Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Chief Commissioner of State Revenue v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 94 Hearing dates: 10 October 2014 Decision date: 01 December 2014 Jurisdiction: Appeal Panel Before: Wright J, President M Schyvens, Deputy President R Seiden SC, Principal Member Decision: 1. The appeal is allowed. 2. The decision at first instance is set aside and in lieu the application is dismissed. Catchwords: APPEAL - Civil and Administrative Tribunal (NSW) - notice of contention - taxes and duties - payroll tax - grouping provisions - whether appellant should exercise discretion to exclude a member from a group under Payroll Tax Act 2007 (NSW), s 79 - revenue ruling - legitimate expectation. Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Payroll Tax Act 2007 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: Bellinz Pty Ltd v FCT (1998) 84 FCR 154 Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 Commissioner of Stamps v Garrett F Hunter Pty Ltd (1997) 68 SASR 275 Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 John French Pty Ltd v Commissioner of Pay-Roll Tax (Qld) [1984] 1 Qd R 125 Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Seovic Civil Engineering Pty Ltd & Ors v Chief Commissioner of State Revenue [2014] NSWCATAD 52 Category: Principal judgment Parties: Chief Commissioner of State Revenue (Appellant) Seovic Civil Engineering Pty Ltd, Seovic Engineering Pty Ltd and Exell Management Pty Ltd (Respondents) Representation: B L Jones (Appellant) R L Hamilton SC and A Korakis (Respondents) Crown Solicitor's Office (Appellant) Paul Bard Lawyers (Respondent) File Number(s): AP 14/46396 Decision under appeal Citation: [2014] NSWCATAD 52 Date of Decision: 2014-04-30 00:00:00 Before: A Verick, Senior Member File Number(s): 136035 reasons for decision Background 1The Payroll Tax Act 2007 (NSW) (the PT Act) levies tax on employers (and deemed employers) in respect of wages (and deemed wages). Part 5 of the PT Act provides for the grouping of businesses. Businesses may be grouped on a variety of bases including as a result of the use of common employees (s 71 of the PT Act). The significance of grouping may be found in the liability provisions. Section 81 of the PT Act provides for joint and several liability for group members. Tax is calculated in accordance with Schedule 1 of the PT Act. A group is entitled to a single tax free threshold, whereas taxpayers who are not members of a group are each entitled to a tax free threshold. 2The underlying dispute in this appeal concerns the appellant's (the Chief Commissioner's) decision, in relation to financial years 2008 to 2012, not to exclude one or more of the respondents from payroll tax groups. 3It was common ground, at first instance and at the hearing before the Appeal Panel, that pursuant to s 71 of the PT Act one of the respondents, Seovic Civil Engineering Pty Ltd (Civil), was correctly grouped with another of the respondent, Exell Management Pty Ltd (Exell), and that Exell was correctly grouped with Seovic Engineering Pty Ltd (Engineering). Further, it was agreed by the parties that as a result of these two groups and s 74 of the PT Act (as to the combining of smaller groups), all three respondents constituted a group. The only issue was whether the Chief Commissioner should have exercised his discretion, found in s 79 of the PT Act, to exclude one or more of the respondents from the groups. 4At first instance, the Tribunal ordered that the matter be remitted to the Chief Commissioner to exercise his discretion under s 79 of the PT Act to exclude Exell from the group constituted by Civil and Exell and to exclude Exell from the group constituted by Engineering and Exell. This produced the automatic result that the larger group was dissolved: at [44] of Seovic Civil Engineering Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 52 (the Decision). The appeal and jurisdiction 5Section 80(1) of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act) provides that an appeal against an internally appealable decision may be made to the Appeal Panel. An internally appealable decision is defined in s 32 of the Act to include a general decision made by the Tribunal. A general decision is defined in s 29 of the Act as a decision made in the exercise of the Tribunal's general jurisdiction which is, in turn, ascertained by reference to legislation other than the Act. In this case, the Tribunal's general jurisdiction was enlivened by s 96 of the Taxation Administration Act 1996 (NSW). 6By s 80(2) of the Act, an appeal from an internally appealable decision lies, as of right, on any question of law or, with the leave of the Appeal Panel, on any other grounds. Notice of appeal 7The appellant is not seeking leave to appeal. The questions for the Appeal Panel are whether a question of law arises and, if so, whether there has been an error of law. Questions of law 8It is necessary that a question of law be stated with precision, as an appellant's right to appeal to the Appeal Panel arises from the question of law and is the subject matter of the appeal. This was recently highlighted by the Court of Appeal, in the context of an appeal from a decision of the Appeal Panel to the Supreme Court, in Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378: see in particular Leeming JA at [3] and White J at [22]. The difficulties in formulating a question of law are referred to by Leeming JA at [4] to [6]. The importance of the question of law was the subject of extensive consideration by the Appeal Panel in Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [11] and [13]. 