Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 Hearing dates: 26 June and 12 August 2013 Decision date: 06 September 2013 Jurisdiction: Appeal Panel - Internal Before: RL Seiden, Deputy President J Block, Judicial Member C Bennett, Non Judicial Member Decision: The appeal is allowed. The Decision is set aside and remitted to the Tribunal as originally constituted, to be determined in accordance with these Reasons. Catchwords: Payroll tax - grouping provisions - de-grouping of company - discretion of Chief Commissioner to de-group - nature of discretion under Payroll Tax Act 2007 (NSW) s 79 - independent and not connected - ability to influence management - ability to control - inter-company loans - carrying on of business - statutory interpretation - question of law or fact - task of Appeal Panel where error of law Legislation Cited: Administrative Decisions Tribunal Act 1997 (NSW) Pay-roll Tax Act 1971 (NSW) Pay-roll Tax Act 1971 (Vic) Payroll Tax Act 2007 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: Aktiebolaget Hassle v Alphapharm Pty Limited (2002) 212 CLR 411 Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 AT v Commissioner of Police, NSW [2010] NSWCA 131 B&L Linings Pty Limited v Chief Commissioner of State Revenue [2008] NSWCA 187 Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 Collector of Customs v Agfa-Gevaert (1996) 186 CLR 389 Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 Commissioner of Taxation v Crown Insurance Services Limited (2012) 207 FCR 247 Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 GTS Industries Pty Limited v Commissioner of State Revenue [2004] VCAT 21 Lloyd v TCN Channel Nine Pty Ltd [1999] NSWADTAP 3 Lombard Farms Pty Ltd v The Chief Commissioner of State Revenue [2013] NSWADT 17 Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 Neat Domestic Trading Pty Ltd v AWB Ltd (2003) 216 CLR 277 Network Clothing Company v Commissioner of State Revenue [2007] VCAT 2492 Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145 R v Young (1999) 46 NSWLR 681 Screen Australia v EME Productions No 1 Pty Ltd (2012) 200 FCR 282 Sharp Corporation of Australia Pty Ltd v Collector of Customs (1995) 59 FCR 6 The Australian Gas Light Company v Valuer-General (1940) 40 SR (NSW) 126 Triline Homes Pty Ltd v Commissioner of State Revenue (Vic) (1994) unreported AAT Vic 3.3.95 Category: Principal judgment Parties: Lombard Farms Pty Ltd (Appellant) Chief Commissioner of State Revenue (Respondent) Representation: A Tsekouras (Appellant) I Latham (Respondent) Barraket Stanton Lawyers (Appellant) Crown Solicitor's Office (Respondent) File Number(s): 139005 Decision under appeal Citation: [2013] NSWADT 17 Date of Decision: 2013-01-24 00:00:00 Before: A Verick, Judicial Member File Number(s): 126032 reasons for decision 1Lombard Farms Pty Ltd (the Appellant) sought review of payroll tax assessments for the 2008 to 2010 tax years. The substantive issue is whether the Appellant should be grouped with the following entities: (1)Con-Tec Pty Limited (Con-Tec); (2)Albem Operations Pty Limited (Albem Operations); (3)Albem Pty Limited (Albem); and (4)Alpine Pty Limited (Alpine). 2It was common ground that the entities were properly grouped under the provisions of the Payroll Tax Act 2007 (NSW) (the Act). The real issue is whether the Commissioner ought to have exercised his discretion under s 79(2) of the Act to determine that the Appellant is not a member of the group. 3Section 79 of the Act relevantly provides as follows: 79 Exclusion of persons from groups (1) The Chief Commissioner may, by order in writing, determine that a person who would, but for the determination, be a member of a group is not a member of the group. (2) The Chief Commissioner may only make such a determination if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Chief Commissioner considers relevant, that a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group [emphasis added]. 4The Judicial Member held that the prerequisites for the exercise of the discretion under s 79(2) of the Act had not been met and accordingly the Appellant was not entitled to be de-grouped: Lombard Farms Pty Ltd v The Chief Commissioner of State Revenue [2013] NSWADT 17 (the Decision). The appeal is brought solely on questions of law. Questions of law 5A significant amount of time at the hearing of the appeal was devoted to examining whether the grounds of appeal articulated questions of law. 6Section 113(2) of the Administrative Decisions Tribunal Act 1997 (NSW) (the ADT Act) provides that an appeal against an appealable decision of the Tribunal (the Decision is an appealable decision) may be made on any question of law: s 113(2)(a) ADT Act. Leave was not sought from the Appeal Panel to extend the appeal to a review of the merits of the appealable decision: s 113(2)(b) ADT Act. Accordingly, it is necessary for the Appellant to identify with some precision the questions of law that are said to arise. 7The Respondent submits that the questions raised in the notice of appeal are questions of fact. In the alternative, he submits that if a question of law arises, no error is detected and therefore the appeal should be dismissed in any event. 8Subsection 79(2) of the Act is, as the extract above demonstrates, a collection of ordinary English words. The Respondent relies heavily upon The Australian Gas Light Company v Valuer-General (1940) 40 SR (NSW) 126 at 137 (Australian Gas Light Company) for the proposition that the meaning of an ordinary English phrase in a statute is a question of fact. 9The Federal Court in Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287 (Pozzolanic) identified five general propositions in relation to the distinction between questions of law and fact. These were extracted by the High Court in Collector of Customs v Agfa-Gevaert (1996) 186 CLR 389 at 395 (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ) (Agfa-Gevaert): 1. The question whether a word or phrase in a statute is to be given its ordinary meaning or some technical or other meaning is a question of law. (22) Jedko Game Co Pty Ltd v Collector or Customs (NSW) (1987) 12 ALD 491; Brutus v Cozens [1973] AC 854. 2. The ordinary meaning of a word or its non-legal technical meaning is a question of fact. (23) Life Insurance Co or Australia Ltd v Phillips (1925) 36 CLR 60 at 78; NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner or Taxation (1956) 94 CLR 509 at 512; Neal v Department or Transport (1980) 3 ALD 97 at 107-108; Jedko (1987) 12 ALD 491. 