Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Infinity Security Group Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCATAD 28 Hearing dates: 13 - 14 October 2022 Date of orders: 2 February 2023 Decision date: 02 February 2023 Jurisdiction: Administrative and Equal Opportunity Division Before: S Dunn, Senior Member Decision: (1) The Assessment be remitted to the Respondent for determination in accordance with these Reasons for Decision. (2) If the Applicant wishes to pursue an application for costs in this matter: (a) the Applicant shall give to the Tribunal and to the Respondent, within 7 days after publication of these Reasons for Decision, written submissions as to costs and as to whether the Tribunal should determine the question of costs without an oral hearing; (b) the Respondent shall give to the Tribunal and to the Applicant, within 14 days after publication of these Reasons for Decision, his written submissions as to costs and as to whether the Tribunal should determine the question of costs without an oral hearing; (c) the Applicant shall, within 21 days after publication of these Reasons for Decision, give the Tribunal and the Respondent any submissions in reply to the Respondent's submissions. Catchwords: TAXES AND DUTIES – payroll tax – employment agency contracts - whether services were provided in and for the conduct of the clients' businesses Legislation Cited: Administrative Decisions Review Act 1997 (NSW) Payroll Tax Act 2007 (NSW) Security Industry Act 1997 (NSW) Security Industry Regulation 2007 (NSW) (repealed) Security Industry Regulation 2016 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: Bonner v Chief Commissioner of State Revenue [2022] NSWSC 441 Chief Commissioner of State Revenue v E Group Security Pty Ltd [2022] NSWCA 115 Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 E Group Security Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1190 HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820 J P Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852 Category: Principal judgment Parties: Infinity Security Group Pty Ltd (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: G Edwards (Applicant) D Stretton (Respondent) Solicitors: Gupta & Co Pty Ltd (Applicant) Crown Solicitor (Respondent) File Number(s): 2021/00180619 Publication restriction: Nil REASONS FOR DECISION Introduction 1. This is an application to the Tribunal under s 55 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act) for a review of assessments of payroll tax for each of the 2016 to 2019 tax years issued to the Applicant on 11 March 2020 under s 37 of the Payroll Tax Act 2007 (NSW) (PTA) (Assessment). 2. During those tax years, the Applicant (referred to in these reasons as the Applicant or Infinity) carried on business as a private security contractor. Under agreements with its clients Infinity provided security guards to licensed venues such as pubs and clubs and at commercial businesses. It also acted as a subcontractor supplying guards to other security companies. In order to provide these services Infinity used its own employees as well as additional guards supplied by third party subcontractors. 3. The Respondent determined that the arrangements between Infinity, its clients and the third party subcontractors were employment agency contracts within the meaning of s 37 of the PTA and assessed Infinity to payroll tax in respect of the payments it made to the subcontractors which he determined were deemed wages under s 40 of the PTA. The Respondent also imposed interest at the market rate of interest on the unpaid tax and imposed 12.5% penalty tax. 4. Infinity claims that the assessments are incorrect because the arrangements were not employment agency contracts within the meaning of s 37 of the PTA. 5. Infinity objected to the Assessment and the Respondent disallowed that objection by notice dated 23 April 2021. 6. The decision is administratively reviewable by the Tribunal by virtue of s 96 of the Taxation Administration Act 1996 (NSW) (TA Act). 7. In conducting the review, the Tribunal is required to determine the correct and preferable decision having regard to the material before it and the applicable law: s 63 of the ADR Act. 8. For the reasons which follow I find that the arrangements between Infinity and some of Infinity's clients (namely its pub/club clients) in respect of the third party subcontractors were not employment agency contracts within the meaning of s 37 of the PTA and I remit the Assessment to the Respondent for determination accordingly. Material before the Tribunal 1. Infinity relied on statements made by each of the following persons: 1. Medehat Magdy, the director and sole shareholder of Infinity, made on 21 December 2021 and 29 July 2022; 2. Phillip Pignataro, the General Manager of the Royal Oak Hotel in Lidcombe, made on 7 December 2021; 3. Emma Christie (nee Boutros), currently the compliance officer for Infinity who was the Operations Manager of Infinity until 2017, made on 17 July 2022; 4. Chris Voukidis, a director and shareholder of Good Time Harbour Cruises, made on 1 December 2021; 5. Wendy Hill, Group Operations Manager of the Duke of Gloucester Hotel made on 16 August 2022; 6. Joshua Green, the Group Operations Manager Side Bar made on 15 July 2022; 7. Karim Chami, a Security Supervisor at Infinity during the relevant period, made on 20 July 2022; 8. Alex Hamka, Operations Manager at Infinity, made on 18 July 2022; 9. Greg James, General Manager of the Vegas Hotel, made on 22 July 2022; and 10. Jason Thomas, Managing Director of AusComply, made on 14 July 2022. 1. Each of Mr Magdy, Mr Pignataro, Mrs Christie, Mr Voukidis, Ms Hill and Mr Green were cross-examined. 2. Infinity also relied on a tender bundle and two sets of written submissions dated 30 March 2022 and 3 October 2022. 3. The Respondent relied on an affidavit of Ms B Sarkissian sworn on 28 April 2022 and a tender bundle of material which comprised a subset of material which had been provided to the Tribunal under s 58 of the ADR Act and a subset of the materials originally exhibited to Ms Sarkissian's affidavit. 4. The Respondent also relied on two sets of written submissions dated 28 April 2022 and 16 September 2022. 5. At the hearing, after the close of evidence, the Respondent sought an order that submissions be made in writing rather than orally in order to allow time for a transcript of the proceedings to be obtained. 6. At the time of the hearing of these proceedings the Court of Appeal had handed down its decision in respect of Grounds 1 to 3 only of the appeal from the decision of Ward CJ in Eq (as Her Honour then was) in E Group Security Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1190, a decision both parties accept is relevant to the issues before the Tribunal: Chief Commissioner of State Revenue v E Group Security Pty Ltd [2022] NSWCA 115 (First Appeal Decision). The remaining grounds of appeal were set down for hearing in the week following the hearing of these proceedings. The Tribunal did not have before it the remaining grounds of appeal. 7. The Tribunal asked the parties to indicate whether, in the event that the Applicant was not successful, there was any reason why the issue of interest and penalties could not be determined on the papers. Both parties indicated they would be content for those issues to be determined on the papers. 8. Accordingly, orders were made for the filing and service of written submissions by the parties which were to include submissions as to the impact, if any, of the Court of Appeal's decision on the remaining grounds of appeal in E Group Security and as to interest and penalty. 9. Infinity provided further submissions dated 4 December 2022, the Respondent provided its further submissions dated 9 December 2022 and Infinity provided submission in reply dated 24 December 2022. 10. The Court of Appeal handed down its decision on the remaining grounds of appeal on 13 December 2022: Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 (Second Appeal Decision). Infinity provided submissions as to the Second Appeal Decision dated 13 January 2023 and the Respondent provided submissions dated 23 January 2023. It is now clear from the Second Appeal Decision that the remaining grounds of appeal related to the grouping provisions of the PTA and the decision has no bearing on the issues before the Tribunal in these proceedings. Relevant Legislation PTA 1. The PTA imposes payroll tax on "taxable wages". 2. The relevant provisions of the PTA in force during each of the relevant tax years were as follows: 6 Imposition of payroll tax Payroll tax is imposed on all taxable wages. 7 Who is liable for payroll tax The employer by whom taxable wages are paid or payable is liable to pay payroll tax on the wages. 13 What are wages? (1) For the purposes of this Act, wages mean wages, remuneration, salary, commission, bonuses or allowances paid or payable to an employee, including— … (e) an amount that is included as or taken to be wages by any other provision of this Act. 1. Division 8 of the PTA relates to "employment agents" and, relevantly, provides: 37 Definitions (1) For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent. … (3) In this section— contract includes agreement, arrangement and undertaking. 38 Persons taken to be employers For the purposes of this Act, the employment agent under an employment agency contract is taken to be an employer. 39 Persons taken to be employees For the purposes of this Act, 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. 