9The grounds of appeal here are as follows: 1. The Tribunal erred in concluding (at [43]) that the requirement in s.79(2) of the Payroll Tax Act 2007 (NSW) that a business carried on by a person is carried on independently and is not connected with the carrying on of a business carried on by any other member of the group will be satisfied where: (a) there was an absence of "any control by" other group members "in the management of" the other; (b) there was no contrivance to reduce payroll tax otherwise payable; and (c) the business arrangements between one group member and the others was "commercial". 2. On the facts found by the Tribunal at [12] that "Excell [sic] only provided services to Civil and Engineering. Excell's employees did not provide services to any other person": (a) it was not open to the Tribunal to conclude (at [43]) that the criteria for the exercise of the discretion in s.79(2) were satisfied; (b) the Tribunal should have concluded that the business of Exell was not carried on independently of and was connected with the carrying on of the businesses of the first and second respondents and that consequently the discretion in s.79(2) could not be exercised to de-group Exell from the groups comprising it and the first and second respondents respectively. 10In effect, the appellant contends that on the facts as found, the Tribunal could not have been satisfied that the statutory test was met. 11In Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 at [9] to [23] the Appeal Panel considered the distinction between questions of law and fact. Where what is alleged is that the facts as found are incapable of satisfying the statutory provision, a question of law arises. 12In the reply to appeal, the respondents contended that no question of law arose and that the notice of appeal disclosed questions of fact only. In the alternative, the respondents contended that if a question of law arose, then no error was made. 13Ultimately, at the hearing before the Appeal Panel, the respondents properly conceded not only that the notice of appeal raised questions of law, but that the Tribunal's orders could not be sustained on the reasoning of the Tribunal. The respondents accepted that Exell did not satisfy the preconditions for the exercise of the Chief Commissioner's discretion to exclude it from the groups. 14The respondents' primary contention was that Civil and Engineering ought to have been excluded from the groups: matters not considered by the Tribunal at first instance. The notice of contention 15The notice of reply to appeal is in a standard form. Question 9 asks as follows: Do you support the original orders made by the Tribunal which the Appellant/s challenges for reasons other than those given by the Tribunal? 16In effect, question 9 acts as a notice of contention and asks whether the respondent contends that the orders of the Tribunal are correct, but for reasons other than those relied upon by the Tribunal at first instance. 17In this case, the box marked "yes" was checked. The respondents specified that the order supported was the order to remit the matter to exclude Exell from the group constituted by Exell and Civil and to exclude Exell from the group constituted by Exell and Engineering: see [44] of the Decision. 18No grounds for supporting the order were provided in the notice of reply to appeal, but this was the subject of submissions to the Appeal Panel by all parties. 19The respondents' primary contention was that, from the individual perspectives of Civil and Engineering, they each satisfy the preconditions for exclusion from the groups. Accordingly, the Tribunal's order to remit and exclude Exell could be supported for the reason that each of Civil and Engineering should be excluded from the groups which included Exell. 20Additionally, the respondents contended that they had a "legitimate expectation" that Revenue Ruling PTA017 (the Ruling) would be followed, and this would lead to Civil and Engineering being excluded from the groups. 21Section 81 of the Act identifies the orders that an Appeal Panel may make in respect of internal appeals. Relevantly, s 81(1) provides: ... the Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal, including ... ... (b) the decision under appeal to be confirmed, affirmed or varied, ... In exercising its functions, the Appeal Panel may exercise all the functions conferred on the Tribunal at first instance, when varying or making a decision in substitution of the first instance decision: s 81(2) of the Act. 22The decision under appeal required the appellant to exercise his discretion under s 79 of the PT Act to exclude Exell from the group constituted by Civil and Exell and to exclude Exell from the group constituted by Engineering and Exell. The respondents are, in effect, arguing that the proper order should have been that the appellant be required to excluding Civil or Engineering rather than Exell from the groups in question. There appears to be no difference in substance between the order appealed from and the order supported by the respondents despite the difference in the entity to be removed from the group. 