Supreme Court New South Wales Medium Neutral Citation: Winlina Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1080 Hearing dates: 12 August 2019 Date of orders: 28 August 2019 Decision date: 28 August 2019 Jurisdiction: Equity Before: Payne J Decision: (1) Summons dismissed. (2) Plaintiffs to pay the costs of the defendant as agreed or assessed. Catchwords: TAXES AND DUTIES – payroll tax – liability to taxation – arrangements affecting liability to tax – objections and appeals – review of assessments pursuant to s 97(4) of the Taxation Administration Act 1996 (NSW) TAXES AND DUTIES – payroll tax – grouping of employers – interpretation of Part 5 of the Payroll Tax Act 2007 (NSW) – whether the taxpayer is a member of a group and jointly and severally liable – whether the taxpayer carried on business in NSW – whether there is a geographical limitation on the application of the grouping provisions Legislation Cited: Australia Act 1986 (Cth), s 2 Constitution Act 1902 (NSW), s 5 Corporations Act 2001 (Cth), ss 21, 142, 146, Sch 3 Evidence Act 1995 (NSW), s 136 Interpretation Act 1987 (NSW), ss 5, 12, 31 Payroll Tax Act 2007 (NSW), ss 3, 6, 7, 10, 11, 67, 68, 72, 74, 79, 81 Supreme Court Act 1970 (NSW), s 19 Taxation Administration Act 1996 (NSW), ss 3, 8, 45, 97, 100 Cases Cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 Balajan v Nikitin (1994) 35 NSWLR 51 Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184 Federal Commissioner of Taxation v Consolidated Media Holdings (2012) 250 CLR 503; [2012] HCA 55 Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd [2005] NSWSC 544 Grain Growers Ltd v Chief Commissioner of State Revenue [2015] NSWSC 925 Hyde v Sullivan (1955) 56 SR (NSW) 113 Kay's Leasing Corporation Pty Ltd v Fletcher (1964) 116 CLR 124; [1964] HCA 79 Mobil Oil Australia Pty Ltd v State of Victoria (2002) 211 CLR 1; [2002] HCA 27 Hope v Bathurst City Council (1980) 144 CLR 1; [1980] HCA 16 Pearce v Florenca (1976) 135 CLR 507; [1976] HCA 26 State Authorities Superannuation Board v Commissioner of State Taxation (WA) (1996) 189 CLR 253; [1996] HCA 32 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2011) 245 CLR 446; [2011] HCA 41 Tobacco Leaf Marketing Board v Corte [1983] 3 NSWLR 10 Union Steamship Co of Australia Pty Ltd v King (1988) 166 CLR 1; [1988] HCA 55 Valve Corporation v Australian Competition and Consumer Commission (2017) 258 FCR 190; [2017] FCAFC 224 Welker v Hewett (1969) 120 CLR 503 at 512; [1969] HCA 53 Texts Cited: A Twomey, The Constitution of New South Wales (2004, Federation Press) Category: Principal judgment Parties: Winlina Pty Ltd (ACN 132 925 565) (First Plaintiff) Steven Andrew Soong (Second Plaintiff) Chief Commissioner of State Revenue (Defendant) Representation: Counsel: T Hale SC / C Palmer (Plaintiffs) G Kennett SC / T Wong / A Gerard (Defendant) Solicitors: Diamond Conway Lawyers (Plaintiffs) Crown Solicitor's Office (Defendant) File Number(s): 2015/00145325 Publication restriction: None Judgment 1. PAYNE J: These proceedings concern assessments issued by the Chief Commissioner of State Revenue to Winlina Pty Ltd ("Winlina") in respect of payroll tax liabilities in the period from 15 November 2010 to 17 July 2012. The total amount of tax and penalties payable by reason of the assessments is $127,209.48. 2. The assessments were issued to Winlina on the basis that it was a member of a payroll tax group with Panlirn Pty Ltd ("Panlirn") and other entities pursuant to Division 2 of Part 5 of the Payroll Tax Act 2007 (NSW) and was therefore jointly and severally liable for Panlirn's unpaid tax liabilities under s 81 of the Payroll Tax Act. 3. Winlina seeks review of those assessments, pursuant to s 97 of the Taxation Administration Act 1996 (NSW). Somewhat unusually, Mr Steven Soong, the sole director of Winlina, was joined to the proceedings on his own motion as the second plaintiff. As this order was made prior to the matter being allocated to me and in the absence of submissions from either party about the joinder I will proceed on the basis that the joinder of Mr Soong was appropriate. 4. The proceedings in this Court are an "appeal" for the purposes of s 19(2) of the Supreme Court Act 1970 (NSW) and s 97(4) of the Taxation Administration Act. An appeal under these provisions is a de novo review not limited to the materials before the Chief Commissioner: Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2011) 245 CLR 446; [2011] HCA 41 at [12]-[22]; Grain Growers Ltd v Chief Commissioner of State Revenue [2015] NSWSC 925 at [7]. 5. Winlina bears the onus of proving its case on the balance of probabilities: Taxation Administration Act, s 100(3). Evidence 1. Winlina read the affidavit of Steven Andrew Soong sworn on 14 May 2015. The affidavit sets out the operations and trading activities of Winlina and Panlirn and the interactions between Winlina and Panlirn. Various assertions made by Mr Soong about Winlina "operating solely in Queensland" were rejected. Winlina also read the affidavit of Steven Andrew Soong sworn on 12 August 2019. An attempt to lead evidence about a new issue (the employees of two related companies, Yelturn Pty Ltd and Larsay Pty Ltd) was rejected. The defendant read the affidavit of Rebecca Sui Ming Lim Kiu affirmed on 13 February 2019. Annexed to the affidavit were various notices, objections, determinations, correspondence between the parties, ASIC records, profit and loss statements, balance sheets, internal ledgers, intra-group tax invoices, intra-group contracts, and bank documents produced under subpoena. There was no cross-examination. The Court Book comprised three volumes and was marked Exhibit A. [1] Relevant facts 1. In this part of the judgment I will describe my principal findings of fact. I will, where necessary, make additional findings of fact when addressing the submissions of the parties. 