40 Amounts taken to be wages (1) 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 … Proper construction of s37: E Group Security Court of Appeal decision 1. In UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852, White J concluded that the definition in s 37 should be construed as follows at [62]: 62…the definition of an employment agency contract as being a contract under which a person (the employment agent) '... procures the services of another ... for a client of the employment agent' can be read as meaning a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent's client. That was the intended scope of the provisions. It does not do too much violence to the text (Taylor v The Owners – Strata Plan 11564 at [40]) to confine the operation of the phrase 'for a client' in that way, rather than as meaning for the client's benefit" (emphasis added). 1. He added at [63]–[65]: 63.Whether the worker is to be characterised as an employee or a contractor, the employment agency contract provisions 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. The mischief apprehended by the legislature following the first instance decision in Drake Personnel was that the supply of temporary personnel by a labour hire company resulted in the avoidance of payroll tax because it muddied the waters as to whether the individuals concerned might be classified as independent contractors, although they would be serving the same function for the client as its employees. 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. 65. But where the services, although provided for the client's benefit, are not provided by the service provider working in the client's business, the arrangement does not fall within the intended scope of the provision…. (emphasis added) 1. White J's construction was adopted in a large number of cases which followed including by Ward CJ in E Group Security Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1190 at [29] where it was common ground between the parties that the definition of employment agency contract was to be construed in accordance with the reasoning of White J in UNSW Global. 2. However on appeal, following a decision by Basten J in Bonner v Chief Commissioner of State Revenue [2022] NSWSC 441 in which His Honour suggested that that construction warranted appellate review, the Chief Commissioner contended that UNSW Global was wrongly decided. 3. The Court of Appeal in the First Appeal Decision rejected that argument holding that there should be no departure from the construction of s 37 in the existing case law: Chief Commissioner of State Revenue v E Group Security Pty Ltd [2022] NSWCA 115, noting at [46]: The construction in UNSW Global accords with the purpose of the Act, by taking relationships which fall short of traditional employer/employee relationships and deeming them to be such. There is nothing to suggest however that Division 8 should entirely outflank its role as an add-on to common law notions of employment. This is not impermissibly to gloss the section. It is to recognise that the preposition "for" is protean and is capable of bearing a very wide range of meanings depending upon context, and the presently relevant context is its appearance in provisions which create a legal fiction – a deemed relationship of employer and employee – in a Payroll Tax Act. Security Industry Act 1. The relevant provisions of the Security Industry Act and the background to the introduction of those provisions were set out at length by Ward CJ in E Group Security and it is convenient to reproduce those paragraphs from Her Honour's judgment at [32]–[49] here: 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 … or to provide other persons to carry on security activities, each of whom must hold a class 1 or class 2 licence… 34 In relation to master licences, the subclass determines the number of persons that 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. … 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. … 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)). … 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: (d) be responsible for all failures by their franchisees, licensees and sub-contractors to satisfy minimum conditions while working for them. This is a two-fold requirement. The principal must exercise supervision and control to ensure that all requirements of the Code of Practices are met, as well as rectify and be responsible for any failures by his franchisees, licensees and sub-contractors to meet the conditions referred to above. [Emphasis as per E Group Security's submissions] … 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 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. 1. As was also explained by Her Honour, the Security Industry Act does not apply to persons identified in the Security Industry Regulation as being exempt. Relevantly, both the Security Industry Regulation 2007 (which relevantly applied from 1 July 2015 to 31 August 2016) and the Security Industry Regulation 2016 (which applied from 1 September 2016) exempted under Schedule 1 (item 8): 8. Licensees under the Liquor Act 2007 and employees who perform activities relating to the exclusion of persons from licensed premises as authorised by that Act (other than any such employee who is employed for the purposes of carrying on security activities), but only to the extent to which they act in that capacity. TA Act 1. The TA Act applies in respect of "taxation laws" which are defined in s 4 of the TA Act to include the PTA. 2. Section 96 of the TA Act provides that a taxpayer may apply to the Tribunal for an administrative review of a decision of the Respondent that has been the subject of an objection. 3. Section 100 of the TA Act provides that the Applicant's and Respondent's cases on an application for review are not limited to the grounds of the objection. Section 100(3) provides that the Applicant has the onus of proving the Applicant's case in an application for review. 4. Section 101 of the TA Act sets out the powers of the Tribunal in dealing with an application for review and provides that the Tribunal may, amongst other things, confirm or revoke the assessment or other decision to which the application relates, make an assessment or other decision in place of the assessment or decision to which the application relates or remit the matter to the Respondent for determination in accordance with its finding or decision. The Evidence Medehat Magdy 1. Mr Medehat Magdy formed Infinity in 2009, has operated the company since that time and is its director and sole shareholder. He gave evidence as to the company's structure and business, the arrangements made with clients and with guards and at a general level as to what the guards are required to do when they are at client sites. Mr Magdy was cross-examined at some length. 2. I propose to set out Mr Magdy's evidence in some detail even though aspects of it need to be assessed on the basis that he was not necessarily personally present at all relevant times at client sites, noting that it is generally supported by the evidence given by each of the other witnesses. Aspects of Mr Magdy's second statement are really in the nature of submission and have been treated as such. 3. Mr Magdy's evidence was largely given in the present tense, although I understood him to mean that those facts applied in the relevant tax years and his cross-examination proceeded on that basis. Infinity's clients 1. Infinity was issued a Master Security License under the Security Industry Act in 2009 which is renewed annually. Mr Magdy also holds a 1A and 1C security license. 2. Mr Magdy's evidence was that Infinity offers to perform a range of security needs for clients including private and corporate events, mobile patrols of commercial or residential properties and licensed venues. He deposed that approximately 90% of Infinity's work is crowd control at hospitality licensed venues such as pubs, clubs and RSL's. The remaining 10% is static work such as providing guards at commercial businesses such as brothels. His evidence was that none of these clients hold any form of security licence. (I note that, while this was not expressly stated, I take this to exclude that part of Infinity's business which comprised acting as a subcontractor in providing security guards to other security companies.) 3. During the relevant tax years 2016-2019, Infinity's revenue was mainly generated from approximately 30 regular clients including Side Bar in the Sydney CBD, Royal Oak Hotel in Lidcombe, Vegas Hotel in Kings Cross and the Alfred Hotel in Camperdown. Security Industry Act 1. He said that Infinity must comply with the Security Industry Act and the Security Industry Regulation which are administered and enforced by the Security Licensing and Enforcement Directorate (SLED). Infinity has its own public liability insurance separate from that held by its clients and the security guards are covered by Infinity's workers compensation policy. 2. He said that all of the guards Infinity procures for its clients have both a 1A and 1C security license. These licenses, he said, are required for all guards who work in crowd control at a pub/club or licensed venue. Mr Magdy and all of Infinity's guards also have Responsible Service of Alcohol (RSA) cards and a certificate 2 first aid in security. The Guards 1. The security guards that Infinity provides to work at its clients' sites are either hired directly by Infinity or are subcontracted to Infinity through a small number of companies which subcontract guards to Infinity to provide to its clients. 2. He said that Infinity handles all of the rostering both of its own guards and those security guards who are subcontractors. All guards report to Infinity's supervisors or managers and do not report to the client. The roster is completed weekly and there is no guarantee which guard will work at which client. 