23In these somewhat unusual circumstances, the Appeal Panel has decided that, in order to comply with the guiding principle in s 36(1) of the Act and to act without undue regard to technicalities, it is appropriate on the appeal to determine whether the decision at first instance to remit the matter to the Chief Commissioner to exclude a member from the payroll tax groups, ought to be supported on grounds other than those relied upon by the Tribunal at first instance. None of the parties opposed this approach being taken 24Whilst there was a contest between the parties as to whether the "legitimate expectation" issue was raised at first instance, the appellant did not object to the Appeal Panel considering that issue. Decision at first instance 25There was no dispute as to the primary facts. During the relevant years Exell's only business activity was as a provider of contract workers to Civil and Engineering ([3] of the Decision). Furthermore, during the relevant period it was accepted that Engineering carried on a mechanical engineering business specialising in repair and maintenance of mining equipment whereas Civil carried on a civil engineering business specialising in concrete slip forming. It was also accepted that Civil and Engineering each carried on a business independently and without any connection with each other. They were only grouped during the relevant period because contract workers were supplied by Exell to both Civil and to Engineering (at [41] of the Decision). 26The Tribunal then determined as follows: 43 In this matter, [Exell] was conducting quite an independent business in the relevant period, being the supply of contract workers. Although [Exell] was owned by a member of the Seovic family, there was no evidence of any control by either Civil or Engineering in the management of [Exell]. There was also no evidence or any suggestion of any contrivance by [Exell] or any other applicant to split or de-aggregate a conglomerate to reduce payroll tax otherwise payable. [Exell's] business arrangements were commercial. There are, therefore, ample grounds in this matter for the exercise of the discretion under s 79 of the Act to avoid of what can be best described as a harsh and unreasonable outcome on the technical application of the grouping provisions. 44 I will, accordingly, remit this matter to the respondent to exercise his discretion under s 79 of the Act to de-group [Exell] from Civil + [Exell] and Engineering + [Exell] groups, grouped under s 72(2). It follows that the de-grouping will also de-group the larger group that arose from the automatic operation of s 74. 27As noted above, the respondents did not attempt to support the Tribunal's reasoning at [43] of the Decision and instead relied upon the contention that each of Civil and Engineering satisfied the requisite test of independence and lack of connectivity; and further that they each fell within the ambit of the Ruling which warranted exercise of the discretion in their favour. The legislation 28As already noted, there was no dispute that the respondents were correctly grouped under the Act. The only question was whether they should be excluded from a group pursuant to s 79 of the Act. The relevant group to consider is the group formed under s 74, the larger group made up of the two smaller groups and containing each of Civil, Engineering and Exell: Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 at [44]. 29Section 79 of the PT Act 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. (3) The Chief Commissioner cannot exclude a person from a group if the person is a body corporate that, by reason of section 50 of the Corporations Act 2001 of the Commonwealth, is related to another body corporate that is a member of that group. (4) This section extends to a group constituted by reason of section 74 (Smaller groups subsumed by larger groups). (5) A determination can be expressed to take effect on a date that is earlier than the date of the determination. (6) The Chief Commissioner may by order in writing revoke a determination that applies in respect of a person if satisfied that the circumstances in which a determination may be made do not apply to the person. (7) The revocation of a determination can be expressed to take effect on a date that is earlier than the date of the determination. 30Recently, the Appeal Panel of the former Administrative Decisions Tribunal summarised the operation of the test in Lombard Farms at [50] and [51] as follows: 50 Section 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 degrouping. 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. 51 To 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 degrouping, 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. 