E Group Security Pty Ltd v Chief Commissioner of State Revenue (NSW)

Members:
Ward CJ

Tribunal:
Supreme Court of New South Wales

MEDIA NEUTRAL CITATION: [2021] NSWSC 1190

Decision date: 22 September 2021

Ward CJ in Eq

1. By summons filed on 12 February 2019, the plaintiff, E Group Security Pty Ltd (E Group Security) seeks a review, pursuant to s 97 of the Taxation Administration Act 1996 (NSW) (Taxation Administration Act), of the determination by the defendant (the Chief Commissioner of State Revenue - the Chief Commissioner), for the purposes of liability to payroll tax under the Payroll Tax Act 2007 (NSW) (Payroll Tax Act), that the plaintiff is an employment agent and liable for payroll tax on payments made to service providers. The determination concerns the plaintiff's liability to pay payroll tax for the financial years ended 30 June 2015 through to 30 June 2018 (Tax Years) and relates to the provision of security guarding services by E Group Security to its clients.

2. On 31 August 2018, the Chief Commissioner assessed E Group Security to payroll tax for the financial year ended 30 June 2015. This followed the conclusion of an earlier payroll tax audit, to which I refer in due course, in which E Group Security had been assessed as being compliant with its payroll tax obligations. On 3 September 2018, the Chief Commissioner assessed E Group Security to payroll tax for the financial years ended 30 June 2016 to 2018 (collectively, the Tax Years). The assessments related to payroll tax in respect of wages of security guards whose services had been sub-contracted from third parties; not E Group Security's own employees. On 30 October 2018, E Group Security objected to those assessments. On 14 December 2018, the Chief Commissioner disallowed that objection. On 12 February 2019, E Group Security filed its summons seeking the Court's review of the assessments issued to it.

3. An amended appeal statement was filed in Court by consent at the outset of the hearing on 1 February 2021. Relevantly, E Group Security does not here press issues two (an estoppel argument) and three (as to whether the plaintiffs' subcontractors had already been assessed for payroll tax in respect of the relevant payments) of its amended appeal statement. However, it relies on the facts

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stated in relation to issue two in support of its claim that any interest should be remitted.

4. The principal issue in dispute is whether the arrangements between E Group Security and its clients (or, alternatively, the arrangements between E Group Security and its wholly-owned subsidiaries) are "employment agency contracts" as defined in s 37 of the Payroll Tax Act. (An issue as to the exempt status of certain of E Group Security's clients was resolved between the parties and does not here require determination.) In addition to the principal issue in dispute there is an issue as to whether interest should be remitted and, if so, whether in whole or in part.

5. As to the contention that the contracts between E Group Security and its clients are employment agency contracts in relation to which E Group Security is the employment agent, E Group Security does not dispute that each of its clients meet the statutory description of a "client", nor does it dispute that it "procures" the services of the security guards in question. Rather, E Group Security's contention is that it does not procure the services of the security guards "for" (in the sense of "in and for the conduct of the business of") its clients (referring to
UNSW Global Pty Ltd v Chief Commissioner of State Revenue (2016) 104 ATR 577; [2016] NSWSC 1852 (UNSW Global) at [62] per White J, as his Honour then was).

6. In this regard, E Group Security places no little emphasis on the security industry legislation (see Security Industry Act 1997 (NSW) (Security Industry Act)), under which it operates and which it contends in effect precludes the integration of workers providing security services into a client's workforce by requiring the maintenance of control by E Group Security over the security guards whose services are provided to its clients. The Chief Commissioner, however, maintains that this misconceives the relevant security legislation, misapplies the relevant test (i.e., whether the workers are provided "in and for" the client's business) and is not supported by the evidence. Pausing here, as I understand its submissions, E Group Security accepts that if it routinely flouted the restrictions placed on it by the security industry legislation then the fact or existence of those legislative constraints would not assist it; but says that this is not here the case. Certainly, given the significance to its business of the group companies' security licences, it is inherently unlikely that E Group Security would knowingly breach those legislative constraints, but I come to this issue in due course.

7. As to the alternative contention that has been raised (i.e., that, on a proper characterisation of the arrangements between E Group Security and its related entities during the Tax Years, each related entity was an employment agent and E Group Security was the client, similar to the arrangements between the related entities in
Southern Cross Group Services Pty Ltd v Chief Commissioner of State Revenue (NSW) (2019) 110 ATR 16; [2019] NSWSC 666 (Southern Cross Group Services), such that E Group Security is jointly and severally liable for the unpaid payroll tax of the related entities on the payments to the workers), E Group Security contends that its arrangements with its wholly-owned subsidiaries are not employment agency contracts. E Group Security says, first, that, when those arrangements are correctly understood, the wholly-owned subsidiaries do not "procure" the services of security guards for the plaintiff (as the wholly-owned subsidiaries are not involved in any contractual relationship with the third-party subcontractors and simply perform a payroll function for E Group Security - the contractual relationship by which the services are procured being said to be between the plaintiff and the third-party subcontractors); and, second, that E Group Security is not a "client" of its wholly-owned subsidiaries in the relevant sense.

Background

8. E Group Security was established in 2004 by Mr Sami Chamoun (its Managing Director, who gave evidence at the hearing). E Group Security is the main operating company in a group of companies involved in the security industry across Australia. That group included, at the relevant time(s): E Group Protective Services Pty Ltd (E Group Protective Services) (now known as EPS Security Pty Ltd), Vital Hospitality Group Pty Ltd (Vital Hospitality Group), Vital Security Group Pty Ltd (Vital

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Security Group) and EGroup Events Australia Pty Ltd (EGroup Events) (together, the Related Entities). The Related Entities are, or were at the relevant times, wholly-owned subsidiaries of E Group Security. As I explain in due course, there have been some changes to the group - and in particular the sale of part of the business of the group - both during and after the Tax Years. Moreover, and somewhat confusingly as far as some of the invoicing is concerned, it seems that there was a re-structure (or "re-branding" as the group's national operations manager has put it - see the evidence of Mr Robert Czub to which I refer in due course) of some kind within the group by early 2018, such that EGroup Protective Services became referred to as the "Employer - EGroup Payroll Company" on at least one Workplace Employment Agreement (see Mr Czub's contract of employment at Ex 6); and at least some invoices to clients contained a notation that the services were "supplied" by an entity named as "Egroup Protective Services Pty Ltd", which has its own separate security licence.

9. The security services provided for E Group Security's clients include workers who perform not only what might be regarded as stereotypical security guard services (such as patrolling buildings, maintaining static security posts, boom gate or access control, and crowd control) but also other services (such as concierge, loading dock control, and weighbridge services) that might not necessarily require any form of security licence.

10. As to the structure of E Group Security and its Related Entities (described in opening submissions as a flat corporate group structure), since 3 October 2017, E Group Security Holdings Pty Ltd (E Group Security Holdings) has held the sole legal and beneficial share in E Group Security. Prior to that date, the share was held by Mr Chamoun (T 70).

11. The evidence of Mr Chamoun is that E Group Security is the entity in the group which, with one qualification, enters into contracts with clients (and there are in evidence some examples of such contracts, said to be representative of E Group Security's contractual arrangements, though the Chief Commissioner cavils with the proposition that these are necessarily representative and emphasises the incomplete nature of the documentary evidence).

12. Mr Chamoun's evidence is that E Group Security is also, with the same qualification, the entity that enters into contracts with third party contractors for the supply of contracted security guards. So, for example, his evidence is that in the "Events" sector, only about 15% of the security guards provided are employed by E Group Security, the balance being contracted through other firms; whereas in the "Commercial" sector, most security guards provided are E Group Security's own employees. (There is no issue here in relation to E Group Security's own employees, in respect of which it is not disputed that it pays payroll tax.)

13. The qualification to be made to both of the above statements is that, since July 2017, contracts both with clients and with third party contractors in the hospitality industry have been entered into by a separate entity (with separate branding) in the group, that being Vital Security Group (see Mr Chamoun's affidavit sworn 23 September 2019 at [18]).

14. Mr Chamoun's evidence is that payroll functions in relation to the security guards engaged by E Group Security are performed by various of the subsidiaries, depending on the State in which the particular security guard is working. The Chief Commissioner argues that, on the proper characterisation of the arrangements, those entities provide more than payroll functions in that they "procure" the security guards for the benefit of E Group Security (referring in this context to invoices which contain a notation in the footer that the security services were supplied by an entity there referred to as "Egroup Protective Services Pty Ltd").

15. There have been some changes in the shareholding of various of the companies in the group. So, for example, from 7 March 2018, the shares in EGroup Events have been held by E Group Security but prior to that the shares were held by Mr Chamoun personally (and, prior to 1 September 2017, Mr Chamoun's brother, Mr Amin Chamoun, held the shares). (Where I refer to Mr Chamoun in these reasons, it is to Mr Sami Chamoun.) As to E Group

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Protective Services, its shares were held by Mr Chamoun until 7 March 2018 when E Group Security acquired the shares. (It may well be that the changes to the shareholdings in the relevant companies followed the conclusion of the payroll tax audit to which I have referred above but that is mere speculation on my part and nothing here turns on it.)

16. Vital Hospitality Group was sold to a third party, Mr Daniel Sobb, on 11 July 2017. There was also a reference to the sale of the business of EGroup Events shortly before the hearing (T 58; T 98) but this is obviously outside the Tax Years.

17. The Chief Commissioner has noted that E Group Security promotes itself, through its website, as a "national and dynamic Australian Owned business with over 18 years' experience in tailoring and delivering high quality professional services to many private, corporate, retail and government organisations", with the stated objective being "to add value through knowledge of local process, systems, and best practices".

18. On its website, E Group Security describes the services it provides as including: "Security Services" (such as Security Officers, Dedicated Concierge Services, Loading Dock Services, Crowd Control & Events, Traffic Control, Mobile Security Patrols & Response, Car Park Attendants, Alarm Response, Weighbridge Operations, Control Room Operations "24x7" and Risk Assessments); and "Event Services" (including Crowd Control, Bag Checking, Incident Reporting, Carrying Out Evictions, Field of Play Monitoring, Patron Flow Monitoring and Management, Escorting of Players, Officials and VIPs, Traffic Management, Responsible Service of Alcohol Officers, Corporate Hostesses and Concierge Services). I refer in more detail in due course to some of the evidence in relation to the provision of such services across the different industry sectors.

19. As will be explained in more detail in due course, the evidence is that, in 2018, E Group Security had more than 600 clients in different industry sectors, with revenue of around $48 million (Mr Chamoun's affidavit sworn 23 September 2019 at [30]). The particular services provided to clients in most cases are agreed between E Group Security and clients pursuant to public or private tenders or request for quotation (RFQ) processes (the preparation of which may take some weeks or months, as the case may be). In many, if not most cases, there is a Standard Operating Procedure (SOP) prepared for the relevant client (about which there was evidence at the hearing) and in some cases standalone SOPs for particular events, addressing relevant security procedures and the like. There was also reference in the evidence to the specification of key performance indicators (KPIs) in some of the client arrangements and the monitoring (and/or self-assessment) of compliance with such KPIs.

20. Mr Chamoun's evidence is that E Group Security's clients fall within three streams or industrial sectors: (i) commercial, government and retail; (ii) events; and (iii) hospitality (Mr Chamoun's affidavit sworn 23 September 2019 at [31]). Mr Chamoun deposes that the contracts E Group Security has with clients in each sector, and the services which E Group Security performs are within each sector's stream, are very similar (though, as noted above, the Chief Commissioner cavils with this at least to some extent).

21. Mr Chamoun categorises E Group Security's clients as being: (a) NSW Government Clients (Government Clients) (of which there are around 50 clients, including hospitals, schools, councils and other government entities); (b) Community Non-Profit Establishments (Club Clients) (of which there are around 17 clients, including Bowling Clubs, RSL Clubs and Sports and Leagues Clubs); (c) Sports Organisations and Events (Sports Clients) (of which there are around 32 clients, including the NRL, various NRL clubs, Football Federation Australia and various horseracing clubs); (d) Superannuation Funds, Strata Plans, Landlords, Property Owners and Trusts (Property Clients) (of which there around 50 clients, comprising trusts and superannuation funds which tend to engage a property agent or representative to manage the asset on the trustee's behalf); (e) one Food Industry client (being the poultry business known as Baiada Group); (f) Builders and Constructions (Construction Clients) (of which there are around 31 clients, such as

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construction companies); (g) Retailers (Retail Clients) (of which there are around 40 clients, including, for example, Emerald Group Investments Pty Ltd); (h) Hotels and Pubs (Pub Clients) (of which there are about 44 clients); and (i) one-off and short-term clients (Short-term Clients) (of which there are around 260 clients, most spending "no more than $1,000").

Evidence

22. E Group Security adduced evidence from Mr Chamoun and a number of employees or contractors of E Group Security or a Related Entity, setting out the background, business or processes of E Group Security or a Related Entity, or describing the circumstances in which services are provided by security guards at particular client sites; as well as evidence from representatives of a number of clients across different industry sectors: a Property Client, Jones Lang LaSalle Pty Ltd (JLL); a Pub Client, the Northern Star Hotel in Newcastle; a Club Client, The Entrance Leagues Club; the only Food Industry Client, Baiada; and three Sports Clients, being the Australian Turf Club, Wests Tigers Rugby League Football Pty Ltd (West Tigers) and Cronulla Leagues Club (Cronulla Sharks). I will refer to that evidence in due course.

23. E Group Security also produced documentary evidence of contracts with various of its clients (albeit in some cases unsigned or in draft form, or otherwise incomplete). The Chief Commissioner notes that several of the contracts do not cover the Tax Years (at least in full); that E Group Security is not indicated as a contracting party on several of the documents; and that just over half of the contracts in evidence are with Property Clients (though it is not clear what, if anything, is said to turn on the disproportionate evidence of contracts with Property Clients).

24. Before turning in more detail to the evidence, it is convenient here to set out the relevant legislative provisions, including (given the focus placed thereon by E Group Security) the security industry legislative provisions.

Relevant legislative provisions

Payroll Tax Act

25. Section 6 of the Payroll Tax Act imposes payroll tax on taxable wages. Section 7 provides that the employer by whom taxable wages are paid or payable is liable to pay payroll tax on those wages. Section 10 provides, relevantly, that taxable wages are wages that are taxable in this jurisdiction. Section 13(1)(e) provides that wages includes an amount that is included as or taken to be wages by any other provision of the Payroll Tax Act.

26. Section 37 of the Payroll Tax Act provides that:

27. If a contract is an employment agency contract then it falls within the definition of taxable wages. Section 38 provides that an employment agent is taken to be an employer and s 39 provides that the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent. Section 40(1) provides:

For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract-

  • (a) any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract,
  • (b) the value of any benefit provided for or in relation to the provision of services in connection with the employment agency contract that would be a fringe benefit if provided to a person in the capacity of an employee,
  • (c) any payment made in relation to the service provider that would be a

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    superannuation contribution if made in relation to a person in the capacity of an employee.

28. Section 40(2) provides an exception where the client for which the services of the service provider are procured is exempt under certain provisions of the Payroll Tax Act. (As noted, there is no longer an issue in the present case about this.)

29. Relevantly, in UNSW Global at [62], White J, as his Honour then was, construed the word "for" in s 37(1) such that a contract is only an employment agency contract if the asserted employment agent procures the services of another person "in and for the conduct of the business of" the asserted employment agent's client. His Honour considered that this construction gave effect to the intended scope of the employment agency contract provisions, which (at [63]-[64]) his Honour said:

63. …were intended to apply to cases where the employment agent provided individuals who would comprise, or who would be added to, the workforce of the client for the conduct of the client's business …

64. One of the hallmarks of an independent contractor is that he or she carries on his or her own business. But sometimes that is done, or is said to be done, by the individual, in substance, working for the client in the same way as would an employee of the client. Where the services of the individual are provided through the intermediary, that is, the employment agent, to help the client conduct its business in the same way, or much the same way, as it would do through an employee, then the arrangement is within the intended scope of the section.

30. That construction has been adopted in numerous subsequent decisions (see, for example, those cited below). It is accepted by both parties in the present case that the test as to whether the services of a service provider are procured "for" the client is whether the service provider is sufficiently integrated into the client's business to be seen as an addition to the client's workforce and works in much the same way as the client's employees (see Southern Cross Group Services at [60];
HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue (2018) 108 ATR 84; [2018] NSWSC 820 (HRC Hotel Services) at [153];
Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue (NSW) (2019) 109 ATR 879; [2019] NSWSC 657 (Bayton Cleaning) at [94]-[96]).

31. In JP Property Services
Pty Ltd v Chief Commissioner of State Revenue (2017) 106 ATR 639; [2017] NSWSC 1391 (JP Property Services) at [74], Kunc J rejected the suggestion that this was equivalent to whether services of the service provider are provided "in the ordinary course of the client's business"; and in Bayton Cleaning at [104] and [266], I rejected the suggestion that a distinction between services that were "integral", "core", "ancillary" or "incidental" to a client's business was relevant to the enquiry required by s 37(1). Neither party cavils with those propositions (though the Chief Commissioner does rely upon the integral nature of the services here being provided as a relevant factor to take into consideration).

Security Industry Act

32. Part 2 Div 2 of the Security Industry Act provides for three classes of security licences, each of which is divided into subclasses. Section 7 provides for offences for unlicensed persons engaging in the conduct that would be permitted by the licences.

33. The relevant classes of licence are as follows: s 10 provides for master licences (which allow the holder of the licence to provide her or his services to carry on security activities (subclass MA) or to provide other persons to carry on security activities, each of whom must hold a class 1 or class 2 licence (subclasses MB to ME)); s 11 provides for class 1 licences (which, depending on the subclass, allow the licensee to carry on certain security activities, such as patrolling, bodyguarding or acting as a crowd controller); s 12 provides for class 2 licences (which, again depending on the subclass, allow the licensee to carry on certain other types of security activities, such selling security methods or principles, acting as a consultant in relation to security risks and providing advice in relation to security equipment).

34. In relation to master licences, the subclass determines the number of persons that

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the licensee may provide. For example, subclass MB allows for the provision of up to three persons; subclass ME allows for the provision of 50 or more persons.

35. Section 10(3) provides that:

A master licence does not authorise the licensee to enter into any arrangement, by contract, franchise or otherwise, with another person for the purpose of providing persons to carry on security activities unless the other person is the holder of a master licence or is a person holding a visitor permit authorising its holder to carry on security activities of a kind authorised by a master licence.

36. Section 38(1) provides:

A licensee must not delegate the carrying on of a security activity to a person who is not the holder of a licence authorising the person to carry on the same security activity.

Maximum penalty: 40 penalty units.

37. Thus, E Group Security points out that under the Security Industry Act a licensee is prohibited from delegating its functions to another person who is not the holder of the relevant class of licence; and a master licence does not permit the provision to an unlicensed person of persons to carry on security activities. E Group Security emphasises that the Security Industry Act expressly prohibits not only the hiring of security guarding labour to unlicensed persons, but also the delegation of the functions of a master licensee to an unlicensed person.

38. Section 29B(1) provides that:

A person who is the holder of a class 1 or class 2 licence must not carry on a security activity authorised by the licence unless the person:

  • a) is employed by a master licensee or the holder of a visitor permit authorising the holder to carry out security activities of a kind authorised by a master licence, or
  • b) is self-employed and is the holder of a master licence.

Maximum penalty: 500 penalty units or imprisonment for 2 years, or both.

39. Thus, E Group Security points out that the Security Industry Act also requires that individuals carrying out security activities must be employed by the holder of a master licence (or be self-employed and a holder of a master licence).

40. I was taken to the second reading speech to the Security Industry Bill 1997 (NSW) (Security Industry Bill), which identified that the licensing system under that new legislation was "largely based on the IRC recommendations" (a reference to the 28 February 1997 report of Justice Peterson of the Industrial Relations Commission of NSW in relation to the cash in transit security industry (New South Wales, Industrial Relations Commission, Reference by the Minister for Industrial Relations pursuant to s 345(4) of the Industrial Relations Act 1991 regarding the transport and delivery of cash and other valuables industry, (February, 1997) - the IRC Report)).

41. The IRC Report recognised that it was appropriate for the clients of the cash in transit security industry not to have involvement in the control or direction of security personnel in the industry, as those clients had neither the ability nor the expertise appropriately to manage the risks inherent in the industry. At 37-39, under the heading "The Role of Clients", the IRC Report stated:

The raison d'être of the CIT industry is to satisfy the desire of a customer or client to have cash or valuables transported in a secure way by another whose business it is so to do. The virtually universal attitude of clients appears to be that the responsibility for the carriage, including safety of goods and personnel, is that of the CIT operator.

In the case of the banks, the ABA accepts that its members do seek to transfer responsibility in this way. However, overwhelmingly they engage either Brambles or Armaguard, who are regarded by the banks as the experts in this field, with an experience and ability the banks lack. The banks rely on the operators' ready acceptance of the responsibility the banks transfer to them.

…

The ABA says, I think with some force, that it is difficult to understand how the banks can take more responsibility. Apart from

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changes in building structure, there are no obvious steps the bank could take in current circumstances of delivery which the law ought impose as a duty.

There can be no efficacy in the imposition by statute of a duty to care for contractors, particularly crew members, unless the means by which the duty may be, or is intended to be, satisfied is understood. If, for example, a cash delivery to a bank across a public footpath was thought to oblige the bank to make the delivery crew secure outside the bank while on the footpath, presumably that might be met by the bank's provision of security staff to assist the delivery crew. But the security of the crew is already the responsibility of their employer; it is the employer who must make adequate the response to the obligation imposed by s.15 of the OH&S Act.