3. While Infinity likes to maintain some consistency with rostering the same guards at their clients' venues, this is often not possible due to other commitments and many guards are not available the same hours each week. Sometimes the same guard will work at the same venue from week to week, but sometimes that will not be the case. Mr Magdy accepted that guards can generally provide a better service if they have been at the venue before and are familiar with it, so he will attempt to place guards at venues they have been assigned to before. However, he said, security is a very high turnover industry. Guards can stay with Infinity for as little as a day, a week or a few months and for many security work is a second job. Further, many factors are considered when assigning guards including clientele, capacity, special events or large bookings. There is no guarantee of any continual assignment at any client especially during weekends when Infinity swaps and moves guards around between venues. 4. Security guards are trained to screen, monitor, communicate with and control customers to maintain security. Infinity provides training in connection with the guards' assignments at the various client venues. The client does not provide any training of the Infinity guards. When a guard is assigned to a client venue for the first time they are generally paired with a senior guard or a supervisor who will provide basic training. Each of Infinity's clients has an Infinity supervisor assigned and that person is the first point of contact for every guard. The onsite training is not training as to how best to provide security services, but site specific training, such as how intoxicated patrons attending the venue might typically be or what are the venue's busiest times, where entry/exit points are, where the guard should be situated and providing the guard with a radio. If there is no Infinity supervisor on site the guard will receive instruction from Mr Magdy or his Operations Manager before they arrive at the venue. 5. Infinity has a Standard Operating Procedure (SOP) which he says is provided to each guard. (I note that the Tribunal has not been provided with an example of a SOP.) 6. Infinity discusses report writing with the guards as well as various situations which can arise at client venues. 7. Infinity provides uniforms to all of its guards which include a black short or long sleeve shirt with the company logo on the pocket and "SECURITY" across the back of the shirt. The guards wear black pants, black shoes and some wear high visibility vests depending upon client venue requirements. The guards display their security license either on a lanyard or armband. This is a legal requirement. The guards have never worn any client branding or logo on their uniforms. 8. Infinity provides guards with radios and earpieces. Radios are often kept at the clients' venues for the guards to access. The guards used the public facilities at the client venues and either brought food or ate off site during a break. The guards did not have keys to the staff rooms or any back of the house areas accessible to staff and management. 9. At each of the clients' venues, Infinity keeps a security binder which contains a copy of the Infinity Master Security License, the Standard Operating Procedures, relevant contact information within Infinity and, until 2018, an incident register. Since 2019 the security incident register is maintained online at most of Infinity's clients' sites. Infinity is required by law to maintain an incident register at each venue where security services are provided. Infinity provides training to its guards in report writing as the guards are the only individuals permitted to write in the Infinity security incident registers. The clients also maintain their own incident register which would include reports of non-security related incidents such as if gaming machines malfunction or are inoperable. The venue incident register is not governed by the Security Industry Regulation but by liquor and licensing regulations which mandate the types of incidents which must be included in that register. 10. Some clients have CCTV systems installed which are operated by the venue. The guards do not have access to the room the CCTV monitors are in. If the client has CCTV footage of an incident, the guards do not have access to that footage to help them complete their incident register. 11. The guards are either static or roving at the clients' venues. The majority of the guards perform crowd control services at access points as well as maintaining static security posts within the clients' venues such as at a gaming bar area. The guards make their own decision about where they should be located throughout their shift based on their training, assessment and risk factors. Guards might move if they sense a group is becoming loud, abusive to other customers or staff or there is a risk that a fight might break out. A guard might observe one area then move to another. 12. Infinity guards will often patrol the venue whether they are a roving guard or a static guard. The patrol of the perimeter, the venue, any gambling or VIP rooms, is carried out to determine whether there is any anti-social or other behaviour by the patrons as part of the guards' crowd control duties and responsibilities. Client Security Plan and Services 1. For each of Infinity's clients, Mr Magdy has an initial meeting at their venue and will provide an assessment of the security services required and will provide an oral proposal. There were no signed contracts with the clients from 2016-2019. (I note, however, that there is in the Respondent's Tender Bundle one contract with the Alfred Hotel which is dated 2015 and a number of other contracts dated 1 January 2019.) 2. After discussion with the client, Infinity determines how many security guards will be required at the client venue as well as the applicable security strategy. 3. Infinity sets the level of service for each client depending upon their venue. Mr Magdy will make recommendations to the client regarding the security services he believes are required and if they are not accepted, Infinity will not accept the job. He says that Infinity cannot jeopardise its Master Security License and must make all decisions with regard to security services for the clients. 4. Clients sometimes tell Infinity what "type" of guard they require, for example they may prefer a heavier build guard. Infinity will do their best to accommodate these requests. 5. The clients' security service needs often fluctuate and can change based on whether they are holding events such as private bookings or celebrations, a sports event such as the Grand Final or Melbourne Cup or it is a public holiday such as Australia or Anzac Day. For the security at one of Infinity's clients, Good Time Harbour Cruises, the level of security recommended will depend upon the size of the booking. The clients contact Mr Magdy or his Operations Manager weekly and the security proposal will be altered accordingly based upon the information the client provides and an assessment of the risk and security requirements. Usually if Infinity considers additional guards are required for some reason it will seek client approval but from time to time it will provide additional guards without having first obtained approval and clients have generally paid for this because they have considered that it was reasonable to do so. 6. Mr Magdy also checks in regularly with clients to obtain feedback on the security services being provided. On occasion clients raise concerns or issues which they may have concerning the guards. These matters are raised with Infinity, not the guards directly. If Infinity receives negative feedback about a particular guard they will do their best to respond to the concern. However, if a client makes a request about a particular guard Infinity will not always agree to it. 7. The guards are trained that if a client representative makes a request to a security guard, the guard should refer the client's representative to their Infinity supervisor. Guards' interaction with the clients' customers 1. Mr Magdy agreed in cross-examination that when the guards are on duty they are always monitoring or interacting with the relevant venue's customers. 2. The guards interact with the clients' customers or patrons in several situations. Guards are asked questions by customers such as the location of an ATM, the bathroom facilities or the gaming areas, what time the venue closes, whether the venue is full, how long it might take to get into the venue if there is a queue or whether there is a cover charge. The guards will typically answer such questions if they can. Mr Magdy says that this is as a matter of common courtesy and not part of their duties as a security guard and there would be no consequences if the guards did not answer such questions. However, he agreed in cross-examination that being friendly but professional makes it easier to interact with customers and that there is a good security reason to display basic courtesy to anybody the guards interact with. 3. The security guards provide access control duties and may determine on their own or be informed by the client that a patron is not permitted entry. At some venues guards tell customers where to line up, and if necessary to line up on the footpath to make sure they are safe. At venues where customers have entry stamps, the guards usually put those stamps on customers' hands or wrists. The guard will often speak with the patrons to assess whether they are intoxicated and may ask how many drinks they have had prior to entry to make an assessment or determination regarding entry. They may also look for slurred speech, loss of balance or aggressive behaviour to get a feel for the level of risk they may pose. The guards working at the clients' venues will sometimes check patrons' identification to check that they are over 18 or as they enter a licensed area to assess any security risk. Guards will also interact with the patrons if they ask to search their bag and as they do they visually check the patron to determine if they are exhibiting any signs of intoxication or other suspicious activity. Some venues have ID scanners and at some of these venues the guards will operate the scanners while at other venues they will be operated by the client staff. The ID scanners belong to the venue and are kept at the premises. At some venues metal detectors may be used to screen bags. Those metal detectors are provided by Infinity. Once the guard is satisfied that there is no reason to refuse entry, they invite the customer to enter the venue. 