2. In the relevant period from 15 November 2010 to 17 July 2012, Winlina was associated with the following companies: 1. Panlirn Pty Ltd ("Panlirn"); 2. Banfirn Pty Ltd ("Banfirn"); 3. Fyna Nuform Pty Ltd ("Fyna Nuform") (now M&M Bros Concreting Pty Ltd); 4. Formforce (NSW) Pty Ltd ("Formforce"); 5. Wyreach Pty Ltd ("Wyreach") and its related bodies corporate: 1. Fyna Constructions (Hire and Sales) Pty Ltd ("Fyna Constructions (Hire and Sales)"); 2. Ashworth Corp Pty Ltd ("Ashworth"); 3. Ashworth Corp (Vic) Pty Ltd ("Ashworth (Vic)"); 4. Parkwind Pty Ltd ("Parkwind"); 5. Wellnora Pty Ltd ("Wellnora"); 1. Norton Developments Pty Ltd ("Norton"); 2. Lafari Pty Ltd ("Lafari"); 3. Larsay Pty Ltd ("Larsay"); 4. Powerform Equipment Pty Ltd ("Powerform"); 5. SAS Holdings Australia Pty Ltd ("SAS"); 6. Talmag Pty Ltd ("Talmag"); 7. Ticaart Pty Ltd ("Ticaart"); and 8. Yelturn Pty Ltd ("Yelturn"). 1. In the relevant period from 15 November 2010 to 17 July 2012, Mr Steven Soong was the sole director of Winlina and was a resident of NSW. [2] Mr Steven Soong was responsible for the day-to-day management of Winlina. 2. Mr Steven Soong was also a director of the following companies, whose registered offices and principal places of business were each located in NSW: 1. Fyna Nuform from 7 October 2011; 2. Formforce from 14 March 2005; 3. Wyreach from 7 October 2011; 4. Fyna Constructions (Hire and Sales) from 7 October 2011; 5. Lafari from 22 May 2012 to 25 April 2014; 6. Larsay from 22 May 2012 to 25 April 2014; 7. Powerform from 7 October 2011; 8. SAS from 28 September 2006; and 9. Talmag from 8 March 2004. 1. At all material times, the sole shareholder of Winlina was Mr Warren Soong, who is the brother of Mr Steven Soong. Mr Warren Soong was at all relevant times a resident of NSW. 2. At all material times, Winlina's registered office and principal place of business were located in NSW. Winlina's registered office today is in Granville, NSW. ASIC was notified that Winlina's principal place of business moved to Queensland in May 2013, after the period covered by the assessments. 3. At all material times: 1. Winlina held a bank account with CBA at its Belmore, NSW branch and account statements were sent to a post office box in Belmore and later in Granville; 2. Winlina held a bank account with ANZ at its Campsie, NSW branch and account statements were sent to the post office box in Belmore and later in Granville; and 3. Winlina held a bank account with Suncorp at its branch located in Brisbane, Queensland. The account statements record a nil balance at all times. 1. During the relevant period, a series of transactions occurred between Winlina and Yelturn, Fyna Nuform, Banfirn, Larsay, Norton and Fyna Constructions (Hire and Sales). Each of those companies' registered offices and principal places of business were located in NSW. 2. In respect of Fyna Nuform, the transactions were loans made during FY2011 by which: 1. Winlina transferred to Fyna Nuform the total amount of $731,470.00; and 2. Fyna Nuform transferred to Winlina the total amount of $824,767.75. 1. During FY2012, the loan accounts between Winlina, Fyna Nuform and Banfirn record that: 1. Winlina transferred to Fyna Nuform the total amount of $204,410.18; 2. Fyna Nuform transferred to Winlina the total amount of $287,415.00; and 3. Winlina lent $59,700 to Banfirn, which was repaid during the course of that financial year. 1. During FY2012, Fyna Nuform had a loan account with Banfirn by which: 1. Banfirn transferred to Fyna Nuform the total amount of $166,205.70; and 2. Fyna Nuform transferred to Banfirn the total amount of $130,403.55. 1. Fyna Nuform and Banfirn both used the labour hire services of Panlirn. Mrs Desley Soong was the director of Panlirn and Mrs Desley Soong and Mr Warren Soong were the shareholders of Panlirn until that company was deregistered on 4 February 2013. 2. In FY2011, a substantial majority of Panlirn's contract income was earned from Fyna Nuform. In FY2011, Panlirn issued tax invoices to Fyna Nuform for labour hire services and management fees in the amount of $1,023,972.63. In FY2012, Panlirn issued invoices to Fyna Nuform and Banfirn in the adjusted amount of $1,029,918.12, being 100% of its income for that year. 3. I find that Winlina transacted with a group of companies, including Panlirn, on a routine basis. In the case of the now-deregistered labour hire companies all based in NSW, Yelturn, Larsay and Panlirn, the majority, if not all, of their revenue was derived from other companies in the group. These companies all operated from the same registered offices and principal places of business, which were located in NSW. Their directors and shareholders were all members of the Soong family and all resided in NSW. 4. In these proceedings, Winlina does not challenge the decision by the Chief Commissioner to refuse to exclude Winlina from a payroll tax group of which Panlirn was a member under s 79 of the Payroll Tax Act. Issues 1. In their outline of submissions filed on 19 July 2019, Winlina contended that the issues to be determined by the Court are as follows: 1. whether, on a proper construction of the Payroll Tax Act and the Taxation Administration Act, Winlina is not relevantly a member of a group with Panlirn, as the grouping provisions of the Act do not apply to corporations who do not carry on business in NSW; and 2. if the Payroll Tax Act, on its proper construction, applies to corporations that do not carry on business in NSW, whether the Act is invalid to the extent that it purports to apply to the extraterritorial activities of Winlina, because it exceeds the power of the State Government to make laws "for the peace, welfare, and good government of New South Wales". 