42. The IRC Report also recognised deficiencies in the predecessor legislative regime, which imposed training and competency requirements on the individual holders of security licences but imposed no such requirements on the holders of business licences (then referred to as class 2 licences) (at 175-176). This led to a number of recommendations as to the requirements that should apply to the holder of a business licence. Recommendation 10(d) (at 182) was that business licensees should:

43. The report further recognised problems with the competence of managers and supervisors in the industry (at 17-18):

44. E Group Security points out that the IRC Report recognised that clients of providers of security services were not taking responsibility for the control, direction and supervision of security personnel; nor was it appropriate for them so to do, as they lacked the ability and expertise to do so in a manner that resulted in an effective service delivery and promoted the safety of those security personnel who work in a dangerous industry; and that the IRC Report also recognised that existing standards of supervision were sometimes lacking because of insufficient training and competency requirements for the holders of business licences. It is noted that the solution proposed by the IRC Report was for business licensees to remain responsible for the control, direction and supervision of security personnel as they had, or should have, the ability and expertise to provide it, and further to impose stricter licensing requirements for business licensees to ensure that they did have that ability and expertise.

45. That recommendation was followed. In the explanatory note to the Security Industry Bill it was said that:

The object of this Bill is to replace the Security (Protection) Industry Act 1985 with

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a legislative scheme that reflects the expansion and changing nature of the security industry.

The main feature of the proposed Act is a modified licensing scheme that is designed to provide greater control over persons who work in the security industry or who conduct a business in the security industry. Under the proposed Act, a person will require a licence if the person intends to work in the security industry (eg as a security guard, bouncer or security consultant) or to conduct a business in the security industry. A licence applicant will need to satisfy stringent probity assessments and suitability criteria in order to obtain a licence.

46. Thus, E Group Security says that, for deliberate policy reasons, the Security Industry Act prohibits security guards from operating as a labour force available for hire to be added to an unlicensed person's workforce (because an unlicensed person does not have the ability and expertise to control, direct and supervise security guards in a way that will promote the safety of those guards and members of the public).

47. The Chief Commissioner points in his submissions to the definition of "carrying on a 'security activity'" in s 4 of the Security Industry Act as follows:

48. Accordingly, it is noted by the Chief Commissioner that, subject to certain exemptions, the activities covered by the legislation relevantly include: acting as a bodyguard; acting as a crowd controller;

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patrolling properties; guarding properties; and protecting properties.

49. The Chief Commissioner points out that the Security Industry Act does not apply to persons identified in the Security Industry Regulation 2016 (NSW) (Security Industry Regulation) as being exempt (see s 6(3) of the Security Industry Act). Clause 7 of the Security Industry Regulation states that exempt persons are those specified in Schedule 1 to the regulations. It is noted that, relevantly, they include (and included during the Tax Years):

50. I refer below to the significance attributed to the above exemption. I note that reference is also made to the Security Industry Regulation 2007 (NSW) (Security Industry Regulation 2007) that was replaced by the 2016 regulation on 1 September 2016 and so was in force for part of the Tax Years - I have not been directed to any relevant differences in the sections that are referred to by the parties.

Evidence

51. I propose shortly to deal with the evidence as to particular industry sectors and clients but, first, to note the following in relation to the evidence given by Mr Chamoun and those performing either a managerial or operational role within E Group Security or its Related Entities at the relevant time(s).

Mr Chamoun

52. The principal witness for E Group Security was its Managing Director, Mr Chamoun, who gave evidence of his understanding of E Group Security's clients and the arrangements entered into with those clients over the relevant Tax Years. For example, Mr Chamoun deposed that most of the clients did not have a security licence. It was made clear in submissions that E Group Security was not here seeking to prove as a fact exactly which clients did, or did not, hold a security licence (T 23). There was also some contention as to a schedule that Mr Chamoun had prepared in which he had identified who the clients were in the relevant period, the roles performed for those clients and had made some notes about those clients. It was accepted that the schedule (which must have been created after July 2018 and hence in the context of the present proceeding being on foot - indeed it was suggested that it was prepared in the context of a mediation of the dispute) was not a

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business record as such. It was, however, relied on as evidence by Mr Chamoun of the particular types of contracts entered into and as an indication of the relative contribution to E Group Security's business of the client revenue over the relevant period (T 31). I admitted this document, subject to weight, as a summary prepared by Mr Chamoun following his review of the documents explained in his affidavit and as recording Mr Chamoun's understanding of particular clients and his understanding of the "contractor spend", i.e., the amounts that were paid and for what they were paid.

53. Mr Chamoun gave further evidence in chief (see T 80ff) as to the way the schedule had been prepared by reference to MYOB records and based on his experience as to the service type for that kind of client; and as to how certain assumptions had been made as to the revenue for the 2015 financial year (see T 83). Effectively, Mr Chamoun says he used a percentage applied to revenue to break down the income across particular client groups (see T 83). (See also the further evidence as to the creation of the spreadsheet at T 101-102.)

54. Mr Chamoun's evidence was, for example, that arrangements for clients such as Eastern Suburbs Leagues Club and the property at Aurora Place were representative of the services provided for the particular sectors in which those clients were operating (see his affidavit at [72]; [152]; T 47-48). That seems to me to be a logical proposition. There seems no logical reason, for example, for the guarding, patrolling or policing services provided by security guards not to be of a similar nature for different sporting events (Randwick Racecourse race days as opposed to NRL games, for example; unless it be assumed that the racing crowd differs relevantly from the rugby league crowd - about which I could not possibly speculate); although the level of services provided might well differ at different venues or for different events; and there might be different aspects of the provision of those services (such as access by E Group Security personnel to the joint operations control room at the Australian Turf Club on race days, for example). Similarly (with no doubt differences referable to particular buildings), it would be surprising if the nature of security services at commercial buildings differed in substantial respects (though I accept that there is a potentially relevant difference between the respective premises as to whether security guards are required to relocate to, or assist at, the concierge desks from time to time or on a regular basis; or provide services in a loading dock or car park, for example).

55. What emerged very clearly in Mr Chamoun's oral testimony was his emphasis or focus (which to my mind is quite understandable) on the need for E Group Security to comply with its legal obligations under the Security Industry Act and therefore his assertion as to the inability of E Group Security to take instructions or directions from anyone (including a client) not licensed under the legislation (see for example at T 48; T 51; T 54; T 62; T 75). Mr Chamoun was adamant that (whatever the contractual documents might say) in practice that would not occur; and I accept that he was genuine in this belief; and that it is an important issue for someone in his position. Furthermore, Mr Chamoun's evidence was corroborated in this respect by a number of other witnesses (see below) who made clear the distinction they saw between taking into account (or indeed complying with) a client's request or meeting a client's expectations; and making the relevant decisions as to security issues.

56. Cross-examined as to the various functions of security guards at commercial buildings, Mr Chamoun was taken to certain SOPs. Apart from somewhat testily (and uncharacteristically having regard to the manner in which he had otherwise given evidence) asking for a definition of "concierge services" (T 90), and dismissively describing SOPs as just containing "general stuff" that might not apply to particular sites, when focussed on the issue of concierge services Mr Chamoun maintained that E Group Security supplied no concierge staff or services to the office premises at 52 Martin Place, 100 Arthur St, Southgate Sylvania, Aurora Place or 2 Park St (T 66-67; 90). Mr Chamoun nevertheless accepted that the E Group Security "controller" would relocate to the concierge desk from 4 pm at 2 Park St (T 92). Taken to a clause in the SOP for the 420 George St building (apparently authored by an employee of E Group Security) which stated that the

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security manager reports directly to the building manager (JLL) for specified matters (including security matters), Mr Chamoun was adamant that it was "incorrect" and "illegal" for the security manager to report to building management (T 94-95).

57. I considered Mr Chamoun to be a matter of fact and forthright witness. For example, he did not shy away from his view that "marketing material" is usually completely different from what happens on the ground (T 53) and that, as adverted to above, whatever the marketing material or contract documents might say he would not accept that E Group Security would be, or was, obliged to follow directions as to security issues; rather, his position was that E Group Security would work with the client to understand its general expectations (T 56). Mr Chamoun's evidence, quite candidly, was that E Group Security would be presented with standard client contracts and that it was easier just to sign the client's contract (than to try to negotiate its terms) (T 60). However, Mr Chamoun was unshaken in his evidence that, for security matters, whatever the standard form contract or client induction might say, and whatever the client request might be, ultimately E Group Security would follow its own course (T 61). I consider that evidence to be wholly plausible (i.e., that Mr Chamoun would adopt an uncompromising position on security issues but would seek to manage client's expectations in that regard).

58. Mr Chamoun was adamant that the security guards were at all times performing the job of providing security services (T 55). As to interactions with clients or customers of clients, Mr Chamoun said that this was not part of security guards' duties but added that he would expect that the guards should be decent in those interactions (T 55; 62). All of that evidence rang true to me (the "puffery" of advertising or marketing material is by no means unheard of in the annals of litigation; and the requirement for security personnel to be presentable and courteous not surprising - indeed, it seemed to me consistent with the evidence given by the former manager of E Group Security, Mr Leif Gould, to the effect that one would place the "most articulate" guards at front of house - see T 197).

59. I accept that Mr Chamoun's evidence as to building procedure must be assessed in light of the fact that he is not the person "on the ground", so to speak, i.e., not necessarily involved in day to day operational issues for particular locations. For example, when questioned on the evidence of Mr Arif Kazi (a security guard) as to procedures to be adopted if there were to be a lockdown at Aurora Place (i.e., a reference to the building manager informing E Group Protective Services whether it is a code red (full) or code brown (less than full) lockdown) and asked whether this indicated that the building manager determines if it is a code red or code brown lockdown, Mr Chamoun conceded that he was not sure of the procedures at Aurora Place (T 60-61). Nevertheless, I consider that Mr Chamoun's evidence at a general level as to security procedures was consistent with that of the witnesses whose functions involved security services at a more operational level (see below).

60. In terms of the corporate structure, however, Mr Chamoun was perhaps best placed to give evidence as to the group and the practical role of companies within the group. Mr Chamoun described E Group Security Holdings as "my holding company" (T 70). Mr Chamoun's evidence is that he bought EGroup Events as a shelf company and became a director in September 2017 (T 70); and that, prior to that, his brother, Amin Chamoun owned the company. From 7 March 2018, the shares in EGroup Events were held by E Group Security. (Mr Chamoun noted that EGroup Events has been recently sold - T 71.) Mr Chamoun accepted that, similarly, the shares in E Group Protective Services, previously held personally by him, were also transferred to E Group Security in March 2018 (T 70).

61. Relevantly, having regard to the alternative basis on which payroll tax liability might arise, Mr Chamoun's evidence is that the Related Entities perform only a payroll function. In the course of cross-examination, Mr Chamoun was taken to a contract between E Group Security and Zenith Combined Services Pty Ltd (Zenith) (T 71-72). Mr Chamoun agreed that Zenith is a subcontractor that supplies labour to E Group Security. Mr Chamoun denied that Zenith supplied labour to the Related Entities. When taken to an

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invoice from Zenith to E Group Protective Services that suggested otherwise, Mr Chamoun denied that workers were provided to E Group Protective Services and said that he directs contractors to whom to send invoices for payment (T 72). Mr Chamoun insisted that E Group Protective Services was a "payment company". A similar line of questioning occurred in relation to E Group Security's arrangements with Prime Security Australia Pty Ltd (T 74).

62. Mr Chamoun was also taken to an invoice from E Group Security to the Australian Turf Club that noted "the above Security Services was [sic] supplied by Egroup Protective Services" and included that company's own ABN and master licence details. Mr Chamoun explained that "[e]very company that pays the staff needs to have its own master licence as well" (T 75). Mr Chamoun maintained that E Group Security is the entity that employs the staff; not E Group Protective Services (T 75). Mr Chamoun was adamant that "all my companies in every State just pay staff" and that E Group Security "does everything else" (T 76). Mr Chamoun's evidence as to the directions given for how invoices were to be directed is consistent with that given by E Group Security's former general manager, Mr Leif Gould, to which I refer below.

63. I address Mr Chamoun's evidence as to particular clients, where relevant, when I consider those clients. Suffice it for present purposes to say that I considered Mr Chamoun to be a credible witness and broadly accept that his evidence reflects his genuine understanding of the arrangements in place within the E Group Security group of companies.

Robert Czub

64. Mr Robert Czub is E Group Security's national operations manager. Mr Czub swore an affidavit on 11 December 2020.

65. From 2015 to 2017, Mr Czub worked for E Group Security as a security manager at the Barangaroo Towers (comprising three towers and a basement). After working elsewhere for a period, Mr Czub returned to E Group Security in February 2018 and commenced his current role (T 149), which he said is more at the management level of E Group Security. Mr Czub said that his original contract was with E Group Security but that, when he returned to the group, E Group Security had changed its brand, and his current contract (a copy of which was in evidence) is with E Group Protective Services (T 149). (Since there is no issue, as I understand it, as to the payment of payroll tax for E Group Security's own employees, nothing here turns on which entity is now employing Mr Czub.)

66. Mr Czub said that while he was security manager at Barangaroo Towers there were about 40 different guards reporting to him at any given time (T 150). As to the recruitment process for those guards, Mr Czub said that the guards were interviewed by E Group Security's human resources team first, then by himself and the account manager (Mr Simon Smith) (who also gave affidavit evidence in the proceeding as to what was involved in the various security roles but was not cross-examined); and then guards would be introduced to (but not vetted by) JLL (T 150).

67. Mr Czub's current role, as noted above, is at the management level of E Group Security, in which role he now has involvement in the development of SOPs. Mr Czub said that while he was working at Barangaroo Towers, it was Mr Craig James (who also gave evidence in the proceeding and was cross-examined) who was involved in the preparation of SOPs for the Barangaroo site (T 151). At T 154, Mr Czub confirmed that site managers do not have authority to "sign off" on a change to an SOP. Mr Czub agreed that a client might request a change to an SOP. Mr Czub referred (consistently with Mr Chamoun's evidence) to the SOPs as "guidelines" (T 158).

68. Mr Czub agreed that, when he was responsible for Barangaroo Towers, monthly reports would be prepared and then discussed in a meeting with a representative of JLL, E Group Security's account manager and, occasionally, the general manager (T 157). At T 160, Mr Czub said that, while the client might raise ideas or queries at these meetings, the client could not enforce ideas about how security functions are performed.

69. When giving his evidence, Mr Czub was wearing an E Group branded jacket but, when questioned about it, Mr Czub quite readily said that no one else in the group in fact had that

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jacket (indeed, he good humouredly told me that Mr Chamoun wanted one but did not yet have one) (T 163). Therefore, I draw no conclusions from the branding on this item of clothing other than to note that it is clear that E Group Security maintains its own corporate logo (and inspires employee loyalty - also, it was apparent from the exchange about Mr Chamoun wanting his jacket, that Mr Czub was hardly intimidated by giving evidence in the presence of the Managing Director). I considered Mr Czub to be a credible witness.

Leif Gould

70. Mr Leif Gould affirmed an affidavit in the proceeding on 18 July 2019, at which time he was the general manager of E Group Security. Mr Gould commenced work at E Group Security in January 2014 as general manager of the commercial/retail division. Mr Gould left E Group Security in February 2020 (T 196). Mr Gould is the holder of a NSW Security licence (class 1A, 2A and 2B). At the time that he affirmed his affidavit, Mr Gould said that the Protective Services division of the business of E Group Security serviced about 250 clients and engaged hundreds of guards in this State (see Mr Gould's affidavit at [4]).

71. Mr Gould deposed to the tender process through which he said the overwhelming majority of work was won (see Mr Gould's affidavit at [7]); the process by which E Group Security performed its role on winning a contract, including identification of suitable guards (see Mr Gould's affidavit at [8]); the ongoing service and interaction with clients (see Mr Gould's affidavit at [9]); and what he described as "contract management" or "contract administration", in the way of monitoring the service provided to clients (see Mr Gould's affidavit at [10]). Mr Gould's very clear understanding of the commercial and retail accounts for which he was responsible was that clients were never engaged in the security aspects of the engagement and he deposed that none of E Group's commercial or retail clients held a New Security Master Licence for the purpose of directing security officers (see Mr Gould's affidavit at [10]-[11]).

72. Questioned as to whether E Group Security's guards performed any concierge activities, Mr Gould said that there may be "rovers" (usually, he said, "the most articulate" guards) that would spend time during the morning in the front of house area to represent the security detail (but clearly regarded that as different from a traditional concierge role in that he said that they did not perform concierge activities such as organising movie tickets, dry-cleaning and sight-seeing) (T 197).

73. Taken to an invoice that described E Group Protective Services as providing a concierge service, Mr Gould said that he could not tell from the invoice whether it was for an ad hoc role (saying that the concierge may have called in sick, or the client may have asked for a service to be billed as a concierge service) (T 200). Taken to another invoice with a similar description, Mr Gould was insistent that "everything we did was under a security umbrella [sic]" and did not accept that the description on the invoice necessarily meant that a guard was at the concierge desk providing concierge services (T 202).

74. As to the 200 George St premises, Mr Gould said that the main tenant (Ernst & Young) had its own desk in the lobby for enquiries and its own concierge service. Mr Gould said that E Group Security had a desk next to it but that he understood that it was a way to have a controller situated in "the bowels of the building" to monitor cameras and be visible to tenants coming and going from the building (T 203).

75. Mr Gould confirmed that he was involved in the tender for the Chifley Tower building. Consistently with Mr Chamoun's evidence (to which I have referred above), Mr Gould said that there was generally very little "wiggle room" on contracts sent out as part of the tender process and that the contract would rarely be altered (T 211).

76. Significantly from my perspective, at T 215, Mr Gould said that it was important that security officers stand out and that part of the security role was to be different to the building management and client. (I consider that to be eminently plausible and it accords with common sense).

77. Mr Gould also gave evidence that business decisions would be made by Mr Chamoun or Mr Amin Chamoun, including

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decisions as to which entity would issue an invoice (T 216-217), which supports Mr Chamoun's evidence in relation to the issue of the invoices.

78. I considered Mr Gould to be a credible and sincere witness. He clearly has no personal interest in the proceeding (now having left E Group Security) and he displayed self-deprecating good humour (see, for example, his evidence at T 205.27). His evidence strongly supports the conclusion that, even at commercial buildings where the security guards might from time to time be located in the concierge area, they were performing a readily identifiable security guard role (which to my mind points against the proposition that they were integrated into the client's workforce).

Craig James

79. Mr Craig James swore two affidavits in the proceeding, one on 18 September 2019 and the other on 27 February 2020. Mr James was previously employed as the security and operations manager at E Group Security (T 226) and, as noted above, was responsible in that role for the preparation or development of one or more SOPs (about which he was not, however, cross-examined) (see T 226-229). As to the Baiada sites that Mr James regularly attended (and as to the tender for which he had some involvement), Mr James added little to the evidence contained in his affidavit in the proceeding (see T 227; and see his affidavit evidence).

80. Mr James gave evidence in his first affidavit as to his role, as E Group Security's national compliance manager, to monitor and review compliance with legislative requirements across all three of the main industry sectors in which E Group security operates (see from [11]ff of his affidavit).

Abdul Nemra

81. Mr Abdul Nemra is an operations manager at E Group Security. Mr Nemra has sworn three affidavits in the proceedings, on 18 September 2019, 1 October 2019 and 11 March 2020, respectively (although I note the 1 October 2019 affidavit was simply to amend a date in his first affidavit).

82. As to the Australian Turf Club, Mr Nemra said that this client is unique in that it has its own master licence and own security staff. However, Mr Nemra said that on race days, the E Group Security staff followed E Group Security's SOPs whereas the Australian Turf Club's SOPs related to the Club's staff (T 167).

83. Mr Nemra was firm in his evidence that clients do not direct the security guards at all. Mr Nemra drew a distinction between directions relating to non-security activities and a security activity (T 168). Mr Nemra accepted that there might be circumstances where a security guard would follow the client's direction with respect to a non-security activity but said that, generally, any directions from a client would go through him (as operations manager) (T 168).

84. Mr Nemra had not previously seen the operational management plan for the Australian Turf Club to which he was taken in cross-examination (T 168-169). Mr Nemra agreed that in the security control room (at least on race day) there would be representatives of the Australian Turf Club, the NSW police force, E Group Security and others (T 171). Mr Nemra gave examples of situations where decision-making is exercised by E Group Security and not the client (T 177). Mr Nemra's evidence was that a lot of the SOPs for events were "standalone" SOPs (T 181-182).

Brian Hill

85. Mr Brian Hill has sworn two affidavits in the proceeding, on 19 September 2019 and 27 February 2020 respectively. Mr Hill is a security manager at E Group Security with experience working at the office buildings at 420 George St, Chifley Tower and 60 Martin Place (Mr Hill's affidavit sworn 27 February 2020 at [5]; T 111).

86. Mr Hill agreed that he was involved in refining the SOP for Chifley Tower. Mr Hill agreed with the proposition that an SOP was an important document but rejected as extreme the suggestion that dismissal would result from non-compliance with an SOP (T 113). Mr Hill accepted that, when making changes to an SOP, the requests or requirements of the client would be taken into account "to some degree" and that any changes were "run past" the client (T 113-115). However, it was clear from the qualifications there made that Mr Hill regarded this as being more from a client facing

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perspective than as some form of strict obligation to do so. Mr Hill's evidence was that he would look at an SOP to understand what the guards can and cannot do but that he generally sought advice for important issues with his upper management (T 113). Furthermore, Mr Hill agreed that, when making amendments to the SOP, he was very careful to ensure that the changes are in line with the Security Industry Act (T 114). Mr Hill had never seen the contract between E Group Protective Services and the client in respect of Chifley Tower (T 114).

87. In his role at Chifley Tower, Mr Hill said that 12 E Group Protective Services' workers reported to him. Mr Hill said that a different entity, not associated with E Group Protective Services, took care of concierge services at that building (T 111-112). To his knowledge (based on his interaction with Knight Frank at Chifley Tower), Knight Frank staff did not have security licences (T 112; his affidavit sworn 19 September 2019 at [19]).