31The parties to this appeal accepted that the foregoing accurately reflected the statutory test. 32Section 79 focuses attention on the nature of interconnections between group businesses, the nature of the businesses and other relevant matters. The Chief Commissioner must turn his mind to the "carrying on" of the businesses. In order to be relevant to s 79 of the Act, the interconnection must affect group members' businesses in some real or practical sense. Read in context, the expressions "independently of" and "not connected with" are somewhat elastic and depend on the nature and degree of the connections and the type of businesses. To be disentitled from exclusion from a group, there must be a real or meaningful connection, in a commercial sense and not an immaterial, inconsequential or passing connection between the carrying on of the businesses. The reference to a substantial connection in Lombard Farms at [51] is to be read in that context: meaning material and not necessarily large or weighty. Conclusion on whether there was an error of law 33At first instance, the Tribunal did not consider whether the supply of contract workers by Exell to Civil and Engineering amounted, in a commercially material sense, to a connection between the carrying on of Exell's business on the one hand and the carrying on of the business of either Civil or Engineering on the other hand. The Tribunal instead had regard to the fact that there was no evidence or suggestion of any contrivance, no evidence of control in the management of Exell and the business arrangements between group members were commercial. Accordingly, the Tribunal held that there were ample grounds for the exercise of the discretion (at [43] of the decision at first instance). 34As noted above, the discretion may only be exercised if the Commissioner is first satisfied that any connections that exist do not lead to a conclusion that the businesses are not independent and not connected in a commercial sense. The Tribunal did not consider whether, due to the nature of the undisputed connection between the group members (i.e., the supply of contract workers by Exell to Civil and Engineering) there was a connection between a business carried on by Exell and a business carried on by either Civil or Engineering, so as to lead to a conclusion that the businesses were relevantly connected. 35The discretion in s79 is not a broad discretion that may be exercised on the basis that it is just and reasonable to do so in order to alleviate harsh consequences. The Tribunal, at first instance, erred at law by asking the wrong question. On the undisputed facts, the Tribunal erred in holding that it was open to the Chief Commissioner to exercise the discretion to exclude Exell from the group. The pre-requisites were not met. 36As noted previously, the respondents accepted that the Tribunal erred in ordering the Chief Commissioner to exclude Exell from the groups on the basis that Exell satisfied the preconditions in s 79 of the Act. The Appeal Panel accepts that the concession was properly made. Legitimate expectation 37The respondents contended that, even if the Tribunal below did err, the "legitimate expectation" and the Ruling required that the same result as that ordered by the Tribunal should follow. The concept of "legitimate expectation" and fairness between taxpayers and the principal of non-discrimination, so the respondents contended, dictate that the same approach should be adopted in relation to taxpayers in like positions. The relevant authorities are discussed at length in Bellinz Pty Ltd v FCT (1998) 84 FCR 154. Furthermore, they submitted that the Ruling, which is entitled "Grouping of Professional Practices and Administration Businesses" covered their case. They contended that there was no policy reason why it should be limited to professional practices. 38The concept of "legitimate expectation" was developed in the context of judicial review on the ground of lack of procedural fairness not merits review: see, for example, Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273. As the Appeal Panel understands it, this is not the concept on which the respondents seek to rely in this appeal under the description "legitimate expectation". 39As the submissions developed in oral argument before the Appeal Panel, it emerged that the respondents' contention in relation to "legitimate expectation" related rather to the expectation that there would be fairness between taxpayers and non-discriminatory treatment, in the context of the Ruling and whether it applied in the respondents' case. It was submitted that the Ruling and whether it could be said to cover the respondents' circumstances were not irrelevant considerations in the sense described in Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 per Mason J at 40. The Tribunal and now the Appeal Panel exercising the functions of the Tribunal at first instance, may have regard to the Ruling in reaching a satisfaction as to whether the businesses were independent and not connected. The Ruling indicates, that so far as professional practices using the services of administrative businesses are concerned, where the criteria set out in the Ruling are satisfied, the Commissioner is likely to be satisfied of the relevant matters. The respondents contend, in effect, that the criteria as set out in the Ruling are satisfied and hence consistency of treatment indicates that the requisite satisfaction ought to be reached here. The respondents however do not contend that the Appeal Panel is bound to follow the Ruling and reach the conclusion that the requisite satisfaction is reached. 