``recovered'' from them or ``passed on'' to them.
72. The judge's conclusion was that Drake did charge the amount of the pay-roll tax to its clients, or did pass it on within the meaning of the definition once introduced on 15 October 1993. But if it is not to be concluded that every business, by having regard to such imposts when striking its mark-up, is caught by s. 19A or s. 22, it is difficult to see why it should be so with Drake
-
unless the calculation of the charge to the client was more specific than the evidence I have mentioned suggests. Commonly, an insurance company will separately identify on the invoice it sends to the insured the amount of premium, the amount of stamp duty and the amount of fire brigade levy. I could understand a provision like s. 19A or s. 22 applying to prevent refund of, say, the fire brigade levy unless arrangements were in place, or were to be put in place, to reimburse the customer if the insurer came seeking a refund. Indeed, Mr Shaw was able to point to
Revenue Ruling
PT 070
of the Commissioner himself, to just such effect. Such rulings are not binding, we were told, under the
Pay-roll Tax Act
, but certainly it is of some comfort that the Commissioner himself takes (or at one stage took) the same view as I now take of s. 19A.
[43]
The correspondence
73. In relation to the first proceeding, Drake relied upon a letter dated 25 March 1993 from an investigator, one Reinisch, in which it had been said that a refund would be made. We were taken to the correspondence which included this letter and it soon became apparent that whatever was said in that correspondence about a refund was said in the context of a discussion which was still continuing about the amount of any refund due. When Mr. Reinisch wrote his letter, nothing had yet been resolved in that regard and if the letter did contain a ``promise'' to make a refund, it was only a ``promise'' to make a refund in an amount which was wholly uncertain. Moreover, there was the question of Mr. Reinisch's authority to write such a letter in so far as it was now claimed to be binding on the Commissioner;
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and we were taken to the oral evidence which made it plain that the group financial controller of Drake had no illusions about the matter: Mr. Reinisch, he said, would only be making a recommendation to someone higher with authority to determine whether a refund should be made.74. In the circumstances, there is nothing in the point taken by reference to Mr. Reinisch's letter. That is fortunate, because I think it fair to say that the basis upon which the Commissioner was supposed to be bound, whether by estoppel or admission or in some other way, was never made clear in argument.
The taxpayer's power to object
75. In relation to the refund sought in the first proceeding, Drake had an alternative argument upon which it relied if it was held (as it was below and as I have said in this judgment) that the claim to a refund by action brought was statute-barred by s. 20A of the Limitation of Actions Act . That being so, Drake points to the Commissioner's letter refusing the refund on 26 July 1993 and to Drake's lodging of an objection to that decision within 60 days. Drake points then to s. 32 of the Act (the Pay-roll Tax Act ) which prior to the commencement of the Taxation Administration Act 1997 on 1 July 1997 read thus:
``(1) A person who is dissatisfied with any decision made by the Commissioner under this Act, by which his liability to pay tax is affected, or with any assessment or determination, made by the Commissioner under this Act, may, within 60 days after service of notice of the decision, assessment or determination post to, or lodge with, the Commissioner an objection in writing...''
The Commissioner submitted that his letter of 26 July 1993 did not embody a ``decision... by which... liability to pay tax is affected''; nor was it, he said, ``any assessment or determination''.
76. Mr. Shaw relied only upon the word ``determination'' claiming that that was sufficiently broad, in ordinary parlance, to include the Commissioner's decision not to grant a refund. By 26 July 1993, the Act included the 1992 version of s. 19, obliging the Commissioner to refund the amount of overpaid tax if the Commissioner ``receives an application for a refund of overpaid tax not more than three years after the overpayment''. That version of s. 19 came into operation on 15 August 1992, and the applications for a refund were, in this case, made earlier than that. Thus, when application was made, s. 19 was in its ``original'' form (for present purposes) and that provided only that where the Commissioner ``finds in any case that tax has been overpaid he may refund
[
it] to the employer who paid the tax''.
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77. The judge accepted the submission of the Commissioner that in s. 32, as it stood, the word ``determination'' meant a decision made under a power to ``determine'' expressly conferred upon the Commissioner by sections such as ss. 3B, 3C(1)(f), 3C(4) and 13(3B) of the Act. It is a nice point whether the word ``determination'' in s. 32 should be understood as so limited; after all the Commissioner in refusing to make a refund under s. 19 of the Act was refusing to exercise a power expressly given him by the Act (even if it was only the discretionary power accorded to him by the original s. 19). As the judge herself observed, in the Taxation Administration Act 1997 (which came into force on 1 July 1997) s. 96 permits an objection to ``a decision of the Commissioner under the Pay- roll Tax Act 1971'' and such a description would appear to fit a decision of the Commissioner, even under the original s. 19, not to grant a refund. As at present advised, I incline to the view the word ``determination'' in s. 32 had the wider meaning that Drake would give it, but I refrain from expressing a final opinion. That is because it cannot avail Drake now. I have decided that pay-roll tax was payable on the amounts paid by Drake to the temporaries as employees according to the ordinary concepts of the common law of master and servant and there can be no point then in Drake pursuing any notice of objection relevant to the first proceeding.
Conclusion
78. For these reasons I would dismiss the appeals and allow the cross-appeals, confirming the assessments to which Drake took objection. In my view Drake was not entitled to any refund in either the first or the second proceeding (the recovery proceedings) and no
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error has been shown in the assessments underlying the three objection proceedings. The Commissioner succeeds in establishing, on the notices of contention and the cross-appeals, that the temporaries were all employees of Drake according to ordinary concepts of the common law, so that the amounts paid to them by Drake were ``wages'' as defined by the Act and taxable accordingly. This means that there was no need to resort to s. 3C to establish Drake's liability and the exceptions in sub-s. (1) were altogether irrelevant. In passing, I simply observe that the recent addition of sub-s. (1A) to s. 3C, expressly excepting employment agencies from the operation of that section, may not avail Drake if the foregoing commends itself to the other members of this Court.Footnotes
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