88. As to his role as site security manager, Mr Hill considered that his role was determined as per client directions but added "and as approved by E Group management" (T 116). Mr Hill accepted requests could be made by building management (for example, he referred to a request from Knight Frank as to the removal of any vagrants from or in the vicinity of the premises) and accepted that the security staff would comply with such a request (T 123).

89. As to uniform, Mr Hill agreed that Knight Frank "had a say" in what security staff would wear "to some degree" (T 122). Mr Hill deposed that the security guard's uniform included a white blouse with the E Group Security/client logo and explained in cross-examination that the client logo may have just been a "magnetic-type badge" (T 122). (A photocopy of a typical badge was later tendered as Ex A.) Mr Hill also said that E Group Security Guards wore E Group Security lanyards, safety vests, and branded shirts (T 134-135).

90. Cross-examined as to various provisions in the Chifley Tower SOP (see at T 125-136), Mr Hill agreed that the role of a rover as there set out was:

Rover patrols all floors of common areas, corporate office foyers, and carparks. In particular, attention to plant rooms, communication rooms, riser cabinets, electrical cupboards, and fire exits, to ensure that these are secure.

…

The rover will also conduct checks of all toilets for leaks or damage, conduct maintenance checks for damaged or ill-working lighting, and report defects in accordance with Knight Frank procedures.

91. Mr Hill accepted that it was an important part of the role of rovers when patrolling the building to check for any maintenance issues and report those back to the building manager (Knight Frank) and said that that was true of every building in which he had worked (T 125).

92. As to the reference in the SOP to "[a]ssist the dock master during peak periods, assist contractors, and complete tasks assigned by Chifley management, security controller, or security manager", Mr Hill assumed that the reference to "Chifley management" was a reference to Frank Knight. Mr Hill accepted that the role of dock master was as set out in his affidavit at [18]-[20], including reference to the dock manager being responsible for the efficient, safe operation of the loading dock area "in accordance with house rules". He was unable to shed light on the reference to "house rules". (I note that in his affidavit Mr Hill refers to the "security dockmaster" and to "E Group Security's dockmaster", which seems somewhat inconsistent with the reference in the SOP to the security guard assisting the dockmaster but nothing seems here to turn on that.) Relevant to note is that Mr Hill's evidence is that the role of security dockmaster includes controlling access to the dock (having been informed by building management of approved entrants); ensuring no unauthorised entry; inspection of vehicles if required and managing vehicle movement within the dock to ensure security and safety; and to conduct internal patrols (but with no involvement in car parking). Mr Hill agreed that some responsibility in the loading dock area included the reporting of spillages to the concierge (see T 126).

93. Reference was also made in cross-examination to the description in the SOP of "[p]atrol retail food court areas, car park and

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perimeter with a focus on implementing the non-smoking policy up on the colonnades".

Steve (Soubhi) Sankari

94. Mr Sankari swore an affidavit on 16 September 2019. Mr Sankari is a security guard employed since 2009 by EPS Protective Services and working at 52 Martin Place. Mr Sankari now works as a controller in the control room of the building at that address. Mr Sankari has deposed that he works specifically in access control, to ensure there is no unauthorised access to the building (see his affidavit at [8]) and he has deposed that he reports and is answerable to the security manager, Mr Wally Nasr, who is also employed by EPS and works in the control room at the building (and who reports to Mr Simon Smith, the account manager for 52 Martin Place, who works at the EPS head office in Petersham) (see at [9]). In this role, Mr Sankari said that he trains and inducts "rovers" and ensures that they follow the EPS SOPs (see at [11]; T 241). Mr Sankari has deposed that he has no or very limited interaction with the client or building manager ([12]).

95. Mr Sankari has deposed to the uniform he wears to work (see at [15]ff). Mr Sankari said that "52 Martin Place" is on the jacket but that everything else (tie, lanyards, shirt) is labelled "E Group Security". Mr Sankari accepted that the E Group Security logo on the shirt could not be seen with the jacket on (T 241). Mr Sankari said that, other than their breaks, rovers patrol constantly and that they do not have a desk. Mr Sankari said that there is a concierge desk in the building that is staffed by a Colliers employee during business hours and an E Group Security guard after hours (that being 6 pm) (T 242), at which time only people with access cards can enter the building (T 242).

Other affidavits by E Group Security personnel

96. Affidavits were also filed by the plaintiff from the following E Group Security personnel (none of whom was cross-examined): Mr Simon Smith (an operations/accounts manager at E Group Security working at the E Group head office since 2010, to whom I have referred above, who deposed to the roles of security guards at commercial buildings); Mr Steven Miklecic (an E Group Security rostering manager and formerly a casual security guard, who deposed to the overseeing of rostering of guards across client portfolios; briefing of guards about the full E Group uniform to be worn; and communications with site managers - such as Mr Hill from 2 Chifley); Mr Chris Tarmagi (a security manager employed by E Group Events Australia Pty Ltd - see his affidavit at [1]; cf Mr Sankari's reference to EPS); Mr Kenneth Walter Jenkins (general manager - operations at E Group Security); and Mr Arif Kazi (a security guard).

Evidence of representatives of clients

97. Affidavit evidence was also given by representatives of various clients of E Group Security (not all of whom were cross-examined), to which I will refer (as relevant) when considering the particular client or industry sectors below, namely, evidence from: Mr Kieran McGuinness, national operations and sustainability manager of JLL; Mr Gary Colston, head of security and access at the Australian Turf Club; Ms Lisa Wilkinson, former operations manager at the Cronulla Leagues Club; Mr Mark Chaffey, CEO of the Entrance Leagues Club; Mr John Ramplin, owner and director of Northern Star Hotel; Mr Justin Pascoe, CEO of the West Tigers; and Mr Simon Camilleri, the managing director of the Baiada group of companies.

Industry sectors - commercial, government and retail

Government

New South Wales Department of Education and Communities

98. E Group Security says that, in the relevant financial years, it provided security services to the New South Wales Department of Education and Communities; those services consisting of patrol services performed at and around public schools during school holidays.

99. Mr Chamoun's evidence is that, during school holidays, E Group Security's security guards drive in a vehicle bearing E Group Security's branding on a patrol route designed by E Group Security that takes the guards via a number of public schools, such that they pass by each relevant school between once and three times each week of the school holidays. The procedure is that when the security guards arrive at a particular

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school, they inform E Group Security's control room of their arrival by radio or mobile phone, and then they conduct an external patrol of the school; and check that all of the doors and windows are locked and no unauthorised persons are present or suspicious activity are taking place; and that when they complete that patrol, they again contact E Group Security's control room to inform the persons in the control room that the security guards have completed the patrol, and then they drive to the next school on the route (see Mr Chamoun's affidavit sworn 11 March 2020 at [6]-[8]).

100. Mr Chamoun's evidence is that sometimes E Group Security's control room will contact the security guards and instruct them to change route (for example, in response to an alarm being activated at a particular school). If the security guards present at a particular school observe any damage to any school property then the procedure is that security guards contact the police and also contact E Group Security's control room for instructions; E Group Security's control room would then provide instructions to the security guards as to what to do until the police arrived. It is said that E Group Security's control room, rather than the individual security guards, would notify the relevant persons at the Department of Education and Communities of the incident (Mr Chamoun's affidavit sworn 11 March 2020 at [9]-[12]).

101. E Group Security submits that, consistently with the obligations under the Security Industry Act, the security guards are controlled by, take direction and instruction from and report to E Group Security (not E Group Security's client). It is said that E Group Security determines the patrol route, remains in contact with the security guards and provides direction to the security guards as required; and that the Department of Education and Communities does not exercise any control over the security guards. It is submitted that the security guards are not integrated into the Department's command, control and reporting structure and, hence, cannot be integrated into the Department's workforce.

102. Further, it is said that as E Group Security's security guards only patrolled the schools during school holidays (when the Department's workforce was absent from the schools), there was a complete physical separation of the two workforces. Additionally, it is submitted that it would be unlikely that there were any occasions on which security guards patrolling a school during school holidays would have an opportunity to liaise with staff, students or members of the public but that, to the extent that they did do so (unlike as was the case in HRC Hotel Services see at [153]), on any such occasions when they did liaise with staff, students or members of the public, it would have been obvious to any observer that the security guards conducting a patrol during school holidays in vehicles bearing E Group Security's branding were not part of the Department's workforce.

New South Wales Health

103. In the relevant financial years, the work performed by the plaintiff's security guards for New South Wales Health consisted primarily of security guarding for mental health wards at the public hospitals at Liverpool, Bankstown, Nepean, Blue Mountains, Westmead and Fairfield.

104. E Group Security provided the security guarding services pursuant to the Whole of Government security panel arrangements (see Mr Chamoun's affidavit sworn 23 September 2019 at [51]). E Group Security says that an example of these arrangements is the Memorandum of Understanding between E Group Security and Liverpool Hospital (an emanation of the South Western Sydney Local Health District), cl 3 of which (headed "Performance"), provides that: in performing the services, security guards are responsible for the provision of security services on the site in which they are working; in carrying out their duties, security guards will be under the control and supervision of the security contractor and not the client nor the client's management or staff; and security guards must provide the security services required at the client's sites without seeking the assistance from the client's management or staff. Clause 3 goes on to provide that:

105. E Group Security's evidence is that the work performed by the security guards generally consisted of responding to ad hoc requests by hospital staff for a security guard to guard a patient who presented with apparent mental health problems such that the patient was a danger to the hospital staff or herself or himself. It is said that, at the time that the patient appeared to the hospital staff member to be a danger, the hospital staff member would contact E Group Security (initially by telephone) to request that a security guard be made available and, subsequently, the hospital staff member would send to E Group Security a written request (an MRN) for the security guard (see Ex B at 2814). It is noted that these requests were last-minute and varied in number (for example, ranging from between five to 25 requests on a weekend) and that the length of time that a guard was required could also vary depending on the particular patient (for example, ranging from between four hours to four weeks). It is said that, because of the unpredictable ad hoc nature of these requests, these roles were mostly performed by sub-contracted security guards, rather than E Group Security's own employed security guards (see Mr Chamoun's affidavit sworn 23 September 2019 at [51], [63]; Mr Chamoun's affidavit sworn 11 March 2020 at [13]-[17]).

106. E Group Security submits that, consistently with the obligations under the Security Industry Act, the security guards are required to remain under the control and supervision of E Group Security, and are not permitted to be under the control and supervision of E Group Security's client (Memorandum of Understanding cl 3(b)-(e)). It is said that, while E Group Security's client is able to monitor security guards' performance, the client is required to direct to E Group Security any complaints about the service being performed and the client does not discipline or direct the security guards directly (Memorandum of Understanding cl 3(e)). It is thus said that E Group Security's client is not able to control the security guards, who remain under E Group Security's control; and that they are not integrated into the client's workforce.

107. Further, it is said that the ad hoc nature of the service provided by E Group Security to New South Wales Health also demonstrates that the security guards are not integrated into that client's workforce. It is said that hospital staff members request that E Group Security provide a security guard in response to a danger presented by a patient as and when the need for mental health guarding services arise, with the need for those services varying substantially in number and duration. As the services were generally performed by sub-contracted security guards (due to the unpredictable ad hoc nature of the requests) there was no continuity in the security guards doing this work; and so it is said that there would be no opportunity for those security guards to develop relationships with hospital staff that would be expected of an integrated workforce. The plaintiffs say that the security guards were brought in to undertake a specific task, after which their services were no longer required.

Local councils

108. E Group Security provides security services at events conducted by local councils, such as festivals, carols and gatherings. Such events are ad hoc, such as annual events including the Fisher's Ghost festival and Christmas and New Year's Eve events (Mr Chamoun's affidavit sworn 23 September 2019 at [20(h)], [55]). In addition to reasons of the kind referred to above, E Group

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Security says that the ad hoc nature of the events in relation to which E Group Security provides security services to local councils evidences that its guards are not integrated into those councils' workforces. It is said that the security guards at these events necessarily arrive for the event, perform their duties and then leave, as there is then no further requirement for their services; that there is no continuity and there is no opportunity for the security guards to develop relationships with the client's workforce. The plaintiffs submit that the security guards cannot be integrated into a client's workforce when their only contact with the client is for one day (through the course of the event).

New South Wales Board of Studies

109. The work done by E Group Security's security guards for the New South Wales Board of Studies was the guarding of HSC papers (Mr Chamoun's affidavit sworn 23 September 2019 at [54]). That was necessarily an ad hoc task occurring once each year.

110. E Group Security says that it could not be said that by this one-off task E Group Security's security guards were integrated into the Board of Studies' workforce. It is submitted that the security guards providing ad hoc work necessarily arrive for that task, perform their duties and then leave, as there is then no further requirement for their services. It is said that, contrary to an integrated workforce, there is no continuity and there is no opportunity for the security guards to develop relationships with the client's workforce.

Health

HammondCare Health and Hospitals Ltd

111. In the relevant financial years, E Group Security also provided security services to HammondCare Health and Hospitals Ltd (HammondCare), a Christian charity operating not-for-profit private hospitals. The security services consisted of out-of-hours vehicular patrols around the Neringah Hospital and the Greenwich Hospital. These hospitals closed in the evening and the hospital staff would leave at around closing time. E Group Security's security guards would be present at the hospital at around closing time and would subsequently conduct approximately three vehicular patrols around the hospital during the course of the night while the hospital was closed (Mr Chamoun's affidavit sworn11 March 2020 at [18]-[19]).

112. E Group Security submits that, as its security guards were only present around the hospitals when the hospitals were closing or closed and performed their security services of vehicular patrols around the exterior of the hospitals while they were closed, there would have been no opportunity for the security guards to take instruction or direction from the client. It is said that only E Group Security could provide direction and instruction to the security guards, which was also consistent with its obligations under the Security Industry Act.

113. Further, and similarly to the situation of the security guards patrolling around public schools during school holidays, it is said that as E Group Security's security guards only patrolled around these two hospitals while the hospitals were closed and when the client's workforce was absent from the hospitals, there was a complete physical separation of the two workforces. Additionally, it is submitted that it would be unlikely that there were any occasions on which security guards patrolling a hospital would have an opportunity to liaise with hospital staff or members of the public. Further, it is said that, to the extent that they did do so, then (again unlike in HRC Hotel Services), it would have been obvious to any observer that the security guards conducting a vehicular patrol around the exterior of a hospital while it was closed were not part of the hospital's workforce.

Licensed venues

114. In the financial years ended 30 June 2015 to 2017, E Group Security's security guards provided security services for a number of clients broadly described as licensed venues (including bowling clubs, RSL clubs, sports and leagues clubs, hotels and pubs).

115. As adverted to above, in the financial year ended 30 June 2018, instead of E Group Security, Vital Security Group Pty Ltd (Vital Security), a wholly-owned subsidiary of E Group Security, provided those security services to those clients by directly entering into the contracts with clients (see Mr Chamoun's affidavit sworn 11 March 2020 at [47], [57]).

116.

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Mr Chamoun's evidence is that, in essence, the work performed by the security guards consisted essentially of preventing dangerous or anti-social behaviour in the licensed venue. One guard would generally monitor the venue's CCTV system and the other guard or guards would be located around the venue. Those guards would be neither static nor on a permanent patrol but, rather, would move around the venue and position themselves as they saw fit from time to time (Mr Chamoun's affidavit sworn 11 March 2020 at [21]-[24]).

117. E Group Security maintains that the security guards did not take directions or instructions from the venue's staff; rather, they decided for themselves where to be and what to do based on their own risk assessments, subject to receiving directions or instructions from their supervisor, who was also a security guard provided by E Group Security (or Vital Security). It is said that the venue's staff did not get involved in making decisions relating to security activities, which remained entirely within the discretion of E Group Security (or Vital Security) and its personnel; and that E Group Security (or Vital Security) was also responsible for determining how many security guards were to be present at a venue on any particular occasion (John Ramplin's affidavit sworn 14 September 2019 at [24]-[28]; Mark Chaffey's affidavit sworn 30 August 2019 at [21]-[28]; Mr Chamoun's affidavit sworn 23 September 2019 at [68], [71]-[72]; Mr Chamoun's affidavit sworn 11 March 2020 at [23], [30]).

118. An example of the contractual arrangements between E Group Security and a client in this industry is the contract between E Group Security and Eastern Suburbs Leagues Club Ltd, this client operating the Eastern Suburbs Leagues Club, the Kingswood Sports Club, the Berkeley Sports Club, the Waverley Bowling Club and the Woy Woy Leagues Club (cl 1). Clause 7, relevantly, provides:

When security guards are present on site

  • (a) Security guards are responsible for the provision of security services on site in which they are working.
  • (b) In carrying out their duties, Security guards will be under the control and supervision of the security contract and not the client nor the client's management or staff.
  • (c) Security guards must provide the security services required at the client's sites without seeking the assistance from the clients management or staff.
  • (d) Clients management and staff do not:
    • • carry and are not licensed under the security industry Act 1997 to carry on any security activity
    • • get involved in security incidents; or
    • • control, influence or assist Security guards in respect of the performance of their duties in performing the security services.
    • • The client will monitor the performance by Security guards of their duties and report to the contractor and its management any ongoing or serious isolated incidents of unsatisfactory performance by individual Security guards to the security provider who supplies those Security guards.

    …

  • (g) If after considering those reports, the client determines that a guard is unsatisfactory or that the external security provider is generally not performing its duties satisfactorily, then the client will take steps under the Agreement between it and the security provider to remedy the situation.

119. Another example to which E Group Security refers is the contract with ALH Group. Clause 3 of Annexure A to that contract provides that: crowd controllers are responsible for the provision of security services at the ALH venues in which they are working; in carrying out their duties, crowd controllers will be under the control and supervision of the security provider and not ALH nor the ALH venue management or staff; and crowd controllers must provide the security services required at the ALH venue without seeking the assistance of ALH venue management or staff. In the course of carrying out their duties, crowd controllers must not in any way represent to patrons or others that: they are employees or agents of the venue or have any association with it apart from being engaged as independent

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contractors to provide security services for the venue; or they are acting at the direction of ALH venue management. The clause further provides that ALH management and staff should not: get involved in security incidents; or control, influence or assist crowd controllers in respect of the performance of their duties in performing the security services. It states that ALH venue management must observe the performance by crowd controllers of their duties and report to nominated senior ALH management any ongoing or serious isolated incidents of unsatisfactory performance by individual crowd controllers or the security provider who supplies those crowd controllers; and that, if, after considering those reports, senior ALH management considers that a particular crowd controller is unsatisfactory or that the external security provider is generally not performing its duties satisfactorily, then ALH will take steps under the Security Management Agreement between it and the security provider to remedy the situation.

120. The evidence is that the security guards wear uniforms with E Group Security's (or Vital Security's) branding; and those uniforms do not bear the client's branding (Mr Ramplin's affidavit sworn 14 September 2019 at [30]; Mr Chaffey's affidavit sworn 30 August 2019 at [33]-[35]; Mr Chamoun's affidavit sworn 11 March 2020 at [32]). It is said that, for any observer, this differentiates the security guards from the venue's workforce (cf HRC Hotel Services at [153]).

121. Mr Chamoun's evidence is that the security guards are not responsible for checking that patrons are of a legal age to consume alcohol (that being the responsibility of the venue's staff) (Mr Chamoun's affidavit sworn 11 March 2020 at [25]).

122. The evidence is that the security guards use the publicly available facilities, rather than facilities specifically for the venue's staff; that when on a break, the security guards do not use a venue's staff rooms but, rather, will eat in the public area of the venue or leave the venue and go elsewhere; and that the security guards are only given access to the publicly available areas of a venue and, with the possible exception of a supervising security guard, the security guards do not have access to back of house areas of a venue, which are only accessible to the venue's staff (Mr Ramplin's affidavit sworn 14 September 2019 at [37]; Mr Chaffey's affidavit sworn 30 August 2019 at [37]-[39]; Mr Chamoun's affidavit sworn 11 March 2020 at [28], [29]). E Group Security again says that this indicates that they are not part of the venue's workforce (cf HRC Hotel Services at [153]).

123. E Group Security submits that, consistently with its obligations under the Security Industry Act, the security guards remain under the control and supervision of E Group Security or Vital Security, and are not subject to control or supervision by the clients. It is said that this is expressly recognised in cl 7 of the contract with Eastern Suburbs Leagues Club Ltd and cl 3 of Annexure A to the contract with ALH Group. E Group Security says that it is also borne out by the evidence, not only from Mr Chamoun but also from representatives of the clients (who have no interest in these proceedings). It is noted that their evidence is to the effect that E Group Security or Vital Security is solely responsible for providing directions and instructions to the security guards.

Events

124. In the relevant financial years, E Group Security provided security services to a number of clients that carried on large-scale sporting and other events (such as football games, horse racing, and music concerts). Clients in this category included various rugby league football clubs, the Sydney Dragway and the Australian Turf Club, which operates racetracks at Warwick Farm, Canterbury, Rosehill and Randwick. Other clients to which the plaintiff provided security guarding services for events were local councils, which conducted events such as festivals, carols and other gatherings (see Abdul Nemra's affidavit sworn 18 September 2019 at [14], [21]; Mr Chamoun's affidavit sworn 23 September 2019 at [20(h)], [55]).

125. E Group Security's evidence is that its security guards performed a number of roles at event venues, varying on the event in question; and that an individual security guard might perform different roles at different points during an event (see Abdul Nemra's

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affidavit sworn 11 March 2020 at [5]-[48]). Those different roles were identified as: entry point security (bag screening and visual inspection of patrons entering venue; patrolling the crowd line; and supervision of those tasks); internal "roaming" within particular areas at the venue to monitor for dangerous or anti-social behaviour; bar guard (to monitor the bar area for anti-social behaviour, particularly from intoxicated patrons); field of play guarding (in or around the interior boundary of the field of play to prevent patrons from attempting to enter the field of play); perimeter control (around the exterior boundary of the field of play, to detect and prevent anti-social behaviour in the vicinity of the field of play and also to prevent patrons from entering the field of play); front or back of tunnel guarding (to ensure no unauthorised access to the field of play or access to the tunnel); support and back-up response teams (these security guards roaming around and able to go to any location around the venue as instructed by E Group Security's operations manager to provide additional support to other guards); egress guarding (located around the exit points of the venue to monitor patrons leaving the venue to ensure no anti-social behaviour occurs); external guarding (at entrance points outside the venue to be on the lookout for threats of harm); and joint operations command and control box personnel.