1. In their submissions in reply filed on 10 August 2019, Winlina accepted that it was critical to the case it wished to advance before me that Winlina first establish that it did not carry on business in NSW in the relevant period within the meaning of Part 5 of the Payroll Tax Act. Submissions of the parties Winlina's submissions 1. Winlina submitted that Part 5 of the Payroll Tax Act, or alternatively those sections in Part 5 of the Payroll Tax Act which relate to or concern the grouping of Winlina with Panlirn, do not apply to Winlina. This is because Winlina is a business wholly based in Queensland which lacks any meaningful nexus with NSW. 2. It was submitted that on a proper construction of the Payroll Tax Act, Winlina could not be liable to pay payroll tax assessed to Panlirn as Winlina did not "carry on business" in NSW as it did not employ any person to perform work in NSW or pay wages for work performed in NSW. Winlina was not, it was submitted, relevantly a member of a group with Panlirn under s 81(1) of the Payroll Tax Act pursuant to ss 72(1), 72(2)(c)(i) and 72(2)(e) of the Payroll Tax Act. 3. It was submitted that Winlina "carries on business" in Queensland and that at no relevant time, did Winlina carry on business in NSW. Winlina asserted that another company was the tenant at the address notified to ASIC in Granville, NSW as Winlina's principal place of business. 4. Winlina submitted that each of ss 72(1), 72(2)(c)(i) and 72(2)(e) of the Payroll Tax Act refers to "carrying on" of a business. Winlina submitted that for the purposes of the Payroll Tax Act, the "businesses" referred to are necessarily businesses "carried on" in NSW. 5. It was submitted that the purpose of s 12(1)(b) of the Interpretation Act 1987 (NSW) is to require the words of a statute to be read as if the words "in and of New South Wales" are incorporated within that statute unless the contrary intention appears. The prima facie rule is that references are to places within the jurisdiction: Tobacco Leaf Marketing Board v Corte [1983] 3 NSWLR 10. 6. It was submitted that Winlina did not "carry on business" in NSW within the meaning of either ss 72(2)(c)(i) or 72(2)(e) of the Payroll Tax Act. Nor was Winlina one of two "businesses" within the meaning of s 72(1). It was submitted to be "extraordinary" if ss 72 and 81 of the Payroll Tax Act were to be construed as imposing liability on corporations that conduct no business, employ no one and pay no wages for work performed in NSW. 7. It was submitted that if the grouping provisions were not construed in the manner for which Winlina contends, an entity with no presence, business or employees in NSW could be assessed for tax in NSW. Such persons or companies would become taxpayers within the meaning of s 3 of the Taxation Administration Act and be subject to payroll tax assessments under s 8. 8. Winlina submitted that if the Chief Commissioner were correct in his construction, s 5 of the Constitution Act 1902 (NSW) prevented Part 5 of the Payroll Tax Act, or alternatively those sections in Part 5 of the Payroll Tax Act that relate to or concern the grouping of Winlina with Panlirn, from having extraterritorial application. 9. Winlina submitted that, pursuant to s 31(1) of the Interpretation Act, an Act is to be construed as "operating to the full extent of, but so as not to exceed, the legislative power of Parliament". This is relevant in this case where limitations on the operation of State laws apply. Section 5 of the Constitution Act provides that the NSW legislature has the power to make laws "for the peace, welfare, and good government of New South Wales". The words "of New South Wales" indicate that there must be a territorial connection between the law and NSW. 10. It was submitted that the legislative powers of the Parliament of each State include full power to make laws for the "peace, order and good government" of that State which have extraterritorial operation. However, it was submitted, in order to have extraterritorial operation, there must be a connection between the law and the territory in which it was enacted. The principle is encapsulated by the decision of the High Court in Union Steamship Co of Australia Pty Ltd v King (1988) 166 CLR 1 at 13-14; [1988] HCA 55: "Accordingly, the nineteenth century decisions do not deny that the words "peace, order and good government" may be a source of territorial limitation, however slight that limitation may be. And, as each State Parliament in the Australian federation has power to enact laws for its State, it is appropriate to maintain the need for some territorial limitation in conformity with the terms of the grant, notwithstanding the recent recognition in the constitutional rearrangements for Australia made in 1986 that State Parliaments have power to enact laws having an extraterritorial operation: see Australia Act 1986 (Cth), s.2(1); Australia Act 1986 (U.K.), s.2(1)." 1. McHugh and Gummow JJ held in State Authorities Superannuation Board v Commissioner of State Taxation (WA) (1996) 189 CLR 253 at 288; [1996] HCA 32 "that there is no prohibition placed upon one State imposing upon another State a tax with respect to property of the other State within the area of the first State or with respect to dealings by the other State in such property". Winlina submitted that there must be a relevant connection between the State enacting the tax and the subject matter of the tax. 2. It was submitted that the NSW Parliament "has no general power to make strangers to its territory liable in its courts to judgments or sentences by way of enforcing contributions to the revenue of the State": Welker v Hewett (1969) 120 CLR 503 at 512; [1969] HCA 53 (Kitto J). In Balajan v Nikitin (1994) 35 NSWLR 51 at 61, Windeyer J held that, on its face, the relevant provision there being considered would empower the court in any action commenced in NSW to make an order in respect of property outside NSW, whether or not there was any link with NSW. His Honour determined that the necessary nexus with the State was absent insofar as the section purported to give power to make orders affecting property outside NSW of a deceased person domiciled outside NSW and, to the extent the law was not within the competence of the NSW legislature, it should be read down, pursuant to the Interpretation Act, to operate as it was intended to operate. 