Integrated Trolley Management Pty Ltd v Chief Commissioner of State Revenue

1. [1]

   This a payroll tax case. Unless otherwise indicated, references in this judgment to “the Act” are to the Payroll Tax Act 2007 and references to sections are to sections of that Act.

2. [2]

   The plaintiff (ITM) has been assessed for payroll tax by the defendant (the Commissioner). In these proceedings, ITM seeks review of those assessments.

3. [3]

   The assessments in question relate to contracts which ITM has with three supermarket operators: Woolworths, ALDI and IGA. At the relevant time, the Woolworths contract covered “Big W” and “Dan Murphy’s” stores, and one “Thomas Dux” store, as well as Woolworths supermarket stores. For convenience I will refer to all of these collectively as “Woolworths” stores.

4. [4]

   Under these contracts, ITM undertakes to the supermarket operators to perform specified “trolley collection services” for them at specified stores. Each supermarket operator owns its own trolleys. The trolleys are made available to customers at bays outside the entrance to the store in question. The services provided by ITM essentially involve returning trolleys taken by customers to the store bays so as to keep those bays replenished at all times. Trolleys are generally collected from where they have been left within the shopping centre or the car park. From time to time, searches may be made of the neighbouring area to collect trolleys which may have been left there (such searches were referred to in the evidence as “street runs”).

5. [5]

   ITM does not itself employ the people who perform the trolley collection services. It engages subcontractors to perform those services. ITM’s subcontractors are a mixture of sole traders, partnerships, and small proprietary companies. Some of these operate as trustees for family trusts. The individuals who perform the actual trolley collection work may thus be sole traders, partners, employees or (in the case of the small proprietary companies) shareholders, directors, or other agents of the company.

6. [6]

   The assessments mainly relate to trolley collection services provided for Woolworths and ALDI. The trolley collection services for IGA cover only two stores, and account for less than 1% of ITM’s revenue in the relevant years.

7. [7]

   The assessments, to the extent that they cover ALDI stores, include separate contracts for the provision of cleaning services at two stores in country New South Wales. The provision of those services was subcontracted by ITM to its trolley collection subcontractor for those stores. Again, this represents a very small proportion of ITM’s revenue in the relevant years.

Issues for determination

1. [8]

   Liability for payroll tax is imposed by sections 6 and 7 on any “employer” by whom “taxable wages” (as defined) are paid or payable. The amount of payroll tax payable is calculated by reference to the total taxable wages paid by the employer, in accordance with schedules 1 and 2.

2. [9]

   The critical provisions for the purpose of this case, appear in Division 8 of Part 3 of the Act, “Employment agents”, which spans ss 36A to 42. The critical provisions of that Division are ss 37 to 40, which provide:

3. [10]

   The application of the provisions requires a three-step approach.

4. [11]

   The first step is to identify the putative employment agency contract under s 37. The question is whether there is a contract (within the extended sense provided for by subsections (1) and (3)) “under” which the putative employment agent “procures the services” of a “service provider” “for a client” of the agent. This is a matter of characterisation of the “contract” (in the extended sense which that term has). Usually, the agent and the service provider would be parties to the contract, but nothing in s 37 expressly requires this.

5. [12]

   If the contract in question is an employment agency contract, then the employment agent is, by sections 38 and 39, deemed to be the employer of the person “who performs work for or in relation to which services are supplied to the client under the employment agency contract”. The person in question need not himself or herself be the service provider. All that is required is that the person performs work “for or in relation to” the supply of the relevant services.

6. [13]

   The third step is the calculation of the deemed wages. This includes “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”. Again, the amount is not confined to payments made to the service provider for the provision of services the subject of the employment agency contract. Furthermore, there are provisions governing fringe benefits and superannuation.

7. [14]

   There are four assessments, and a further set of four amended assessments, which are the subject of the proceedings. They cover the financial years ending 30 June 2016, 2017, 2018 and 2019. The primary tax liability was about $2.87 million. This assessment also included a total of approximately $360,000 in penalty tax. The assessments also carry interest which is currently more than $400,000.

8. [15]

   The assessments proceed on the basis that all of the payments made by ITM to its subcontractors under ITM’s contracts with Woolworths, ALDI and IGA were deemed by s 40 to be “taxable wages” paid by ITM as a deemed employer, ITM being an “employment agent” and Woolworths, ALDI and IGA being the relevant “clients”.

9. [16]

   The assessments were issued in October 2020 and followed an audit by the Commissioner. The Commissioner’s covering letter stated:

10. [17]

    It is common ground that the onus in these review proceedings lies on ITM to demonstrate that the assessments are erroneous. The review however involves a de novo hearing and is not limited to the material before the Commissioner.

11. [18]

    The area of dispute between the parties was confined. They agreed that all aspects of s 37 were satisfied in this case apart from one. That issue will be explained in due course, as it needs to be understood in the context of how s 37 has been construed in prior decisions.

Evidence

1. [19]

   ITM has been operating a trolley collection contracting business since 2005. It was founded, and continues to be managed, by two business partners: Dennis Roy Vickery and Steven Hills.

2. [20]

   Mr Vickery gave evidence in support of ITM’s case in these proceedings. In his affidavit, he described the way in which ITM’s business was conducted during the relevant period (July 2015 to June 2019).

3. [21]

   Mr Vickery was cross-examined by counsel for the Commissioner on some points of detail. For reasons given below, I am not sure that all of Mr Vickery’s evidence is actually relevant to the Court’s task; some of it may, in the end, be a matter of opinion. But I did not understand there to be any dispute about the basic facts stated by Mr Vickery.

4. [22]

   ITM does not provide trolley collection services for all of the Woolworths, ALDI or IGA stores in New South Wales. It seems that there are other trolley collection contractors in the market.

5. [23]

   Nor do all supermarkets use such contractors. Mr Vickery was cross-examined about the other main supermarket operator in New South Wales, Coles, and said that he understood that “in most cases” Coles’ trolleys are collected by their own employees.

6. [24]

   Often the trolley collection services which are relevant in the present case covered the whole period of the relevant store’s operations. Sometimes it was only a restricted period. Occasionally, the only service provided by ITM for a store was to conduct street runs. In Woolworths stores, the remaining collection work was undertaken by Woolworths staff. Mr Vickery said that he believed the position for IGA was similar. According to Mr Vickery, however, all of ALDI’s trolley collection work was contracted out.

7. [25]

   It seems that equipment was often used in the process of collecting trolleys. For some stores, a tractor was used to tow trolleys, or a trailer containing trolleys, back to the store bays. In other stores, smaller pieces of equipment were used to help with handling trolleys. None of this equipment belonged to the supermarket operator. Mr Vickery gave evidence that the subcontractors used their own equipment. He did note that ITM would sometimes (Mr Vickery estimated, in about 20% of cases) loan equipment to new subcontractors (usually a trolley trailer) for some months until the subcontractor acquired its own.

8. [26]

   The administration of ITM’s contracts with the supermarket operators, and its subcontracts for the provision of the trolley management services pursuant to those contracts, was undertaken jointly by Mr Hills and Mr Vickery. Mr Hills spent more of his time on back-office work and Mr Vickery was more involved in onsite work.

9. [27]

   On behalf of ITM, Mr Vickery and Mr Hills provided induction training for the subcontractors, as well as ongoing training. For this purpose, ITM provided its contractors with a Workplace Health and Safety and Compliance Manual (“ITM Compliance Manual”). A copy of the Manual, dated July 2016, is in evidence.

10. [28]

    As part of its management of ITM’s trolley collection contracts, Mr Hills and Mr Vickery regularly undertook site visits to the relevant shopping centres. During the relevant period, Mr Vickery was performing over 200 site visits per year.

11. [29]

    Occasionally, site visits or other information would result in formal audits being undertaken by ITM. There were 360 site audits during the relevant period. Summaries of those audits, together with some of the underlying audit papers, were in evidence before me.