126. The last of those roles (joint operations command and control box) are performed by E Group Security's personnel who are located in the joint operations command and control box (referred to as the "JOCC box") during the event to direct and instruct E Group Security's security guards during the course of the event. E Group Security's personnel who are located there during the event include the CCTV operator, the operations manager, the log officer and team leaders and supervisors.

127. E Group Security's evidence is that, when preparing to provide security for an event or series of events, E Group Security develops a scope of service document to set out the security services that will be provided at the event or series of events. E Group Security says that it participates in meetings with stakeholders for the events, such as the client, the local council, NSW police, other emergency services and transport services; that it develops a security risk assessment and a safe work method statement for the event; and that it develops a set of SOPs that instruct the security guards as to how all security services are to be delivered at the event. E Group Security says it also develops a security management and operational plan, which sets out how security services are to be delivered. Examples of such documents were in evidence. E Group Security says that typically a structure diagram sets out the command structure that applies to E Group Security's security guards and shows that all of E Group Security's security guards report to E Group Security's personnel. E Group Security says that it is also responsible for developing all deployment sheets, schedules and rosters for its security guards (see Mr Nemra's affidavit sworn 18 September 2019 at [45]-[46]; Mr Chamoun's affidavit sworn 23 September 2019 at [82]). In following the directives of those documents, it is said that E Group Security's security guards are following E Group Security's directions and instructions.

128. During events, E Group Security directs and instructs its security guards through its personnel who are located in the JOCC box. The CCTV operator is responsible for monitoring CCTV footage and directing the CCTV cameras to focus on areas of the event as directed by the operations manager. The operations manager, who is in charge of E Group Security's personnel, gives directions and instructions to the security guards around the event venue, either directly or through E Group Security's team leaders and supervisors, who in turn direct and instruct the security guards under their control. The security guards report incidents to the operations manager by radio, who will then determine how to respond to the incident. For example, the operations manager might instruct a support response team to go to the location of the incident and attend to the incident. The security guards will deal with any incidents and report to the operations manager by radio as to how they have dealt with the incident. The operations manager will then direct and instruct the security guards whether that is an acceptable outcome from the incident or whether the security guards need to take further steps to deal with the incident (Mr Nemra's affidavit sworn 18

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September 2019 at [50]; Mr Nemra's affidavit sworn 11 March 2020 at [37]-[43], [48]).

129. E Group Security says that there are multiple levels in E Group Security's command, control and reporting hierarchy who are able to give directions to the security guards, such as team leaders, supervisors or the operations manager but that all of the personnel giving directions and instructions are the personnel of E Group Security; and that E Group Security's security guards are briefed and trained only to follow the directions and instructions of their superiors within E Group Security's organisation (see Mr Nemra's affidavit sworn 18 September 2019 at [50]-[53]; Mr Nemra's affidavit sworn 11 March 2020 at [49]-[51]; Mr Chamoun's affidavit sworn 23 September 2019 at [82]).

130. E Group Security says that the personnel of E Group Security's client do not provide directions or instructions to E Group Security's security guards and do not get involved in making decisions about security activities. It is only E Group Security's personnel who direct and instruct E Group Security's security guards (Justin Pascoe's affidavit sworn 17 September 2019 at [9]; Lisa Wilkinson's affidavit sworn 13 August 2019 at [18]-[23]; Gary Colston's affidavit sworn 14 September 2019 at [16], [19], [24]-[27]; Abdul Nemra's affidavit sworn18 September 2019 at [15]; Abdul Nemra's affidavit sworn 11 March 2020 at [49]-[51]).

131. In particular, E Group Security says that its security guards are instructed that if a representative of E Group Security's client purports to direct or instruct them then they are to tell that person to direct any requests to E Group Security's operations manager. E Group Security points to evidence that, from time to time, during an event, representatives of E Group Security's clients have identified to E Group Security's operations manager that they made a request of E Group Security's security guards that was refused with the security guard informing the client's representative to make the request of E Group Security's operations manager; and that from time to time, during an event, representatives of E Group Security's clients have made requests of E Group Security's operations manager, such as to admit patrons who arrived on a party bus, and those requests have been refused by E Group Security's operations manager (Mr Nemra's affidavit sworn 18 September 2019 at 2019 [54]-[56]; Mr Nemra's affidavit sworn 11 March 2020 at [49]-[51]). By reason of this separate command, control and reporting structure, it is said that E Group Security's security guards cannot be said to be integrated in the clients' workforces.

132. An example of a contract between E Group Security and a client in the events industry is the contract between E Group Security and National Rugby League Ltd. Clause 7 of that contract, entitled "[r]elationships created by this agreement", provides:

This agreement creates a relationship between the parties of principal and contractor. The parties agree that they do not intend to create:

  • • a relationship of principal and agent between themselves; nor
  • • an employment relationship.

You must not hold yourself out as being authorised to exercise any responsibilities for or on behalf of us other than as provided by this agreement. For the avoidance of doubt:

  • • Personnel are supervised, controlled and managed by you (not NRL), and we will not attempt to supervise, control, manage or otherwise influence Personnel in delivery of the Planning Services and Security Services;
  • • Personnel will adhere to the standard operating procedures, risk assessment and other instructions issued to them by you (not NRL);
  • • Personnel will deliver the Planning Services and Security Services without seeking the assistance of our management or personnel; and
  • • Personnel are engaged/employed, inducted and trained by you (not NRL).

133. Another example is the contract between E Group Security and Wests Tigers Rugby League Football Club Pty Ltd. Clause 3.5.1 provides that E Group Security:

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will comply with all reasonable guidelines, requirements and instructions provided by the Company [i.e. the client] concerning the provision of the Services. However, it is the Supplier's [i.e. E Group Security's] responsibility to determine how the work is performed and the Supplier has full responsibility for the own supervision, daily direction and control of its Personnel

134. A further example is the contract between E Group Security and Penrith District Rugby League Football Club Ltd. Clause 7, relevantly, provides:

When security guards are present on site

  • (a) Security guards are responsible for the provision of security services on site in which they are working.
  • (b) In carrying out their duties, Security guards will be under the control and supervision of the security contract and not the client nor the client's management or staff.
  • (c) Security guards must provide the security services required at the client's sites without seeking the assistance from the clients management or staff.
  • (d) Clients management and staff do not:
    • • carry and are not licensed under the security industry Act 1997 to carry on any security activity
    • • get involved in security incidents; or
    • • control, influence or assist Security guards in respect of the performance of their duties in performing the security services.
    • • The client will monitor the performance by Security guards of their duties and report to the contractor and its management any ongoing or serious isolated incidents of unsatisfactory performance by individual Security guards to the security provider who supplies those Security guards.

135. E Group Security's security guards wear uniforms with E Group Security's branding, including "hi-vis" fluoro yellow vests with a large image of E Group Security's logo (being a stylised version of E Group Security's name) on the front. Their uniforms do not feature any of the client's branding (Ms Wilkinson's affidavit sworn 13 August 2019 at [25]-[26]; Mr Colston's affidavit sworn 14 September 2019 at [38]-[40]; Mr Nemra's affidavit sworn 11 March 2020 at [52]; Mr Chamoun's affidavit sworn 23 September 2019 at [84], [89]). Some example photographs of the plaintiff's security guards in uniform at events are in evidence. Again, it is said that these uniforms clearly distinguish the security guards as being part of E Group Security's workforce and as being separate from the clients' workforces (cf HRC Hotel Services at [153]).

136. E Group Security's security guards do not have access to private facilities available to the venue's staff, but rather use publicly available facilities. E Group Security's security guards are only given access to those parts of the venue that they are required to access for their duties, so most of the security guards are only able to access the publicly available areas of the venue (Ms Wilkinson's affidavit sworn 13 August 2019 at [27]; Mr Colston's affidavit sworn 14 September 2019 at [32]; Mr Nemra's affidavit sworn 18 September 2019 at [61]-[62]; Mr Nemra's affidavit sworn 11 March 2020 at [56]).

137. E Group Security's security guards generally take their breaks outside the events venue, either sitting in a public area or going to E Group Security's sign on area, which is an area outside the venue where E Group Security's security guards sign on before the start of the event. The sign on area is only accessible to E Group Security's personnel. E Group Security's security guards can get food and drink there (Mr Colston's affidavit sworn 14 September 2019 at [33]; Mr Nemra's affidavit sworn 11 March 2020 at [53]). It is said that E Group Security's use of public facilities or their sign on area for breaks indicates that they are not part of the venue's workforce (cf HRC Hotel Services at [153]).

138. E Group Security notes that members of the NSW police force attend many of the events at which E Group Security provides security guards. It says that they do so under a "user pays" model, where the police attend in their official capacity as police but E Group Security's client pays the State of NSW a fee for the police to attend the event (Ms Wilkinson's affidavit sworn 13 August

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2019 at [16]; Mr Colston's affidavit sworn 14 September 2019 at [22]; Mr Nemra's affidavit sworn 11 March 2020 at [44]; Mr Chamoun's affidavit sworn 23 September 2019 at [82]).

139. So, for example, on race days at the Australian Turf Club a representative from NSW police will be located in the JOCC box; and that representative will provide instructions to the police officers deployed around the venue. E Group Security's operations manager may make requests from time to time of the NSW police representative for police officers to do certain things, such as eject a quarrelsome patron (Mr Colston's affidavit sworn 14 September 2019 at [21]-[23]; Mr Nemra's affidavit sworn 11 March 2020 at [43]-[45]). It is said that while the police discharge a somewhat similar security function to E Group Security's security guards, and do so for a fee paid by the client to the State of NSW, it could not be that the NSW police are an addition to the workforce of E Group Security's client; rather, they remain subject to their own reporting structure and are not integrated into the workforce of E Group Security's client. E Group Security contends that the same applies to its security guards.

140. It is said that E Group Security's participation in meetings with stakeholders for the events, such as the client, the local council, NSW police, other emergency services and transport services, also supports the contention that E Group Security's security guards remain under the control of E Group Security and are not integrated into the clients' workforces. It is said that if E Group Security's security guards were going to be integrated into the clients' workforces and be under the control of the clients, there would be no need for E Group Security to participate in such meetings, as the client's participation would, on that hypothesis, allow it to provide directions to the security guards who are putatively added to its workforce.

The Australian Turf Club

141. One of E Group Security's clients in the events industry at the relevant time was the Australian Turf Club, which operates racing venues. In cross-examination, Mr Chamoun noted that, by time of the hearing, the Australian Turf Club was no longer a direct client of E Group Security, the contract having been novated to EGroup Events (which he says was a payroll company), the business of which had been sold about two weeks before the hearing (T 58; 98).

142. The head of security and access at the Australian Turf Club (Mr Gary Colston) swore an affidavit on 14 September 2019 and was cross-examined.

143. The Australian Turf Club has a master security licence which allows it to employ up to 14 security guards. It has four principal venues, including Randwick and Rosehill racecourses; and employs four full-time security guards at each of the Randwick and Rosehill racecourses on a daily basis for asset protection. Those security guards employed by the Australian Turf Club do not become involved in security operations on race day (Mr Colston's affidavit sworn 14 September 2019 at [11]-[13], [25]).

144. E Group Security provides security guards for Australian Turf Club's race day events. It provides a minimum of around 38 guards for events and up to 270 guards (for the largest event, being the Everest Carnival at Randwick), depending on the particular event (Mr Colston's affidavit sworn 14 September 2019; Mr Nemra's affidavit sworn 18 September 2019 at [60(d)]). E Group Security says that the different nature of the function performed by the Australian Turf Club's security guards is discernible from the difference in the number of guards that can be easily seen on event or race days.

145. Mr Colston deposed to having minimal involvement in the preparation of E Group Security's separate standard SOPs for the Australian Turf Club and its events (see Mr Colston's affidavit at [36]). In cross-examination, Mr Colston said that on race days there are various security firms at the racecourse (identifying those different security firms) and said that they all sign in, wear different uniforms and perform different functions (T 234; 238). In his affidavit at [38], Mr Colston deposed to the E Group Security guard's uniform at Australian Turf Club events (see at [36], [40]) and to the requirement by the Australian Turf Club that E Group Security is clearly identified as a separate and independent security company (see at [39]). Mr Colston's

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explanation for that requirement (to avoid confusion on race day and chain of command issues) and the example he gave for problems encountered where plain clothed police performed arrests on patrons (see at [39]) accords with the evidence of Mr Gould as to the importance of security guards being readily distinguishable (and, as I have earlier observed, accords with common sense).

146. Taken to an Australian Turf Club operation management plan, Mr Colston said that the Australian Turf Club produces a plan of that kind but that he had not approved that particular plan (which he considered to be out of date) (T 232). Mr Colston said that it was not the practice to provide E Group Security with the Australian Turf Club's operational manual (T 232).

147. E Group Security submits that the Australian Turf Club's security guards were not subject to E Group Security's command, control and reporting structure, and similarly it is said that E Group Security's security guards were not subject to the Australian Turf Club's command, control and reporting structure.

Cronulla Leagues Club

148. As to another of the Club clients, the Cronulla Leagues Club, evidence was given by Ms Wilkinson in an affidavit sworn on 13 August 2019. At the time Ms Wilkinson swore her affidavit she was the operations manager of Cronulla Leagues Club. Ms Wilkinson deposed that there were two businesses at the Club: the leagues club and the football club; and that she was responsible for overseeing the licence of the Cronulla Leagues Club and any area where alcohol was sold at the club or the stadium (see Ms Wilkinson's affidavit at [4]-[5]). Ms Wilkinson referred to a leagues club licence and a multi-function licence (see Ms Wilkinson's affidavit at [6]). In cross-examination, Ms Wilkinson confirmed that the Cronulla Leagues Club holds two liquor licences (T 220). Ms Wilkinson's evidence was that E Group Security's guards were situated in the stands (not in the bars) and performed crowd control (T 22).

149. Ms Wilkinson deposed that another security company was in charge of security at the Leagues Club (Exact Security) (see Ms Wilkinson's affidavit at [11]) and Ms Wilkinson deposed to the preparation for and services provided for game days where there are home games at the club, including that on those days E Group Security supplies 40-50 guards for the match (and Exact Security 40-50 guards for the club); and that NSW police also supply a number of police officers (Ms Wilkinson's affidavit at [12]-[16]). Ms Wilkinson's evidence was that she liaised with Mr Nemra from E Group Security or occasionally his deputy, Mr Chris Tarmagi and that on game day either Mr Nemra or Mr Tarmagi was in control of the E Group Security guards and operation; and that none of Ms Wilkinson's managers or staff were involved in security matters, leaving this up to the security companies (see Ms Wilkinson's affidavit at [17]-[19]); nor did anyone from the leagues club or football club give security directions on game days (noting that they did not have the expertise, training or qualifications to do so) (see Ms Wilkinson's affidavit at [21]-[22]).

Commercial buildings

150. In the relevant financial years, E Group Security provided security services to clients that owned or operated commercial buildings, such as 2 Chifley Square, the Queen Victoria Building, Aurora Place and International Towers at Barangaroo.

151. In addition to E Group Security's security managers, it is said that E Group Security's security guards performed three main roles at commercial buildings: security rover; security dockmaster and dock rovers; and security controllers.

152. First, as a "rover" (see Mr Simon Smith's affidavit affirmed 27 February 2020 at [6]-[14]; Mr Hill's affidavit sworn 27 February 2020 at [7]-[17]). A rover (as the name indicates) patrols around the building both internally and externally on a route determined by the plaintiff during both the day and night. This patrol route covers the common areas of the building, being the lobby, the common space on the floors (if any) and plant rooms, and also around the exterior of the building.

153. The evidence is that the rover does not enter areas that are leased to tenants, unless the tenant specifically requests that the plaintiff visits that area. The patrol route covers the same area of the interior of the building

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regardless of whether it occurs during the day or at night, although the order in which the security guard visits different parts of the building may differ. It is said that the only difference in patrol routes between day and night for the exterior of the building is that, during the night, the security guards will ensure that they remain at all times within view of the CCTV cameras that are operated by other of the plaintiff's security guards.

154. The evidence is: that a rover typically does not stay in any one place for an extended period, other than occasionally staying for perhaps an hour in the lobby during a morning, depending on the circumstances; that a rover's task while on patrol consists of checking for hazards and any dangerous or anti-social behaviour; and that, while on patrol, the rover uses E Group Security's "R2" computer program on the rover's iPhone to scan barcodes that the plaintiff has placed around the building at points on the rover's route. The R2 program will then present the rover with a series of questions for the rover to answer about the state of that area of the building.

155. The evidence is that a rover will also escort contractors, such as electricians and plumbers, to the relevant area in the building where the contractor is doing work. The rover receives directions from the controller (who is also one of the plaintiff's security guards, addressed below) to escort the contractor (Mr Hill's affidavit sworn 27 February 2020 at [24]). Rovers might occasionally be approached by a member of the public and be asked a question, such as for directions to transportation or cafes.

156. Most of the commercial buildings at which E Group Security provides security services have a concierge or reception desk. It is said that visitors with questions about tenants in the building would tend to ask those of the person at the concierge or reception desk.

157. Second, as a "controller" (see Mr Smith's affidavit affirmed 27 February 2020 at [20]-[22]; Mr Hill's affidavit sworn 27 February 2020at [21]-[24]). The controller stays in the building's control room during his or her shift and monitors the CCTV, alarm and telephone systems. The controller also ensures that contractors who enter the building are authorised to be there. The controller will direct a rover to escort the contractor to the relevant part of the building at which the contractor needs to do work.

158. Third, as a dockmaster (Mr Smith's affidavit affirmed 27 February 2020 at [15]-[19]; Mr Hill's affidavit sworn 27 February 2020at [18]-[20]). The dockmaster is located in the building's dock. The dockmaster ensures that only authorised persons are able to enter the building's dock for deliveries. This includes conducting internal patrols of the dock area. The dockmaster does not deal with car parking.

159. For most of the commercial buildings at which E Group Security provided security services, E Group Security provided services under a contract between E Group Security, on the one hand, and the owner of the building, on the other hand. The owner of the building was often the trustee of a trust that had no day-to-day involvement in the operation of the building. In those situations, the building was managed by a professional building manager. That building manager generally signed the contract as agent for the building owner, and the building manager was responsible for the management of the contract on behalf of the owner (Mr Chamoun's affidavit sworn 23 September 2019 at [99]-[104]).

160. One example to which reference was made is the contract for the Southgate Shopping Centre. E Group Security has entered into that contract with ISPT Pty Ltd (ISPT) in its capacity as trustee of the ISPT Retail Property Trust (item 12 of the Reference Schedule), which is the registered proprietor of the land (Recital A). The property manager at the commencement of the contract is JLL (item 8 of the Reference Schedule). The property manager from time to time is appointed by ISPT to administer the contract on its behalf (cl 5.1(a)). It is noted that E Group Security is appointed to provide its services to ISPT, rather than to the property manager (cl 2(a)).

161. Similar observations are made by the plaintiff as to other contracts to which E Group Security is a party for the provision of security guarding services at commercial buildings. For example, for the International Towers at Barangaroo, JLL is the property manager and signed the contract as agent for the owner of the

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property. Similarly, for 2 Chifley Square, Knight Frank is the property manager and appears to have signed the contract as agent for the owner of the property. Mr Chamoun was taken in cross-examination to the contract for Chifley Tower with Ausco Benedict atf Benedict Holding Trust 2 (i.e., the owner and client) where the property manager, Knight Frank Australia Pty Ltd (Knight Frank) was recorded as the client's representative (with authority to act for and on behalf of the Client in relation to the contract) (T 60).

162. The plaintiff argues that the owners of the buildings do not have their own workforce but, rather, rely on the building manager to coordinate the services required for the operation of the building; and therefore that E Group Security's security guards cannot be integrated into a workforce, or form an addition to a workforce, of E Group Security's client when that client has no workforce of its own.

163. E Group Security says that it is solely responsible for managing and controlling its security guards at the commercial buildings; and that E Group Security's client (and the building manager) do not become involved in managing or controlling the plaintiff's security guards (Mr Kieran McGuinness' affidavit sworn 23 September 2019 at [9]-[16]); Mr Smith's affidavit affirmed 16 September 2019 at [28]-[31]).

164. E Group Security's security guards all reported to E Group Security's security manager, who in turn reported to E Group Security's operations manager.

165. The evidence is that the building manager does not directly interact with E Group Security's security guards who are not among E Group Security's management personnel. Rather, the building manager's personnel had formal and informal meetings with members of E Group Security's management personnel to discuss E Group Security's performance of its security services. The building manager would also provide any complaints about E Group Security's security guards to E Group Security's management personnel, who would be responsible for dealing with the relevant security guard. The building manager's personnel also communicated requests to E Group Security's management personnel, such as for contractors to be escorted in the building or for security guards to be available for an ad hoc event taking place in the foyer of the building. It was a matter for E Group Security's management personnel to decide how to deploy E Group Security's security guards to go about implementing those requests (Mr McGuinness' affidavit sworn 23 September 2019at [13]-[16]; Mr Smith's affidavit affirmed 16 September 2019 at [29(b)]-[31], [45]-[47]; Kenneth Walter Jenkins' affidavit sworn 19 September 2019 at [47]-[48]; Steve Sankari's affidavit sworn 16 September 2019 at [8]-[10], [12], [28], [34]-[36]; Robert Czub's affidavit sworn 11 December 2020 at [17], [34]-[41]; Mr Hill's affidavit sworn 19 September 2019 at [27]-[39]; Arif Kazi's affidavit sworn 19 September 2019 at [25]-[28]). Therefore, it is said that E Group Security's security guards remain within E Group Security's command, control and reporting structure, which is entirely separate from that of the building manager (or the owner of the building). It is also noted that this is consistent with its obligations under the Security Industry Act.