3. The meaning of a technical legal term is a question of law. (24) Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126 at 137-138; Lombardo v Federal Commissioner or Taxation (1979) 40 FLR 208 at 215. 4. The effect or construction of a term whose meaning or interpretation is established is a question of law. (25) Life Insurance Co of Australia (1925) 36 CLR 60 at 79. 5. The question whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of law." (26) Hope v Bathurst City Council (1980) 144 CLR 1 at 7, per Mason J with whom Gibbs, Stephen, Murphy and Aickin JJ agreed; Australian National Railways Commission v Collector of Customs (SA) (1985) 8 FCR 264 at 277, per Sheppard and Burchett JJ. In Pozzolanic, the Full Court qualified the fifth proposition. The Court said that, when a statute uses words according to their ordinary meaning and it is reasonably open to hold that the facts of the case fall within those words, the question as to whether they do or do not is one of fact. (27) Pozzolanic (1993) 43 FCR 280 at 288, citing Hope (1980) 144 CLR 1 at 8. 10The debate between the parties centred on the distinction between the second and fourth propositions, but there was also some debate about the fifth proposition. 11In relation to the fifth proposition, in Sharp Corporation of Australia Pty Ltd v Collector of Customs (1995) 59 FCR 6 Hill J noted at 16 as follows: The rule that a question of fact is involved in determining whether facts fall within the meaning of a word once that meaning is ascertained, may cause confusion. The confusion comes about because there are actually two related rules, the distinction between which is not always readily apparent. The first of these rules is generally expressed as being that where the facts have been fully found or there is no dispute as to the facts and the question is whether those facts necessarily fall within the description of a word or phrase in a statute, that will be a question of law. This is the sixth proposition enunciated by [Jordan] CJ in the Australian Gas Light Co case. The rationale for this principle is clear enough. If only one meaning is open but a tribunal arrives at a different meaning, underlying the Tribunal's conclusion must be an error of principle, that is to say, an error of law. The second related principle is that where the facts found are capable of falling within or without the description used in the statute, the decision which side of the line they fall on will be a decision of fact and not law. Such a decision will generally involve weight being given to one or other element of the facts and so involve matters of degree. 12Recently, the Full Federal Court in Commissioner of Taxation v Crown Insurance Services Limited (2012) 207 FCR 247 said at [39]: When the statute under consideration has no technical meaning, but is understood in its plain ordinary meaning, a question of law will arise if the facts found must necessarily have come within the statutory description, but only a question of fact will arise if the facts found are capable of coming within the statutory description. In that second case, no question of law arises because, as Hill J said at 16 in Sharp Corporation of Australia Pty Ltd v Collector of Customs, the decision "will generally involve weight being given to one or other element of the facts and so involve matters of degree". To put it another way, a choice between two conclusions open on a consideration of the facts is a question of fact. 13In relation to the distinction between the second and fourth propositions in Pozzolanic, the High Court, in Agfa-Gevaert, highlighted a problem (at 396-397). The second proposition concerns the "meaning" of a word and the fourth proposition concerns the "effect or construction" of a term. Their Honours emphasised that notions of meaning and construction are interdependent. This led their Honours to remark that: it is difficult to see how meaning is a question of fact while construction is a question of law without insisting on some qualification concerning construction that is currently absent from the law. 14The inter-relationship between "meaning" and "construction" was accepted in Aktiebolaget Hassle v Alphapharm Pty Limited (2002) 212 CLR 411 at [36] per Gleeson CJ, Gaudron, Gummow and Hayne JJ and at [138] per Kirby J; see also Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145 per Beazley ACJ at [59] to [61]. 15For the Appeal Panel, this means that we ought not be too quick to dismiss a ground as a mere question of fact simply because it relates to an ordinary English phrase. Beazley ACJ said in Norrie at [62]: The High Court's obiter remarks in Agfa-Gevaert and their approval in Aktiebolaget Hassle v Alphapharm indicates that it cannot be said that the ordinary meaning of a word or its non-technical meaning is a question of fact, at least as a stand alone proposition. Rather, when the Court is engaged in a task of statutory construction, it is required to have regard to the language used by Parliament and the context in which it is used. That task involves a question of law. 16As noted by Preston CJ of LEC in Norrie at [304]: But the Appeal Panel's error ... was associated with its error in construction of the effect of the statutory provision ... and accordingly is of law: Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 at 10. 17Whether an Act uses an expression in its ordinary sense is a question of law but so too is the process of construction. In Agfa-Gevaert their Honours said at 397.5: ... the determination of whether an "Act uses [an] expression ... in any other sense than that which they have in ordinary speech" is always a question of law. (32) NSW Associated Blue-Metal Quarries (1956) 94 CLR 509 at 511-512. 18In Screen Australia v EME Productions No 1 Pty Ltd (2012) 200 FCR 282 (Screen Australia) their Honours noted at [42]: Where there is uncertainty as to the meaning of a statutory word or expression, as here, the process of construction raises a question of law: Baxter Healthcare Pty Ltd v Comptroller-General of Customs (1997) 72 FCR 467 at 473-474. 19At [49] their Honours said: The process of construction which it [the Tribunal] in fact employed was a process of law and was not directed to a question of fact. 20In other words, where a phrase is identified as being used in a sense different from ordinary speech, or there is uncertainty, a question of law arises as to the process of construction. 