3. Balajan v Nikitin was referred to by Brereton J in Hitchcock v Pratt (2010) 79 NSWLR 687; [2010] NSWSC 1508. In Hitchcock v Pratt, his Honour determined that the statute in question was invalid to the extent it purported to authorise a family provision order in respect of property outside NSW of a testator who died domiciled outside NSW. His Honour stated at [8]: "For a State law to have extra-territorial operation, there must be a relevant connection between the persons or circumstances on which the legislation operates and the State, and while this test is to be liberally applied and legislation should be held valid if there is any real connection, even a remote or general one, between the subject matter of the legislation and the State, there must nonetheless be some such connection: Pearce v Florenca (1976) 135 CLR 507 at 518; Union Steamship Co of Australia Pty Ltd v King (1988) 166 CLR 1 at 14; Port MacDonnell Professional Fishermen's Association Inc v South Australia (1989) 168 CLR 340 at 372; Mobil Oil Australia Pty Ltd v State of Victoria (2002) 211 CLR 1 at [48]." 1. It was only in written submissions in reply that Winlina squarely confronted the critical factual underpinning of its case, namely, even assuming that its construction of the Payroll Tax Act was correct, it bore the onus of demonstrating that during the relevant period Winlina did not carry on business in NSW. 2. Winlina submitted that it trades under the name of "Fyna Constructions Qld". Therefore, it was submitted, Winlina carries on business in Queensland. It was submitted that the evidence established that, in the period from 15 November 2010 to 17 July 2012, Winlina's sole income was derived from formwork contracts for construction projects in Queensland. 3. Winlina submitted that it does not occupy its registered office at Granville, NSW and that another company is the tenant at the address that Winlina had notified ASIC was its registered office. Winlina's principal place of business is currently at Beenleigh, Queensland although Winlina conceded that during the whole of the relevant period it had notified ASIC that it had a principal place of business in NSW. Winlina submitted that this registration in NSW was "for administrative purposes only". 4. Winlina submitted that the Court should not consider this (unexplained) internal arrangement as determinative. It was submitted that s 21(3)(b) of the Corporations Act 2001 (Cth) provides that merely because a body corporate "holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs" in Australia will not indicate that the company is carrying on business in Australia. 5. It was submitted that the fact that Mr Steven Soong resides in NSW should similarly not be considered to be determinative of the question of where Winlina was carrying on business during the relevant period. Mr Hale SC accepted that it was one factor that the Court may consider, but submitted that it was not a decisive one. It was submitted that there was a meaningful distinction between a situation where a company was carrying on business in NSW as opposed to circumstances where an individual associated with a company, such as Mr Soong, engages in business activities in NSW unrelated to Winlina. 6. Winlina submitted that just because Mr Soong resides in NSW, and arguably himself "carries on business" in NSW, does not mean that Winlina itself "carries on business" in NSW for the purposes of the Payroll Tax Act. 7. Winlina submitted that two of the companies whose dealings with Winlina were identified by the Chief Commissioner as being relevant, Yelturn and Larsay, are labour hire companies with operations based in Queensland. It was submitted that neither Yelturn nor Larsay provided any services in respect of construction projects based in NSW or have ever traded in NSW. It was conceded that, for reasons not explained in the evidence, each had a registered office in NSW. 8. It was submitted that Winlina's agreements with Yelturn and Larsay under which each company provided services and labour to Winlina to enable Winlina to complete formwork subcontracts were carried out solely in Queensland. 9. Winlina submitted that the presence of a bank account does not indicate that a body corporate is carrying on business in a particular State or Territory: Corporations Act, s 21(3)(c). It was submitted that the fact that Winlina has previously transferred funds to Fyna Nuform, a company with a registered office and carrying on business in Sydney, does not illustrate that Winlina was carrying on business in NSW. 10. When Mr Hale SC was asked about what test Winlina submitted the Court should apply to determine if Winlina was "carrying on business" in NSW during the relevant period the following exchange occurred: "HIS HONOUR: No, I understand. I am inviting from you what the test is and where I get it from? HALE: The test is and, perhaps, I can just summarise it this way, the "to carry on business" obviously, enough, is, in a commercial sense, is to provide services or obtain income from the carrying out of particular business of the company. … HIS HONOUR: That's why I asked you is the test ‑ is it some sort of comparative test you are urging on me so that I look at all of the activities and work out what best describes the place where the company is carrying on business? HALE: Yes. I was trying to urge against a test, because, although there might be ‑ recognising that there will have to be a factual inquiry, but‑‑ HIS HONOUR: If I say there is no test, that itself is a test, isn't it? HALE: Except for this, the test, relevantly, is well, I suppose, in a sense it is, s 67 going back to s 67, but what truly is the indicia of a business? The starting point must be one which, perhaps, I'm be labouring too often. It is the activities through which the company generates its income and that will identify where the business is carried on and, so, if, for example, 80% of the formwork construction jobs being carried out by Winlina were in Queensland, but 20% were carried out in New South Wales, the conclusion clearly would be, Winlina was carrying out businesses in two places, but that is not the case that's not the case here …" 1. The essence of the submission was that carrying on a business has been generally understood to mean to "conduct some form of commercial enterprise, systematically and regularly, with a view to profit": Hyde v Sullivan (1955) 56 SR (NSW) 113 at 119. It was submitted that what is absent from the evidence is any indication that Winlina has ever undertaken activities in NSW that: (a) constitute a commercial enterprise (i.e. are undertaken for the purpose of profit); and (b) are performed on a continuous and repetitive basis. 