4. A client will sometimes tell Infinity that certain people are banned from entry. In those cases, if a guard recognises a person as being someone who is banned, they will stop them from entering the premises. 5. The guards will also assess whether customers meet the client venue's dress code. 6. At some venues as patrons enter or exit the venue, the guard will press a clicker to count the number of people in the venue to ensure that the venue does not exceed its capacity for its liquor licence purposes. On occasion the Infinity supervisor on duty might suggest to the venue manager to pause admission even if not at full capacity if he felt that there were too many people at the venue for safety reasons. 7. If a patron becomes unruly, a guard will often approach and request to see the patron's identification to assess the situation and whether there is any safety risk. The patron's response to the guard's request will be a factor in the guard's assessment. 8. Sometimes the client will let the Infinity supervisor know where it thinks it needs the static guards to stand and if the supervisor thinks the request is reasonable he will carry out the request. However, the supervisor will not necessarily ask the guards to stand in those places if he feels it is not important and the guards should actually be elsewhere from a security point of view. 9. On busy weekends, holidays or for large events, Infinity's guards are often stationed at the bar areas. The guards will assess any security and safety risks including the level of intoxication of the customers who are purchasing alcohol. 10. Guards will monitor the patrons' behaviour and assess any anti-social or violent conduct or incidents in the venue both at the bar areas and at the entry points of the venue. The guard may have to ask a customer to leave the client's premises and, while Infinity has a "hands off policy" sometimes it is necessary to physically escort them outside. 11. If customers were congregating in front of an emergency exit, the guards would ask them to move away from the doors. 12. If an area of the venue is closing earlier than other areas of the venue, the guards may ask the patrons to move to a different area and at closing time, the guards will advise patrons that it is closing time and ask them to leave. 13. As people are leaving the venue, the guards will check they are not carrying alcohol and encourage them to leave quickly and quietly. If customers are congregating outside the exit the guards will encourage them to disperse and if they are being noisy, on occasions the guards will ask them to keep the noise down. In Mr Magdy's experience when groups are congregating outside a venue after having been drinking fights can break out, so it is safer to have those persons move on as quickly as possible. 14. Infinity guards are all trained in first aid and will interact with a patron if first aid is needed until the client's staff arrives. 15. A client venue may also ask the guards to provide a security escort if they are moving cash within the venue. 16. Guards may on occasion offer to assist bar staff at the end of the night with certain tasks, for example one guard has assisted at the Duke of Gloucester Hotel stacking tables and chairs. However, this is not part of a guard's job or responsibilities. Guards might pick up glasses or bottles as these have been used as weapons so a guard might remove them as a security risk. 17. Mr Magdy agreed in cross-examination that the guards are present throughout a customer's visit to the relevant venue and are likely to be the first people a customer may see and interact with and the last people customers see and interact with. Guards' interaction with client staff 1. The guards report to their Infinity supervisor while on duty and the supervisor provides them instructions. The guards are trained and briefed that while they are on duty, they only follow the instructions of their immediate supervisor or someone from Infinity. 2. If a guard is running late, is ill and/or needs to leave early, the guard will not communicate with the client but with their Infinity supervisor who will then liaise with the client and find a replacement guard. 3. The guards will interact with the clients' staff in a professional friendly manner but they do not take instructions from any of the clients' management or staff. 4. A client's staff member will sometimes communicate with a security guard regarding a regular customer or staff family member or friend that does not have identification. The guard may on occasion be asked to waive the requirement to produce identification. The security guards have been trained to politely explain to the staff that it remains the guard's decision whether to allow that person entry after an assessment of the situation. 5. While the guards have their own radio channel, the client's management or staff can tune into that channel to communicate with the guards on a two-way radio which Infinity provides if there is a specific security incident requiring their attention such as a fight breaking out on the dance floor or someone being aggressive at the bar which the guards have not already noticed. The security guards will assess the situation and make a determination as to whether the patron(s) should be removed from the venue. 6. Guards fill in a timesheet at the end of their shift. Previously the venue manager would sign off on this timesheet and send it to Infinity by fax or email. This is also now done by an online application for time keeping. 7. The guards would not report to management that the toilets need to be cleaned. Evidence of other Infinity Staff 1. Evidence was also given by the previous and present Operations Managers at Infinity as well as a Security Supervisor at Infinity. 2. Ms Christie (nee Boutros) was Operations Manager for over six years until 2017. As Operations Manager she was responsible for rosters, site visits, meetings with management at client sites, meetings with police in respect of incidents, supervising and ensuring compliance by the guards and overseeing the incident registers. Her evidence was generally consistent with Mr Magdy's evidence. In cross-examination Ms Christie agreed that she would try where possible to put the same guards at the same venue week to week to keep continuity and because they could provide a better service if the guards were familiar with the venue. She said that if a client gave feedback about a particular guard she would generally do her best to address their concerns by rostering that guard back on or not, subject to availability. She said that about half of the venues would leave it to security as to whether to eject a patron and in other cases it would be a joint decision between management and security. However, she rejected the suggestion that in those cases management would have the final say as she said that security would also have to agree because if something happened, it would be Infinity's responsibility. 3. Mr Alex Hamka, Infinity's current Operations Manager who has held that role since 2017 also gave evidence to generally similar effect and was not required for cross-examination. There were a few aspects of his evidence which supplemented or differed slightly from Mr Magdy's evidence. He said that the security industry has quite a lot of turnover and "guards come and go all the time" as, he said, for most it is a side job, not their main job. He said some guards stay a week or a few months and some don't come back after one shift. He said, as a result, guards are moveable and replaceable. His evidence was that there is an Infinity supervisor on site at only approximately half of their client sites. He also pointed out that the guards' security duties do not include picking up rubbish, glasses or stacking chairs and tables. However, he noted that the guards will pick up anything that can be a threat to others including a glass or a bottle, especially if left around the perimeter of the premises. 