12. [30]

    Mr Vickery stated that, to his observation, the trolley collectors had “very limited” engagement with the supermarket staff. They did not attend supermarket staff meetings, and the supermarket staff rarely ventured into the carpark or other areas where the trolley collectors would work. In general, trolley collectors who worked at supermarket sites would have no need to attend the retail part of the stores. An exception to this in Woolworths stores was that occasionally a collector would have to pass through the retail area to collect customer trolleys left at the back of the store, by store staff. When this happened, the trolley collectors would wear a sticker displaying the word “visitor”. Although Woolworths permitted trolley collectors to use lunchrooms and restrooms, to Mr Vickery’s observation they rarely did so. Instead, they tended to use the public restrooms in the shopping centres and took their meal breaks outside the store or in their cars.

13. [31]

    According to Mr Vickery, he and Mr Hills encouraged both the Woolworths store managers and the subcontractors to communicate through them. In particular, any requests by store managers for a particular service would typically be directed to Mr Hills or Mr Vickery and would be relayed by them to the relevant subcontractor. If any request was outside the scope of the contract, it would be declined.

14. [32]

    According to Mr Vickery, ITM’s policy was that its subcontractors on the Woolworths, ALDI and IGA contracts were free to undertake trolley collection services for other stores in the same shopping centres, or for other trolley collection contractors (see also, [68] below). According to Mr Vickery, at any given time, “approximately half a dozen sub-contractors in New South Wales performed such other work”. Indeed, the services provided to the Woolworths, ALDI and IGA stores at Park Beach Plaza, Coffs Harbour were all provided by the same subcontractor.

Woolworths trolley collection services

1. [33]

   The case was argued around the Woolworths contract. I will first summarise the terms of the contract and ITM’s subcontracts, and the evidence about how the contract and the subcontracts were administered. I will then refer to the relevant authorities, before addressing the parties’ arguments on the application of the legislation.

2. [34]

   Woolworths contract: The trolley collection services provided by ITM to Woolworths during the relevant years were supplied pursuant to two contracts, one dated October 2011 and the other dated June 2012. The two contracts each applied to a group of stores. The terms of the two contracts however were relevantly the same. For simplicity, I will refer only to the October 2011 contract except where it is necessary to refer separately to the June 2012 contract.

3. [35]

   Clause 1.1 provided that:

4. [36]

   Clause 3.1 provided that:

5. [37]

   “Services” was defined in clause 31.1:

6. [38]

   Schedule 1 was headed, “Trolley Collection Services”. It provided:

7. [39]

   Schedule 3 does not appear to have been used. It was headed “Charges (Not applicable” and said, “Insert rate sheet”. There was, however, a Schedule 2 headed “Sites and Charges”. Included was an excel spreadsheet with the following details, for 78 different stores:

   1. (1)

      Contractor Name (ITM for all)

   2. (2)

      Region Number (Numbers included were 1, 2, 6 and 8)

   3. (3)

      Area Number (Blank for all)

   4. (4)

      Store Number

   5. (5)

      Store Name

   6. (6)

      Banner (Relevant Woolworths brand. Those included were: Woolworths; Big W; Dan Murphy; Thomas Dux)

   7. (7)

      Collection Type (67 had “Full service”; 10 had “Street Run Only”; 1 had “Evening Cleanup & Street Run”)

   8. (8)

      SITE Price (ranging from $64 to $5,800 (presumably, per week))

   9. (9)

      Fixed Site Operating Hours (ranging from 0 to 100)

   10. (10)

       Site Labour Hours (ranging from 0 to 226)

   11. (11)

       Total Site Street Runs (ranging from 1 to 28)

8. [40]

   Clause 4 provided that:

9. [41]

   Clause 5 provided that:

10. [42]

    The list of subcontractors referred to in clause 5.1(b) was set out in Schedule 4. The Schedule contained a spreadsheet. The first six columns contained store details equivalent to (1)-(6) at [39] above. It then contained columns with subcontractor details. The columns were not labelled but appear to have contained the following details (see also [60] below regarding the corresponding part of the 2012 contract):

    1. (1)

       Subcontractor (some natural persons, others not)

    2. (2)

       ABN

    3. (3)

       ACN (blank for many)

    4. (4)

       An address

    5. (5)

       A name (presumably, contact name)

    6. (6)

       A mobile phone number (presumably, of the contact person)

11. [43]

    Clause 6.2 provided:

12. [44]

    Clause 6.3 provided:

13. [45]

    Clause 7 provided:

14. [46]

    Clause 8 provided:

15. [47]

    Clause 9 provided:

16. [48]

    Clause 10 provided:

17. [49]

    Clause 11 provided:

18. [50]

    Clause 12 relevantly provided:

19. [51]

    Clause 13 relevantly provided:

20. [52]

    Clause 14 relevantly provided:

21. [53]

    Clause 15 provided:

22. [54]

    Clause 16 relevantly provided:

23. [55]

    Clause 17 relevantly provided:

24. [56]

    Clause 23 relevantly provided:

25. [57]

    Clause 24 provided:

26. [58]

    Schedule 5 set out “Key Performance Indicators”. Schedule 6 was titled “Governance and reports”.

27. [59]

    In the 2012 contract, Schedule 2 was in a similar form to the 2011 contract. It contained 15 stores, across the Woolworths, Big W and Dan Murphy’s banners. 4 stores had Street Run collection types; 11 had Full service collection types. SITE Prices ranged from $124 to $5,029. Fixed Site Operating Hours ranged from 3 to 99. Site Labour Hours ranged from 3 to 159. Total Site Street Runs ranged from 3 to 35.

28. [60]

    In the 2012 contract, Schedule 4 was also in a similar form to the 2011 contract. It contained store details across the first six columns of the spreadsheet. It then included subcontractor details, in comparable columns but this time with labels. Those labels were:

    1. (1)

       Subcontractor Business Name [along with a note, “[NONE for direct employ]”. I note that “NONE” was not used for any entries]

    2. (2)

       Subcontractor Business ABN

    3. (3)

       Subcontractor Business ACN

    4. (4)

       Address

    5. (5)

       Contact (Full Name)

    6. (6)

       Contact Phone number

29. [61]

    Woolworths subcontracts: ITM had a standard form subcontract which it used for its Woolworths contracts.

30. [62]

    Recitals B, D and E provided:

31. [63]

    Clause 3 concerned ITM’s general undertakings to the contractor. In summary, it provided that ITM undertook to:

    1. (1)

       Do everything in its power to preserve the contract with the relevant store, and assist the contractor in maintaining and building its business.

    2. (2)

       Assist the contractor in carrying out the work and to exercise oversight over compliance with the store contract and the subcontract agreement.

    3. (3)

       Oversee public liability insurance, at the contractor’s expense, noting that a fleet policy could also be provided (again at the contractor’s expense).

    4. (4)

       Provide uniforms, at the contractor’s expense.

    5. (5)

       Use its buying power, contacts and experience to provide information and sources to help minimise business expenses, maximise efficiency and legal and contractual compliance.

    6. (6)

       Provide guidance on OH&S, Awards and Award entitlements, payroll records and vehicle safety.

    7. (7)

       Monitor compliance with the subcontract agreement and legal compliance more broadly.

    8. (8)

       Provide quarterly summary transactional information to assist with completing BAS obligations.

32. [64]

    Clause 4 concerned payment. ITM would take 6.5% of the amount invoiced to the stores, leaving 93.5% as gross pay for the contractor. Provision was made for various instances in which the rate paid could be varied, temporarily or permanently. Below clause 4 was the following note (emphasis in original):

33. [65]

    Clause 5 concerned undertakings of the contractor. In summary, it undertook to:

    1. (1)

       Maintain an ABN and GST registration and provide ITM with periodic tax invoices.

    2. (2)

       Maintain Workers Compensations Insurance, and provide ITM with evidence of compliance with Workers Compensation legislation.

    3. (3)

       Purchase or hire all necessary equipment.

    4. (4)

       Have ITM check all foreign born employees prior to them starting work, and ensure they will comply with any visa conditions.

    5. (5)

       Abide by all relevant laws and regulations.

    6. (6)

       Maintain the WH&S system required by the Store and provided by ITM, and ensure proper induction, supervision, recordkeeping and consultation.

    7. (7)

       Provide ITM with written incident reports in specified circumstances, and suitably train employees to report.

    8. (8)

       Comply with the relevant award in payment, and maintain appropriate records.

    9. (9)

       Provide current contact details for the contractor and main supervisors during service hours, compliant with requirements.