166. E Group Security conducts the site induction for all of its security guards, and it also conducts all of the training for its security guards, being both the initial training for when a security guard comes to a site and ongoing training (Mr Smith's affidavit affirmed 16 September 2019 at [36]-[37]; Mr Sankari's affidavit sworn 16 September 2019 at [11]).

167. E Group Security is responsible for all of the rostering of its security guards and ensuring that all of its security guards maintain current security licences (Mr Smith's affidavit affirmed 16 September 2019 at [40]-[41]; Mr Jenkins' affidavit sworn 19 September 2019 at [40]-[43]).

168. E Group Security develops the Standard Operating Procedures for each building. These govern how the security guards are to go about discharging their duties (Mr Smith's affidavit affirmed 16 September 2019 at [50]-[53]; Mr Sankari's affidavit sworn 16 September 2019 at [25]; Mr Jenkins' affidavit sworn 19 September 2019 at [35]-[37]). Thus, in following the directives of those documents, it is said that E Group Security's security guards are following E Group Security's directions and instructions.

169.

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It is relevant here to note the evidence of Mr Kieran McGuinness, who swore an affidavit in the proceeding on 23 September 2019. Mr McGuinness is the national director, national operations and sustainability manager of JLL (his affidavit at [2]). Mr McGuinness is aware that JLL now has a master licence but says that it did not have one at the relevant time; and understands that JLL's master licence is not being used to employ security personnel guards (T 139).

170. Mr McGuinness said that at the Barangaroo Towers, the concierge staff are all direct JLL employees; and that they sit at desks in the lobbies (T 139). Mr McGuinness said that the security guards do not sit at those desks, explaining that it is not part of the "aesthetics" (T 139). However, Mr McGuinness later noted that after 4 pm when the concierge staff finish, sometimes a security guard might stay in the concierge area until 5 pm when most people have left the building (T 140).

171. Mr McGuinness' evidence was that there are three or four parts to the security services received at the Barangaroo Towers - the control room; rovers; and guards managing the loading dock (T 140).

Uniforms, use of facilities and access to building areas

172. E Group Security's security guards wear a variety of different uniforms depending on the building at which they are deployed, but they generally wear some items of clothing with E Group Security's branding on them and they always wear their security licence (Mr Sankari's affidavit sworn 16 September 2019 at [15]-[22]; Mr Czub's affidavit sworn 11 December 2020 at [22]-[23]; Mr Smith's affidavit affirmed 27 February 2020 at [23]-[27]). Photographs of some of E Group Security's security guards in uniform are in evidence. It is said that these uniforms clearly distinguish the security guards as being part of the plaintiff's workforce and as being separate from any other workforce present at the buildings (cf HRC Hotel Services at [153]).

173. As above, Mr Sankari says that, at 52 Martin Place, the building name is on the jacket but that everything else (tie, lanyards, shirt) has the E Group Security branding. Mr Sankari accepted that the E Group Security logo on the shirt could not be seen with the jacket on (T 241). This is similar to Mr Hill's evidence as to the uniform at Chifley Tower (see T 122; 134-135; Ex A).

174. E Group Security says that it provides all the resources to be used by E Group Security's security guards, such as uniforms and equipment (Mr Smith's affidavit affirmed 16 September 2019 at [38]; Mr Smith's affidavit affirmed 27 February 2020 at [25]).

175. E Group Security's security guards are permitted to use the public facilities at the commercial buildings, including public cafeterias (Mr Sankari's affidavit sworn 16 September 2019 at [31]-[32]). It is said that this indicates that they are not part of the venue's workforce (cf HRC Hotel Services at [153]).

176. E Group Security's controllers and security managers are located in the control room of the relevant building. Only E Group Security's personnel are permitted to enter the control room; anyone else, including representatives of the building manager, may only enter the control room with the consent of E Group Security's security manager (Mr Sankari's affidavit sworn 16 September 2019 at [27]-[28]).

177. E Group Security says that the nature of the security guards' work at commercial buildings is such that they do not frequently liaise with the building managers' personnel or with members of the public. It is said that their duties do not involve static guarding but rather involve either being in the control room or the dock or being a rover who is generally moving around the building. However, to the extent that the security guards do liaise with the building managers' personnel or with members of the public, it is said that because of their uniform and the wearing of the security licence the fact that the security guards might speak to other people at a commercial building would not cause an observer to think that the security guards are part of any other workforce (cf HRC Hotel Services at [153]).

Food industry

178. In the relevant financial years, E Group Security provided security services to the Baiada Group, which makes poultry-based foodstuffs, such as under the "Steggles" brand name.

179.

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At each of the Baiada Group sites for which E Group Security provides security guards, there is one security guard present at all times of the day and night (Craig William James' affidavit sworn 27 February 2020 at [8]). During working hours, the security guard is located in or in the immediate vicinity of the gatehouse, which is a small building near the entrance to the site. The gatehouse is physically separated from the central buildings where the client's staff work. For example, the gatehouse at the Hanwood site is 100m to 130m from the central buildings. The security guard checks the passes of staff who are entering the site, controls contractors' access, monitors CCTV and alarms and visually inspects trucks entering and exiting the site (Mr James' affidavit sworn 27 February 2020 at [10]-[17]).

180. Outside of working hours, the security guard unlocks and locks the site, checks the authorisations of any persons entering the site, patrols the site from time to time and monitors the CCTV and alarms. The security guard is based in the gatehouse but leaves the gatehouse to unlock and lock the site and to conduct patrols. While on patrol, the security guard remains outside the site's buildings unless the guard finds an unlocked door, in which case the guard would investigate further (Mr James' affidavit sworn 27 February 2020 at [18]-[22]).

181. All of the plaintiff's security guards at Baiada Group sites reported directly to E Group Security's account manager for Baiada Group, who was at the relevant time Mr Craig James (see Mr James' affidavit sworn 18 September 2019). Baiada Group did not consult directly with the plaintiff's security guards, but rather communicated with Mr James. It was Mr James' responsibility to direct and instruct all of the plaintiff's security guards (Mr James' affidavit sworn 18 September 2019 at [39], [43]-[45]). Thus, it is said that E Group Security's security guards operate within a reporting structure that is entirely separate from that which applies to E Group Security's client's staff.

182. E Group Security prepared and provided to its security guards all instructional documentation, such as risk assessments, safe work method statements, Standard Operating Procedures and site risk management plans. E Group Security also provided all site inductions and training for its security guards (Mr James' affidavit sworn 18 September 2019 at [41], [46]-[48]). Again, it is said that in following the directives of those documents, E Group Security's security guards are following E Group Security's directions and instructions.

183. Subject to very limited and occasional exceptions, the only persons who use the gatehouse are E Group Security's security guards. E Group Security's security guards do not take breaks with the client's staff. They also do not use the client's staff rooms, which are in the central buildings that are physically separated from the gatehouse. Rather, the security guards take their breaks at the rear of the gatehouse (Mr James' affidavit sworn 27 February 2020 at [24]-[25]).

184. E Group Security's security guards wear uniforms with E Group Security's branding, including "hi-vis" fluoro yellow vests with a large image of E Group Security's logo (being a stylised version of E Group Security's name) on the front (Mr James' affidavit sworn 27 February 2020 at [26]-[27], Annexure B).

185. E Group Security provides all the resources to be used by E Group Security's security guards, such as uniforms and sunscreen (Mr James' affidavit sworn 27 February 2020 at [28]).

186. Questioned on the "weighbridge" tasks performed by E Group Security's guards for Baiada, Mr Chamoun said that the guards check "everything" to ensure there are no unauthorised people or security risks (bombs; unauthorised devices) and that the guards weigh the trucks to make sure "there's nothing on there that we're going to get caught out by" (T 67). Mr Chamoun said that another reason for this task is to ensure nothing is stolen (T 68).

187. Mr Simon Camilleri, the managing director of Baiada, swore an affidavit in the proceeding on 5 July 2019. Mr Camilleri deposed to the fact that the Baiada entities are not licensed under the security industry legislation, that Baiada does not employ a security workforce, and is aware that it is illegal to operate any security activity without being appropriately licensed (Mr Camilleri's affidavit sworn 5 July 2019 at [5]; see also [4], [6]-[7]). Mr Camilleri

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deposed to the services provided by E Group Security for Baiada as part of its national operation (CCTV, access control services and site security services) (see Mr Camilleri's affidavit sworn 5 July 2019 at [8]-[9]). Mr Camilleri deposed that Baiada management does not instruct or direct E Group Security guards and that he has regular meetings with Mr Chamoun to discuss their performance (Mr Camilleri's affidavit sworn 5 July 2019 at [12]-[13]).

188. In cross-examination, Mr Camilleri said that, at Baiada, E Group Security workers mainly do access control (to ensure only authorised persons enter the site, and weighbridge monitoring to monitor for theft and ensure the trucks are not overweight) but that they also perform alarm monitoring (including patrolling if an alarm goes off) (T 190-193). Mr Camilleri said that E Group Security guards do not walk around the building sites (T 191). Mr Camilleri agreed that there is a constant stream of trucks entering the New South Wales sites (T 193-194). Mr Camilleri said that, at most sites, E Group Security workers would check the ID cards of people entering the site (T 194).

189. E Group Security says that, consistently with its obligations under the Security Industry Act, and similar to other client industries, the security guards remain under the control and supervision of E Group Security, and are not subject to the control or supervision by E Group Security's clients. Moreover, it is submitted that the separate location of the security guards at the Baiada Group sites, together with their distinctive uniforms, mean that, even to the extent that the security guards liaise with the client's staff and members of the public, it would be readily apparent to an ordinary observer that the security guards were not part of the client's workforce (cf HRC Hotel Services at [153]).

Other industries

190. In the relevant financial years, E Group Security also provided security services to clients in a number of other industries, the vast majority of which were for ad hoc, short term or one-off jobs.

191. These clients were mostly in the building and construction industry and the retail industry, as well as other miscellaneous clients. The work generally involved guarding a premises while building or fit-out work was being done to the premises, such as when a tenant was moving in or out. E Group Security did not generally have ongoing relationships with these clients. The clients would generally contact E Group Security by telephone to request the provision of security guarding services for the limited time that they were needed. There would not be any written agreement for the ongoing provision of security services but, rather, E Group Security would provide a quote and acceptance form for the specific job, which the client would complete (Mr Chamoun's affidavit sworn 23 September 2019 at [187]-[197], [209]-[213]).

192. One exception to E Group Security having no ongoing relationship with its clients in these industries was Emerald Group Investments Pty Ltd, which sold expensive jewellery and watches. E Group Security had multiple engagements with this client for the provision of security services at functions, showings and events (Mr Chamoun's affidavit sworn 23 September 2019 at [197]).

193. Similar submissions are made as to the inability for an integrated workforce where the work is ad hoc, and the plaintiff submits this is also the case for Emerald Group Investments Pty Ltd.

E Group Security's submissions

194. E Group Security describes its business as the provision of security guarding services to clients that operate across a variety of industries (including public schools, hospitals, pubs and clubs and commercial office buildings). It says that none of its clients operate security firms. (At least one of its clients, the Australian Turf Club, does, however, have its own security licence under the Security Industry Act.)

195. Although there is a dispute as to the precise nature of the legal arrangements between E Group Security and its wholly-owned subsidiaries by which security guarding labour is obtained, E Group Security says that it is uncontroversial that the business model of its corporate group, considered as a whole, involves the employment of some security guards but with the balance of the security guarding labour force being provided to it by third-party subcontractors.

196.

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E Group Security emphasises the distinction between the concept of being "integrated" and the concept of being "integral"; and says (which I accept) that the correct test is whether the service provider is integrated into the client's workforce, not whether the services performed by the service provider are integral to the client's business (in the sense that the business could not operate without those services). E Group Security says (and again, I agree) that the test is not whether or not the client is able to operate its business without the services provided by the service provider; rather, the focus of the enquiry is on the manner in which the service provider provides the services, and whether that manner of provision of services is indicative of the service provider being integrated into the client's workforce and working in much the same manner as the client's employees (see the analysis in HRC Hotel Services at [153], applying White J's reasoning in UNSW Global).

197. Although the manner in which its security guards perform their security guarding work varies as between different clients' industries, E Group Security says that what is applicable across all clients' industries (and what it submits is key to demonstrating that the security guards are not integrated into the clients' workforces) is that E Group Security strictly maintains control of all of its security guards and that its clients do not exercise any degree of control over its security guards.

198. It is said that the security guards follow E Group Security's directions and instructions and remain distinctly within E Group Security's command, control and reporting structure; that the clients do not provide directions or instructions to the security guards; and that the security guards remain entirely separate from the command, control and reporting structure that applies to the clients' workforces. E Group Security contends that this is the antithesis of the security guards being integrated into the clients' workforces.

199. E Group Security emphasises the factual nature of the enquiry (referring to
Commissioner of State Revenue v Liquid Rock Constructions Pty Ltd (2012) 87 ATR 921; [2012] VSC 329 (Liquid Rock)), as to the distinction between, on the one hand, an employee providing duties for or in connection with the business of the other person and, on the other, an employee performing duties for the employer by which the employer provides its services to the other person. In that case, Pagone J concluded that it turned on whether the other person had the practical ability to direct the employee in the manner of performance of her or his duties (at [7]-[8]). Reference is also made to
Commissioner of Stamps v Garrett Hunter Pty Ltd (1997) 69 SASR 275 at 282-283 per Doyle CJ, which was cited in Liquid Rock.

200. E Group Security contends that, understood within the framework of the Security Industry Act, which mandates that E Group Security maintain control over the security guards (and prohibits E Group Security's clients from controlling the security guards), the security guards are thus prohibited from being integrated into the command, control and reporting structure that applies to the clients' workforces.

201. E Group Security does not contend that, simply because of the existence of the Security Industry Act, the security guards cannot be integrated into clients' workforces (accepting that if it routinely contravened the Security Industry Act and allowed the security guards to report to, and to be directed and instructed by, E Group Security's clients, then those security guards might conceivably be integrated into the clients' workforces). However, its position is that the security guards comply with the Security Industry Act by following E Group Security's command, control and reporting structure and being separate from that of E Group Security's clients; and hence, it is said that they are not integrated into the clients' workforces.

202. As to the evidence of compliance with its obligations under the Security Industry Act, E Group Security points to the fact that, with very few exceptions, E Group Security's clients do not have master licences (and hence, it is said that those clients cannot and do not employ security guards or carry out security activities). E Group Security points to a number of other factors that it says demonstrate that its security guards are not integrated into the clients' workforces: that they wear

ATC 24613

uniforms with E Group Security's branding; that they use publicly available facilities and do not use staff rooms available to the clients' staff; that E Group Security is responsible for all site inductions, training (both initial and ongoing), licensing compliance and rostering for the security guards; and that E Group Security prepares all instruction manuals and other documentation used by the security guards for direction and guidance in the performance of their functions.

203. As to the evidence in relation to particular clients and industries, I have referred to this above.

204. As to the alternative contention (i.e., that the arrangements between E Group Security and its wholly-owned subsidiaries are employment agency contracts in relation to which those wholly-owned subsidiaries are the employment agents, which are said to procure the services of security guards for E Group Security; and hence the wholly-owned subsidiaries are liable to pay payroll tax on the amounts taken to be wages under s 40(1) and, by reason of their failure to pay that payroll tax, E Group Security is jointly and severally liable for those amounts of payroll tax under s 81), E Group Security makes the following submissions.

205. E Group Security contends, first, that on a true understanding of the arrangements between E Group Security and its wholly-owned subsidiaries, those wholly-owned subsidiaries did not "procure" the services of the security guards for E Group Security; and, second, that E Group Security was not the "client" of its wholly-owned subsidiaries.

206. As to the first of those contentions, E Group Security refers to
Freelance Global Ltd v Chief Commissioner of State Revenue [2014] ATC 20-445; [2014] NSWSC 127 (Freelance Global), where White J, as his Honour then was, said (at [115]) that the word "procure" in s 37(1) "means more than facilitate or enable and requires that the employment agent cause the services of a contract worker (or service provider) to be provided to the employment agent's client, with the expenditure of care or effort by the employment agent". It is noted that the taxpayer in that case did procure the services of the service provider as it produced the services of the service providers "by endeavour" as it "set out to see that the services were provided and took the appropriate steps to produce that happening" (at [119]). (See also HRC Hotel Services at [118], where I construed the word "procure" as having the ordinary meaning of "obtain", which I considered encompassed White J's construction of "procure".)

207. E Group Security submits that the alternative contention is based on a misapprehension of the legal arrangements between E Group Security and its wholly-owned subsidiaries. E Group Security says that the wholly-owned subsidiaries do not contract with the third-party subcontractors and then on-supply the labour of those security guards to E Group Security; rather, it is E Group Security that directly contracts with the third-party subcontractors (and examples of these contracts are in evidence). It is said that none of E Group Security's wholly-owned subsidiaries is a party to those contracts (see Mr Chamoun's affidavit sworn 11 March 2020 at [37], [49]).

208. E Group Security and its wholly-owned subsidiaries have entered into Group Payroll Agreements. These were drafted by Mr Chamoun (who is not a lawyer, as I understand it) (see Mr Chamoun's affidavit sworn 11 March 2020 at [51]). Each of those agreements appears to follow the same template and be in a similar form. So, for example, in the agreement between E Group Security and E Security Group Pty Ltd, E Security Group Pty Ltd is referred to as the "NSW payroll company" and cl 1.1 provides:

the payroll company must only performance [sic] a payroll function as required by the sole shareholder and on behalf of the group.

209. The term "payroll company" is defined as meaning "the company that pays all the staff, contractors and agents on behalf of the [sic] its shareholder".

210. Clause 2, which is headed "Payroll company role", relevantly, provides that:

211. Clause 3, which is headed "General Warranties", relevantly, provides:

The sole shareholder warrants that:

  • a) the staff, contractors and suppliers be paid by the NSW payroll company on its behalf
  • b) all staff, contractors, managers and suppliers be supplied and provided by the sole shareholder […]

212. Thus, it is said that the role of E Group Security's wholly-owned subsidiaries was to perform what Mr Chamoun described as a "payroll function", which included paying E Group Security's employees and paying the invoices of E Group Security's subcontractors as directed by E Group Security (Mr Chamoun's affidavit sworn 11 March 2020 at [41], [51]). E Group Security puts its wholly-owned subsidiaries in funds for them to do so (Mr Chamoun's affidavit sworn 11 March 2020 at [52]-[56]).

213. It is said that this role is also confirmed by the minutes of meeting for each of E Group Security and its wholly-owned subsidiaries. The minutes of meeting for E Group Security refer to E Group Security "using" its wholly-owned subsidiaries "to pay all its staff and contractors". The minutes of meeting for E Security Group Pty Ltd refer to E Group Security "using this company solely to administer and pay all the staff, contractors and any other expenses for" E Group Security, "[r]emain the payroll and administration arm of" the plaintiff and "[c]ontinue to process the payroll and administration functions of" E Group Security. Similar statements are made in the minutes of meeting for the other wholly-owned subsidiaries.

214. In those circumstances, it is said that E Group Security's wholly-owned subsidiaries do not "procure" the subcontracted security guards for E Group Security; rather, E Group Security procures the security guards itself and it uses its wholly-owned subsidiaries to pay the subcontractors, which it puts in funds for that purpose on a weekly basis based on the amounts to be paid by the subsidiaries for the week ahead (Mr Chamoun's affidavit sworn 11 March 2020 at [52]-[55]).

215. Further, E Group Security says that, even if it could be said that its wholly-owned subsidiaries procured the services of the subcontracted security guards for it, E Group Security does not meet the description of a "client" of the wholly-owned subsidiaries that is required for the definition of "employment agency contract" in s 37(1) to apply.

216. It is noted that the definition of "employment agency contract" requires that the employment agent procure the services of a service provider for its "client"; and that the term "client" is not a defined term and thus, in its context, the word bears its ordinary meaning.

217. E Group Security says that the ordinary meaning of "client" is a person to or for whom one provides goods or services, generally for a fee or on a pro bono basis; and that it means more than simply another person who is one's contractual counterparty (for example, it is said that neither of the parties to a futures contract entered into on an exchange is the client of the other party). It is said that a person who is a "client" has had her, his or its custom attracted to the business of the person providing the service (referring to the concept of goodwill for legal purposes which has been recognised to extend to sources which generate or add value by attracting custom - see
Commissioner of State Revenue (WA) v Placer Dome Inc (2018) 265 CLR 585; [2018] HCA 59 (Placer Dome) at [63], [91] per Kiefel CJ, Bell, Nettle and Gordon JJ). (Pausing here, I have some difficulty with the proposition that, in order to be a client, one must be in a position whereby goodwill may be generated from the relationship - one might surely have clients who add nothing to the goodwill of a business.

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Nevertheless, the force underlying this submission is that, in ordinary parlance, a "client" imports something more than simply a person or entity for who some kind of task is performed - what seems to me to be required is some form of business or professional relationship pursuant to which the task is performed; otherwise, although I accept that this is an example at the extreme end of the spectrum, the apocryphal neighbour borrowing a cup of sugar would be entering into a client relationship.)

218. E Group Security says that it was not a "client" of its wholly-owned subsidiaries. It is said that, to the extent that it could be said that the wholly-owned subsidiaries were providing it with a service, there was no attraction of E Group Security's custom to the wholly-owned subsidiaries. Rather, E Group Security incorporated the wholly-owned subsidiaries for the specific purpose of performing the payroll function identified by E Group Security. Additionally, it is said that the wholly-owned subsidiaries did not receive a fee for the performance of this function, nor were they performing that function on a pro bono basis.