40The Ruling provides as follows: Revenue Ruling No. PTA 017 Grouping of Professional Practices and Administration Businesses (Payroll Tax Act 2007) Ruling history Ruling no. Issued date Dates of effect Status From To PTA 017 11 January 2008 1 July 2007 - Current Preamble The Payroll Tax Act 2007 (the Act), which commenced on 1 July 2007, rewrites the Pay-roll Tax Act 1971 and harmonises the payroll tax legislation in Victoria and NSW. Under the grouping provisions in Part 5 of the Act, two or more employers may constitute a group if: a. they are corporations that are related bodies corporate within the meaning of the Corporations Act 2001 (Cth) (section 70 of the Act) b. they share or inter-use employees (section 71 of the Act) c. they are controlled by the same person(s) (section 72 of the Act), or d. one has a controlling interest in the other (being a corporation) under the tracing provisions in section 73 of the Act. Section 74 of the Act provides that if an employer is a member of two or more groups, all the members of those groups will constitute one group. There are situations where a number of professional practices (e.g. legal practices, accounting practices, medical practices) operate from the same premises and share the services of an administrative service business. Under these circumstances, each of the professional practices may be grouped with the service business under section 71 of the Act. As a consequence, all of the businesses could be treated as one group under section 74 of the Act. The purpose of this Revenue Ruling is to clarify the circumstances in which professional practices and administrative service businesses are regarded as a group. Ruling An administrative service business set up purely to provide administrative services to a professional practice, is routinely grouped with the professional practice under section 71 of the Act. However, the approach is less stringent in cases where several professional practices use the services of a single administrative business. Where two or more professional practices use the services of one service administration business, the Chief Commissioner of State Revenue (the Chief Commissioner) will generally exercise his discretion under section 79 of the Act not to group all the professional practices with the administrative business if all the following conditions are met: · none of the persons who own or operate the professional practices has a proprietary interest, whether directly or indirectly, in any of the other professional practices · the professional practices are carried on independently of, and unconnected with, each other (i.e. there is no significant financial interdependence and/or commercial transactions between the professional practices, and each professional practice is managed separately) · none of the persons who own or operate the professional practices has a controlling interest (as defined in Sections 72 and 73 of the Act), in their own right, in the administrative services business · the administrative services business does not derive more than 60 per cent of its income from one professional practice, and · there is no suggestion that such a structure is designed to avoid payroll tax. If any of the above conditions are not satisfied, and you believe that you should not be grouped, please apply to the Chief Commissioner for a determination. This Revenue Ruling is effective from 1 July 2007. Please note that rulings do not have the force of law. Each decision made by the Office of State Revenue is made on the merits of each individual case having regard to any relevant ruling. Bob Smith Chief Commissioner of State Revenue 11 January 2008 Last updated: 12 December 2013 41The respondents contended that, in substance, they satisfied the prerequisites outlined in the Ruling. First, the business of Civil and Engineering were akin to professional practices, independently run and owned with no substantial connection between them. Second, the administrative services business (Exell) does not derive more than 60% of its income from any one of the businesses akin to professional practice and there was no suggestion of a tax avoidance purpose. 42Thirdly, insofar as there appeared from ASIC records to be a common controlling interest between Engineering and Exell prior to March 2010, that should be ignored, as the Ruling makes plain that dispensation with its terms may be sought. 