    10. (10)

        Authorise ITM to deduct excesses of insurance claims for which the contractor or its staff are responsible.

    11. (11)

        Abide by all aspects of the store contract, with emphasis drawn to 15 requirements

    12. (12)

        Maintain ongoing goodwill and friendliness with Store management and staff, Shopping Centre Management and staff, customers, other Centre tenants, and any other contractors on site, in the carrying out of the work.

    13. (13)

        Maintain direct control over the work at all times, with delegations, subcontracting or assignments not permitted without prior and express permission of ITM, capable of being withheld at its sole discretion.

    14. (14)

        Indemnify the Stores (including subsidiaries and affiliate brands), ITM and Pacific Services Pty Ltd against fines, claims, legal or other costs arising from their performance of the work.

    15. (15)

        Attend personally the Shopping Centre site for at least 4 of 7 days, including Thursday to Saturday.

    16. (16)

        Make personal contact weekly with each Store Manager or Store Services Manager.

    17. (17)

        Permit ITM to deduct monies advanced or loaned or for purchases by them to ITM.

    18. (18)

        Permit ITM to deduct extra administrative charges in specified circumstances.

    19. (19)

        Keep any equipment owned by ITM or Pacific Services Pty Limited in a safe and roadworthy condition, ensure regular services of motors, authorise deductions of rentals and repair costs, agree to indemnify for fines, actions or charges due to failures to maintain in a roadworthy and safe condition.

34. [66]

    Clause 6 provided that the parties agreed they were independent contractors, and not in any way entering into a partnership regarding the work. They also agreed that they were not entering an agency or employee arrangement. They agreed that apart from the agreement in question, neither had the authority to contract on the other’s behalf or in the other’s name, nor bind or create liability for the other.

35. [67]

    Clause 9 concerned termination. The contractor had a right to terminate by giving 4 weeks written notice. ITM had a right to terminate immediately in one of seven specified circumstances. Those were, in summary:

    1. (1)

       Termination of the Store Contract, or Centre Management requesting termination of the contractor.

    2. (2)

       For natural person contractors – that person dying, becoming mentally ill, being declared bankrupt, entering a scheme of arrangement or making an assignment for the benefit of creditors.

    3. (3)

       For company, partnership or other business contractors – ceasing to retain entity or status, resolving to enter administration or liquidation or have a petition for winding up presented, entering a scheme, or having a liquidator, receiver or official manager appointed.

    4. (4)

       Breach by the contractor of any term of the agreement with ITM or ITM’s agreement with Woolworths, accompanied by failure to rectify within 7 days, or comply with requirements expressly or impliedly contemplated per the agreement with ITM. Express provision was made that this was to include working for a different prime contractor for other stores in an ITM centre without ITM’s written permission, which could be withheld at ITM’s discretion.

    5. (5)

       Failure by a contractor to meet legal and contractual obligations, with a non-exhaustive list provided.

    6. (6)

       ITM reserved a right to terminate if the contractor left Australia for more than 1 month each year or left Australia without ITM’s written consent.

    7. (7)

       A contractor bringing ITM or Woolworths into disrepute, including by having legal action taken against it by the ATO, FWO, Workcover authorities or the Department of Immigration.

36. [68]

    Two points can be made about the last sentence of (4) above. First, the provision did not prevent contractors from working directly for other stores in an ITM centre. Mr Vickery gave evidence that this occurs. Second, the clause only required permission. Mr Vickery gave evidence that ITM never sought to stop subcontractors from providing trolley collection services directly to other stores or as subcontractors of other businesses.

37. [69]

    There are references in the subcontract to a schedule. The schedule for the Woolworths subcontract does not appear to have been in evidence. There was however an example of a schedule to an ALDI subcontract. Item 1 of that schedule specified particulars, item 2 specified stores and corresponding rates, and item 3 specified charges. Presumably, the standard form Woolworths schedule took a similar form. Additionally, from the terms of the subcontract, it is clear that the schedule was to specify the parts of the main contract being subcontracted, together with the weekly rate and an itemisation of any additional charges payable beyond the 6.5% retained by ITM.

38. [70]

    Woolworths contract administration: Also in evidence was an “EMS Services Manual – Trolley Collection” dated February 2016. This manual appears to have been an internal Woolworths document for the benefit of its store managers. A section of that manual was headed “Trolley Collection Do’s and Don’t’s. It contained a subheading, “Operational Message: Trolley Collection”, with text underneath explaining, “It’s time … for a refresher on the “Do’s” and “Don’ts” for Trolley Collection. Please review this with your team. The manual then set out “Do’s” and “Don’ts”.

39. [71]

    The list of “Do’s” stated:

40. [72]

    The list of “Don’t’s” stated:

41. [73]

    There was then a short list of “Tools” which stated:

42. [74]

    The first E Group Appeal: The Court of Appeal recently considered the test to be applied under s 37(1) in Chief Commissioner of State Revenue v E Group Security Pty Ltd (2022) 109 NSWLR 123. The Court was invited to reconsider what is referred to as the “in and for” test, articulated by White J (as his Honour then was) in UNSW Global Pty Ltd v Chief Commissioner of State Revenue (2016) 104 ATR 577.

43. [75]

    The Court delivered a unanimous joint judgment concluding that there should be no departure from White J’s construction of s 37(1) (at [5]). The Court identified (at [11]) White J’s construction by quoting the following passage from [62] of UNSW Global:

44. [76]

    For present purposes, it is not necessary to set out the reasons given by the Court of Appeal for affirming that construction. Both parties agreed that White J’s construction must be applied.

45. [77]

    The Court of Appeal observed at [12] that White J’s construction “has been followed in a large number of cases” since. Some of those decisions were referred to by the parties in the course of argument. Before discussing the relevant decisions, it is necessary to say something about UNSW Global itself.

46. [78]

    UNSW Global: White J’s decision in UNSW Global was concerned with a wholly owned subsidiary of the University of New South Wales. It ran a business unit named “Unisearch”, which facilitated the provision of experts to provide opinions for litigation (“expert opinion services”) and other forms of consulting (ordinarily by way of a written report). The Commissioner had assessed payments to experts (providing both types of services) over a certain period to be subject to payroll tax. White J concluded that the assessments should be revoked.

47. [79]

    UNSW Global submitted that the employment agency provisions did not, properly construed, apply where the service provider was in substance an independent contractor. Otherwise, many independent contractor relationships would attract payroll tax, a result which could not have been intended by Parliament. In the end, the Chief Commissioner conceded that giving literal effect to the provision “was not the preferred construction” (at [25]).

48. [80]

    White J accepted the substance of UNSW Global’s submission and the Chief Commissioner’s concession. But his Honour was not satisfied that the construction adopted by the Commissioner in making this concession was necessarily correct. After a review of prior authorities and reference to prior versions of the legislation, his Honour derived the conclusion at [62] (which was quoted in E Group (No 1) (Court of Appeal) and extracted above). He continued at [63]:

49. [81]

    White J explained at [64]-[65]:

50. [82]

    Applying this test, White J concluded that none of the payments made by UNSW Global for expert opinion services were taxable wages because “[in] none of those cases could it be said that the work done by the consultant was being done in the conduct of the client’s business”. The same was so for payments to experts for undertaking tests at the University laboratory (at [66]).

51. [83]

    His Honour then dealt with the remaining payments for more general consultancy services (at [67]-[69]):

52. [84]

    JP Property Services: The next decision is that of Kunc J in JP Property Services Pty Limited v Chief Commissioner of State Revenue [2017] NSWSC 1391. His Honour had heard argument prior to the decision of White J in UNSW Global being handed down, but subsequently invited the parties to make further submissions with the benefit of the decision. Kunc J noted (at [70]) that had he decided the case on the basis of the law as it stood prior to UNSW Global, the plaintiff’s claim “may well have failed”.

53. [85]

    The plaintiff provided “cleaning and property maintenance services”. The predominant contracts in issue before Kunc J were with Franklins (the supermarket chain) for the provision of after-hours cleaning services. The other contracts in issue concerned the provision of after-hours services across a variety of other areas. These included, hotels, taverns, childcare, trucking, disability employment services, and property ownership/management. The plaintiff had consecutive written contracts with Franklins, across several years, in materially similar terms. The plaintiff had a mixture of written, oral and partly written and oral contracts with the other clients. The plaintiff provided services by using both its own employees, and subcontractors (both natural persons and corporations) (see [2]).