219. Reference is made to a number of the provisions in the Group Payroll Agreement between E Group Security and E Security Group Pty Ltd in support of this proposition. Clause 1.1 provided that the subsidiary was only to perform "a payroll function as required by the sole shareholder and on behalf of the group". Clause 2 provided that it was to follow the instructions of and perform its payroll function as requested by the plaintiff, that it was not to trade in its own capacity, that its sole function was to pay staff, that it was not to provide any services externally and that it was to maintain its "sole payroll purpose" as part of the group.

220. E Group Security says that a number of other provisions of that agreement are also relevant. A form of recital under the heading "Intent" provides:

The intent of this agreement is to formalise and set out the designated roles of the entities within the group.

The sole shareholder owns 100% of the shares in the payroll company Both entities have the same Sole Director

The entities are grouped as per the corporation [sic] Act 2001 and carry on the business collectively

The entities do not carry on individual business and only operate within the group as per their designated roles.

221. Emphasis is placed on cl 6, headed "Dispute resolution", which provides:

Since all related entities has [sic] the same sole Director and management, their [sic] should never be and [sic] disputes and as a result deal with by the same individuals.

222. It is said that that clause plainly reveals the substance of the relationship between E Group Security and its wholly-owned subsidiaries; i.e., that there will never be a dispute between those entities because, while they are separate legal persons, they operate as a single unified organisation controlled by the same sole director. It is said that this is also supported by cl 5, "Recording of money transfer", which provides:

the transfer of funds will be recorded as discussed and agreed with the sole shareholders [sic] external accountant which [sic] the aim of keeping this process as simple as possible.

and by the footer to cl 3 (which is headed "General Warranties"), which provides:

The warranties set out in clause 5 [sic] are in addition to any other warranties and guarantees as changed from time to time by the sole shareholder.

223. Thus, E Group Security says that it has the right unilaterally to vary the warranties given by it and its wholly-owned subsidiary.

224. It is noted that cl 2(c) records that E Group Security's wholly-owned subsidiary will "[u]se all the resources of the sole shareholder including office, accounting staff, management, IT, websites, phones, email addresses" and it is said that this is also consistent with the evidence that E Group Security and its wholly-owned subsidiaries all share the same head office, the same website and phone numbers, the same sole director (Mr Chamoun) and the same chief financial officer, chief executive officer, group general manager, national operations manager, compliance manager and executive staff, and that E Group

ATC 24616

Security's wholly-owned subsidiaries do not have any of their own resources (Mr Chamoun's affidavit sworn 23 September 2019 at [23]-[24]). It is noted that E Group Security and its wholly-owned subsidiaries also share a single Westpac banking platform that is operated by Mr Chamoun on behalf of all of the companies and that he uses to move moneys between the companies' bank accounts as he considers appropriate (Mr Chamoun's affidavit sworn 11 March 2020 at [52]-[55]).

225. E Group Security says that this conclusion is also supported by the minutes of meeting for each of E Group Security and its wholly-owned subsidiaries. It is noted, for example, that the minutes of meeting for E Security Group Pty Ltd record that:

226. It is said that, in performing their payroll function of paying employees, subcontractors and other expenses on behalf of the plaintiff, E Group Security's wholly-owned subsidiaries were not paid any fee or mark-up and did not otherwise make any profit. Each week, E Group Security's chief financial officer would provide Mr Chamoun with a spreadsheet setting out how much each of the subsidiaries required to pay the various amounts that they would be paying on behalf of E Group Security. Using the Westpac website or the application on his phone, Mr Chamoun would then transfer from the plaintiff's bank account to each wholly-owned subsidiary's bank account an amount of funds so that the amount in the subsidiary's bank account would be sufficient to cover the amount identified in the spreadsheet of expenses for that week. Mr Chamoun would then authorise the batch payments of funds by each wholly-owned subsidiary that would automatically split to pay the individual employees or subcontractors. Mr Chamoun might occasionally transfer to a wholly-owned subsidiary slightly more or slightly less than the amount required by it for the relevant week due to rounding, but none of the subsidiaries ever built up a surplus of cash in its bank account (Mr Chamoun's affidavit sworn 11 March 2020 at [52]-[55]).

227. Thus, it is said that E Group Security's wholly-owned subsidiaries never made any profit from the arrangement and, if what they were doing could be described as a service, they were never remunerated for that service; they were simply put in funds by E Group Security so that they could pay the amounts that E Group Security caused them to pay.

228. It is said that the legal arrangement between E Group Security and its wholly-owned subsidiaries pursuant to the Group Payroll Agreements involved the plaintiff directing its wholly-owned subsidiaries to pay amounts on its behalf. It is said that, while in a strict legal sense there was a direction being provided by one legal person to another, it was Mr Chamoun (as sole director of E Group and its subsidiaries) who caused E Group Security and its wholly-owned subsidiaries to carry out this arrangement.

229. For those reasons, it is contended that E Group Security cannot be described as the "client" of its wholly-owned subsidiaries.

230. E Group Security says that an additional reason why its construction of the definition of "employment agency contract" should be accepted is the adverse consequence of acceptance of the Chief Commissioner's competing construction for entities that are exempt from payroll tax.

231. It is noted that in both Southern Cross Group Services and
Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744 (Securecorp), the Chief Commissioner successfully argued that there was no limitation in the definition of "employment agency contract" that restricted the employment agent to being the "closest to end user"; rather, where there was a "chain" of contractual relationships, each could potentially answer the description of being an employment agency contract, and s 41 of the Payroll Tax Act together with the Chief

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Commissioner's discretion in determining who the appropriate person was to bear the payroll tax burden would ensure that there was no double taxation along the "links" in the "chain" (Southern Cross Group Services at [55]-[58]; Securecorp at [93]-[96]).

232. E Group Security points out that neither of those cases considered the situation of an "end user" that was exempt from payroll tax and in respect of which an exemption for an employment agent would apply under s 40(2). It is said that where there is a "chain" of employment agency contract relationships, if the "end user" is exempt then s 40(2) would apply to the employment agent under the employment agency contract with that exempt "end user", but it would not for each of the other employment agency contract relationships in that "chain".

233. E Group Security says that if the arrangements between it and its wholly-owned subsidiaries were employment agency contracts then, simply by reason of using those wholly-owned subsidiaries to perform a payroll function, E Group Security could never enjoy the benefit of the exemption under s 40(2) in relation to any of its exempt clients, because the Chief Commissioner could always tax the wholly-owned subsidiaries as employment agents (and hence, tax E Group Security, as all of the companies are grouped).

234. It is said that the Chief Commissioner's construction would deny to E Group Security an exemption that Parliament made available to persons providing services to exempt clients; whereas E Group Security's construction would avoid that outcome.

Remission of interest

235. As to the question of interest, it is noted that the Chief Commissioner imposed the full rate of interest on the plaintiff. E Group Security contends that interest should be remitted in full or, if not in full then in part, under s 25 of the Taxation Administration Act.

236. As to the facts relevant to remission of interest, it is noted that E Group Security was previously audited by the Chief Commissioner for payroll tax for earlier financial years, in which audit E Group Security was represented by PricewaterhouseCoopers (PwC). (This is the audit to which I have adverted to above.)

237. E Group Security points to the evidence that, as part of that audit, in late 2014, Mr Eric Blazek, an auditor in the employ of the then NSW Office of State Revenue, spoke to Mr Adam Carter of PwC about the possible application of the employment agency provisions to the security industry. Also as part of that audit, on 28 January 2015, Mr Chamoun, Mr Carter and Mr Blazek attended a meeting. Mr Chamoun gives evidence as to representations having been made to him by Mr Blazek, which included the following (Mr Chamoun's affidavit sworn 23 September 2019 at [219]):

Don't use sole traders or individual contractors. They would be captured under employment agency provisions moving forward.

…

Just engage corporate contractors and you'll be okay. They have to have at least 2 or 3 employees.

…

You should download the Subcontractors Statement off the OSR website regarding workers compensation, payroll tax and remuneration and make sure that they are signed by each contractor. That way you're protected from any liability moving forward.

238. It is noted by E Group Security that the Chief Commissioner has not adduced any evidence from Mr Blazek.

239. Mr Chamoun gives evidence that he understood the effect of Mr Blazek's representations to be that, if E Group Security implemented Mr Blazek's advice of only engaging corporate contractors with multiple employees, then the plaintiff would not have to pay payroll tax in relation to the amounts paid to those corporate contractors. Mr Chamoun further gives evidence that he accepted and relied on those representations, that E Group Security made changes to the manner in which it administered its business in reliance on those representations, and that E Group Security prepared its payroll tax returns on the basis that it did not need to pay payroll tax on those amounts in reliance on those representations (Mr Chamoun's affidavit

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sworn 23 September 2019 at [221]; Mr Chamoun's affidavit sworn 11 March 2020 at [61]-[64]).

240. On 19 August 2015, Mr Blazek (on behalf of the Chief Commissioner) wrote that E Group Security was found to have complied with its payroll tax obligations. In around October 2019, Revenue NSW entered into a settlement deed that recited that E Group Security was subject to a NSW State tax investigation for the financial years ended 30 June 2010 to 2015 and was found by Revenue NSW to have complied with its payroll tax obligations (Mr Chamoun's affidavit sworn 13 October 2020, Annexure A Recitals D and E).

241. It is noted that s 25 of the Taxation Administration Act provides that:

The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.

242. The power to remit interest is unconstrained and discretionary, and this Court is able to exercise that same power under s 101 of the Taxation Administration Act.

243. Interest under Pt 5 Div 1 of the Taxation Administration Act consists of a market rate component and a premium component (s 22). The market rate component compensates the State of NSW for the time value of the money to which it was entitled, whereas the premium component is a form of penalty (see
Chief Commissioner of State Revenue v Incise Technologies Pty Ltd (2004) 56 ATR 82; [2004] NSWADTAP 19 at [60]-[61]).

244. E Group Security points to a number of authorities that have suggested that the market rate component should only be remitted in "exceptional circumstances" (
Trust Co of Australia Ltd v Chief Commissioner of State Revenue [2002] NSWADT 21 (Trust Co) at [27] per Verick A;
Lease A Leaf Property Pty Ltd v Chief Commissioner of State Revenue (2011) 85 ATR 273; [2011] NSWADTAP 41 at [35]; OSR Guidelines referred to in
Adams Bidco Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 702 (Adams Bidco) at [156]).

245. E Group Security nevertheless points out that the words "exceptional circumstances" do not appear in the legislation; and it submits that there is no such limit as to the Chief Commissioner's (and hence this Court's) power to remit interest (see
Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd (2002) 103 NSWLR 772; [2020] NSWCA 126 at [149]-[151] per Bathurst CJ (with whom Macfarlan and Meagher JJA agreed)).

246. E Group Security points to the reference in the second reading speech to the Taxation Administration Bill 1996 (NSW) to the provision for "interest to be remitted by the Chief Commissioner if warranted by special circumstances" (emphasis added). E Group Security emphasises a distinction between "special circumstances" and "exceptional circumstances", in that "special circumstances" are circumstances that are out of the ordinary but they do not have to be extraordinary or exceptional (citing
Cripps v G & M Dawson Pty Ltd (2006) ANZ ConvR 350; [2006] NSWCA 81 at [60] per Santow JA (with whom Mason P and Brownie AJA agreed)). E Group Security submits that, to ask whether there are "exceptional circumstances", would be to ask the wrong question (cf
N & M Martin Holdings Pty Ltd v Commissioner of Taxation [2020] FCA 1186 at [94]-[100] per Steward J).

247. E Group Security contends that, when exercising the unconstrained discretionary power under s 25, the principle on which that discretion should turn is, as indicated by the second reading speech, whether there are "special circumstances", being circumstances that are out of the ordinary.

248. The relevant circumstances of E Group Security are identified here as being that, during an earlier payroll tax audit in which the NSW Office of State Revenue auditor had expressly referred to the employment agency contract provisions, that auditor made representations to E Group Security as to how E Group Security should retain the services of subcontractors in order for E Group Security not to be liable to pay payroll tax in respect of the amounts paid to those subcontractors. E Group Security says that it relied on those representations and structured its business accordingly, and consequently it did not return those amounts in

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its payroll tax returns. On E Group Security's contention as to the applicable test under s 25, those circumstances are accurately described as special in the sense that they are out of the ordinary.

249. In the alternative, if E Group Security's contention as to the applicable test is incorrect and instead the applicable test is whether there are "exceptional circumstances", it is noted that in Trust Co at [27], "exceptional circumstances" justifying remission of the market rate component were identified as including cases where the tax default (which triggers the liability to interest under s 21(1) of the Taxation Administration Act) "is entirely due to a fault of the Chief Commissioner". Here, it is submitted that the tax default was entirely due to a fault of the Chief Commissioner by his officer making the representations to E Group Security, on which E Group Security relied in structuring its business and preparing its payroll tax returns, resulting in E Group Security's failure to pay the payroll tax it was liable to pay.

250. Further, in any event, it is noted that the premium component of interest is a form of penalty. It is said that E Group Security's circumstances do not justify a form of penalty being imposed on it and, at the least, the premium component of interest should be remitted.

251. A further point on remission of interest was raised in relation to E Group Security's exempt clients but, as I understand it, this is no longer pressed in light of the resolution of this issue with the Chief Commissioner.

Chief Commissioner's submissions

252. The Chief Commissioner emphasises (and E Group Security does not cavil with this proposition) that it is the taxpayer (E Group Security) which brings this application and bears the onus of proof (s 100(3) of the Taxation Administration Act), requiring proof (on the balance of probabilities) of all matters necessary to enable a finding in its favour.

253. The Chief Commissioner accepts that it is insufficient, in order to engage the employment agent provisions, that the worker merely benefits the client's business; rather, it is necessary that the worker be working "in" the client's business. The Chief Commissioner says that the focus is squarely upon the effect or contribution of the worker to the client's conduct of its business. The Chief Commissioner says that these provisions are plainly designed to operate where some part or process of a client's business is conducted in whole or part by workers procured by employment agents; and that the worker need not be "employee-like" to the extent that the workers are employees. As adverted to already, it is noted that the application of the "in and for" test requires a "fact sensitive analysis of each of the service and the business and of the connection between the two" (JP Property at [75]).

254. The Chief Commissioner draws from the various decisions of this Court that, in undertaking that assessment, the following indicia (for working "in and for the conduct" of a business) are relevant: first, the location at which the services are provided by the workers; second, the regularity with which the workers provide the services to the client; third, the level of interaction (if any) between the workers and the client's customers; fourth, the level of interaction (if any) between the workers and the client's employees; fifth, the level of direction or instruction (if any) provided by the client to the workers; sixth, the workers' access to and use of the client's staff facilities; and, seventh, the relevance or connection, to the goods or services provided by the client to its customers, of the services provided by the workers to the client.

255. The Chief Commissioner says that E Group Security's case is directed primarily at the fifth of those indicia set out above; noting that E Group Security contends, in effect, that the services provided by the workers to its clients are (and were, during the Tax Years) all heavily regulated by the Security Industry Act, Security Industry Regulation 2007 and Security Industry Regulation 2016, such that the workers were unable to take any (or routinely take) instructions or directions from clients without contravening that legislation; and, according to E Group Security, could therefore not be integrated into the client's workforce.

256. In response, the Chief Commissioner contends: that the Security Industry Act and Security Industry Regulations do not apply to

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all clients or to all services being provided; that direction and control is but one indicium of the "in and for" test; that direction and control need not be direct; that the evidence discloses, at least, some direct control and direction from the client; and that the focus of the employment agent provisions is not upon integration into the workforce per se, but integration into the conduct of the client's business. It is noted that the worker must be "in" the client's business.

257. It is submitted that, although E Group Security's particular argument concerning direction and control was apparently not run in earlier cases concerning the application of the employment agent provisions in the case of security workers, here to uphold such an argument would be inconsistent with considered cases of this Court such as Securecorp and Southern Cross Group Services. (The Chief Commissioner points out that, so far as E Group Security's Property Clients are concerned, arrangements between the property manager, JLL, and Securecorp (NSW) Pty Ltd (a competitor of E Group Security in the security industry in NSW), in respect of the provision of services of security contractors at buildings managed by JLL, were considered in Securecorp.)

258. As to the import of the regulation of the security industry (the relevant provisions having been set out earlier) the Chief Commissioner says that to suggest that E Group Security's clients could not themselves perform security activities without having a licence under the Security Industry Act, or could never direct E Group Security's workers, puts the case too high. In any event, the Chief Commissioner says that some substantial services provided by the plaintiff's security guards are not "security activities" as such.

259. Reference is made to the "Licensees under the Liquor Act" exemption (item 8 in Schedule 1 of the Security Industry Regulation - see at [48] above), and s 77 of the Liquor Act 2007 (NSW) (Liquor Act) which, relevantly, provides that:

260. The Chief Commissioner notes that the above provision imposes obligations, and associated "turn out" rights, on licensees; and includes an entitlement to remove from a licensed premises, with "such reasonable degree of force as may be necessary", patrons who are intoxicated, violent, quarrelsome or disorderly; and such "turn out" activities may be exercised by the licensee or an employee or agent. The Chief Commissioner says that it follows that, when performing such activities, employees or contractors of the licensee may be exempt from the operation of the Security Industry Act, depending on the scope of the activities in question (and the purposes for which the particular worker was employed or engaged). It is said that, depending on the circumstances and needs of a particular client, this provides flexibility and options as to how they conduct their business; and whether or not a licensed security guard is required or desirable.

261. The Chief Commissioner, further, says that E Group Security's "regulation" argument has been dismissed in other related areas of the law, such as those concerning the distinction between employees and contractors at general law or in applying statutory deeming provisions. Reference is made in this context to what was said by the majority of the High Court (Dixon CJ, Williams, Webb and Taylor JJ (with whom McTiernan J agreed)) in
Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561; [1955] HCA 73 (Zuijs v Wirth) at 571-572 (a workers' compensation case in respect of an injury suffered by a trapeze artist), to the effect that what mattered was whether there was "lawful authority to command so far as there is scope for it … if only in incidental or collateral matters". Reference is also made to
Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 where the majority (Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ), in a case of vicarious liability for a tortious act, considered the concept of "control" as a distinction between employees and independent contractors (at [43]-[44]).

262. The Chief Commissioner says that, adopting that approach, it is not to the point that a security guard (even if highly regulated in the particular activities being undertaken) may not be able to take direction or control in respect of particular activities. It is said that the mere fact that a person has very considerable autonomy in the performance of their contractual obligations does not necessarily negative the existence of an employment (or, relevantly here, employee-like) relationship (referring to
Dental Corporation Pty Ltd v Moffet (2002) 278 FCR 502; [2020] FCAFC 118 at [36] per Perram and Anderson JJ). Rather, it is said that, in assessing whether a worker is an employee or contractor, the totality of the relationship is assessed including whether, in matters that are not so regulated (and even if only incidental or collateral matters), the purported employer is able to impose control over the worker.

263. The Chief Commissioner says that, applied in this case, it cannot be said that the clients of E Group Security had no relevant direction or control over the security guards. It is said that the evidence shows that, at least, the clients had direction and control of matters ranging from hours of work, codes of conduct, livery, use of facilities, and similar matters. It is said that some of these matters were governed by stipulations in tender documents and contracts, and others by way of interaction in the performance of the contract (including, for example, regular mandated meetings between clients and workers (or representatives of E Group Security) concerning the performance of workers, quality issues, client concerns). The Chief Commissioner says that clients' imposition of obligations around such matters is a manifestation of the existence of control.

264. As to E Group Security's response to the second of the two bases upon which the Chief Commissioner contends that the payroll liability arises (i.e., that the arrangements between E Group Security and each Related Entity constituted, for the purposes of s 37, an

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"employment agency contract", with each Related Entity as an "employment agent" and E Group Security as its "client"), the Chief Commissioner says as follows.

265. First, that E Group Security's response is inconsistent with its appeal statement dated 8 April 2019, in which it was contended (at [17]-[18]) that E Group Security is the main trading entity of the group; that it engages with clients; that it employs no security staff directly; and that E Group Protective Services, EGroup Events and Vital Hospitality Group "employ and engage [E Group Security's] security staff". The Chief Commissioner says that those contentions are supported by the following evidence at [20] of Mr Chamoun's affidavit sworn on 23 September 2019 (with emphasis added as per the Chief Commissioner's submissions):

266. The Chief Commissioner notes that, in his later affidavit sworn on 11 March 2020, Mr Chamoun deposes (at [36]) that he swore his earlier affidavit "without giving sufficient attention" to [20]; and there deposes (at [41]) that each of the Related Entities was always merely "a payroll company - that is, a company that receives money from E Group Security and then pays the wages of E Group Security's employees and E Group Security's expenses of engaging subcontractors". It is noted that Mr Chamoun exhibits to that affidavit three contract documents (each drafted by him, styled a "Group Payroll Agreement" in similar terms; and signed by Mr Chamoun for both counterparties): one dated 1 December 2015, identifying E Group Security and E Group Protective Services as parties; another dated 1 December 2015, with E Group Security and Vital Hospitality Group as parties; and the third dated 2 September 2017, with E Group Security and EGroup Events as parties.

267. The Chief Commissioner says that, whatever the proper construction and intended effect of those documents (and the context and circumstances in which they were prepared and executed), they do not reflect the actual operation of E Group Security, EGroup Events, Vital Hospitality Group or E Group Protective Services during the Tax Years as recorded in a significant volume of contemporaneous documents in evidence. For example, the Chief Commissioner refers to the following. First, the Chief Commissioners says that documents concerning the practical aspects of performance of services for clients, such as tailored SOPs (which are provided to clients and workers) training and work health and safety registers, indicate a Related Entity as providing the workers. Second, that E Group Security expressly promoted itself to clients, and potential clients, in presentations and tenders or RFQ responses as obtaining workers through E Group Protective Services "who is

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underwritten by the Security Industry Services Award 2010". Third, that the financial statements of the Related Entities each record expenses and revenues indicative of a standalone business (such as engaging workers; spending funds in promoting itself for custom; renting premises and similar).