21As noted by Allsop P in B&L Linings Pty Limited v Chief Commissioner of State Revenue [2008] NSWCA 187 at [95]: the proper interpretation of the relevant statutory provision is most certainly a question of law. 22Questions such as whether the wrong question was asked, the statute construed too narrowly, or too widely, have always been questions of law. It has long been appreciated that questions of statutory construction raise questions of law. 23From the authorities we have just cited we distil the following propositions particularly relevant to this matter: (1)The question whether a word or phrase is to be given its ordinary meaning is a question of law; (2)The question whether a word is used in a sense other than that in which it is used in ordinary speech is a question of law; (3)Where, objectively, there is uncertainty as to the meaning of a word, the process of construction raises a question of law; (4)The process of construing and the construction of an expression raise questions of law; and (5)Whether facts as found are capable of falling within a statutory provision, must necessarily fall within the statutory provision or must necessarily fall outside the statutory provision are questions of law. 24In light of the foregoing, in order to determine whether the notice of appeal raises questions of law, it is necessary to first consider the issue confronting the Tribunal below. 25The Tribunal was concerned with whether the Commissioner ought to have exercised his discretion to determine that the Appellant not be a member of the group. The Tribunal was required to form a decision about whether or not the Appellant's business was "independent" and "not connected with" the other businesses within the group. However, first the Tribunal had to construe those expressions in context. 26The Appellant urged the Tribunal not to confine the operation of the discretion to cases of total independence. The Tribunal was invited to adopt the approach of the Victorian Civil and Administrative Tribunal in GTS Industries Pty Limited v Commissioner of State Revenue [2004] VCAT 21 (GTS Industries) where it was accepted that the de-grouping discretion does not require there to be a "complete absence of connection" and "what is required is a finding of substantial independence and substantial absence of connection": at [37]. We pause here to note that there is no reference to "substantial" in the Victorian provision. 27On the other hand, the Respondent highlighted that the section, as presently enacted, differs significantly from its predecessor in that it no longer employs a test of "substantial independence" and that to adopt the contention of the Appellant would not pay due regard to the legislative change. The Respondent however accepted that some de minimus inter-dependence between group businesses would not prohibit the exercise of the discretion. 28After referring to the Explanatory Note to the Payroll Tax Bill 2007 (the Bill) which introduced s 79 and noting that it made no reference to the earlier test of "substantial independence" the Judicial Member accepted the Respondent's submission: see at [30] of the Decision. The Tribunal considered the case GTS Industries and another case Triline Homes Pty Ltd v Commissioner of State Revenue (Vic) (1994) unreported AAT Vic 3.3.95 (Triline). However, the Judicial Member held that in those cases, the Victorian Tribunal had fallen into error by adopting a test of "substantial connection" and accordingly declined to follow them. The Judicial Member said at [35]: In my view, the absence of the additional requirement is quite significant because the discretion in its present form can only be exercised where there is complete independence of, and complete absence of any connection between the person seeking de-grouping and the other member or members of the group. The additional question of determining whether the independence or connection is substantial is not, therefore, an issue in its current application. The exercise will, of course, depend on all relevant matters on an objective basis. 29The Tribunal then turned to the question of whether or not the businesses were in fact carried on independently. The Judicial Member said at [45]: Whether the discretion found in s 79(2) of the Act should be exercised in this matter depends entirely on whether the Applicant conducts its business activities quite independently from any of the other companies in the group and without any connection or the influence of any of the other companies or their principals. 30It is apparent from the foregoing that the Tribunal undertook a process of statutory construction. That process required the Tribunal to have regard to the language used by Parliament, the context of the Act as a whole and the historical changes. Adopting the words of Beazley ACJ in Norrie at [62], that task involved a question of law. 31Furthermore, the parties both accept that the expressions "independent" and "not connected" in s 79(2) of the Act are somewhat elastic and seem to agree that the terms are not to be interpreted strictly (though they disagree on how loosely they are to be interpreted). This raises a question about whether the expressions have their ordinary meaning. For example, the Respondent says that "not connected" encompasses de minimus connections and the Appellant contends "not connected" encompasses insubstantial connections. Objectively, there is uncertainty about the meaning or ambit of the statutory words and therefore a question of law arises: Screen Australia at [42]. As stated by the Full Court of the Federal Court in Pozzolanic at 288-289: The words "connected with" are capable of describing a spectrum of relationships ...What is left is a value judgment about the range of the Act and that is a question of law. 32The Appellant contends, in effect, that the Tribunal construed the test too narrowly. This raises a question of law. As Meagher JA said in Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 (Tasty Chicks) at [58]: ... the primary judge applied the test too narrowly and as a result did not take into account matters which he was bound to consider with respect to the "nature" or activities of the various businesses. 