2. In Hope v Bathurst City Council (1980) 144 CLR 1; [1980] HCA 16, the High Court considered the meaning of the words "carrying on the business of grazing". Mason J (Gibbs, Stephen, Murphy and Aickin JJ agreeing) commented at 8: "In truth it is the popular meaning of the word as used in the expression "carrying on a business", rather than the popular meaning of the word itself, that is enshrined in the statutory definition. It is the words "carrying on" which imply the repetition of acts (Smith v. Anderson (1880) 15 Ch D 247, at pp 277-278 ) and activities which possess something of a permanent character. This conclusion serves to emphasize that it is necessary to engage in a process of construction in order to arrive at the meaning of the word in s. 118 (1). I accept, then, that "business" in the sub-section has the ordinary or popular meaning which it would be given in the expression "carrying on the business of grazing". It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis." 1. It was submitted that Mason J's comments were consistent with the conclusion that a company may engage in some commercial activity in the jurisdiction, but still not carry on business in that jurisdiction. 2. Winlina accepted that it "may also be correct" that a company may be found to be carrying on business "in" a particular geographic area even though the bulk of its business is conducted elsewhere. Barrett J made such a finding at [39] in Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd [2005] NSWSC 544. However, Winlina submitted that his Honour did not identify circumstances where a business has a limited number of financial connections to a jurisdiction but does not conduct any activities that are undertaken as a commercial enterprise on a continuous and repetitive basis. 3. It was submitted that Winlina's corporate architecture in NSW is not nearly so established as that of other companies in other decided cases. It was submitted (without reference to any evidence) that Winlina has never undertaken systematic capital-raising in NSW and its registered address is in NSW "for administrative purposes only". Chief Commissioner's submissions 1. For the period from 15 November 2010 to 7 October 2011, the Chief Commissioner contends that Winlina formed part of the same payroll tax group with Panlirn on the following grounds: 1. Mr Warren Soong, as sole shareholder of Panlirn, Winlina, Banfirn, Formforce, Lafari, Larsay, Powerform, Talmag and Yelturn, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(e) of the Payroll Tax Act; 2. Mrs Desley Soong, as sole director of Panlirn, Banfirn, Fyna Nuform, Wyreach, Norton, Lafari, Larsay, Powerform, Ticaart, Yelturn, Fyna Constructions (Hire and Sales), Ashworth, Ashworth (Vic), Parkwind and Wellnora, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(c)(i) of the Payroll Tax Act; 3. Mrs Desley Soong, as sole shareholder of Wyreach, had a relevant "controlling interest" in the business carried on by that company: s 72(2)(e) of the Payroll Tax Act; 4. Mr Steven Soong, as sole director of Winlina, Formforce, SAS and Talmag, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(c)(i) of the Payroll Tax Act; 5. Mr Steven Soong, as sole shareholder of Fyna Nuform and SAS, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(e) of the Payroll Tax Act; and 6. because Panlirn formed a payroll tax group with Winlina, Banfirn, Fyna Nuform, Formforce, Wyreach, Norton, Lafari, Larsay, Powerform, SAS, Talmag, Ticaart, Yelturn, Fyna Constructions (Hire and Sales), Ashworth, Ashworth (Vic), Parkwind and Wellnora on at least the bases of ss 72(2)(e) and/or 72(2)(c)(i), by operation of s 74 (Panlirn being the relevant person referred to in s 74(1)), the members of each smaller group became members of a single larger group, which included both Panlirn and Winlina. 1. For the period from 8 October 2011 to 15 May 2012, the Chief Commissioner contends that Winlina formed part of the same payroll tax group with Panlirn on the following grounds: 1. Mr Warren Soong, as sole shareholder of Panlirn, Winlina, Banfirn, Formforce, Lafari, Larsay, Powerform, Talmag and Yelturn, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(e) of the Payroll Tax Act; 2. Mrs Desley Soong, as sole director of Panlirn, Banfirn (until 1 May 2012), Norton, Lafari, Larsay, Ticaart, Yelturn, Ashworth, Ashworth (Vic), Parkwind and Wellnora, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(c)(i) of the Payroll Tax Act; 3. Mrs Desley Soong, as sole shareholder of Wyreach had a relevant "controlling interest" in the business carried on by that company: s 72(2)(e) of the Payroll Tax Act; 4. Mr Steven Soong, as sole director of Winlina, Fyna Nuform, Formforce, Wyreach, Powerform, SAS, Talmag and Fyna Constructions (Hire and Sales), had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(c)(i) of the Payroll Tax Act; 5. Mr Steven Soong, as sole shareholder of Fyna Nuform and SAS, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(e) of the Payroll Tax Act; and 6. because Panlirn formed a payroll tax group with Winlina, Banfirn, Fyna Nuform, Formforce, Wyreach, Norton, Lafari, Larsay, Powerform, SAS, Talmag, Ticaart, Yelturn, Fyna Constructions (Hire and Sales), Ashworth, Ashworth (Corp), Parkwind and Wellnora, on at least the bases of ss 72(2)(e) and/or 72(2)(c)(i), by operation of s 74 (Panlirn being the relevant person referred to in s 74(1)), the members of each smaller group became members of a single larger group, which included both Panlirn and Winlina. 