54. [86]

    Kunc J identified three types of contracts (at [3]). First, contracts between the plaintiff and Franklins. Second, contracts between the plaintiff and other clients. Third, contracts between the plaintiff and subcontractors. Kunc J held that none of these types of contracts were employment agency contracts, as defined in s 37(1) (at [6]). The Commissioner’s assessment that payroll tax was payable on payments made to subcontractors, on the basis that the subcontractor contracts fell within the scope of s 37(1) (see [4]), was revoked.

55. [87]

    Kunc J stated (at [76]) that “the fundamental factual reason” for his conclusion was “that the services provided … are out of hours cleaning services” (emphasis in original). His Honour accepted the plaintiff’s submission that while those services were incidental to Franklins’ business, they were not in and for the conduct of its business (at [79]). Kunc J characterised Franklins’ business as “sell[ing] mixed goods including food and produce to the general public from premises which generally include aisles between shelves or islands on which the items for sale are displayed” (at [79]). His Honour was not satisfied that the subcontractors were “working in Franklins’ business”.

56. [88]

    Kunc J explained that he was “fortified in this conclusion” by drawing a contrast with the position of cleaners who are on call to clean spills during shopping hours. His Honour stated (at [80]):

57. [89]

    Kunc J also rejected an argument by the Commissioner that Franklins’ ordinary hours extended to the times when the cleaners were working, because the premises would have been open to receive deliveries, stack shelves and other matters. In rejecting that argument, his Honour stated at [90]:

58. [90]

    Kunc J inferred that the clients other than Franklins did not “provide cleaning services to their customers or clients” (at [92]). The services were also provided out of business or office hours. Kunc J characterised the respective businesses (at [91]) as:

59. [91]

    HRC Hotel: HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue (2018) 108 ATR 84 was a decision of Ward CJ concerned with the provision of hotel room cleaning services. The factual matrix was reasonably complex. The following summary is sufficient for present purposes. HRC contracted with various hotels to provide room cleaning services. Those services were provided by staff sourced from a variety of sources: (1) HRC’s own employees; (2) Employees (full-time, part-time and casual) of two other entities forming part of the same corporate group (HOS and HRT); (3) Third party subcontractors. The evidence indicated that around 60% of staff used were either employed or contracted by HRC, as opposed to HOS and HRT (see [2]). A further entity in the corporate group, HS, operated comparable arrangements (see [19]).

60. [92]

    The Commissioner had assessed both HRC and HS as liable for payroll tax on payments to subcontractors. This was on the basis that the contracts they had with hotels were employment agency contracts (see [6]). Shortly after the assessments were issued, HS went into liquidation. The Commissioner responded by issuing assessments to HOS, as jointly and severally liable for the liability of HS (based on a grouping determination) (see [7]).

61. [93]

    The evidence was that the subcontractors were sourced “[f]rom time to time” as “additional staff” (at [2]). Evidence was given that this was because of the “seasonal nature of the hotel industry … and the volatility in hotel custom” (at [20]). The entities with which HRC and HS had subcontracting arrangements are set out at [21] of the judgment. They were all Pty Ltd companies.

62. [94]

    Ward CJ upheld the assessments. Her Honour concluded at [152]-[153]:

63. [95]

    The plaintiffs in that case advanced a further contention, by way of alternative, that payroll tax should be assessed on the payments made by subcontractors to their workers, instead of on the payments made by HRC and HS to the subcontractors (see [9], [155]-[157]). Ward CJ dealt with this contention at [180]-[181]:

64. [96]

    Bayton: In Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue (2019) 109 ATR 879, Ward CJ upheld payroll tax assessments in respect of two entities, Bayton and IHS. The two entities had a shared Chief Executive Officer (at [8]). Bayton predominantly contracted with commercial and aged care/health clients, to provide cleaning services (at [11]). IHS predominantly contracted with hotels to provide cleaning and housekeeping services (at [12]). Both entities used a mixture of employed staff and staff provided through subcontract agreements (at [13]). Ward CJ upheld the assessments.

65. [97]

    Ward CJ regarded the hotel clients as “perhaps the clearest example of cleaners or housekeeping staff forming an addition to and comprising in effect part of the hotel’s workforce” (at [272]). Her Honour referred to relevant features from HRC Hotel: wearing hotel branded uniforms; liaising with guests and other hotel staff in providing the services; being entitled to use hotel staff facilities; being difficult for hotel customers to distinguish from other staff. Ward CJ continued at [272]-[273]:

66. [98]

    Ward CJ regarded the aged care/retirement villages’ staff as “the next most obvious example”. Her Honour referred to a man who had been a cleaner at a particular facility “for some years” as “a prime example” (at [274]). That was because:

67. [99]

    Ward CJ then turned to the “commercial and corporate clients”. It can be inferred from her Honour’s other comments that she regarded those clients as the least clear of the client types. Her Honour accepted at [277] that:

68. [100]

    E Group: A further decision to which the parties made significant reference was that of Ward CJ in E Group. The plaintiff in that case provided security services. The Commissioner advanced two alternative contentions. The first contention was that the plaintiff, E Group, was the employment agent, and its various clients constituted the “client” for the purposes of s 37(1) (see [4]). The second contention was that a related entity of E Group was the “employment agent” and that E Group itself was the “client” (see [7]).

69. [101]

    Neither contention succeeded at trial. Grounds of appeal based on the second contention, however, eventually succeeded on appeal: see Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259. An application for special leave to appeal from that judgment was refused by the High Court in April. I have already referred to the first appeal judgment. There has been a further Court of Appeal judgment concerning costs.

70. [102]

    The first Court of Appeal decision was, technically speaking, concerned with an appeal from the parts of Ward CJ’s judgment dealing with the plaintiff’s first contention (above). Nonetheless, as noted earlier, the grounds of appeal were confined to the appropriate construction of s 37. They were not concerned with Ward CJ’s application of that construction, which, as a result, has not been the subject of appellate comment. This explains the reliance placed by the parties on the primary judgment in these proceedings.

71. [103]

    The plaintiff in those proceedings, E Group, was described as the “main operating company” in a corporate group operating in the security industry (at [8]). The group comprised various other wholly owned subsidiaries (see [8]). In almost all instances, E Group was the entity which contracted with clients, and it also contracted with third party contractors who agreed to supply contracted security guards (see [12]). Security services were provided to clients across a wide range of industries, embracing what Ward CJ described as “stereotypical security guard services” and “other services … that might not necessarily require any form of security license” (see [9]).

72. [104]

    Ward CJ stated at [318]:

73. [105]

    Ward CJ set out (at [328]) what was established on the evidence “of the factors identified as relevant in considering whether the workers are provided “in and for” the client’s business”:

74. [106]

    Ward CJ gave her overall conclusion at [329]:

75. [107]

    Ward CJ first dealt with “one off-clients and those clients for whom services were provided on an ad hoc basis” (at [331]). Her Honour concluded that she could “see no basis on which the security guards could be said to be integrated into the client’s workforce”.

76. [108]

    Ward CJ analysed the position of school holiday patrols for the Department of Education in some detail. Her Honour clarified that she was not merely relying on the fact that the patrols occurred outside of the school term or after hours. Her Honour noted that “in some cases after hours workers – say cleaners, for example – could well be sufficiently integrated to form part of the client’s workforce”. Ward CJ, however, emphasised evidence of “an almost complete lack of interaction by the security guards with anyone at the schools”. Her Honour added (at [331]):

77. [109]

    Ward CJ thought this pointed to “a very significant issue” – that security guards “need to be readily distinguishable” (at [332]). Her Honour thought this was particularly so for guards “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”. Ward CJ noted that some clients (giving the examples of the Australian Turf Club and occupants of buildings at the Barangaroo site) had their own security licence or employed their own security guards, but observed that, “even then, there is no suggestion that E Group Security’s guards would be indistinguishable or mistaken for employees of the client”. Her Honour went on to say:

78. [110]

    Ward CJ then discussed (at [333]), “Club and Pub Clients and the like”. Her Honour regarded the security guards as “not sufficiently integrated into the client’s workforce”. Her Honour referred to evidence that guards “use public facilities … take instruction from E Group Security, and … wear distinguishing clothing”. Ward CJ noted that “[w]hile they provide an integral function for the clients, they are not an addition in the sense of being integrated into the workforce”.