268. The Chief Commissioner emphasises that the concern here is to ascertain a true understanding of the arrangements between E Group Security and the Related Entities and says that this necessarily requires an assessment of how the entities actually operated (and interacted) during the Tax Years.

269. As to E Group Security's submissions concerning the meaning of the terms "client" and "procure", the Chief Commissioner says that those should be rejected for the following reasons.

270. First, as to the term "client" in s 37, the Chief Commissioner says that there is nothing in the text or context of s 37 of the Payroll Tax Act that supports an interpretation of the term "client" that would exclude related entities (whether or not wholly-owned) of the "employment agent". It is noted that the term is not defined in the Payroll Tax Act or the Taxation Administration Act (together with which the Payroll Tax Act is to be read - see s 4 of the Payroll Tax Act); and that it is only used (in each of those statutes) to describe rights and obligations in connection with the employment agent regime. It is said that in each such use, the term is employed simply to identify, within that statutory context, the party for whom the services of workers are procured by an employment agent (irrespective of any association between the employment agent and client).

271. The Chief Commissioner says that the structure and language of s 37 make plain that the term "employment agency contract" is not intended to be confined to formal contracts or arms-length commercial arrangements. It is noted that s 37(1) expressly notes that such arrangements may be informal and implied; and, again, that the definition of "contract" in s 37(3) extends to arrangements and undertakings. Further, it is noted that there is no reference made in s 37 to any requirement that there be any fee or profit earned, or any quid pro quo provided, for the procurement of services, or that they be provided "pro bono"; all that is required, to fall within the definition of "employment agency contract" is that the services be procured under the "arrangement" (or "undertaking").

272. It is said that an interpretation of the term "client" (in s 37) encompassing arrangements between related entities (whether or not one is wholly-owned by another) accommodates the mischief to which s 37 is directed (the structuring of arrangements through a series of intermediate contractual arrangements, which might have the effect of avoiding payroll tax; see Southern Cross Group Services at [58]); and thereby protects the revenue (a primary purpose of the legislation).

273. It is said that there is no proper basis (as a matter of statutory interpretation or otherwise) for the imposition upon s 37 of the test apparently advanced by E Group Security that a client need be a person whose custom has been attracted to the business, such that there is goodwill in a legal sense. The Chief Commissioner says that the cited references in Placer Dome, are, in this respect, of no assistance, and are directed at wholly inapposite legal issues (the meaning of legal goodwill and going concern value in the context of Western Australian stamp duty legislation).

274. Further, it is noted that this Court has said that care needs to be taken to ensure that White J's construction of s 37 in UNSW Global is not over-read, including so far as concerns the terms "business" and "client" (see Securecorp at [89]-[90]).

275. Second, as to the term "'procure" in s 37, it is said that this simply requires "the expenditure of care or effort by the employment agent" (citing Freelance Global at [115]). It is said that in Freelance Global the view was taken that the verb "procure" meant "more than facilitate or enable" and that it required that the employment agent cause the services to be provided "with the expenditure of care or effort by the employment agent". It is noted that White J did not accept that this could only be done if the employment worker recruited the contract worker or service provider for the client. The Chief Commissioner says that, on the case as originally articulated, there would be

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no doubt that the Related Entities "procured" the workers.

276. The Chief Commissioner also refers to Southern Cross Group Services, where Pt 3 Div 8 applied in respect of similar arrangements for the provision of security contractors (involving associated companies, Southern Cross Group Services Pty Ltd and Southern Cross Group NSW Pty Ltd). Reference is made to the determination at [61] that, in the circumstances of that case, "the security staff procured by the second plaintiff [were] added to the workforce of the first plaintiff for the purpose of the provision of their services to the first plaintiff's clients as [were] the first plaintiff's own employees".

277. On the basis that E Group Security is itself in the business of providing security services and that the workers are, ultimately, provided to clients of E Group Security, the Chief Commissioner says that there is no impediment to the application of Pt 3 Div 8 in respect of the arrangements between the Related Entities and E Group Security, on the basis that the Related Entities are each employment agents and E Group Security the client. It is noted that there is no suggestion that E Group Protective Services, EGroup Events or Vital Hospitality Group has paid payroll tax on payments made by each of the companies to its workers, and hence it is said that, applying s 81 of the Payroll Tax Act, E Group Security is jointly and severally liable for that tax.

278. Pausing here, as to the submission by the Chief Commissioner that E Group Security's arguments are inconsistent with Southern Cross Group Services and Securecorp, in reply submissions E Group Security emphasises that its arguments are put differently from those put in the earlier cases; and says that it is not explained how the case here put is inconsistent with any ratio decidendi or obiter dictum of either of those cases. E Group Security emphasises the acknowledgement by the Chief Commissioner that the application of the "for" test in s 37 requires a fact-sensitive analysis. E Group Security says that it does not follow that, simply because the taxpayers in those cases were also security firms, its case must meet the same fate. (It is noted that the taxpayer in Securecorp seems to have focussed its case solely on the "closest to end user" argument, an argument that was rejected there and in Southern Cross Group Services.) It is said that there does not appear to have been any consideration of the "for" test except to the extent that it bore upon the "closest to end user" argument, so it is not apparent why that case would foreclose the plaintiff's argument here.

279. In the event that the alternative contention is not accepted (i.e., that it is not accepted that the Related Entities were, in the Tax Years, employment agents (with E Group Security as the client) for the purposes of Pt 3 Div 8), the Chief Commissioner's position is that E Group Security was an employment agent and its clients were the "clients" under s 37. On this basis, it is said that the payments made in respect of the workers were (and are) taken to be wages and taxable.

280. The Chief Commissioner notes that the key issue in addressing this argument is the application of the "in and for" test; and that it requires a fact-sensitive analysis, in each case, of the details of the client, its business and the services provided (guidance being able to be taken from indicia of the kind identified in UNSW Global and the various decisions of this Court that have followed it).

281. As a general proposition, the Chief Commissioner makes the following observations. First, the workers are not (or rarely) provided on a one-off basis; rather, the workers are provided recurrently, regularly and frequently for the client and in many cases, every day. Second, the workers performed tasks that were essential to the ordinary, routine, functioning of a client's business (in many cases, enabling the client to discharge its own obligations such as under its liquor licence or under contracts with its own clients). Third, the workers provide the client's other workers and the client's customers with a safe place of work, or environment. Fourth, the workers often provided services other than security services, such as concierge services or, in the case of Baiada, weighbridge services. Fifth, the workers perform services that are tailored to the client's unique circumstances (including, via the tender process, the comprehensive development of SOPs for

ATC 24625

a particular client and the induction processes). Sixth, in many cases, there is communication between the client, the client's other workers or customers on the one hand and E Group Security's guards on the other hand. Finally, the client exerts control over the workers, if not directly, then via the regular quality assurance procedures with staff of E Group Security. In this sense, it is submitted that the workers comprise a (in some cases, permanent) workforce in the conduct of a client's business.

Categories of clients

282. Turning then to the categories of clients identified by E Group Security, the Chief Commissioner cavils with any proposition that the evidence establishes any uniformity amongst the clients or categories of clients.

283. By way of example, the Chief Commissioner refers to the types of services said to be provided by workers at "Commercial buildings" in the Tax Years. It is noted that, although Mr Chamoun says that there are about 50 clients in this category, E Group Security's submissions address the particular circumstances of only between about 5 and 10 particular clients or client sites. It is said that E Group Security otherwise relies on a suggested uniformity in the characteristics of services, workers and the client businesses, across those clients (and client sites). (The Chief Commissioner in Schedule B to his submissions has identified details of the arrangements and services of those Property Clients, which are said not to support an inference of uniformity.)

284. Further, reference is made to E Group Security's submissions in relation to Pub Clients, Club Clients and some Sports Clients. It is noted that Mr Chamoun indicates that, in aggregate, there are around 90 clients falling into those categories. The Chief Commissioner points out that E Group Security's submissions hold out only two examples of those clients (seemingly seeking an inference that the circumstances of those clients and their businesses, as well as the provision of services, is uniform across all such clients).

285. The Chief Commissioner points to submissions made in relation to several other clients falling within the Government Clients category and says that the evidence apparently relied upon by E Group Security in relation to these clients (and Government Clients generally) comprises simply the general descriptions of clients and services given by Mr Chamoun.

286. Insofar as the submissions of E Group Security address the provision of services to Baiada, the Chief Commissioner says that the summary overview fails to identify various matters directly relevant to the indicia of an employment agency relationship (referring to the examples in the table in Schedule C of the Chief Commissioner's submissions).

287. As to E Group Security's submissions in relation to "other industries" (which the Chief Commissioner understands to be a reference to Short-Term Clients and Retail Clients), it is said that the evidence provided in relation to such clients comprises only general assertions by Mr Chamoun and other E Group Security representatives in their affidavits; and that the evidence advances no further than broad statements about the types of clients (with no details about the circumstances in which particular services are being provided). Similarly, complaint is made that the submissions in relation to services provided to the NSW Board of Studies are founded on generic assertion in a paragraph of Mr Chamoun's affidavit sworn on 23 September 2019 without any reasonable attempt to identify the circumstances of the provision of the services or the business of the relevant client entity.

288. As to concierge services, the Chief Commissioner notes that on its website E Group Security states that it provides "enthusiastic, friendly, client focused talent for your front of house"; has "developed a unique recruitment, training and support framework to attract and retain the industry's strongest customer service operatives"; and that its staff "understand the importance of first and last impressions and the lasting impact concierge and customer service staff can have on guests and tenants".

289. The Chief Commissioner points to the following statements on E Group Security's website, referring to teamwork and collaboration with clients:

WE DELIVER - Regardless of our passion for service, we understand that the bottom

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line is that we must deliver our services in a manner that fully meets your expectations. We set the ground rules for how we deliver through a series of Operating Procedures and Policies and we monitor our progress through our Quality Management Plan. We know that some clients operate around the clock, therefore we provide a manned control room 7 days per week, 24 hours per day.

WE ADAPT - We have a core set of non-negotiable principles and values that drive our people and the services we provide. Beyond that we can adapt to any situation where a client wants our services. We are always ready to listen to new approaches to how we deliver our services. We have a company culture that encourages innovation and forward thinking. We get great suggestions from our people, but generally the exceptional ideas come from our clients. When we innovate its win-win for EGroup and our clients.

…

WE UNDERSTAND - We provide services in over a half-dozen market segments and to do this successfully we must know our markets and understand the unique needs that each client faces in their respective market. We will always share our experience and suggestions with our clients, however you know your business better than anyone, therefore we will always take your guidance on how we provide our services to you.

WE CARE - Our entire operation is geared to successfully providing our services to you and making sure you are fully satisfied with everything we do.

…

We assign an Account Manager to every client who will work with you to maximise the benefits of EGroup services, and also to assist with any problems that arise. Know that you are one of us - your problems are our problems.

[Emphasis as per defendant's submissions]

290. The Chief Commissioner contends that the representations on E Group Security's website (which emphasise its dedication to, and culture of, collaboration with clients, tailoring its services to client circumstances and delivering services in a manner to meet client expectations) are supported by, and strongly reflected in, the evidence; and consistent with the characterisation (for the purpose of s 37) of workers (whether concierge staff, security guards, weighbridge operators or otherwise) being "in and for the conduct" of the clients' businesses. It is noted that in a presentation to JLL (a tender or RFQ response), E Group Security states that it is a "tested business partner of numerous property owners and Facilities management companies, including JLL, Colliers, Knight Frank, Ipoh, ISPT, Dexus, Lend Lease & Mirvac"; provides clients with a "pool of permanent and part-time staff"; develops a "site specific" visitor management system for clients; and has a rostering system that "puts building management back in control".

291. Pausing here, I note that in its reply submissions, as to the statements extracted from its website, E Group Security says that these are of limited utility. It is said that the majority of those statements are couched in generic marketing language that could "easily be transplanted" to a professional services firm's website and that the fact that it markets itself as "tailoring" its services to clients' needs and delivering services "in a manner that fully meets" a client's expectations says very little about what E Group Security's security guards do. Further, as to the submission by the Chief Commissioner referring to a presentation by E Group Security to JLL, it is said that this is incorrect insofar as it suggests that the presentation states that E Group Security provides clients with a pool of permanent and part-time staff. It is noted that what the presentation says, referring to E Group Security's extensive portfolio of Sydney CBD commercial buildings across which it has many security guards deployed, is that this is "providing us [i.e., E Group Security not its clients] with a pool of permanent and part-time staff" (Ex B at 3536).

Interest

292. The Chief Commissioner notes that interest has been assessed, and continues to accrue, by operation of Pt 5 of the Taxation

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Administration Act on the occurrence of a tax default, at the sum of the market rate component and premium component. It is noted that, for the interest to be remitted below that which was imposed by operation of the Taxation Administration Act, what E Group Security must show is that the circumstances, considered as a whole, justify a remission under the general or residual discretion in s 25 of the Taxation Administration Act (see s 100(3) of the Taxation Administration Act). It is said that there is, here, no proper basis for the remission of premium or market rate components of interest in the assessments.

293. As to premium interest (and market), the Chief Commissioner says that E Group Security's complaint concerning discussions with representatives of Revenue NSW during the 2015 audit of E Group Security is ill-conceived. It is said that the evidence identifies that the relevant discussions with Revenue NSW were concerned with another entity (in which Mr Chamoun has interests) and its particular circumstances; not E Group Security; and that any connection between that entity and E Group Security (including by reason of Mr Chamoun's interests) does not abrogate E Group Security's culpability in failing to satisfy its payroll tax obligations.

294. In particular, as to the market rate component of interest in the assessments, it is noted that its purpose is to compensate the Chief Commissioner for not having had, over the period since assessments, the benefit of funds that were payable by the taxpayer (during which time, conversely, the taxpayer had the benefit of those funds) (citing Adams Bidco at [156]). The Chief Commissioner says that he has not had the benefit of tax that has been payable, and so it is appropriate that the market rate component provide compensation. It is said that there are no circumstances (whether "exceptional" or not) that would give cause for the remission of that component of the assessments.

Reply submissions

295. In reply submissions as to the arrangements between E Group Security and its clients under which E Group Security is said to be an "employment agent" under s 37 of the Payroll Tax Act, E Group Security says the following.

296. First, that insofar as the Chief Commissioner says that the focus is "squarely upon the effect or contribution of the worker to the client's conduct of its business" and that the focus of the employment agent provisions is upon "integration into the conduct of the client's business" (and acknowledges that it is not enough for there to be an employment agency contract for the service providers to benefit the client's business), E Group Security maintains that the correct test is whether the service provider is sufficiently integrated into the client's business such that the provider works in much the same way as the client's employees and is seen as an addition to the client's workforce (citing Southern Cross Group Services at [60]; HRC Hotel Services at [153]).

297. E Group Security notes that this interpretation is because the focus of the purposive reading of the word "for" in UNSW Global is that the intended application of the employment agency contract provisions was "where the employment agent provided individuals who would comprise, or who would be added to, the workforce of the client for the conduct of the client's business" (at [63]).

298. E Group Security complains that the statements in the Chief Commissioner's submissions "seek to jettison the crucial role of the client's workforce in the test" and appear to propose a test that would characterise a client's business as having a particular scope and then ask whether the service provider performs a function that is within the scope of that business. It is submitted that this would invite questions as to what is within and what is outside the scope of a client's business and that such a test is inconsistent with the rejection of distinctions between services that were "integral", "core", "ancillary" or "incidental" to a client's business (see Bayton Cleaning at [104]; [266]) and inconsistent with the rejection of the relevant test as depending on whether services were provided "in the ordinary course of the client's business" in JP Property Services at [74].

299. It is submitted that the Chief Commissioner erroneously focusses on the

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"significance" or "necessity" of the services provided by the service provider to the goods or services provided by the client to its customers and on whether E Group Security's security guards were performing tasks essential to "ordinary, routine, functioning of a client's business". Criticism is made that the proposed restatement of the test by the Chief Commissioner as being whether the worker is "in" the client's business does not assist in the application of s 37 (and the suggestion is made that this is Delphic).

300. As to the Chief Commissioner's argument on control of the security guards, E Group Security argues that, properly understood, the cases to which reference is there made assist E Group Security's argument. As to the reference to Zuijs v Wirth at 571-572, E Group Security says that, there, their Honours were pointing out that some occupations involve a degree of specialisation such that, as a practical matter, there may be limited scope for the worker to receive direction or commands. For that reason, it is submitted by E Group Security that the focus of the control test in that area of discourse is about lawful authority to direct or command insofar as there is scope to do so.

301. Insofar as the Chief Commissioner reads that part of Zuijs v Wirth as standing for the proposition that it is sufficient for the extent of control capable of being exercised to be very limited and, therefore, that any small amount of control able to be exercised, however attenuated or indirect, is sufficient, E Group Security says that Zuijs v Wirth was dealing with an entirely different issue. It is said that the problem in Zuijs v Wirth was that the nature of the worker's work was that there was limited capacity for directions or commands to be given by anyone (and it was held that lawful authority to direct or command within the scope limited by the nature of the worker's work was sufficient). E Group Security says that this is not an issue in relation to its security guards; rather, that the nature of their work is such that there is a very clear legal and practical capacity to direct and instruct them; and that that capacity is capable of being exercised, and is in fact exercised, by E Group Security through its personnel (whether by the control room personnel providing directions by radio or telephone to guards patrolling around public schools, E Group Security's staff in the JOCC box providing directions by radio to security guards at events or the variety of other means detailed in the plaintiff's submissions).

302. E Group Security thus says that this is not the case where the nature of the work meant that there was a limited practical ability by anyone to exercise control; rather, this is a case where control is routinely and regularly exercised (by E Group Security) in respect of the security guards; and that, fundamental to the way that clients are engaged is that E Group Security reserves to itself the right and obligation (consistent with the security industry legislation) to direct the way that security guards actually carry out their duties.

303. As to the passage extracted in the Chief Commissioner's submissions from Zuijs v Wirth at 572, E Group Security says that each of the factors in that passage points to the master and servant relationship existing between E Group Security and its security guards (and being absent from the relationship between E Group Security's clients and the security guards).

304. E Group Security says that the matters identified by the Chief Commissioner (in the submissions at [46]) are not probative of whether the plaintiff's security guards were integrated into the clients' businesses so as to become additions to their workforces. In particular, it is said that a client's ability to raise issues with E Group Security's management personnel about the performance of E Group Security's contractual obligations does not indicate that the security guards were so integrated. (On the contrary, it is said that it demonstrates quite the opposite.) E Group Security submits that the evidence canvassed in its submissions shows that E Group Security's clients did not provide directions and instructions to the security guards, nor could they discipline them, negotiate with them or in any way act like an employer could in relation to an employee. It is said that E Group Security's clients' recourse was to deal with E Group Security as to the plaintiff's performance of its contractual obligations; and that it was for E Group Security to deal with its security guards.

305.

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As to the submissions made by the Chief Commissioner regarding the exemptions in the Security Industry Act so that an unlicensed person may undertake those specific activities that would or might otherwise be security activities and so prohibited, E Group Security says that this does not mean that a client's employees could perform the security guarding work performed by E Group Security's security guards (it is said that the identified exceptions are limited to very specific activities that do not encompass the whole of a security guard's role).

306. For example, insofar as the Chief Commissioner identifies that, under s 77 of the Liquor Act, a licensee may turn out certain patrons in certain circumstances without contravening the Security Industry Act even if the licensee does not have a security licence, E Group Security says that such conduct is not the whole or even a majority of the work done by its security guards at licensed venues (referring to the explanation of the work done by its security guards in Mr Chamoun's affidavit sworn 11 March 2020 at [21]-[24] and noting that some of that work could not be done by the licensed venue's staff).

307. Second, it is said that, while the exceptions to the Security Industry Act identified by the Chief Commissioner excuse E Group Security's client from needing a security licence to perform certain particular activities, crucially, they do not excuse E Group Security from compliance with its obligations under the Security Industry Act when it provides security services to those clients. Emphasis is placed on the fact that E Group Security is not thereby excused from its obligations under ss 10 and 38(1) of the Security Industry Act, nor are the security guards excused from their obligations under s 29B.

308. It is submitted that, even if E Group Security's client's employees could perform some limited aspects of a security guard's role, the fact remains that E Group Security's security guards are the persons who are actually performing the role and, because of that fact, E Group Security is prohibited from delegating its functions in relation to those security guards to its client or providing the security guards to its client as an unlicensed person. It is emphasised that E Group Security still cannot permit its security guards to be integrated into its client's workforce.

309. Insofar as the Chief Commissioner has referred to "communication between the client, the client's other workers or customers on the one hand and the workers on the other hand", E Group Security says that the mere existence of such communication is not probative of the question of whether its security guards are integrated into the client's workforce. It is said that the test does not simply involve counting the number of occasions on which a security guard speaks with the client's staff or customers during a shift and considering whether that is a high number or a low number; rather, it is said that the existence of communication can only assist if it helps to answer the question of whether, on the particular facts, there is integration into the workforce. E Group Security says that such communication as existed does not point towards E Group Security's guards being integrated into the clients' workforces.

310. As to the submissions made by the Chief Commissioner dealing with the arrangements between E Group Security and its wholly-owned subsidiaries under which those wholly-owned subsidiaries are said to be "employment agents" and E Group Security is said to be their "client" for the purposes of s 37 of the Payroll Tax Act, the reply by E Group Security is as follows.