1. For the period from 16 May 2012 to 17 July 2012, the Chief Commissioner contends that Winlina formed part of the same payroll tax group with Panlirn on the following grounds: 1. Mr Warren Soong, as a shareholder of Panlirn and sole shareholder of Winlina, Banfirn, Formforce, Lafari, Larsay, Powerform, Talmag and Yelturn, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(e) of the Payroll Tax Act; 2. Mrs Desley Soong, as sole director of Panlirn and Norton, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(c)(i) of the Payroll Tax Act; 3. Mrs Desley Soong, as a shareholder of Panlirn and sole shareholder of Wyreach, had a relevant "controlling interest" in the business carried on by that company: s 72(2)(e) of the Payroll Tax Act; 4. Mr Steven Soong, as sole director of Winlina, Fyna Nuform, Formforce, Wyreach, Lafari, Larsay, Powerform, SAS, Talmag and Fyna Constructions (Hire and Sales), had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(c)(i) of the Payroll Tax Act; 5. Mr Steven Soong, as sole shareholder of Fyna Nuform and SAS, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(e) of the Payroll Tax Act; 6. Mr Jim Soong, as sole director of Banfirn, Ticaart, Ashworth, Ashworth (Vic), Parkwind and Wellnora, had a relevant "controlling interest" in the businesses carried on by those companies: s 72(2)(c)(i) of the Payroll Tax Act; and 7. because Panlirn formed a payroll tax group with Winlina, Banfirn, Fyna Nuform, Formforce, Wyreach, Norton, Lafari, Larsay, Powerform, SAS, Talmag, Ticaart, Yelturn, Fyna Constructions (Hire and Sales), Ashworth, Ashworth (Vic), Parkwind and Wellnora on at least the bases of ss 72(2)(e) and/or 72(2)(c)(i), by operation of s 74 (Panlirn being the relevant person referred to in s 74(1)), the members of each smaller group become members of a single larger group, which included both Panlirn and Winlina. 1. The Chief Commissioner noted that, aside from the arguments regarding the geographical limitations on the application of the grouping provisions, Winlina and Mr Steven Soong do not dispute the Chief Commissioner's approach to grouping Winlina and Panlirn under Part 5 of the Payroll Tax Act. The Chief Commissioner also noted that Winlina does not challenge the decision to refuse to exclude Winlina from a group of which Panlirn was a member under s 79 of the Payroll Tax Act. 2. The Chief Commissioner submitted that, were the Court to conclude that the fundamental factual premise of Winlina's argument that it did not carry on business in NSW was not made out, it was unnecessary and undesirable to address the construction and constitutional issues raised by Winlina as they were predicated on a factual basis that did not arise here. 3. If the Court were to consider construction issues the Chief Commissioner submitted that: 1. the proper construction of the text of Part 5 of the Payroll Tax Act, considered in light of its context and purpose, requires the conclusion that no geographical limit be placed on its application, to the effect that group members must carry on a business in NSW; and 2. Part 5 of the Payroll Tax Act was within the constitutional competence of NSW. Legislative provisions 1. Section 3 of the Payroll Tax Act relevantly defines "employer": 3 Definitions employer means a person who pays or is liable to pay wages and includes: … (b) a person taken to be an employer by or under this Act, and … 1. Sections 6 and 7 of the Act impose an obligation to pay payroll tax as follows: 6 Imposition of payroll tax Payroll tax is imposed on all taxable wages. 7 Who is liable for payroll tax The employer by whom taxable wages are paid or payable is liable to pay payroll tax on the wages. 1. Division 2 of Part 2 deals with "Taxable wages". Section 10(1) states that, for the purposes of the Act, "taxable wages are wages that are taxable in this jurisdiction". Section 11(1) sets out the circumstances in which wages are "taxable in this jurisdiction" by reference to a series of criteria as follows: Division 2 Taxable wages 10 What are taxable wages (1) For the purposes of this Act, taxable wages are wages that are taxable in this jurisdiction. (2) However, exempt wages are not taxable wages. 11 Wages that are taxable in this jurisdiction (1) For the purposes of this Act, wages are taxable in this jurisdiction if: (a) the wages are paid or payable by an employer for or in relation to services performed by an employee wholly in this jurisdiction, or (b) the wages are paid or payable by an employer for or in relation to services performed by an employee in 2 or more Australian jurisdictions, or partly in one or more Australian jurisdictions and partly outside all Australian jurisdictions, and: (i) the employee is based in this jurisdiction, or (ii) the employer is based in this jurisdiction (in a case where the employee is not based in an Australian jurisdiction), or (iii) the wages are paid or payable in this jurisdiction (in a case where both the employee and the employer are not based in an Australian jurisdiction), or (iv) the wages are paid or payable for services performed mainly in this jurisdiction (in a case where both the employee and the employer are not based in an Australian jurisdiction and the wages are not paid or payable in an Australian jurisdiction), or (c) the wages are paid or payable by an employer for or in relation to services performed by an employee wholly outside all Australian jurisdictions and are paid or payable in this jurisdiction. 1. These sections appear in substantially identical form in the payroll tax legislation of all States and Territories in Australia: Payroll Tax Act 2011 (ACT), Pt 2, Div 2.2; Payroll Tax Act 2009 (NT), Pt 2, Div 2; Payroll Tax Act 1971 (Qld), Pt 2, Div 1; Payroll Tax Act 2009 (SA), Pt 2, Div 2; Payroll Tax Act 2008 (Tas), Pt 2, Div 2; Payroll Tax Act 2007 (Vic), Pt 2, Div 2; Pay-roll Tax Assessment Act 2002 (WA), Pt 2, Div 1. 