79. [111]

    From [334], Ward CJ discussed “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”. These were the “categories in respect of which” her Honour had “some concern”.

80. [112]

    Ward CJ observed (at [335]) that some commercial buildings had a separate, clearly identifiable, concierge desk. Her Honour was not concerned about those buildings. Ward CJ added that:

81. [113]

    Ward CJ was also not concerned (at [335]) about guards relocating to a concierge desk after hours to perform a security function there. Her Honour noted:

82. [114]

    Ward CJ’s “area of concern” (at [336]) was security guards “being invoiced to a client as a concierge”. Her Honour had “less difficulty with ad hoc invoicing for an “additional concierge””, and more difficulty with buildings where invoicing was consistent. Nonetheless, her Honour concluded that:

83. [115]

    Ward CJ added (at [337]) that she accepted that there was a security function involved in carrying out loading dock functions at commercial buildings more generally. Her Honour was “not satisfied that the security guards are otherwise sufficiently integrated into the workforce at those locations to warrant a different conclusion”.

84. [116]

    Ward CJ then commented on the “Baiada chicken operation” (at [338]). Her Honour commented that the security guards were “in a physically separate location and readily identifiable as E Group security personnel”. Her Honour expressed “some hesitation as to the weighbridge tasks performed” but accepted “that there is a security function in ensuring that there is not access by unauthorised persons (or objects) to the Baiada sites”. Ward CJ accepted evidence that guards “also perform access control, CCTV and alarm monitoring”. Her Honour also observed that the guards were “physically separated from Baida’s workforce” and wore “highly distinct clothing”. Ward CJ concluded: “[a]ll factors combined, I am satisfied the plaintiff’s guards were not integrated into the Baiada workforce”.

85. [117]

    The case was argued on the basis that the sole issue in dispute was whether the “in and for” aspect of s 37(1), in the sense outlined by White J in UNSW Global, was satisfied.

86. [118]

    Submissions for ITM: Counsel for ITM submitted that I should apply the test stated by Ward CJ in Eq in E Group at [318] (quoted above at [104]), namely whether the workers performing the Woolworths trolley collection services were sufficiently integrated into Woolworths’ business to be seen as additional to Woolworths’ workforce. This test, in counsel’s submission, had also been applied in the HRC Hotel case (at [153]). It is a fact-sensitive analysis depending on various different indicia.

87. [119]

    In the application of the test to the Woolworths trolley collectors, counsel referred to numerous indicia in order to characterise the relationship between the trolley collectors and Woolworths. I think the points made by counsel can be summarised by reference to four main factors.

88. [120]

    The first factor was the location of the trolley collectors’ work. Counsel noted that the service involved, in its essence, returning trolleys to the bays outside the relevant Woolworths store. Apart from occasionally collecting trolleys left at the rear of the store by Woolworths staff, there was no need for the trolley collectors to go into the store. The service was essentially an external one. Counsel acknowledged that the trolley collectors had access to Woolworths’ toilet and eating facilities, but noted Mr Vickery’s evidence that this was rarely taken up.

89. [121]

    The second factor was the nature of the task. Counsel pointed out that the subcontractor’s obligation was to ensure that the store’s trolley bays were filled to a certain percentage level, and otherwise to retrieve trolleys belonging to the store within the shopping centre (or, in the case of street runs, within a defined geographical area). These obligations were objectively defined in the contract and the subcontract. In return the subcontractor was to receive a specified fee. Fulfilling the labour and equipment requirements for undertaking these tasks was left entirely to the subcontractor.

90. [122]

    The third factor was demarcation. Counsel emphasised the requirement imposed by ITM that all trolley collectors wear an ITM uniform identifying them as part of the ITM organisation. This uniform was quite distinct from the uniform worn by Woolworths staff. Counsel also referred to the requirement to sign into the visitor’s book, and to wear a “visitor” tag, when trolley collectors were on Woolworths’ premises. In counsel’s submission, no one could have been in any doubt that the trolley collectors belonged to a separate organisation from the Woolworths staff.

91. [123]

    The fourth factor was the degree of interaction between the trolley collectors on the one hand and Woolworths’ staff and customers on the other. Counsel noted the evidence that it was ITM’s practice to field complaints and requests from Woolworths, supervise and provide training for the trolley collectors. There might be occasional contact with staff, but this was unusual. Similarly, trolley collectors would occasionally help Woolworths customers with their trolleys, but this was not formally part of the job.

92. [124]

    Submissions for Commissioner: Counsel for the Commissioner, in inviting me to apply the “in and for” test, emphasised the formulation by Emmett AJA in Southern Cross Community Healthcare Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [241]. Counsel quoted as follows:

93. [125]

    Counsel submitted that the test should be applied at a general level: it was not necessary to ask whether a particular trolley collector was being procured to work in Woolworths’ business. Also, the fact that the task to be done was defined by reference to achieving a particular outcome or result said little about whether the test was satisfied: Bayton at [105]. Counsel also submitted that the “in and for test” did not represent a binary choice between working in the client’s business and the employment agent’s business. In counsel’s submission, the trolley collectors could still have been working in and for Woolworths’ business even if they were simultaneously working for ITM.

94. [126]

    Counsel submitted that use of the “integration test” risked error. The word “integration” does not appear in s 37, nor did it appear in White J’s construction which was approved by the Court of Appeal in E Group (No 1).

95. [127]

    Counsel submitted that the test was potentially erroneous for another reason. Counsel submitted that s 37(2) made clear that if there is a common law employment relationship between the client and worker, there can be no employment agency contract under s 37. Counsel submitted that the “integration test” was effectively the same as the common law test of employment. Circumstances that satisfied the “integration test” therefore necessarily fell outside s 37.

96. [128]

    Counsel for the Commissioner had their own list of factors which they contended were relevant to the application of the “in and for” test in the present case.

97. [129]

    First, counsel submitted that the collection of trolleys played an important part in, and was indeed essential to, the conduct of Woolworths’ business. Counsel also noted that the trolleys were owned by Woolworths. The fact that the trolley collectors were dealing with property belonging to Woolworths reinforced, in counsel’s submission, that their activities were part of Woolworths’ business. Counsel also suggested that the abandonment of its trolleys in the streets was something which could potentially damage Woolworths’ reputation.

98. [130]

    Counsel next submitted that an important factor was the continuity and regularity of the service being provided. The trolley services were provided for as long as the Woolworths stores were open and operated continually during the period of store opening. ITM’s practice was to give continuity to the same subcontractors at the same stores, if possible. There was also an obligation on the subcontractors to use their best endeavours to ensure continuity of the staff who worked as the actual trolley collectors under a subcontract.

99. [131]

    Counsel also submitted that Woolworths retained a substantial degree of control over the provision of services. Counsel pointed to contractual provisions requiring ITM to comply with Woolworths’ directions and policies. The policies affected the way in which work was carried out: for instance, they restricted the number of trolleys which could be pushed at any one time and even prevented collectors wearing MP3 players. Woolworths also had power to insist on a new representative being appointed by the subcontractor.

100. [132]

     Counsel next noted that the trolley collection task was regarded as requiring good relations between the trolley collectors on the one hand, and Woolworths store management and customers on the other. Counsel referred to the list of tasks for Woolworths managers, which included having regular meetings with the trolley collector representative (see [71] above). Counsel also referred to ITM’s Woolworths Checklist, point 16 of which stated:

101. [133]

     The ITM Compliance Manual contained various pages headed “Contractor Guide”. Counsel referred to the following passage from pages headed “Contractor Guide #26 – Trolley Supply”:

102. [134]

     Counsel also referred to the two trolley collector employment contracts in evidence. These were contracts between one subcontractor and two individuals who worked for that subcontractor. Counsel referred to how they described the collector as “part of the customer service function” and required the collector to “maintain friendly and helpful relations with centre customers and other centre workers at all times”.