33There is a live issue about whether the expressions "not connected" and "independent" have their ordinary meanings. There is a contest about the effect of those words. There is a contest about the ambit of the expressions in the context of the Act and in light of the historical changes. These contests raise questions of law. 34The Respondent also contends that the grounds of appeal are not adequately framed to articulate questions of law. However, it is apparent that the Appellant contends that in undertaking the process of statutory construction the Tribunal fell into error. It is contended that the Judicial Member erroneously construed the statutory test: (1)too narrowly by requiring the businesses to be carried on "quite independently" and "without any connection or influence" from other group members (grounds 1 and 2); (2)by taking irrelevant considerations into account: the theoretical ability to control the businesses (grounds 3 and 4); and (3)by giving the mere fact that there was an inter-group loan conclusive force, which was either having regard to an irrelevant consideration or disclosed (by putting too much weight on a relevant factor) that the wrong statutory test had been employed (ground 5). 35Grounds 6 to 9 were not pressed and grounds 10 and 11 are in furtherance of grounds 1 to 5. 36The appeal is accordingly an appeal on questions of law. Grounds 1 and 2: independent and not connected 37Grounds 1 and 2 of the Notice of Appeal state as follows: 1. The Tribunal erred when it concluded (at [35] and [40]) that the absence of the word "substantially" in s 79(2) of the Payroll Tax Act 2007 ("the Act"), following its enactment, now means that the relevant inquiry as to whether the Chief Commissioner can exercise his discretion to de-group is whether there is complete independence of and complete absence of any connection between the entity seeking to be de-grouped and the other members of the group (emphasis added) and that "the provision has ...not been considered in its present form by the Tribunal or the courts". 2. The Tribunal erred when it concluded (at [45]) that "Whether the discretion found in s 79(2) of the Act should be exercised in this matter depends entirely on whether the Applicant conducts its business activities quite independently from any of the other companies in the group and without any connection or the influence of any of the other companies or their principals." (emphasis added) 38These grounds raise squarely the question of whether, construed in its statutory context and with regard to legislative history, s 79(2) requires a determination that there is complete independence and complete absence of any connection between the Appellant's business and the businesses run by the rest of the group. Harmonisation of legislation 39Immediately prior to the introduction of the Act, it was necessary only to demonstrate that there was substantial independence between group businesses: s 16C(3) of the Taxation Administration Act 1996 (NSW) (TAA). Prior to that, it was necessary to demonstrate that group businesses were substantially independent and "not substantially connected": s 16H(1) of the Pay-roll Tax Act 1971 (NSW) (the 1971 Act). The fact that the word "substantial" has been omitted from the section suggests, absent some other explanation, that the current provision has a narrower ambit than its earlier versions. 40The Appellant however, raised for consideration the possibility that there was an explanation for the omission of the word "substantial" that does not have a narrowing effect on the discretion. The enactment of the Act stemmed from a harmonisation of payroll tax legislation amongst various participating jurisdictions. The Explanatory Note to the Bill stated, under the heading "Overview of Bill", that the object of the Bill was to "repeal and re-enact the Pay-roll Tax Act 1971 (the 1971 Act) with various changes to harmonise the Act with the equivalent payroll tax legislation of Victoria". The relevant Victorian provision at the time was s 9A(1J) of the Pay-roll Tax Act 1971 (Vic): (1J) If the Commissioner is satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Commissioner considers relevant, that a business carried on by a member of a group, including a group constituted by reason of section 9A(2), is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group, the Commissioner may exclude the member from that group. 41As demonstrated by GTS Industries at [37] and Triline at [20] and [25] the Victorian provision had been interpreted consistently with the earlier New South Wales provision which posed a test of "substantial independence", despite the fact that the Victorian counterpart did not contain the word "substantial". It is reasonable therefore to infer that the word "substantial" was, in those circumstances, otiose and omitted for that reason. Even if this is not correct, there is much force to the submission that the Victorian provision and the current New South Wales provisions are to be interpreted harmoniously and this means the Appeal Panel would follow GTS Industries and Triline unless we were of the view they were clearly wrong. For the reasons we explain below, we agree with the Victorian authorities. Absurd result 42The Appellant also contended that the construction arrived at by the Judicial Member leads to an absurd result because s 79(2) will have no work to do. In order for entities to be grouped in the first place there must be some connection between them and if any connection disentitles an entity from de-grouping, then s 79(2) could never be activated. 43Plainly s 79(2) of the Act must anticipate and tolerate some connection between the group members because otherwise they would not be grouped in the first place. If a complete absence of connection was required by s 79(2) of the Act, it could never be applied. In Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 it was said that a construction which leads to an absurd, extraordinary, capricious, irrational or obscure operation of the statute supports the conclusion that the legislature could not have intended such an operation and the alternative interpretation must be preferred: per Mason and Wilson JJ at 320-1. 44In order to analyse this submission it is necessary to have close regard to the terms of s 79(2). The focus, in s 79(2) of the Act, is on the connection between the carrying on of the businesses and not merely the connection between the different entities (see the underlined passage in the section extracted above at [3]). 