4. Mr Karim Chami a security supervisor at Infinity from 2012 to 2018 also provided affidavit evidence. He worked as a security supervisor at one of Infinity's clients, Side Bar, overseeing the Infinity guards assigned to shifts there for a period of 5 years. His evidence as to his roles and responsibilities and those of the guards reporting to him was also generally consistent with Mr Magdy's evidence. He was not required for cross-examination. He deposed that he would usually have a team of 4 guards for a few months and that they would then move on. He said he never had the same people during his 5 years at Side Bar by which I understood him to mean that once a guard had "moved on" he did not return. He said management left all security decisions to him and no one at Side Bar gave him instructions on security issues and that while he would keep managers posted on security incidents or issues, they did not supervise him. No one ever told him to pick up rubbish or help with tables and chairs and if they had he would have said no as he was not a cleaner. He said guards would remove glasses or glass bottles left outside the perimeter for safety and security reasons as glasses or bottles are used as weapons especially if a guard refuses entry. He said that Police and SLED would come to Side Bar often and perform checks including around the perimeter for issues and that if there were issues, they would speak to security, not Side Bar management. If there were a breach it would be Infinity, not Side Bar, who would be fined. He said that guards would sometimes show the security register entries to Side Bar management or staff at the end of the night so they could make sure that they had noted incidents in their own register and hadn't missed anything. Evidence from Infinity's clients 1. Infinity also called evidence from managers (or previous managers) of a number of its clients who had been involved in engaging Infinity's services: Phillip Pignatoro General Manager of the Royal Oak Hotel and previously the licensee of the Alfred Hotel, Chris Voukidis, director and shareholder of Good Time Harbour Cruises, Greg James, General Manager of the Vegas Hotel, Joshua Green General Manager of Side Bar and Wendy Hill, previously the Group General Manager of various pubs including the Duke of Gloucester Hotel. Mr Pignatoro, Mr Voukidis, Mr Green and Ms Hill were each cross-examined. 2. The evidence given by each of them is in generally similar terms and generally corroborated the evidence given by the Infinity employees. It is not necessary to set that evidence out at length. Each deposed, in slightly different terms, that the relevant venue either did not hold a security licence and could not employ security guards or did not have management or staff trained or licensed to provide security services. 3. I extract some aspects of their evidence below which I found to be instructive or upon which the parties rely. 4. Mr Pignataro explained that the guards at his premises stood out from his staff whose uniforms were navy or light blue and are branded with the hotel logo. When asked in cross-examination whether the guards might store their personal belongings behind the counter he said that, depending on what it was, sometimes they might be allowed to but generally he did not want the guards behind the bar as he didn't want people he didn't know behind the bar where there was easy access to cash. In re-examination he confirmed that the guards were not allowed back of house at all. He said that the venue had to be involved in every incident, so that guards would inform venue staff when they had asked a customer to leave. He said his staff might speak to the guards to check they have the correct details when filling out the venue's incident reports but would not look at the guard's incident register. 5. Mr Pignataro agreed in cross-examination that it was part of the business of both the Royal Oak and the Albert Hotel to provide hospitality, entertainment, food, beverage and gambling facilities in a safe environment. 6. He also said that venues with gambling facilities will have a list of people who are on a "self exclusion" list. Mr Pignataro's venues had a self exclusion booklet with photos of those persons' faces. That list is not given to the guards or any third party for privacy reasons. Those persons may be allowed to enter the bar area but not the self exclusion gambling zone. If such a person comes into the venue the manager might tell the guards that they cannot be in the self exclusion zone and might ask them to monitor them to ensure they don't go into the gaming area. This would be set out in the Standard Operating Procedures that would be provided to the guards by Infinity. 7. The Respondent suggests that Mr Pignataro was at times evasive or defensive in his answers in cross-examination. I did not find this to be the case. In any event, the Respondent does not suggest I should not accept his evidence, and I do. 8. Mr Voukidis also said that the guards never wore any uniform with the "GTH Cruises" logo whereas the managers and staff all wore the company logo on their uniform. His evidence was that the guards could have access to a staff cabinet or the staff area on the relevant boat to store their belongings because "they had to put their stuff somewhere". He agreed in cross-examination that provision of security is part of the package that he provides to his customers. He also said that in many cases he had a good feel for the number of guards he might require after 10 years in the business and that he would agree the number of guards required for an event with Infinity. If Infinity wished to increase the number of guards they were proposing to provide they would have to discuss it with him first. 9. Mr Green said that he made a conscious effort to keep the guards separate from his staff and employees. The guards could not stay back after their shift and join them for a drink. The guards would never go to the back of the house or the staff room and the guards had no privileges. The guards would not take breaks or eat with Side Bar staff and would use the same toilets as the patrons. 10. He said it was obvious to customers from the guards' uniforms that the guards were security guards and not floor staff although he conceded that at some venues staff in different departments also dressed differently from each other. He could not recall whether the high visibility vests that the guards wore on certain occasions bore the Infinity logo so he accepted that the Infinity logo may not be visible to customers when the guards were wearing those vests. A customer would, therefore, see that they were security guards but not necessarily which company had supplied them. 11. Under cross examination Mr Green said that the guards controlled entry using temporary barriers which were put out and packed away by management and stored on site. In re-examination he said that if a guard refused someone entry he would accept that decision. He said it would be reckless to employ security guards and then, when they did their job, for him to say that someone should be allowed in. He said that would make no sense. 12. Mr Green said that his managers did do some perimeter checks, particularly on busy nights where they may have liked more guards on duty but had plenty of management. In re-examination he confirmed that otherwise he did not want any managers doing security guard work because he was paying security to do that work and they were not licensed to perform security guard tasks. He said that when the guards were asking a patron to leave management would sometimes come over to help deal with the situation from a license point of view and from a customer service point of view because as a security guard he wouldn't expect the guards to be customer focussed all of the time. At the end of the evening as Side Bar closed he or another manager would be at the door thanking people and the security guards would also be there. Both the managers and the guards would encourage patrons to leave quietly which was, to some extent, in order to avoid receiving noise complaints from neighbours. 13. Mr James deposed that the Vegas Hotel managers did not supervise or direct the security guards. He said "the manager is looking after a million things and cannot be supervising the guards from Infinity." 14. The Respondent relied on the affidavit of Ms Betty Sarkissian which annexed Plans of Management which had been produced either informally or under summons by certain of Infinity's clients. Mr Magdy's evidence and the evidence of each of the clients was that these documents were not shared with Infinity or the guards. 15. The Applicant also relied upon the statement of Mr Jason Thomas an expert in compliance who is the founder and owner of AusComply, a digital incident register and compliance platform which assists businesses in the liquor, gaming and security industries to record incidents and demonstrate compliance with their legislative obligations. He explained that the differing legislation governing incident registers for licensed venues and security incident registers required that the security guards and the licensed venues each maintain their own registers and be uniquely accountable for them. He said that venue staff do not have access to or create entries in the security incident register and vice versa although to reduce duplication security incidents are automatically copied to the venue register. 16. The Respondent submits that "no significant issues of credit ultimately arise" from the evidence of the witnesses who were cross-examined. I found each of them to be credible witnesses. There also has been no challenge to the evidence given by those witnesses who were not required for cross-examination and I accept that evidence. I also accept that the evidence given by the sample of clients is representative of the arrangements in place with each of Infinity's pubs/clubs clients. The Parties' submissions 1. There is no dispute that Infinity procured the services of its security guards for its clients. The only issue in dispute is whether Infinity procured the services of the security guards "in and for the conduct of the business of" its clients in the sense required by UNSW Global. The Respondent contends that it did. Infinity contends that it did not. 2. Nine sets of written submissions have been filed by the parties. I summarise their submissions below as to the factors they say are relevant to the determination of the "in and for" test. Security Industry Act 1. First, the Applicant submits 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 an unlicensed person or persons to carry on security activities. 