103. [135]

     As to the location of the services, counsel noted that sometimes trolley collectors came into stores to pick up and organise trolleys. Counsel acknowledged the evidence that trolley collectors rarely used the Woolworths toilet and eating facilities. Counsel however observed that a right to use the facilities was the important thing. Whether that right was exercised was less important. In any event, this was less significant than the manner in which the services were provided by the trolley collectors.

104. [136]

     Counsel acknowledged that ITM’s adoption of a distinctive uniform for trolley collectors was, on the authorities, a factor in favour of ITM. But counsel submitted that this was far from decisive. There was some evidence that customers remained unsure about the demarcation. Counsel also referred to the trolley contractors’ obligation to identify themselves as “Woolworths trolley collectors” (with reference to clause 15.3(d)) where they saw someone using Woolworths’ trolleys without authorisation.

105. [137]

     Counsel submitted that a critical factor was whether the Woolworths trolley collectors were doing work which would otherwise have been done by Woolworths’ employees. Counsel acknowledged that, at a simple level, it was always possible to say that the work could have been done by an employee. Counsel submitted that the test was not so crude, but that it was relevant to ask whether the work in question was work which was “ordinarily” done by a typical contractor. Counsel pointed to the academics working as experts in the UNSW Global case, as an example of such independent contractors, along with sole tradesmen such as plumbers and electricians. Counsel submitted that, by contrast, trolley collectors were not, in substance, “genuine” independent contractors.

106. [138]

     Counsel submitted that simultaneous employment was not a problem. Counsel submitted that it was common for people to work as causal employees. Counsel also submitted that being a casual employee did not prevent employment for another employer, with reference to Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89, 112 [84].

107. [139]

     Counsel pointed to evidence showing that, in some situations, Woolworths’ own staff were involved in moving the trolleys. Counsel submitted that this tended to indicate the artificiality of what was going on.

108. [140]

     Conclusions: In evaluating these submissions, the starting point is the language of s 37. The employment agency contract must be identified. That is the contract (in the extended sense of that term in s 37) under which the putative employment agent procured services for the “client”.

109. [141]

     One way of looking at the case assumes that the employment agency contract is the contract between ITM and Woolworths. Seen in this way, the question is primarily a question of characterisation of that contract. If it is an “employment agency contract” then all of the payments under the subcontracts are caught; if it is not, none of them are. That is, I think, the way it was analysed in the Commissioner’s covering letter which accompanied the assessments. Counsel for the Commissioner took the same approach at the hearing.

110. [142]

     I do not accept this analysis. In E Group (No 2), Brereton JA said at [7] (emphases in original):

111. [143]

     At [3], his Honour stated that in taking this view he was taking a “slightly different” approach to that taken by the majority. But I see nothing in the majority’s decision to contradict his Honour’s analysis, and I respectfully agree with it.

112. [144]

     If this is correct, the question is not whether ITM’s head contract with Woolworths was an employment agency contract. Of course, the terms of the head contract remain relevant, because the terms of that contract inform the terms of the subcontracts. But the real question is whether each of the subcontracts was an employment agency contract. There were dozens of such subcontracts. Although, so far as the evidence goes, they were all in standard form, the services under each of them differed, as potentially did other relevant circumstances. Each should have been separately identified in the assessment.

113. [145]

     It also needs to be remembered that the statutory task begins with identifying an “employment agency contract”. It is true that this is not limited to the terms of a formal contract and may include an “arrangement” or an “undertaking”. But essentially it is still a matter of identifying the terms of the contract, arrangement or undertaking between the relevant parties and asking whether that contract, arrangement or undertaking is an “employment agency contract” for the purposes of s 37.

114. [146]

     It seems to me that, if the task is as I have described it, the relevance of some of the evidence presented to me by the parties may be questionable. I did not understand the Commissioner to suggest that, beyond the terms of the written contract and subcontracts, there was any “undertaking” or “arrangement” which introduced any relevant additional terms or features into the contractual relationships between the parties. The essential question therefore seems to be one of characterisation of the written contracts (and, if I am right in the point made previously, it is a question of the characterisation of each of the subcontracts, rather than the single head contract).

115. [147]

     In these circumstances, evidence about the way in which the contracts operated in practice may not be relevant. For instance, it is difficult to see how the actions of individual Woolworths store managers, as recorded in the audit reports, can be used to characterise the contractual relationship between the parties. If I am right in saying that the focus is on the subcontracts, the relevance of such evidence is even more questionable. Even if relevant to the individual subcontracts in question, such evidence could on no view be relevant to the characterisation of other subcontracts.

116. [148]

     I do not think it is necessary in this case to go into the validity of the “integration test”, as stated by Ward CJ. It may be accepted that neither s 37 nor the “in and for” test stated by White J uses the term “integration”. On the other hand, the use of the word “in” inevitably must bring in some of the same concepts as the integration test stated by Ward CJ. Indeed, counsel for the Commissioner, having submitted that “integration” was potentially erroneous, nevertheless went on to present submissions of a multi-factorial nature in much the same way as counsel for ITM had.

117. [149]

     In applying the “in and for” test formulated by White J, I think it is important to look at the origin of that test. His Honour was concerned by the possibility that, read literally, s 37 might have the effect of converting fees paid to persons who were independent contractors, operating their own businesses, into deemed wages. His Honour considered that this could not possibly have been contemplated by the Parliament: see UNSW Global at [47], [49]; E Group (No 1) (Court of Appeal) at [46]. It follows, in my view, that when his Honour referred, in formulating the “in and for” test, to the business of the client, he was drawing a distinction between the client’s business on the one hand, and a business operated by the service provider on the other: see UNSW Global at [64]-[65] (quoted above at [81]). Independent contractors operating their own businesses who were retained by a client through an intermediary, would remain independent contractors operating their own businesses and therefore could not be seen as undertaking the relevant work “in and for” the business of the client.

118. [150]

     It follows that I disagree with the submission of counsel for the Commissioner about the possibility of working for more than one business. Counsel’s submission presented the dichotomy as if it was one between working for the business of the client on the one hand and the service provider on the other. But in my view, the true dichotomy is between working “in and for” the business of the client on the one hand, and conducting one’s own business as an independent contractor, on the other.

119. [151]

     I also disagree with the submission by counsel for the Commissioner that an employment agency contract for the purposes of s 37 necessarily falls outside a contract of employment at general law. I am not sure that the common law test of employment will always be relevant, but I think the statement is too broad, having regard to the origin of the “in and for” test, as I have described it. Furthermore, I do not think that the argument works contextually. The exclusion in s 37(2) accepts the possibility that an employment agency contract might result in, or be, a contract of employment according to the application of common law principles. I do not think that they necessarily exclude each other.

120. [152]

     Nor do I accept the submission that a person engaged in the collection of trolleys on a contract basis is not a “genuine” independent contractor. In my view, the scope of s 37 must depend on applying the statutory language to the particular contractual relationship in question. It would be wrong to construe s 37 upon some sort of a priori assumption as to what is a “genuine” form of permissible contracting and what is not.

121. [153]

     I turn now to the factors identified by the parties in their submissions.

122. [154]

     In my view, the fact that the trolley collection services involved activities which take place outside Woolworths’ premises is significant. This is not a case where employees of a business took their work home or performed it remotely. Substantially, the whole of the task took place away from the Woolworths staff and did not require any supervision by, or co-ordination with, them. I do not think that individual cases where Woolworths managers may have observed or commented upon work done by the trolley collectors affects this conclusion. Nor does the occasional collection of trolleys from within the Woolworths store.

123. [155]

     It may be accepted that a ready supply of trolleys for customers is an important, and perhaps vital, part of the conduct of Woolworths’ business. But in emphasising this, counsel for the Commissioner raised a tension with their own earlier submission that the Court should not make a judgment about whether the service provider’s work relates to a “core” or “non-core” aspect in the client’s business. In truth, however, I think some characterisation of the nature of the client’s business is required if one is to ask whether an activity is “in and for” that business, as distinct from merely being for its benefit: see JP Property Services at [75].