45It is not any connection that will disentitle the Appellant from being de-grouped. It must be a connection in relation to the carrying on of the business. 46As the Judicial Member said at [4] of the Decision: Broadly speaking, grouping of employers can occur where: (1) one or more employees of an employer are employed solely or mainly to perform duties for or in connection with one or more business carried on by one or more other persons (groups arising from the use of common employees - s 71); or (2) a person or set of persons has a controlling interest in each of 2 businesses (groups of commonly controlled businesses - s 72(1)); or (3) the two corporations are related bodies corporate within the meaning of the Corporations Act 2001 of the Commonwealth (related corporations - s 72(3)); or (4) an entity has a controlling interest in a corporation arising from tracing of interests in corporations (groups arising from tracing of interests in corporations - s 73). 47Other than with respect to related bodies corporate (for which there is an express carve out in s 79(3) of the Act), the entities might be de-grouped if the connection (the reason they were grouped in the first place) is not a connection in respect of the "carrying on" of the various businesses within the group. 48When one focuses on the fact that the test in s 79(2) directs an enquiry to the carrying on of the businesses and not simply any connection between group members, one can see that there may be work for s 79(2) to do. However, if the most casual connection in the carrying on of businesses is sufficient to disentitle an applicant from de-grouping, then the scope of s 79 is extremely narrow. 49We reject the submission that the construction adopted by the Judicial Member led to an absurd result. Question of judgment and degree 50Section 79(2) requires the trier of fact to determine whether, having regard to the nature of the connections between group businesses, it can nevertheless be said that the businesses are independent and not connected. Ultimately, this will be a question of judgment based on facts objectively determined. It is not the case that any connection between businesses will disentitle an applicant from de-grouping. The connection must be material and not insignificant or inconsequential. This is the approach that was adopted in the Victorian authorities referred to above: see Triline at [19], [22] and [30] and GTS Industries at [38]. We agree with this approach because it directs the focus to the "carrying on" of the business: to be relevant, the connection must affect the business in some real or practical sense. 51To say that there can be absolutely no connection between the businesses sets the bar too high. The question is one of fact and degree: Network Clothing Company v Commissioner of State Revenue [2007] VCAT 2492 at [34]. To disentitle an applicant to de-grouping, the connection must be meaningful in a commercial sense and not immaterial or inconsequential to the carrying on of the businesses. Adopting the words of GT Pagone, Presiding Member (as his Honour then was) in Triline at [25] there must be a finding of substantial absence of connection and substantial independence between the businesses, to warrant the exercise of the discretion. Reading in words 52This is not a case where the omission of the word "substantial" effected a change to the discretion to de-group entities. So much may be seen from the fact that the legislative change was to harmonise the Act with Victorian legislation, which had been interpreted consistently with the NSW provision even though it did not employ the word substantial. 53If the process of construction we have adopted is one of "supplying omitted words" (adopting the words of Spigelman CJ in R v Young (1999) 46 NSWLR 681 at [16]) then it is necessary to demonstrate that the omission of the word "substantial" from the legislation was inadvertent and that to "read the word in", achieves the legislative purpose: see for instance Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 113-16. Furthermore, as this is a matter of construction, the words which actually appear in the legislation must be "open to such a construction": R v Young per Spigelman CJ at [12] and [15]. 54Here the "inadvertence" may be gleaned from the legislative harmonisation project. In order to achieve that legislative goal, the construction we have adopted is to be favoured. Furthermore, as the words used in the statute describe a spectrum of relationships (Pozzolanic at 288-289) we are satisfied that the construction we have adopted is open. The Ruling 55Whilst not binding on the Tribunal, it is relevant that the Respondent's ruling Revenue Ruling No. PTA031 (the Ruling) supports the position we have just outlined. Despite articulating the test in terms of a business being carried on independently and not connected with another business with the group, the Ruling indicates that the test is one of fact and degree. It states: The purpose of this Revenue Ruling is to explain the exclusion discretion available under section 79, including the matters the Chief Commissioner takes into account in exercising the discretion. ... The Chief Commissioner must be satisfied that: · there is not a continuous course of active and significant relationship, in a business or commercial sense, between the carrying on of the applicant's business and the carrying on of businesses conducted by every other member of the group, and · the connections which do exist are no more than casual, irregular or occasional occurrences. 56In relation to matters to be taken into account, the Ruling identifies several factors, each prefaced with the words "the nature and extent" or "the degree" or "the extent". 57Finally, the Ruling concludes: None of the matters listed above are determinative in isolation from the other matters listed, nor are they an exhaustive list of the relevant issues. Each case will be considered on the basis of all of the relevant facts and circumstances. Conclusion on grounds 1 and 2 58The Judicial Member construed the statutory test as requiring no connection and a complete independence between group businesses: at [35] and [45] of the Decision. As we have concluded that we should follow the Victorian authorities and that the test is a matter of judgment, or degree, the Tribunal fell into error. For reasons discussed below, the matter will be remitted to the Tribunal for reconsideration. Grounds 3 and 4: ability to influence 59Grounds 3 and 4 of the Notice of Appeal state as follows: 3. The Tribunal erred when it concluded (at [46]) that the enquiry for the purposes of making a determination under s 79(2) is not whether the business of the entity seeking to be de-grouped is actually carried on independently from the other members of the group and is not connected with the [actual] carrying on of a business carried on by any other member of that group in accordance with Commissioner of State Revenue (WA) v Scotford Cameron and Middleton Pty Ltd (1981) 81 ATC 4576 at 4579. 