2. Infinity also submits that s 29B(1) of Security Industry Act 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). 3. Referring to the IRC report and Second Reading Speech extracted by Ward CJ in E Group Security referred to at paragraph 28 above, Infinity says that, for 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 (the policy reason being that an unlicensed person does not have the ability or expertise to control, direct and supervise security guards in a way that will promote the safety of those guards and members of the public). 4. The Respondent submits that the Security Industry Act does not assist Infinity. It says that it does not support the proposition – either in law or in fact – that security firms necessarily maintain control and supervision over their guards to the exclusion of the firms' clients. It submits that none of the provisions Infinity relies upon has that effect. It submits that s 7 of the Security Industry Act has the effect that security patrols and crowd control services must be outsourced to a licensed security firm; but that does not answer the question of whether those outsourced services are provided in and for the client's business. It submits that s 10(3) has the effect that Infinity cannot authorise its clients to provide security guards to others; but there is no suggestion the clients were doing that here. It also relies on the exemption under the Security Industry Regulation allowing licensed venues to retain the ability to "perform activities relating to the exclusion of persons from [their] licensed premises": Thus, the Respondent submits there is no barrier to a key security function – excluding persons from the client's premises – being shared between the client and outsourced security guards. Relevant indicia 1. The Respondent submits that there are three "overarching points": 1. It is part of the venue's business to provide a safe environment by having security guards present; 2. When Infinity's guards are on duty they are always monitoring or interacting with the venue's customers; and 3. Infinity's guards are present throughout the customer's visit to the venue – they are likely to be the first and last people that customers interact with. 1. The Respondent submits that those matters illustrate at a general level how the guards worked in and for the clients' businesses. The Respondent submits that the following matters are specific indicia that Infinity's guards worked in and for the conduct of the clients' businesses. 1. the services were performed on-site and Infinity stored documents and property at the clients' venues; some venues have ID scanners which belong to the client and are kept at the premises which are operated by the guards or the venue staff and some venues have temporary barriers owned by the venue used by the guards controlling entry which are stored on-site (although the fact that the equipment the guards needed such as uniforms, radios etc were provided by Infinity it says is not a meaningful factor for the purposes of the test); 2. a safe and secure environment (through a security presence) is part of what the clients provide to their customers as part of their business (whether the security services are legally required or simply considered best practice) so that, in a practical sense, the security services are necessary for the operation of the clients' business; 3. Infinity's guards act on behalf of the client for the purposes of the clients' businesses: the Respondent says that the guards are exercising the clients' right to eject or exclude customers and that the client has delegated this right to them for the purposes of its business; 4. The services are provided with regularity or continuity: the same types of services were provided and the same guards worked regularly at the same venues, Infinity tries where possible to place guards at the same venue from week to week and at venues they had worked before; 5. Infinity's clients exercised significant supervision or control over the services. In this regard the Respondent points to the following matters: 1. Under the written contracts in evidence the parties agree that "any personnel engaged or employed by Infinity, while on-site at the [c]lient's business premises are there in the course of their work duties and act under the [c]lient's instructions"; 2. The clients determine in consultation with Infinity the hours and number of guards to be provided; 3. Clients set the dress code which is enforced by the guards; 4. Clients tell Infinity that certain people are banned and the guards enforce that ban; 5. Clients request guards to attend to specific incidents or can tell a supervisor that a guard is needed at a specific location and Infinity usually accommodates that request; 6. Clients give feedback to Infinity about the services provided or particular guards and Inifnity is responsive to complaints about guards; 7. Clients may request a particular look or size of guard and Infinity does its best to accommodate that preference; 8. Some clients want a say in whether a patron is ejected; 9. Venue managers sign off on the guards timesheets. 1. There was substantial interaction between the guards and staff (staff can contact the guards via radio at any time to request assistance and are informed when a client is asked to leave). There was also significant interaction with customers. As to customers, the Respondent points to the following interactions: 1. The guards tell customers where to line up, check their IDs, ask questions to determine any intoxication or other security risk, may check their bags and screen them with a metal detector and once satisfied there is no reason to refuse entry, invite the customer to enter the venue; 2. Inside the venue the guards monitor the customers for anti-social behaviour and may ask them to leave; 3. The guards answer various questions from customers; 4. The guards put entry stamps on customers' hands or wrists; 5. The guards may tell customers to move to a different area if a part of the venue is closing earlier and ask customers to leave at closing time; 6. They may ask customers to leave quickly and quietly. 1. There was a significant sharing of functions: 1. guards would show the venue staff their register so that they could copy across information and since digitisation the security incident register is automatically copied across to the venue incident register; 2. the clients and the security guards share the function of collecting glasses and bottles; 3. where venues use temporary barriers to control entry, management put them out and pack them away and the guards use them to direct customers where to line up; 4. for venues with ID scanners, the scanners belong to the client and are operated either by the guards or venue staff; 5. guards usually put entry stamps on customers hands or wrists but sometimes this was done by staff; 6. guards would keep track of patron numbers (using a clicker) so that the client did not exceed the capacity set by its liquor licence; 7. guards would tell customers to stop blocking a fire exit, to leave an area which was closing or the venue as a whole when it was closing and would encourage patrons to leave quietly which was partly to prevent noise complaints; 8. in venues with gaming facilities which had lists of self excluded persons, the manager may ask the guards to monitor a person on the list to ensure they did not enter the gaming area; 9. in some cases, the decision whether to eject a patron would be made jointly between management and security and in some cases management would come over to help deal with the situation; 10. venues with CCTV systems operated the CCTV system themselves; 11. at Side Bar, particularly on busy nights, the managers did carry out some perimeter checks. 1. In their first submissions the Respondent also relied on Plans of Management for certain of the venues and the Side Bar Security Basic Procedures Documents as evidence of a sharing of functions and supervision/interaction with clients' staff. However, as the evidence was that these documents had not been shared with Infinity and that the documents did not necessarily reflect what happened in practice I understood that submission not to have been pressed. 