311. First, as to the assertion as to the "actual operation" of E Group Security and its wholly-owned subsidiaries, E Group Security says that this ignores the documents that are critical to the relevant question of whether its wholly-owned subsidiaries "procure" the services of the security guards obtained from third-party subcontractors (namely, the contracts under which those third-party subcontractors agree to provide security guard labour). E Group Security emphasises that those contracts are between E Group Security, on the one hand, and the third-party subcontractor, on the other; and that its wholly-owned subsidiaries are not party to those contracts. E Group Security reiterates its submission that the wholly-owned subsidiaries do not procure the

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services of the security guards obtained from third-party subcontractors.

312. Second, as to the Commissioner's submission in relation to the meaning of "client", E Group Security says that it does not claim that one person can never be a "client" of a related entity; rather, it says that whether or not one person is a "client" of another depends on all the facts and circumstances. E Group Security maintains that in the present case the particular facts and circumstances are such that it is not a "client" of its wholly-owned subsidiaries because of the way in which they in fact operate (i.e., as a single unified organisation, as explained in its submissions at [227]-[240]).

313. As to the submission at that the structure and language of s 37 make plain that the definition of "employment agency contract" is not intended to be confined to formal contracts or arms-length commercial arrangements, E Group Security says that it may be accepted that a "contract" includes an arrangement and that it may be formal or informal and it does not claim that any limitation should be read into the word "contract". E Group Security accepts that, at the very least, there is an "arrangement" between it and its wholly-owned subsidiaries. However, E Group Security contends that it is not a "client" of its wholly-owned subsidiaries.

314. As to the Commissioner's submission in relation to the caution expressed in Securecorp (at [89]) about over-reading the word "business" in White J's formulation of the s 37 "for" test in UNSW Global, E Group Security says that that is because "business" is a word that does not appear in the legislation. However, E Group Security points out that the same caution has not been expressed about the word "client" (which does appear in s 37). Relevantly, I note that in Securecorp, Payne J was referring to an attempt by Securecorp in submissions to take the one word "business" and use that word out of the context in which it was used to read down the meaning of the word "client" used by the statute.

315. As to the submission that the financial statements of its wholly-owned subsidiaries indicate that each operates a "standalone business", E Group Security denies this and says that rather, those financial statements record the wholly-owned subsidiaries as receiving revenues from the amounts paid to them by E Group Security and incurring expenses from the amounts they pay on behalf of E Group Security, pursuant to the Group Payroll Agreements. It is said that the evidence is that E Group Security and its wholly-owned subsidiaries operate as a single unified organisation, and that those financial statements are consistent with that.

Remission of interest

316. Finally, as to the submission made by the Chief Commissioner that the relevant discussions with the NSW Office of State Revenue were with a different entity than E Group Security, E Group Security says that there is no basis for this submission in circumstances where there is no evidence from Mr Blazek (the maker of the representations in the employ of the then NSW Office of State Revenue); whereas Mr Chamoun has given evidence as to what was said in that conversation. Further, it is said that the objective evidence is that E Group Security was a participant in the Chief Commissioner's earlier audit (Mr Chamoun's affidavit sworn 13 October 2020, Annexure A, Recitals D-E).

Determination

317. The relevant legislative provisions have been extracted above. The history to the introduction of the employment agency contract provisions of the Payroll Tax Act was set out by White J in Freelance Global (at [143]-[148]) and it is not necessary here to repeat that. Nor is it necessary to repeat what was said by his Honour in UNSW Global (see at [30]; [41]) as to the "mischief" to which s 37 of the Payroll Tax Act is directed, or his Honour's construction of the test to be applied under that section. I have already set out the meaning attributed by his Honour in Freelance Global (at [115]) to "procure" (see also at [119]; and
CXC Consulting Pty Ltd v Commissioner of State Revenue (2013) 96 ATR 796; [2013] VSC 492 at [67]-[77] per Ginnane J).

318. Those legislative provisions, and his Honour's construction of the relevant terms have been considered in a number of decisions (to which reference has been made already). It is well-recognised that the analysis is a

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fact sensitive one and much was made of the indicia identified in cases such as HRC Hotel Services when determining whether there is the requisite integration of the service providers into the relevant client's workforce. It is not disputed (though the emphasis placed on each varies in the respective parties' submissions) that those indicia include, as the Chief Commissioner has submitted, matters such as the location at which the services are provided by the workers; the regularity with which the workers provide the services to the client; the level of any interaction between the workers and the client's customers on the one hand and the client's employees on the other; the level of any direction or instruction provided by the client to the workers; the workers' access to, and use of, client staff facilities; and the relevance or connection to the client's business of the services provided by the workers to the client. What is not relevant in this context is whether the services performed by the workers are integral or ancillary, as the case may be, to the client's business.

319. The contention propounded in Southern Cross Group Services (see as summarised at [26] in that decision) (what I might call the "end user" argument) was that the relevant contractual relationships were not within the intended scope of the employment agent provisions as: the plaintiffs were not party to a contract "under which" they procured the services of another person in and for the conduct of the business of the employment agent's client (the contracts being ones with the contractors and not the end user). It was thus submitted there that, although the services are provided for the relevant client (i.e., contractor's benefit), the services were not provided by the service provider working in the client's business; and that the service providers did not comprise, nor were they added to, the workforce of the client for the conduct of the client's business (see [74] in JP Property Services).

320. I concluded (at [60]) that the first plaintiff's security staff (who worked on-site at the clients' premises and wore the clients' branded uniforms) were sufficiently integrated into the clients' businesses to be seen as additions to the clients' workforces (and I considered that this was most evident in the cases where there was already an internal security staff component to which the plaintiffs' service providers were added). Similarly, at [61], I concluded that the security staff procured by the second plaintiff were added to the workforce of the first plaintiff for the purpose of the provision of their services to the first plaintiff's clients as are the first plaintiff's own employees. Thus, at [62], I concluded that the plaintiffs' respective contractual arrangements were arrangements "under which" each (as an employment agent) procured the services of security staff for a client of the plaintiff; and that there was the requisite connection between the contractual arrangements and the provision of services "in and for the conduct of" the respective client's business.

321. However, the mere fact that two cases may concern the provision of services of security guards does not (and the Chief Commissioner does not suggest this) mandate a similar conclusion. Relevantly, for present purposes, I accept that there was no debate in Southern Cross Group Services as to the meaning in this context of the term "client" when considering the contracts between the employment agent and the contractors. Nor was there express consideration of the meaning of "client" in the consideration in UNSW Global of the phrase "procures the services of another … for a client of the employment agent", which his Honour concluded meant "in and for the conduct of the business of the employment agent's client" rather than simply as meaning for the client's benefit.

322. As to Securecorp, there was some discussion of the meaning of "client" to the extent that Payne J held that "client" in s 37 is not to be read as the "ultimate end user of the services provided" (at [90]-[91]). His Honour also said (at [91]) that the "'client', for the purposes of s 37, is the recipient of services - Westfield Management Co and JLL - even if those firms were not the so-called 'end users' of those services".

323. I will turn shortly to the respective clients and industry sectors in the present case. However, at the outset, I wish to make clear that my understanding of the "in and for" test is that it requires an analysis as to whether the workers in question were integrated into the

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client's business (or added in effect to its workforce), not whether the workers or the provision of their services were integral or essential (as opposed to ancillary) to the client's business or workforce; nor whether the client could itself have performed the relevant tasks. In Bayton Cleaning, I considered it significant that what had occurred (at least in one instance) was that, in effect, the client's workforce had simply transferred (or "transitioned") to that of the employment agent and was then continuing to provide the same service and carry out the same tasks as had previously been undertaken as part of the client's workforce (see at [273]), as this indicated to me that those workers continued to be performing the same role in the client's workforce albeit no longer employed directly by the hotel client. The same cannot be said here. Moreover, the fact that clients could (and one, the Australian Turf Club in fact did) obtain their own security licence and employ their own security staff is not to my mind to the point.

324. Further, by way of introductory observation, while the capacity to direct or control the tasks that are performed or the manner in which they will be performed is a relevant consideration and will in some (perhaps many) cases be significant, I do not consider that this factor alone will necessarily be determinative in all cases.

325. In the present case, Mr Chamoun's mantra in cross-examination (and I say this with no disrespect) was the invocation of E Group Security's obligations under the Security Industry Act. I can well understand his concern to ensure that there be no breach (or perceived breach) of that legislation, which would carry significant consequences, not just as to penalty but also (one would assume) to the continued holding of a security licence. However, a contractual ability to give (or obligation to comply with) a direction would not seem to me necessarily to involve any breach of the legislation and nor would a refusal (if based on the security industry constraints) to accede to such a direction necessarily involve a breach of contract (since the contractual obligation to comply with such a direction could surely only be with a direction that was lawful - and hence, it would seem to me that there would be no contractual obligation to comply with a direction that would or might place E Group Security in breach of its security licence) (see by way of analogy the discussion as to lawful directions in a master/servant relationship in
Tullett Prebon (Australia) Pty Ltd v Purcell [2009] NSWSC 1079 at [35]-[36] at first instance, for example). On the one hand, if, looked at pragmatically there would be no enforceable obligation to comply with directions that might place E Group Security in breach of its security licence, then a contractual provision reserving to the client the ability to give directions takes the matter no further because it says nothing about what in practice occurs in the performance of the contract. On the other hand, the mere existence of the constraints imposed by the legislation (as E Group Security in submissions quite fairly conceded) would say nothing if those constraints were not in practice regularly observed.

326. Furthermore, let it be assumed that client participation in determining the parameters of an SOP (whether by way of suggestion or request) did occur from time to time (or can be said to have occurred by way of the setting or monitoring of performance to stipulated KPIs), I do not accept that this would necessarily amount to sufficient control or direction to warrant a conclusion that the security guards were integrated into the clients' workforce. There seems no doubt at a practical level that E Group Security personnel were required to perform their tasks at the client's premises subject to the direction and instruction of their E Group Security supervisors. In that regard, I accept the evidence of those responsible for supervision of the security operations at various of the clients' sites to the effect that, on the ground so to speak, the security guards were directed to comply with E Group Security's instructions and to report back to E Group Security. Responding to a request from a client (or answering a query from a customer of the client) does not change that.

327. As to the complaint by the Chief Commissioner of incomplete contractual documents and the like, I bear in mind that there is not a complete documentary record of the whole of the 600 odd clients' contractual arrangements but I note that Mr Chamoun's evidence was that for a large number

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of clients (indeed as I understand it, more than half) the arrangements were not in writing and were conducted by telephone calls (and therefore for some clients it is explicable that no such record of contractual arrangements would exist). Moreover, I do have the benefit not simply of Mr Chamoun's evidence but also of a selection of client representatives from across the various sectors and from former E Group Security personnel (who have no personal interest in the outcome of the proceeding and would have no reason not to present their honest recollection of events); and the overall picture they presented was consistently to the effect that E Group Security takes its security licensing obligations very seriously and that E Group Security maintains control over the supervision of the security guards it provides to clients (both its own employees and those contracted from sub-contractors).

328. By way of summary, and speaking at a general level, of the factors identified as relevant in considering whether the workers are provided "in and for" the client's business, in the present case the evidence establishes the following. The location at which the services are provided by the workers is generally that of the client's premises (although, as with Baiada, the location is physically separate from the client's main business operations; and with the Department of Education holiday school patrols the location might be described as a roving location that necessarily extends beyond the boundary of the schools themselves). There is a regularity with which the workers provide the services to the clients in the Commercial sector but a more ad hoc provision of services in, say, the health sectors or Event sector and certainly for one-off or short-term clients. The level of interaction as between the workers and the client's customers or contractors varies but there is generally at least some interaction between them (except in the Department of Education holiday patrols and the HammondCare out-of-hours vehicle patrols). There is some level of direction or instruction reserved to the client under the contractual documentation that was in evidence though, as noted above, I do not accept that it would extend to the control over or giving of binding instructions as to security decisions of a kind required under the legislation to be made by the security licence holder. I see as significant the distinction drawn by various of the witnesses between security issues and non-security issues. The workers' access to and use of client staff facilities is limited or non-existent in most cases (and I do not regard access to the JOCC at the Australian Turf Club on race days relevant in this regard, since I consider that a necessary incident of control over the security aspects of the work performed by E Group Security personnel - and, equally, others have access thereto, such as the police officers, who on no view would be regarded as integrated into the Club's own workforce). Last, I accept that there is an obvious significance (or necessity) to the clients of the security services provided by E Group Security's workers; and the clients may or may not be in a position to obtain or hold licences which would permit the clients themselves to perform those services.

329. Balancing all of those factors, I have concluded that the arrangements by which E Group Security provided security guard services to the clients in the present case do not constitute employment agency contracts and do not give rise to payroll tax liability.

330. Turning then to the particular categories of clients, I find as follows.

331. First, for the one-off clients and those clients for whom services were provided on an ad hoc basis (such as the NSW Department of Health and the Board of Studies) or outside the ordinary day to day activity of the client's workforce (such as the NSW Department of Education where the patrolling of school sites occurred completely outside the functioning of the school terms), I can see no basis on which the security guards could be said to be integrated into the client's workforce. I would conclude the same for events functions on a one-off basis (such as the jeweller's functions). As to the patrolling in school holidays, I make clear that it is not only that it occurs after hours or after the school term as such that I consider significant (because I consider that in some cases after hours workers - say, cleaners for example - could well be sufficiently integrated to form part of the client's workforce). However, the evidence points to an almost complete lack of interaction by the security guards with anyone at

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the schools (indeed there would only be such an interaction if a security breach or problem was detected and the evidence then is that it would be relayed to the client through E Group Security and directly to the police). I would have thought that no-one seeing a security car patrolling outside a school would think that this was a Department of Education employee foraying into the security guard's world.

332. That points to a very significant issue in my opinion. Common sense would suggest that security guards (particularly those monitoring crowd control or bag screening or the like at sporting events or other such events but also no doubt those located in public or other areas of commercial buildings) need to be readily distinguishable (much in the same way that police officers patrolling areas to ensure compliance with, say, public health orders during the current pandemic are no doubt meant to be readily distinguishable to the public). Indeed, that was the very evidence that was given by Mr Gould (see at T 215) and by Mr Colston (see above). In those circumstances one would expect that it would be important for the security guards to stand out as such. True it is that some clients (such as the Australian Turf Club, for example; or occupants of buildings such as Westpac at the Barangaroo site - see Mr James' affidavit) may have their own security licence and may employ their own security guard employees. However, even then, there is no suggestion that E Group Security's guards would be indistinguishable from or mistaken for employees of the client. There is, for example, no suggestion that those E Group Security guards patrolling Randwick Racecourse on race days or carrying out bag services or other crowd control were not readily distinguishable to the public from ordinary Australian Turf Club employees (and the evidence is that they were in fact used as a quite separate taskforce at race day events). The fact that some E Group Security personnel had access to a joint control or operations area (say, the JOCC at the Australian Turf Club) does not change my opinion in that regard. Nor does the fact that in situations of emergency (such as a lost child) all staff at the venue are likely to be diverted to the emergency at hand (as was one example explored in the course of cross-examination at the hearing).

333. Second, as to the Club and Pub Clients and the like; for the reasons adverted to above, I see the E Group Security personnel as not sufficiently integrated into the client's workforce. In general, the evidence is that the security guard's use public facilities, that they take instruction from E Group Security, and that they wear distinguishing clothing. While they provide an integral function for the clients, they are not an addition in the sense of being integrated into the workforce.

334. The two categories in respect of which I have some concern are the commercial buildings (including those where security staff may be deployed to sit at a concierge desk or as additional concierge staff or in the loading dock) and the one Food Industry client, Baiada.

335. As to the first, in buildings, such as the Ernst & Young building, where there is a separate Ernst & Young concierge desk that is clearly identifiable, I do not have a concern. The fact that E Group Security are instructed to be polite to clients of their clients' business (and might give directions to the bus stop or a helping hand to old ladies in need of assistance from time to time) is not to the point (indeed, it is no more than good manners and courtesy, which no doubt is the professional face that E Group Security would wish for the workers it provides to display). Nor do I have a concern as to security guards who might relocate to a concierge desk after business hours in order to perform a security function from that location. I accept that in some of the commercial buildings there seems to be less distinction in the clothing that is worn (the relevant distinction seemingly being a lanyard or perhaps a badge - particularly where the E Group Security branded white shirt is covered by a suit jacket) and it might be that a casual observer would not appreciate the difference between a security guard and, say, a receptionist or concierge if the guard were sitting at the concierge desk. However, the evidence is that for the most part any security guards that were located at the concierge desk did so after hours. As Mr Camilleri says in relation to 52 Martin Place, by the time the security guard sits at the concierge desk (6 pm), only people with access cards can enter the building (T 242). Moreover, in most of the material to which I was taken it was apparent that the security guards are

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not (or should not be) spending their time at a desk - they are patrolling or roaming or being placed at strategic static positions to monitor for risks to the security of the building or harm to its occupants.

336. My area of concern is with the examples of a security guard being invoiced to a client as a concierge. While I have less difficulty with ad hoc invoicing for an "additional concierge" (for example, the invoice for an "ad hoc guard/concierge desk" at 52 Martin Place for one day on 12 May 2017), there is evidence of consistent invoicing for concierge services at a number of buildings (100 William St, 200 George St, 607 St Kilda St and 420 George St). However, even where a security guard is stationed consistently at the concierge desk, this is still a small proportion of the work provided by E Group Security's guards (as I noted above, most of the evidence was that the guards are patrolling the buildings, performing access control or at the loading dock). Moreover, I also accept that some security function is no doubt performed at the concierge desk, indeed, there is an invoice (Ex 6 at 9052) for a representative of E Group Security to "[i]nvestigate poor CCTV system connection at Concierge Desk 100 William St". While it may be that an ordinary observer would have difficulty distinguishing between the E Group Security guard seated at the concierge desk in those particular buildings from the client's employees, I am not persuaded that, as a whole, the E Group Security guards are indistinguishable. Ultimately, considered with the other relevant factors as to control, use of client's facilities, and E Group Security uniforms for example, I find that the E Group Security guards in the commercial buildings are not sufficiently integrated in the relevant client's workforce.

337. As to the loading dock functions carried out at commercial buildings generally, I accept that there is a security function involved and I am not satisfied that the security guards are otherwise sufficiently integrated into the workforce at those locations to warrant a different conclusion.

338. Finally, as to the Baiada chicken operation, the security guards there provided are in a physically separate location and readily identifiable as E Group Security personnel. While I have some hesitation as to the weighbridge tasks performed, I accept that there is a security function in ensuring that there is not access by unauthorised persons (or objects) to the Baiada sites. Further, I accept Mr Camilleri's evidence that the E Group Security guards also perform access control, CCTV and alarm monitoring. Moreover, the E Group Security workforce there is physically separated from Baida's workforce (Mr James' affidavit sworn 27 February 2020 at [26]-[27], Annexure B) and wear highly distinct clothing (Mr James' affidavit sworn 27 February 2020 at [24]-[25]). All factors combined, I am satisfied that the plaintiff's guards were not integrated into the Baiada workforce.

339. Therefore, the first basis on which it might have been concluded that the payroll tax liability arose is not, in my opinion, the correct analysis of the situation. I accept that E Group Security bears the onus of establishing that it does not fall within s 37. I consider that it has satisfied that onus.

340. As to the alternate proposition that the contracts between E Group Security and its subsidiaries were themselves employment contracts, I am also not satisfied that a payroll tax liability has arisen. First, as to the meaning of "client" in s 37(1), I do not accept that it is necessary to show that there was some goodwill arising from the contractual arrangement in order to bring it within the client/employment arrangement. I consider that "client" (which is not defined in the legislation) should be given its ordinary (common parlance) meaning - as someone with whom there is some form of relationship whereby (for reward or otherwise) one party does something on behalf of or at the request of another at least where that is in a professional or business context (and I consider that this accords with Payne J's analysis in Securecorp). In that sense, it might be said that E Group Security is the client of the Related Entities insofar as the Related Entities perform an invoicing service for E Group Security but that does not make E Group Security a client for the purpose of procuring of workers. However, more likely to my mind is that the payroll arrangements were not "client" arrangements but were instances of compliance

ATC 24636

by the subsidiary with a direction from the parent company.

341. However, this argument ultimately turns on whether the Related Entities "procured" the services of the security guards for E Group Security within the meaning articulated by White J in Freelance Global. I am not persuaded that there was an agreement between E Group Security and its subsidiaries to procure the workers. I consider that the Group Payroll Agreements were a contract or agreement for the subsidiaries to perform a payroll function. That is because I accept that (poorly drafted as they may have been) the intent was that the payroll functions be performed by the subsidiaries but that the security guards (though paid via the subsidiaries) were procured as such by E Group Security. I accept that the footer of the invoices that refers to services having been "supplied" by E Group Protective Services raises concern in relation to this point. However, considering the invoices as a whole that discrepancy does not seem to me to warrant a conclusion contrary to E Group Security's position (particularly since I consider that the re-structure or re-branding of the companies in the group does not appear to have been consistently implemented in the documentary arrangements). On the whole, I am of the view that the Related Entities did not procure the security guards for E Group Security in the relevant years but, rather, facilitated E Group Security's provision of services to its clients.

342. Therefore, I consider that E Group Security's application for review should be allowed.

343. As to the question of remittal of interest, had it arisen (which in light of the above conclusion it does not), I confess I am troubled by the evidence as to the advice or representation said to have been made in the course of the audit (albeit that I do not suggest that any such advice or recommendation would have been expressed as binding; nor do I accept that any misrepresentation has been established). However, if a taxpayer acts on the basis of such advice or recommendation (and I am not here suggesting that there was any impropriety in what was alleged to have been said), particularly if there is no disclaimer, and ultimately it is shown to be incorrect, then that may well provide a basis (amounting to special circumstances not exceptional circumstances) to exercise the discretion to remit interest or at least penalty interest but as it is, it is not necessary to explore that issue further.

Costs

344. The parties indicated that they wish to make further submissions as to the question of costs. I will make orders for that to occur with a view to dealing with the issue of costs on the papers.

Orders

345. For the above reasons I make the following orders:

 

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