4. The Tribunal erred when at [46] it described the enquiry under s 79(2) as requiring a consideration of the "ability", that is the theoretical ability, of a principal of one business to influence the management and decision-making of the other. 60The Appellant contends that the Judicial Member read too much into the word "ability" as it appears at [57] of Tasty Chicks. That paragraph states as follows [our emphasis]: In John French Pty Ltd v Commissioner of Pay-roll Tax (Qld), McPherson J (with whom Campbell CJ and Matthews J agreed) considered (at 141-142) that an inquiry as to whether a business was carried on substantially independently, and was not substantially connected with another business, made it necessary to consider the inter-relation of the activities of the businesses and the ability of a principal of one business to influence the management and decision-making of the other. The provision there under consideration was in the same terms as s 16H(1) of the Pay-roll Tax Act as it applied in the first period. Notwithstanding the absence in s 16C(3) of the "substantially connected" consideration in s 16H(1), the matters referred to were said to be relevant to each part of s 16H(1) and to prevent a conclusion that the relevant business was carried on substantially independently of the other business. The same approach was adopted by Doyle CJ in Garrett F Hunter (at 285). He concluded that the corporate trustee providing the secretarial and other services to the three medical practice companies could not be said to be carried on "substantially independently of" the business of each medical practice company. That was because each was one of only two or three clients of the corporate trustee and because its business was so closely connected with that of each practice that decisions by the practice company as to the manner in which its business would be conducted necessarily influenced the conduct of the trustee's business of providing services to the practice (at 285-286). 61The Appellant contends that the focus of s 79(2) of the Act is on the actual carrying out of the business and not the theoretical possibility of how the businesses might be carried on. The Appellant contends that the Tribunal erred in taking into account theoretical ability to influence the conduct of the business, which is an irrelevant consideration. 62In Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 (Peko-Wallsend). Mason J (at 39) refers to an irrelevant consideration as one which is prohibited from being taken into account, having regard to the subject matter, scope and purpose of the legislation. Taking into account such an irrelevant consideration reflects an extraneous or improper purpose or renders a decision arbitrary or capricious. 63Focusing attention on s 79(2) of the Act, it is clear that one of the factors that can be taken into account is the nature and degree and ownership and control of the businesses. This indicates that the ownership and therefore inherent (or theoretical) ability to control the businesses is not an irrelevant consideration, in the sense contemplated in Peko-Wallsend. 64The Tribunal did not make an error of law in taking into account theoretical ability to control a business. It is one factor that is to be weighed up in forming a conclusion as to whether the business is carried on independently. The question of weight is generally a matter for the Tribunal. Conclusion on grounds 3 and 4 65The ability of a principal of one business to influence the management and decision-making of another is not an irrelevant consideration. Questions of weight are to be addressed by the Tribunal on the remittal. Ground 5: the loan from Alpine 66Ground 5 of the Notice of Appeal states as follows: 5. The Tribunal erred when it concluded (at [50]) that the "substantial connection of Alpine [and the Appellant in the form of a loan] alone prevents a finding necessary for both limbs of s 79(2)." (emphasis added) 67The Tribunal held at [50] that the fact that Alpine had provided a loan to the Appellant and had taken a decision not to enforce the debt, had effectively allowed for the continued existence of the Appellant. The Tribunal held this to be a substantial connection between Alpine and the Appellant. 68The "carrying on" of a business in the context of s 79(2) of the Act extends to the very existence of a business. 69At [56] of Tasty Chicks it was said: A business may not be carried on independently of another business if its existence or continued operation depends upon the existence or custom of that other business. [our emphasis] 70The Appellant submits that there were sound commercial reasons for Alpine to make the decision and consequently the connection between Alpine and the Appellant is no different from the connection between Westpac and the Appellant, had Westpac granted the loan and decided not to enforce the debt for commercial reasons. However, the Tribunal did not make a finding about the commerciality of the loan and referred (at [50]) to the lack of evidence that the commercial value of the then applicant's assets would be sufficient to satisfy the outstanding loan. 71The Appellant's contention in relation to ground 5 raises two issues: first, whether the loan from Alpine was an irrelevant consideration; and second, if it was not an irrelevant consideration, whether by placing undue weight on it, an error of law is nonetheless disclosed. As to the first issue, the fact that an entity is provided a loan from a group member is not an irrelevant consideration: see for instance, Triline at [25] that the role of one entity as an internal banker precluded the exercise of the discretion to de-group; see too Network Clothing at [39]. However, the mere fact that there is an inter-group loan will not necessitate the conclusion that there is no entitlement to de-grouping: see for instance, GTS Industries at [32] and [38]. 