2. As to these matters the Applicant submits: 1. While the services are provided on-site, it is relevant that training is provided by Infinity and not the client. Further, it is a requirement of the Applicant's Master Licence that an incident register must be maintained on-site. The keeping of this register and items such as radios at the clients' premises does not demonstrate integration into the clients' businesses; 2. The submission that the provision of security services are integral or provided for the necessary conduct of the clients' business has been rejected by the Courts including in JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 and by Ward CJ in E Group Security; 3. The fact that the clients engaged the Applicant to provide security services and one of the functions performed was to remove quarrelsome patrons does not transform the guards into the clients' agents; 4. While the Applicant does not dispute the regularity of services, and accepts that in some cases the guards may stay for a week or a few months, the Applicant says that the evidence makes good that there is no guarantee of any continual assignment of guards; 5. The Security Industry Act mandates that the Applicant must maintain control over the security guards. The evidence given by the various managers or former managers also makes good that, as a matter of fact, the clients staff did not direct the guards or give instructions on security issues and that even if there were some level of direction or control permitted contractually or which occurred practically, it would not extend to control over giving binding instructions as to security decisions of a kind required under the legislation to be made by a security licence holder; 6. Insofar as interaction with customers is concerned, the interactions are as part of the guards role in providing security services and the guards are readily distinguishable as security. Insofar as interaction with staff, the evidence of the interactions that do occur does not establish that the guards were integrated into the clients' workforces, quite the opposite; 7. As to a sharing of functions, there is an overlap between what the legislation requires a licensed venue keep in their incident register and the security guards keep in theirs, but a staff member checking the information to be included in their register does not constitute a sharing of security functions. Nor does the collection of glassware: the clients' staff collect glassware for cleaning purposes, while the security guards may collect it to remove a potential weapon for security purposes. 1. The Applicant also points to the following matters as demonstrating that the security guards are not integrated into the clients' workforces: 1. The guards wear uniforms which differentiate them from the venue's workforce; and 2. The guards use publicly available facilities and do not use staff rooms available to the clients' staff. 1. As to these matters the Respondent submits that: 1. in the absence of any noticeable branding on the guards uniforms, their uniforms are a neutral factor in determining the "in and for" test, the guards are not clearly marked as belonging to Infinity and while their uniform is different to floor staff, what the customer is likely to see is simply a security guard, not that a separate entity, Infinity, has supplied that guard; 2. Liability to payroll tax should not depend on where workers eat lunch or go to the toilet as those matters do not bear on how the services are provided to the client. The Respondent notes that in some cases guards may be allowed to keep their bag behind the counter or on cruises in a staff cabinet or area. However, the Respondent accepts that these are personal matters which have little bearing on how the services are provided to the client. Consideration 1. As Kunc J said in J P Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 at [72] and [75] whether the services were provided "in and for the conduct of the business of the clients": 72 … will be determined by asking whether or not the individuals provided by the employment agents comprise, or are added to, the workforce of the client for the conduct of the client's business. Adopting White J's language: are the individual's services provided to help the client conduct its business in the same way, or much the same way, as it would through an employee, or are they services which, although provided for the client's benefit, are not provided by the service provider working in the client's business? … 75 I do accept the Commissioner's submission that the application of UNSW Global does require careful attention to both the service and the business of the client to whom it is being provided. It involves fact sensitive analysis of each of the service and the business and of the connection between the two. For example, circumstances may arise where services provided to Business A will meet the description of being services provided to help it conduct its business in the same way, or much the same way, as it would through an employee. The same services provided to Business B may not meet that description, even though in broad terms Businesses A and B are the same types of business (emphasis added) 1. As Ward CJ (as Her Honour then was) said in E Group Security at [318]: It is well-recognised that the analysis is a 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 … 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. 1. As Her Honour also said, the mere fact that two cases may concern the provision of services of security guards does not mandate a similar conclusion. While there are some similarities in the facts of this case to the facts before Her Honour in E Group Security, I do not accept the Applicant's submission that the facts are on "all fours" with the facts of that case. Pub/Club Clients 1. In terms of the relevant factors, in respect of Infinity's pub/club clients during the relevant tax years, I find: 1. The guards' services were provided at the client's sites. However, it is the very nature of security services that this be so. The equipment used by the guards was (with some minor exceptions such as temporary barriers and ID scanners) owned by Infinity. As a practical matter it was stored at the client's venue. I do not consider that the fact that Infinity may store some of its equipment or incident registers (which were required by law to be maintained on-site) at the client sites has any particular significance. 2. The regularity of the services varied from site to site and from time to time. While it is clear that at some venues there may have been the same guards rostered on from week to week, and in one case there was a team of four guards for a period of a few months at a time and it is clear that Infinity would try to put guards at the same venue as they had worked previously for continuity, it is equally clear that this would not necessarily be the case. 3. There was interaction between the guards and the client's customers but, other than responding to questions they may be asked about the location of ATMs and the like, the interactions between the guards and the customers were all interactions which were necessary in order for the guards to perform their security duties of screening, monitoring, communicating with and controlling customers throughout their visit. Indeed the Respondent submits that there was also a security rationale in responding courteously to patrons' questions. 4. While I accept the Respondent's submission that the evidence does not establish that the Infinity logo was clearly visible on the guard's uniforms, nonetheless the guards' uniforms clearly identified them as security guards and distinguished them from the clients' staff members. They did not bear the client venue logo and there is evidence from some clients that their staff wore uniforms of a different colour to the guards and/or bearing the their own logos. I do not think the fact that at some venues staff from different departments may also have dressed differently from each other changes that. 5. There was interaction between the guards and staff. However again these interactions were generally those necessary for the guards to perform their security duties. The guards generally had no or very limited access to staff facilities (although there may have been some exceptions to this, such as in the case of Good Time Harbour Cruises). 6. The clients did not have control over the guards in the performance of their security duties. While the clients may have some input into the scope of services to be provided and the Standard Operating Procedures document and may have expressed preferences for the look and size of the guards they would like, the security guards were trained by Infinity, rostered on by Infinity, took their instructions from and were supervised by either their Infinity supervisor or Infinity. There were no formal contracts between Infinity and its clients during the relevant tax years other than 2019 (and possibly one from 2015 although this was not put to Mr Magdy or Mr Pignataro in examination or cross-examination so the status of that document is not clear). While a clause of the written contracts which were in evidence for the 2019 year did provide that the guards while on-site were to "act under the client's instructions", the evidence was clear that, as a matter of fact, generally they did not. While it is clear from the evidence that clients did make some requests of the guards and in some cases did want a say in some matters such as whether patrons were to be ejected, I accept the Applicant's submission that to the extent that as a matter of practice there was some level of direction given at client venues, it did not extend to giving a binding instruction as to a security decision of a kind required under the legislation to be made by a security license holder. That this was so was made clear by Mr Magdy who said that if a client requested guards to stand in a certain place but the supervisor did not feel that it was important for the guards to stand there and thought they should be elsewhere from a security point of view, they would not direct the guards to stand where the client had suggested. Ms Christie also rejected the suggestion that management would have the final say in any decision to eject a patron because it was Infinity's responsibility to make that decision. Mr Green also said it would be reckless not to accept a security guard's decision to refuse a person entry. The fact that feedback was provided by clients to Infinity and not to individual guards also serves to demonstrate this. The clients were not in a position to discipline the guards. Further the Security Industry Act requires that this be so and the evidence was, as was also the case in E Group Security, that Infinity took its obligations under the Act seriously. 