43The appellant contended that the Ruling has no application in the circumstances for the reasons that it is expressly stated to apply to professional practices and at least until March 2010 one of the conditions (as to control of the administrative services business) is not met. Furthermore, the terms of the PT Act are paramount and the Ruling cannot override the statutory prerequisites to the exercise of the discretion. The appellant relied on the following passage from Bellinz at 167: But where the question arises as to the inclusion of an amount in assessable income or the allowance of an amount as a deduction, where no question of discretion arises and where the Commissioner is charged to administer the law (compare s 8 of the Act), and one might say bound so to do in accordance with the language used in the statute as passed by Parliament, it is difficult to see how the Commissioner can properly be said to have acted unfairly, even if there is an element of discrimination, where he has acted in accordance with the law itself. Different considerations arise in other circumstances. Conclusion on "legitimate expectation" 44Accepting, as we do, that taxpayers are to be treated fairly and that the Ruling is not irrelevant to the task at hand, there is nonetheless no unfair treatment as between taxpayers where the PT Act is applied according to its terms. In order for the discretion in s 79 to be enlivened, the Chief Commissioner (or the Tribunal in the Commissioner's shoes) must be satisfied of independence and lack of connections between group members. Whilst the Ruling identifies some circumstances where the decision-maker may be so satisfied, it does not replace the statutory test. The Ruling itself identifies and expressly states it does not have the force of law and that each decision is made on the merits of the individual case. Quite apart from the fact that the Ruling is not expressed to extend to the respondents' circumstances (particularly in relation to the period before March 2010), the connections we outline below as to the administration and day to day management of Civil and Engineering are such that it could not be said that those businesses were independent of and not connected to the business of Exell. The Ruling cannot change that position. Accordingly, the Tribunal's decision is not supportable on this basis. Exclusion of Civil and Engineering 45The respondents contended that, despite the fact that Exell ought not be excluded from the group, each of Civil and Engineering may and ought to be excluded. Even though this has the same result as excluding Exell from the group (which is accepted to be impermissible), the respondents contend that there is nothing in the PT Act which would prevent this approach being taken. 46The appellant submited that the PT Act does not operate in the manner contended for by the respondents: it would thwart the operation of the Act. 47Section 79 is very specific in that it requires the Commissioner to consider whether the business carried on by a member of the group is independent of and not connected with any other member of the group. The Appeal Panel accepts that simply because one business is not carried on independently of the carrying on of another business, it cannot be concluded (on that reason alone) that the latter business is not independent of the former business. Independence within the meaning of s 79 does not appear to be reciprocal. The example cited by the respondents, of a small scale farmer being dependent on a national supermarket chain whilst the national entity is not dependent on the farmer, highlighted why independence might not be necessarily reciprocal. It would not usually be said that, simply because the farmer's business was dependent on the supermarket, the supermarket was not independent of the farmer's business. 48Nevertheless, in addition to the businesses being independent, s 79 of the PT Act requires there to be no connection (in the commercial sense described above) between businesses of group members. It is difficult to conceive of an example where one business is connected to another, yet the latter is not connected to the former. 49The appellant pointed to Tasty Chicks Pty Ltd, Commissioner of Stamps v Garrett F Hunter Pty Ltd (1997) 68 SASR 275 and John French Pty Ltd v Commissioner of Pay-Roll Tax (Qld) [1984] 1 Qd R 125 as precluding the result contended for by the respondents. Where one business is dependent on another for its custom (as Exell was on Civil and Engineering) and where the first business is controlled or influenced by other group members it cannot be said that the first business is independent of the other businesses: Tasty Chicks Pty Ltd at [56] and [59]. Furthermore, where decisions about the first business are closely related to and must take into account the needs of the other businesses to continue to attract custom, it cannot be said that the carrying on of the first business is not substantially connected with the carrying on of the other businesses: Garrett F Hunter Pty Ltd at 285-286. Finally, it is not possible for one group member to be excluded from the group unless all members satisfy the requisite test of independence and lack of connection: John French Pty Ltd at 140-141. 50The respondents contended that these cases were readily distinguishable because the focus had been on the business reliant on the other group members (akin to Exell's position). The decisions do not consider the perspective of the other group members (i.e., Civil and Engineering). In Tasty Chicks Pty Ltd, the application had been made by the administration company and not by the company operating the principal business. The Court of Appeal noted (at [56]) that the PT Act requires attention to be focussed on the business seeking exclusion and its interrelationship with businesses of other group members. In Garrett F Hunter Pty Ltd and John French Pty Ltd there were express findings to the effect that the owner of one of the businesses had the ability to control or substantially influence the other business. 