124. [156]

     In the present case, I would characterise Woolworths’ business as one of selling goods by retail using a supermarket format. That is how its business income is derived. It may be accepted that stacking the shelves should be seen as an activity “in and for” that business: see JP Property Services at [90] (quoted above at [89]). The collection of trolleys may be for the benefit of the business, in the sense that it is one of the conditions which must be satisfied for the business to be carried on. But, in my view, it is no more “in and for” the business than the delivery, by truck, of the goods to be sold in the business.

125. [157]

     I also consider that the defined nature of the task done by the trolley collectors, and the associated maintenance of demarcation, are significant factors in this case. Some stores were served by a street run service only. But for all stores the provision of the specified service was a discrete, defined task. What is important is that there appears to be an established market within which trolley collection contractors operate and which extends well beyond the three supermarket operators in the present case. ITM is only one of the contractors in that market.

126. [158]

     For present purposes, I do not see that Woolworths’ ownership of the trolleys makes any real difference. Nor does the requirement in clause 15.3(d) for the trolley collectors to identify themselves as “Woolworths trolley collectors” when dealing with the public. I am not sure why the perception of a third party is relevant at all for the purposes of characterising the contract in question. In any event, because Woolworths owned the trolleys, the trolley collectors had to have been delegated, explicitly or implicitly, authority from Woolworths to retrieve those trolleys on its behalf. For the collectors to identify themselves as “Woolworths trolley collectors” in that context is not in the slightest surprising, but it says nothing about whether such collectors are comparable to a Woolworths employee.

127. [159]

     What I do think is important about the ownership arrangements is that the subcontractors were responsible for supplying and maintaining the equipment needed to collect the trolleys, some of which was quite substantial. That is a typical indication of an independent contractor conducting its own business. The subcontractors’ charges would not have consisted entirely of wages and on-costs for individual trolley collectors. Their charges would have included a component representing the costs of financing and depreciating, or leasing, the equipment in performing the services.

128. [160]

     Also important is the fact that ITM’s subcontractors could, and in some cases did, perform work for more than one store at the same shopping centre. It provides a practical illustration of the independence of their businesses from Woolworths’ business (and indeed ITM’s business). The point made by counsel for the Commissioner about casual employees working for different employers does not answer this. Everyone accepts that a casual employee might work on Monday for one employer and on Tuesday for another. But what is under consideration in the present case includes a “service provider” working for multiple “clients” simultaneously. I find that hard to fit into s 37.

129. [161]

     It is true that Woolworths retained some powers of direction over trolley collectors. But despite their broad language, these were powers which were to be read down to accord with the contract in which they appeared. It cannot be supposed that Woolworths would have a power to, for instance, direct a trolley collector to come into the store and work on the checkout to cover a gap in Woolworths’ own staff. The power to give a direction would have been limited to directions having some relevant connection with the discharge of ITM’s functions under the contract.

130. [162]

     In this regard, I do not think that, properly analysed, the list of “do’s and don’t’s” in the Woolworths ERM Services Manual, if relevant at all, assists the Commissioner’s argument. It is true that Woolworths’ managers were encouraged to maintain a good relationship with the trolley collector representatives working at their stores. But read as a whole, the list (which of course applied to all trolley collection contractors, not merely ITM’s) emphasised Woolworths’ acknowledgement that the services in question had been contracted out, and a desire to respect the demarcation created by that. The trolley collectors were there to undertake a certain task as defined by the contract, and were not to be asked to step outside that area. I refer, in particular, to the general instructions not to make direct contact with the contractors about selection of contractors, contractual coverage and pricing, and to the instructions which emphasised that dealing with damaged trolleys and fitting child restraints were the responsibilities of Woolworths staff.

131. [163]

     The statements in the ITM Compliance Manual about the trolley collectors being part of the customers’ shopping experience are, in my view, of minimal, if any, significance. The author of that Manual may have believed that this was so. But this can only be a matter of opinion. It is hard to see how that can be used to characterise the subcontracts between ITM and subcontractors (or the contract between ITM and Woolworths, for that matter). One only has to ask whether it would have made a difference if the author had instead asserted the importance of remaining independent and performing no more and no less than the allotted task in the contract.

132. [164]

     Finally, I should deal with the submission from counsel for the Commissioner that the trolley collectors’ work could have been, and to some extent was, carried out by Woolworths employees.

133. [165]

     As counsel acknowledged, such a submission, at least at a broad level, is available in every case. To apply such a test therefore tends to beg the question. In terms, the “in and for” test under s 37 does not refer to it. In some factual situations, the fact that the service providers are undertaking the same work as was formerly (cf Bayton at [273]), or is currently (cf HRC Hotel at [153]), done by the client’s employees, may illustrate features of the work which make it “in and for” the client’s business. Otherwise, I find it difficult to see how such circumstances are relevant.

134. [166]

     The evidence in the present case illustrates part of the difficulty. It was said that Coles had trolley collection done exclusively by employees. ALDI exclusively used contractors. Woolworths used contractors and its own employees (at least in some locations, or in some places for part of the time). It seems strange to think that Woolworths’ business, for the purposes of s 37, varied from the businesses of Coles and ALDI. It seems even stranger to think that Woolworths’ business varied between different stores according to the trolley collection system it used. But if Coles, ALDI and Woolworths were all conducting the same type of business for the purposes of s 37, it is hard to see how the use of employees at some Woolworths stores could be of any relevance.

135. [167]

     For these reasons, I do not think that, on the evidence before me, the Woolworths trolley collectors satisfied the “in and for” test under s 37. The assessments fail for that reason.

136. [168]

     This is enough to dispose of the case so far as it concerns the Woolworths trolley collection services. But I wish to make some observations about other issues which may arise in the application of the Act to such services.

137. [169]

     As I understood the argument presented by counsel for ITM, counsel did not dispute that, apart from the “in and for test”, s 37 was satisfied. As counsel put it, there was no dispute that the trolley collectors had been “procured” by ITM. Nor was any point taken about the application of s 40.

138. [170]

     Nevertheless, there was some reference to these questions in the argument. I asked counsel for the Commissioner whether the “service providers” for the purposes of s 37 were the actual trolley collectors or the subcontractor entities. Counsel submitted that it was the latter, and a “service provider” did not need to be a natural person. Counsel also submitted that there was no difficulty with the inclusion of the whole of the amount paid to the subcontractor being treated as deemed wages under s 40. Counsel referred to what Ward CJ said in HRC Hotel at [181] (quoted above at [95]) about the width of the term “in relation to” in s 40.

139. [171]

     I am not sure, however, about these conclusions. I think there is much to be said for the view that the reference in s 37 to a service provider is to the person who actually provides the service, rather than (in the present case) the subcontractor entity. That seems to me, more consistent with the views of Brereton JA in E Group (No 2) to which I have referred above at [142] (see in particular the parenthetical reference to individual guards as service providers at [7]).

140. [172]

     Furthermore, the way in which the Commissioner applied s 40 seems to me to have been questionable. The categories of payment listed in s 40 are all payments to or for the benefit of employees in that capacity. But as I have pointed out, it was not necessary for a contractor to employ anyone to discharge the contract. It would be possible where the subcontractor was the trustee of a family trust, for the work to have been done by some family members without pay, with the resulting profit distributed to other family members as beneficiaries. I find it difficult to see how such distributions could properly be treated as deemed wages under s 40 (cf Value Engineering (Australasia) Pty Ltd v Commissioner of State Taxation (WA) (1985) 16 ATR 296 at 303-5 per Brinsden J).

141. [173]

     Given the way the case has been argued, it is not necessary to go any further into these questions.

ALDI trolley collection services

1. [174]

   The ALDI trolley collection services which are the subject of the assessments were supplied pursuant to five trolley collection contracts between ITM and ALDI. They began on 1 June 2015; 4 July 2016; 1 December 2017 (in fact two separate contracts); and 1 September 2018. ITM had a standard form subcontract for its ALDI contracts, a copy of which was in evidence.

2. [175]

   ALDI Contracts: There was variable specification of the services to be provided across the different iterations of the ALDI contracts. The 2015 contract merely referred to “Trolley Collection Services”. By the 2016 and 2017 contracts, reference was also made to specifications in the corresponding tender, with the 2017 contract also referring to an appendix defining the scope of work. I note that I was unable to locate the 2017 appendix in evidence. By 2018, the description evolved to “The supply of trolley collection services on both an ad hoc or regular basis”, along with an annexure entitled “Specifications/Scope of Works”.