7. Under the Security Industry Act individuals carrying out security activities must be employed by the holder of a Master Licence (or be self-employed and be the holder of a Master Licence). While there was no evidence that the guards in fact satisfied those criteria, it was not in dispute that Infinity's clients did not hold Master Licences and their staff were not trained or licensed to provide security services. While the exemption under the Security Industry Regulation allowed licensed venues to retain the ability to perform activities related to excluding persons from licensed premises, I agree that as, a matter of law, the security guards could not actually have been added to the clients' workforces. However, (while I do not accept the Respondent's construction of s 10(3) of the Security Industry Act) I agree with the Respondent that that does not determine the question as to whether as a matter of fact the guards were added to the workforce of the clients for the conduct of their businesses. 8. Some clients were required as part of their liquor licence to have a security guard presence, others chose to do so. There was clearly therefore a legal or otherwise perceived need for the services. However, as Ward CJ said in E Group Security at [323], the "in and for" test: requires an analysis as to whether the workers in question were integrated into the 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; … 1. I accept that there was some degree of overlap between the guards' security functions and the staff's non-security functions (such as the collection of glasses, and the use of ID scanners). I also accept that there were some aspects of the functions performed by the guards which also assisted the clients in the conduct of non-security related aspects of their businesses (such as assessing whether customers met dress code requirements, avoiding noise complaints or completing their separate incident register). It is also clear that staff at some venues sometimes carried out or became involved in some security related duties (such as perimeter checks and CCTV monitoring). However, I accept that as a general rule the security guards generally carried out the security duties they were trained to do and the venue staff did not. 2. I accept, as did the witnesses, that it was part of the clients' businesses to provide food, beverage, hospitality, entertainment and in some cases gambling facilities in a safe environment. However, I do not accept that it follows that the venues were in the business of providing security services. The limited exemption under the Security Industry Regulation with respect to the ability to turn guests out does not alter that fact. As the Respondent submitted, the effect of s 7 of the Security Industry Act was that the clients had to outsource security services. 1. I consider the guards in this case are in quite a different position from the cleaners in HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820 in respect of whom Her Honour Ward CJ concluded that it was difficult to see how it would be apparent to the ordinary hotel guest that there was any distinction between the cleaners and other hotel employees. Here, the guards wore clearly marked "Security" uniforms and were readily distinguishable to the public as security guards, even if it was not obvious that they were supplied by Infinity. They generally did not make use of staff facilities. Their interactions with customers (other than answering questions seeking directions and the like) were interactions undertaken clearly in the performance of their security duties. While it may be true that the security guard may be the first and last person a customer might see, and may be involved in the collection of bottles (and in one case, the stacking of chairs) I do not accept it follows that customers would, therefore, view them as part of the venue's staff. 2. I do not agree that the Respondent's three "overarching" points illustrate that the guards worked in and for the clients' businesses. 3. While it is accepted that it was part of the clients' businesses to provide a safe environment for customers, the services provided by the guards were not services provided to help conduct the client's business in the same way, or much the same way, as it would through an employee. They were generally quite separate and distinct services which, in fact, the employees generally did not and could not provide. 4. Balancing all of the factors, while they were performing necessary and, in some cases, integral functions for the clients, in so far as the pubs and clubs clients are concerned, I consider that the guards were not integrated into the clients' businesses (or effectively added to their workforces). As such I find that they were not providing services "in and for" the conduct of the clients' businesses. It follows that I find that the arrangements between Infinity and its pubs and clubs clients in respect of the guards were not employment agency contracts within s 37 of the PTA. 5. I note that in the Second Appeal Decision a slightly different approach was taken by the members of the Court of Appeal as to the identification of the relevant employment agency contract. On the majority view the relevant contracts for consideration in this case would be identified as the contracts between Infinity and its clients, whereas on Brereton JA's approach the relevant contracts would be the contracts between Infinity and the subcontractors. On either approach, however, the relevant question remains whether the guards were providing services "in and for" the clients' businesses. For the reasons identified above I find that (in so far as the pubs and clubs clients were concerned) they were not, so that this difference in approach would not lead to any different conclusion. Other Clients 1. However, other than a brief reference to a "chain of on-hire" issue and a submission in their original submissions that because the Respondent had not offered reasons in its objection decision for the assessments in so far as they relate to Infinity's arrangements with other security companies the decision should be disallowed (which submission must clearly be rejected where the Applicant has the onus of proof), the Tribunal was taken to no evidence and no submissions were made in so far as Infinity's provision of guards to other security companies are concerned. Such arrangements strike me as being of an entirely different nature and the services that the guards would likely be providing under those arrangements might well be the same as the services of the workforce of those clients. 2. Further no evidence was provided or submissions made as to the services provided to Infinity's commercial businesses, such as brothels. 3. Accordingly, in respect of the arrangements between Infinity and its clients other than its pubs and clubs clients, the Applicant has not discharged its onus of establishing those arrangements are not employment agency contracts or that the Assessment is incorrect. Interest and Penalties 1. It follows that no payroll tax is payable insofar as payments made to guards in respect of services performed for Infinity's pubs and clubs clients (which have been deemed wages under s 40 of the PTA) are concerned. It further follows, therefore, that interest and penalty in respect of any payroll tax imposed with respect to those payments also falls away. 2. In so far as payments to guards performing services for the balance of Infinity's clients are concerned, however, the Assessment should stand. 3. At the conclusion of the hearing I made an order directing the parties to file submissions including any submissions they wished to make as to interest and penalty. The Applicant has made no submissions as to interest or penalty. Accordingly, it follows that the interest and penalty tax imposed in respect of so much of the Assessment as relates to those payments should also stand. Conclusion 1. It follows that I find the correct and preferable decision is that the Assessment should be remitted to the Respondent for determination in accordance with these Reasons for Decision. Costs 1. At the hearing the Applicant foreshadowed an application for costs in the event the Applicant was successful. As I have found the Applicant has been successful in part, if the Applicant does propose to make an application, I will make orders for the filing and exchange of written submissions as to costs. Orders 1. The Assessment be remitted to the Respondent for determination in accordance with these Reasons for Decision. 2. If the Applicant wishes to pursue an application for costs in this matter: 1. the Applicant shall give to the Tribunal and to the Respondent, within 7 days after publication of these Reasons for Decision, written submissions as to costs and as to whether the Tribunal should determine the question of costs without an oral hearing; 2. the Respondent shall give to the Tribunal and to the Applicant, within 14 days after publication of these Reasons for Decision, his written submissions as to costs and as to whether the Tribunal should determine the question of costs without an oral hearing; 3. the Applicant shall, within 21 days after publication of these Reasons for Decision, give the Tribunal and the Respondent any submissions in reply to the Respondent's submissions. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 February 2023