51Ultimately, it is not necessary for the Appeal Panel to resolve the issue of whether independence and connection are reciprocal in every case. On the facts of this matter, we are not satisfied that the businesses of either Civil or Engineering are carried on independently of and are not connected with the business of Exell. 52A significant proportion of the workforce of both Engineering and Civil came from Exell. Over the period the subject of the dispute, Exell provided between 12% and 26% of the workforce of Civil and Engineering. The majority, if not the whole, of the administration and day to day management staff were provided by Exell. This included provision to Civil of a general manager, engineering manager, construction manager, accounts/payroll officer, clerical assistant and secretary. To Engineering, Exell provided business managers, manager, administration manager, purchasing officer, OH&S coordinator, store person and receptionist. 53Relevantly, the discretion may only be exercised if the carrying on of Civil's business could be said to be independent from and not connected to (in a real or commercial sense) the carrying on of Exell's business. Similarly, it must be able to be said that the carrying on of Engineering's business was independent from and not connected to the carrying on of Exell's business. Here, Civil and Engineering each depended on the employees of Exell to provide their management as well as their day to day administrative staff. They each depended to this extent on the business of Exell. It is difficult to see how without the staff provided by Exell their businesses would have functioned. This is not a case of a passing, infrequent or random connection. It is material and goes to the heart of the carrying on of the businesses of Civil and Engineering. The circumstances here are very similar to those described by Doyle CJ in Garrett F Hunter Pty Ltd at 285 and referred to by the Court of Appeal in Tasty Chicks Pty Ltd. 54Some business decisions of Civil and Engineering, for instance as to whether they will employ permanent staff or take on workers from Exell or another provider (i.e., the source of the labour) are, of their nature, capable of being influenced by decisions made by Exell about its own business (for instance about the number, type, qualifications and training of its workforce). Therefore, some business decisions of Civil and Engineering are connected to the business of Exell. The choices that Exell makes in its own business affect the business choices of Civil and Engineering. This is so irrespective of whether there is actual control by Civil or Engineering over business decisions made by Exell. 55Where all, or substantially all, of an entity's management and administration staff are provided by one other entity, it is apt to say that the entities are closely connected. This is the case with both Civil and Engineering whose management and administration staff are all, or substantially all, supplied by Exell. Accordingly, the prerequisites for the exercise of the discretion under s 79 are not satisfied. The Chief Commissioner is not empowered to exclude Civil and Engineering from the group. Conclusion on the notice of contention 56On the facts as found, Exell supplied contract workers to its only two customers Civil and Engineering. Each of Civil and Engineering were in a commercial position to influence the business of Exell through continued custom. Exell was in a commercial position to influence business decisions of Civil and Engineering. These business decisions included, most significantly, decisions as to whether Civil and Engineering employed their own staff or continued to obtain staff from Exell. Furthermore, the day to day management and administrative staff of Civil and Engineering were solely or predominately supplied by Exell. In these circumstances, it can be said that the carrying on of the businesses of each of Civil and Engineering was connected to Exell's carrying on of its business. Accordingly, a statutory precondition to exclude a member from a group (absence of connection) is not met. There is therefore no power to exclude Civil or Engineering from the group, pursuant to s 79 of the PT Act. 57It follows that the decision of the Tribunal below is not the correct and preferable decision in the circumstances and it cannot be supported on the basis put forward by the respondents. 58For these reasons, the Appeal Panel is of the view that the appeal should be allowed and the decision of the Tribunal below should be set aside and in its place an order should be made that the decision of the appellant is affirmed. Orders (1)The appeal is allowed. (2)The decision at first instance is set aside and in lieu the application is dismissed. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 01 December 2014