3. [176]

   The annexure to the 2018 contract included a note that it was “to be used for all Trolley Collection contracts regardless of the service company contracted to perform the service”. It then contained a table describing particular aspects of the work and the corresponding frequency of performing those aspects, along with accompanying notes for particular categories. Some were to be performed every visit: collecting and returning trolleys, as well as maintaining trolley supply; removing rubbish from trolleys, bays and carparks; checking trolleys were of the right kind; checking starter chains and baby straps were in working order and notifying Store Management if in need of replacement. Others were only to be performed “Ad hoc as reported” (street runs; collecting impounded trolleys from the Council, or “as required” (isolating damaged trolleys and notifying ALDI staff of repairs needed).

4. [177]

   The ALDI contracts contained less stringent subcontracting provisions. As opposed to the Woolworths contracts which required ITM to obtain the written consent of Woolworths before subcontracting, ALDI only required ITM to disclose subcontractor details on request. As with the Woolworths contracts, provision was made that ITM would not be discharged of its responsibilities by subcontracting. Additionally, as with the Woolworths contracts, ITM was required to ensure the suitability of any subcontractors used (the language of “personnel” used in the ALDI contracts), by way of expertise, skill, experience and resources.

5. [178]

   The ALDI contracts made similar provision to the Woolworths contracts in terms of direction and control, by requiring ITM to comply with all reasonable directions of ALDI. One difference is that the 2015 ALDI contract also required ITM’s personnel to comply with reasonable directions of ALDI personnel, but that requirement was not maintained in later iterations. An additional provision across the iterations was that ALDI could direct ITM to alter the services. Further, from 2016 to 2018, ITM was expressly solely responsible for the management, direction and control of its personnel and the manner in which they performed the work.

6. [179]

   The ALDI and Woolworths contracts alike contained obligations on ITM to perform the services in question with due care and skill. They also both made provision for ITM to indemnify the relevant operator, and required ITM to maintain workers compensation and public liability insurance.

7. [180]

   A contractual requirement for contractors to use a visitor’s book, akin to that in the Woolworths contracts, was only introduced in the 2018 ALDI contract. That contract also introduced requirements for ITM to maintain appropriate systems, policies and procedures, as well as training.

8. [181]

   The ALDI contracts appear to have not contained corresponding express provisions for the matters addressed in clauses 4, 6.3(c), 7(a), 8, 9, 9A, 10, 11, 12.8, 13.1, 13.2, 13.3, 14.1, 14.3, 16.1, 16.2(b), 16.2(c)(v) or 17.1(b)(ii). So much was put to me in a table provided by counsel for ITM during the course of the hearing, and I did not understand it to be contested by counsel for the Commissioner.

9. [182]

   ALDI Subcontracts: The ALDI standard form subcontract in evidence appears to be almost identical to the Woolworths standard form subcontract, apart from differences attributable to ensuring compliance with different requirements of ALDI and Woolworths contracts respectively. Those differences included: ITM undertaking under the Woolworths contract (clause 3(g)) to “monitor the Contractor’s compliance with the Trolley Agreement and legal compliance” whereas no such undertaking appeared in the ALDI Contract; references to different WH&S systems in clause 5(f); and references to aspects of the respective contracts in clause 5(k), to draw those to the contractor’s attention. There was also a different note below clause 4 of the ALDI subcontract (cf the Woolworths clause quoted above at [64]). It provided (emphases in original):

10. [183]

    I have discussed the schedule to the ALDI subcontract above at [69], where I presumed that the schedule to the Woolworths subcontract (which was not in evidence) took a similar form.

11. [184]

    Conclusions: Counsel for the Commissioner accepted that the ALDI contracts were “less prescriptive” than the Woolworths ones; I did not understand counsel to contend that the Commissioner’s case under the ALDI contracts was stronger than the Commissioner’s case under the Woolworths contracts. The same conclusions I have reached about the Woolworths contracts apply to the ALDI contracts.

ALDI cleaning services

1. [185]

   The cleaning services supplied by ITM to ALDI were supplied pursuant to informal arrangements constituted by exchange of emails. This began in May 2015. Services were provided for stores at Gunnedah and Tamworth. Provisions of services ceased at Tamworth in November 2015. A formal written contract was entered into for Gunnedah which covered the period from July 2016 to September 2018. This contract was apparently a standard form ALDI contract for the provision of services. The schedule to the contract specified that there were to be two visits per week, with a total of 6 hours per week. That appears to be consistent with a schedule indicating the position in Gunnedah prior to the formal contract. One of the emails also refers to 10 hours per week in Tamworth. In evidence is also an ALDI Cleaning Checklist specifying various areas, cleaning details and frequencies.

2. [186]

   The decision of Kunc J in JP Property Services concerned the provision of cleaning services for a supermarket. It is thus apparently in point. But counsel for the Commissioner pointed out that the services in question were provided after hours whereas the services in the present case were (apparently) provided during usual working hours.

3. [187]

   Counsel for the Commissioner also relied upon the decision of Ward CJ in Bayton, noting that, in that case, which concerned hotel, commercial, and aged care/health cleaning services, her Honour reached the opposite conclusion from Kunc J. Counsel submitted that some of her Honour’s reasoning was inconsistent with some of that employed by Kunc J. For their part, counsel for ITM contended that her Honour’s decision was distinguishable: they noted in particular that the ITM cleaners used their own distinctive uniform whereas that was not necessarily the case in Bayton. Also, ITM assumed sole responsibility for management, direction, and control of the employees, who were not directed by ALDI as the client.

4. [188]

   I agree that there may be some tension between the two decisions. But Ward CJ did not directly consider Kunc J’s conclusion or express disagreement with it. Additionally, the fact that the cleaning services were provided after hours was not the only element in Kunc J’s decision; his Honour also relied on the fact that the cleaning was not done to protect members of the public while they were shopping and therefore was not directly related to the sale of goods.

5. [189]

   In these circumstances, I think the best course for me is to apply the decision of Kunc J of JP Property Services. In my view, that means rejecting the assessments so far as they relate to the ALDI cleaning services.

IGA trolley collection services

1. [190]

   In evidence was a trolley collection contract between a company called Walleyfish Pty Ltd and Franklins (the previous owner of the IGA stores) in 1999. This contract referred only to Franklins’ Wentworthville store in Sydney. According to Mr Vickery, this was the contract under which cleaning services were provided to Franklins (he did not explain the role of Walleyfish, or why the contract only referred to the Wentworthville store).

2. [191]

   Mr Vickery stated that IGA took over and rebranded the Franklins stores in 2001 and ITM took over the provision of trolley collection services at some point thereafter. During the relevant period, such services were provided for two IGA stores, one at Summer Hill in Sydney and one at Coffs Harbour. No formal contract was entered into between IGA and ITM.

3. [192]

   There was no standard form IGA subcontract. Mr Vickery stated that instead the subcontractors (who were apparently subcontractors under Woolworths or ALDI contracts) were asked to sign a new schedule which included reference to the relevant IGA store. It is difficult to see how these “subcontracts” could have been effective in their terms, because there was no head contract for them to pick up.

4. [193]

   I do not think that it is necessary to describe the terms of the Walleyfish contract in detail. I do not think the evidence actually establishes that the terms of that contract were in fact novated between ITM and IGA. In any event, counsel for the Commissioner did not contend for a more favourable result under the Walleyfish contract (or a basic oral contract, if there was no novation) than under the Woolworths contracts. My conclusions under the Woolworths contracts therefore apply here as well.

Conclusions and orders

1. [194]

   I have concluded that:

   1. (1)

      the trolley collection services provided to Woolworths, ALDI and IGA were not services procured under an employment agency contract within the meaning of that term in s 37 of the Act;

   2. (2)

      nor were the cleaning services provided to ALDI.

2. [195]

   These conclusions mean that the assessments should be revoked. On the face of it, costs should follow the event in the ordinary way, but I will reserve costs to allow the parties to seek any different order.

3. [196]

   The orders of the Court are:

   1. (1)

      Revoke the assessments made by the defendant that were notified to the plaintiff by:

   2. (2)

      Costs reserved.