72As to the second issue, generally, weight is a matter for the trier of fact and errors of weight are not errors of law: see for instance Hill J in Sharp extracted above at [11]. However, giving undue weight to factors, which are not alleged to be irrelevant factors, may disclose a misapplication of a statutory test. Failure to "give adequate weight to a relevant matter" or "giving excessive weight to a relevant factor of no great importance" may also disclose that a decision is "manifestly unreasonable" in the sense contemplated in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223; Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 at [10]. 73Whether the loan was sufficient to disentitle the Appellant from de-grouping, is a factor to be weighed up in the balancing exercise. We have already expressed our view that the Tribunal set the bar too high. Whether the loan from Alpine is sufficient to disentitle the Appellant from de-grouping is a matter to be weighed by the Tribunal employing the test outlined in answer to grounds 1 and 2: at [50] and [51] above. It is a matter for the Tribunal on the remittal. Ground 10 74In relation to Ground 10, the allegation is that the Tribunal misapplied the relevant statute and that this can be seen from the fact that the Tribunal took into account irrelevant considerations. Taking into account irrelevant considerations is an error of law: Peko-Wallsend at 39. 75However, when one looks at the particular considerations in Ground 10, they are not "irrelevant" in the Peko-Wallsend sense. They are not prohibited from being taken into account: paragraph (a) refers to the taking into account of "the fact that the ultimate owners and controllers of the various businesses are closely connected members of the Panizza family ...". Sub-section 79(2) expressly directs attention to the nature and degree of ownership and control of the business, the nature of the businesses and "any other matters the Chief Commissioner considers relevant". Having regard to the subject matter, scope and purpose of s 79(2), it cannot be discerned that it is prohibited to consider the fact that the ultimate owners are members of a particular family. 76Paragraph (b) relates to the factors found by the Tribunal at [52] that there are not individual meetings of the directors of the individual entities and shareholders and there are not "meetings on an independent basis to set future directions or make independent business decisions". This is not a matter that is prohibited by the statute from being considered. It speaks to the way in which the businesses in the group are supervised. 77Paragraph (c), relates to the Tribunal's finding at [53] that the siblings "have the ability to decide and provide directions to the Applicant". This relates to the Appellant's argument that the ability to control ought not be taken into account when it is the fact of control that is relevant. For the reasons we have expressed above, the ability to provide directions and control is not an irrelevant consideration. 78Those are all factors for the Tribunal to consider on the remittal. Ground 11 79In relation to Ground 11, the Appellant contends that the Tribunal placed undue weight on certain enumerated factors and failed to give due weight to other factors and that this discloses that the Tribunal misapplied the statutory test, as alleged in Grounds 1 to 5. As described above at [72] giving incorrect weight to factors may disclose an error of law. 80The Appellant contends that on the one hand, the Tribunal placed undue weight on the role of Alpine as financier and the role of Albem as service provider and the theoretical capacity of the Panizza siblings to influence the business of the Appellant. On the other hand, it is contended that the Judicial Member failed to properly take into account or give due weight to the following: the degree and control of Albert Panizza over the Appellant's business; that the operating/holding structure was devised for reasons unconnected with the carrying on of the Appellant's business; the diverse nature of the group businesses; the diverse locations of the group businesses; the lack of common employees, customers and resources; the commercial basis for the loan and that it was substantially amortised recently; that Alpine is controlled by Mary Panizza; and finally that the Appellant is commercially viable. 81We have already concluded that the Tribunal erred in construing the statutory test. The Tribunal did not clearly have in mind that the test of independence and absence of connections is one of substance and degree. The factors pointed to by the Appellant will need to be weighed with this in mind. Reason to remit 82We have concluded that there was an error in construction of the statute. As the appeal is restricted to questions of law, we are bound by s 114 of the ADT Act which provides as follows: (1) If an appeal under this Part is restricted to questions of law, the Appeal Panel is to determine the appeal and may make such orders as it thinks appropriate in light of its decision. (2) The orders that may be made by the Appeal Panel on any such appeal include, but are not limited to, any of the following: (a) an order affirming or setting aside the decision of the Tribunal (as originally constituted), (b) an order remitting the whole or any part of the case to be heard and decided again by the Tribunal (as originally or similarly constituted), either with or without the hearing of further evidence, in accordance with the directions of the Appeal Panel, (c) an order made in substitution for an order made by the Tribunal. 83It is notable that there is no reference in s 114 to the Appeal Panel having any of the powers conferred on the Tribunal at first instance, as would be the case if the appeal had been extended to the merits, where the task of the Appeal Panel would be to make the "correct and preferable decision". 