2. Part 5 of the Payroll Tax Act relevantly provides: Part 5 Grouping of employers … Division 1 Interpretation 67 Definitions In this Part: business includes: (a) a profession or trade, and (b) any other activity carried on for fee, gain or reward, and (c) the activity of employing one or more persons who perform duties in connection with another business, and (d) the carrying on of a trust (including a dormant trust), and (e) the activity of holding any money or property used for or in connection with another business, whether carried on by 1 person or 2 or more persons together. group means a group constituted under this Part, but does not include any member of the group in respect of whom a determination under Division 4 is in force. 68 Grouping provisions to operate independently The fact that a person is not a member of a group constituted under a provision of this Part does not prevent that person from being a member of a group constituted under another provision of this Part. Division 2 Business groups … 72 Groups of commonly controlled businesses (1) If a person or set of persons has a controlling interest in each of 2 businesses, the persons who carry on those businesses constitute a group. Note. Section 79 (Exclusion of persons from groups) allows the Chief Commissioner, for payroll tax purposes, to exclude persons from a group constituted under this section in certain circumstances. (2) For the purposes of this section, a person or set of persons has a controlling interest in a business if: … (c) in the case of a business carried on by a corporation: (i) the person or each of the set of persons is a director of the corporation and the person or set of persons is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation, or … (e) in the case of a business carried on by a corporation that has a share capital—that person or set of persons can, directly or indirectly, exercise, control the exercise of, or substantially influence the exercise of, more than 50% of the voting power attached to the voting shares, or any class of voting shares, issued by the corporation, or … … 74 Smaller groups subsumed by larger groups (1) If a person is a member of 2 or more groups, the members of all the groups together constitute a group. … Division 4 Miscellaneous 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. … 81 Joint and several liability (1) If a member of a group fails to pay an amount that the member is required to pay under this Act in respect of any period, every member of the group is liable jointly and severally to pay that amount to the Chief Commissioner. (2) If 2 or more persons are jointly or severally liable to pay an amount under this section, the Chief Commissioner may recover the whole of the amount from them, or any of them, or any one of them. (3) If, under this section, 2 or more persons are jointly and severally liable to pay an amount that is payable by any one of them, each person is also jointly and severally liable to pay: (a) any amount payable to the Chief Commissioner under this or any other Act in relation to that amount, including any interest and penalty tax, and (b) any costs and expenses incurred in relation to the recovery of that amount that the Chief Commissioner is entitled to recover from any such person. (4) A person who pays an amount in accordance with the liability imposed by this section has such rights of contribution or indemnity from the other person or persons as are just. (5) This section applies whether or not the person was an employer during the relevant period. 1. Section 45 of the Taxation Administration Act provides: 45 Joint and several liability (1) If 2 or more persons are jointly and severally liable to pay an amount under a taxation law, the amount that is unpaid is a tax debt payable to the Chief Commissioner by each of them. (2) If under a taxation law two or more persons are jointly and severally liable to pay an amount of tax that is payable by any one of them, each person is also jointly and severally liable to pay any related charges, being: (a) any amount payable to the Chief Commissioner under a taxation law in relation to that amount, including any interest and penalty tax under Part 5, and (b) any costs and expenses incurred in relation to the recovery of that amount that the Chief Commissioner is entitled to recover from any such person. (2A) The Chief Commissioner may issue a notice of assessment of the liability of a person to pay any tax and related charges for which the person is jointly and severally liable with another person under a taxation law, even if a notice of assessment has already been issued to the other person. (3) A person who pays an amount of tax in accordance with the liability imposed by this section has such rights of contribution or indemnity from the other person or persons as are just. 1. Section 12(1) of the Interpretation Act provides: 12 References to New South Wales to be implied (1) In any Act or instrument: (a) a reference to an officer, office or statutory body is a reference to such an officer, office or statutory body in and for New South Wales, and (b) a reference to a locality, jurisdiction or other matter or thing is a reference to such a locality, jurisdiction or other matter or thing in and of New South Wales. … Consideration Carrying on business in NSW 1. The fundamental precondition to Winlina's case is that a "business" in Part 5 of the Payroll Tax Act is a "matter or thing" within the meaning of s 12 of the Interpretation Act and that those references to a "business" must be to a business "in and of" NSW. Winlina submits that this means that Part 5 of the Payroll Tax Act only applies to a business carried on in NSW. I will first address Winlina's case on the hypothesis that a "business" in ss 72(1) and 72(2) of the Payroll Tax Act must be understood to refer to a business "in and of" NSW. 2. Making that assumption about the construction of Part 5 of the Payroll Tax Act in Winlina's favour, I have concluded that Winlina carried on business in NSW throughout the relevant period. 