84The task therefore of the Appeal Panel is to make the "correct" decision. It is not the task of the Appeal Panel to make an evaluative judgment. It would only be in a case where a particular outcome was required, as a matter of law, that the Appeal Panel would not remit the matter, having concluded there was an error of law: Lloyd v TCN Channel Nine Pty Ltd [1999] NSWADTAP 3 at [148]. As noted in AT v Commissioner of Police, NSW [2010] NSWCA 131 (AT) at [12] (Beazley, Basten and Macfarlan JJA): There are cases where, on the facts as found by the original decision-maker, the only conclusion open was that reached at first instance, though on a legally erroneous basis. In that case, the Appeal Panel could properly decline to reverse the decision of the Tribunal: Tribunal Act, s 114(2)(c); cf Chen Shi Hai v Minister for Immigration and Multicultural Affairs [2000] HCA 19; 201 CLR 293 at [42]; Li Shi Ping v Minister of Immigration, Local Government and Ethnic Affairs [1994] FCA 1275 at [109]-[110] (Drummond J), see also Stead v State Government Insurance Commission [1986] HCA 54; 161 CLR 141 at 145. There are several reasons why that course was not open in the present case. [emphasis added] 85Where, as here, there is a requirement to exercise judgment, there is not one conclusion open in the circumstances: AT at [14]. 86For the reason that the primary question - whether the Appellant's business is independent and not connected to group businesses - is a question of judgment and degree, this is a matter that should be remitted to the Tribunal as originally constituted: AT at [17]. 87The statutory test to be employed is as we have described it at [50] and [51] above. The nature of the discretion 88The Appellant contends that there is not a true discretion. It is submitted that once a decision is objectively made as to whether the businesses are independent and not connected, de-grouping follows. Support for this approach is found in both GTS at [19] and [39] (although there is a contrary indication at [24]) and Triline at [19] and [22] (although the remarks were obiter). 89The Respondent, on the other hand, submits that even if there is a conclusion reached that the businesses are independent and not connected, the Respondent retains a discretion to not de-group. This is the position that was adopted by the Court of Appeal in Tasty Chicks (at [64]), albeit in respect of a previous version of s 79 of the Act. 90The structure of s 79 gives some support to the Respondent's contention: the discretion is found in s 79(1), but may only be exercised if not precluded by s 79(2). In this sense, the structure of the discretion under consideration in Tasty Chicks (which required a similar two-step approach: s 16C(3) and s 16B(1) of the TAA) is more similar to s 79 than the Victorian counterpart considered in GTS and Triline where the Commissioner could de-group if satisfied that the businesses were independent and not connected. 91It is not necessary for us to decide whether the Commissioner retains a discretion to not de-group, if objectively the businesses are independent and not connected, as we have decided to remit the matter for reconsideration. The question of whether s 79 is a true discretion, or whether de-grouping follows the result of the s 79(2) analysis may arise when the Tribunal re-hears the matter. If so, we indicate that for the reasons that the remarks in Triline were obiter and that there are apparently contradictory observations in GTS and that, on this aspect, there are structural differences between the Victorian and NSW provisions, we would follow the reasoning of the Court of Appeal in Tasty Chicks in relation to s 16C and s 16B of the TAA, by analogy. At [64] Meagher JA (Barrett JA and Sackville AJA agreeing): Assuming s 16C(3) did not prevent the exercise of the discretion to exclude under s 16B(1), in my view the primary judge did not err in either of the respects relied upon. He did not overlook the need to exercise the discretion provided by s 16B(1): [2009] NSWSC 1007 at [143]. His Honour did not proceed upon the basis that if the prohibition did not apply the discretion "must" be exercised: see Interpretation Act 1987, ss 5, 9; Ward v Williams [1955] HCA 4; 92 CLR 496 at 505-506; Samad v District Court of New South Wales [2002] HCA 24; 209 CLR 140 at [33]-[34]. He gave reasons, albeit very short, for his determination that the discretion should be exercised. They were that "on the facts set out" in the judgment the discretion ought to have been exercised: [2009] NSWSC 1007 at [166]. The reference to "the facts" is to be understood as a reference to the facts found or discussed at [127]-[142]. In so doing the primary judge also sufficiently identified the basis on which he considered that the discretion should be exercised. 92Section 79(1) of the Act appears to provide the Respondent with a true discretion, subject to there being the necessary finding in relation to independence of group businesses. The exercise of the discretion is to be exercised within the limits delineated by the subject matter, scope and purpose of the provision: Neat Domestic Trading Pty Ltd v AWB Ltd (2003) 216 CLR 277 at [56]. Grounds not pressed and costs 93The Appellant withdrew reliance upon grounds 6 to 9 during the hearing. The Respondent seeks his costs thrown away. There is jurisdiction to award costs. Section 88 of the ADT Act provides that generally parties before the proceedings are to bear their own costs, however costs may be awarded against a party if the Tribunal is satisfied that it is fair to do so having regard to several enumerated factors. Of most relevance are (b) and (c): 88 Costs (1) Each party to proceedings before the Tribunal is to bear the party's own costs in the proceedings, except as provided by this section. (1A) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following: ... (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, 94Each of the abandoned grounds refers to a finding of fact made by the Tribunal "that is not supported by the evidence". Expressed in that way, the grounds raised questions of law. By not pressing those grounds at the hearing, the Appellant saved time at the hearing. It was not submitted that those particular grounds were wholly untenable (other than for reasons that they did not raise questions of law, which we have rejected). In the context of an Appeal that raised complex questions of law we are not satisfied it is in the interests of justice to depart from the usual rule. There will be no order as to costs. Orders 95The appeal is allowed. The Decision is set aside and remitted to the Tribunal as originally constituted, to be determined in accordance with these Reasons. ********** 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: 06 September 2013