3. The grouping provisions in Part 5 of the Payroll Tax Act are an anti-avoidance measure designed to protect the revenue. In Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue, in the context of the Pay-roll Tax Act 1971 (NSW) and the Taxation Administration Act (which at the relevant time contained the grouping machinery), the High Court said at [8]: "The "grouping" provisions were designed to counter tax avoidance through the splitting of business activities by the use of additional entities, each attracting a threshold." 1. In Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184, the Court of Appeal identified a further purpose of the grouping provisions in light of s 81 of the Act; namely to facilitate the collection of tax, by making non-employer group members jointly and severally liable for the payroll tax liabilities of employer group members in the event of a relevant default. In Smeaton Grange, Sackville JA (with whom Leeming and Gleeson JJA agreed) said at [25]: "One purpose of the grouping provisions is to prevent an employer avoiding payroll tax by splitting businesses into separate components so as to take advantage of multiple threshold amounts. A second purpose is to make each member of a group liable for payroll tax due by another member of the group." (Footnote omitted.) 1. By imposing joint and several liability on all members of a payroll tax group, s 81 of the Payroll Tax Act achieves an anti-tax avoidance purpose, namely to preclude a group of companies from shielding assets from taxation liabilities by placing those assets in the hands of group companies that have not incurred a primary obligation to pay payroll tax. In the present case, the wages which are the subject of the assessments are in respect of services performed by employees of Panlirn, a company that carried on business in NSW. The wages paid by Panlirn to its employees were "taxable in this jurisdiction", namely NSW, under s 11(1)(a) of the Payroll Tax Act and are not subject to payroll tax in any other State or Territory in Australia. Panlirn went into liquidation without paying the tax it was liable to pay and has been deregistered. But for its jurisdictional argument, Winlina accepts that it is a member of a payroll tax group with Panlirn and liable under s 81 of the Payroll Tax Act to pay the amount identified in the assessments. 2. Winlina's submission about identifying the geographic scope of where a company carries on business has too narrow a focus. It was submitted that what is absent from the evidence is any indication that Winlina has ever undertaken activities in NSW that: (a) constitute a commercial enterprise, being undertaken for the purpose of profit; and (b) are performed on a continuous and repetitive basis. Winlina relied for the test it propounded on s 67 of the Payroll Tax Act. That provision is a very broad and inclusive definition of a "business". To the extent that s 67 suggests any geographic limitation, it is a limited one. A "business" within the meaning of s 67 is much broader than the general law conception and may include a single activity such as "employing one or more persons who perform duties in connection with another business" or "holding any money or property" used for or in connection with another business. That rather suggests that the nature of any connection with NSW may be slight for that enterprise to be regarded as carrying on business in NSW. 3. A critical fallacy that pervaded Winlina's submission was to misunderstand the onus of proof. It was Winlina's burden to demonstrate that it did not carry on business in NSW. Repeated references in the submissions to points raised as crucial or problematic "for the Defendant's case" at best confused the issues and more generally failed to engage with what Winlina was required to prove. I accept that reliance by revenue authorities on the onus of proof provisions can be overdone in some cases, but this was not such a case. It was Winlina's obligation to prove that it did not carry on business in NSW. Winlina failed to do so. 4. Another fallacy that pervaded Winlina's written submissions is that a company can only carry on business in one State in Australia. That submission simply ignores the statutory language. Even when the language is construed in the way Winlina suggests it does not assist Winlina. Winlina's submissions seemed at various times to confuse the question of whether Winlina carried on business in Queensland with the critical question of whether Winlina carried on business in NSW. A company may be found to be carrying on business "in" a particular geographic area even though the bulk of its business is conducted elsewhere: Gebo Investments at [39]. 5. In Gebo Investments Barrett J addressed the question of whether a corporation, which was incorporated under the Offshore Companies Act 1990 (Malaysia) and was based in a designated "International Offshore Financial Centre" in Labuan, carried on business in Australia. His Honour said: "[38] I return to the general law concept of carrying on business. According to those concepts, carrying on of business generally involves conducting some form of commercial enterprise, systematically and regularly with a view to profit (see, for example, Hyde v Sullivan (1956) 56 SR (NSW) 113 at p.119), although, as a number of cases emphasise, there may be a finding that business is carried on even where some of the usual elements are missing. The following passage in the judgment of Gibbs J in Smith (on behalf of National Parks and Wildlife Service) v Capewell (1979) 142 CLR 509 is instructive: "The expression 'carry on business' in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts, and not simply the effecting of one solitary transaction. In Smith v Anderson (1880) 15 Ch D 247; [1874–80] All ER Rep 1121, where the Court of Appeal considered the effect of s 4 of the Companies Act 1862 (UK) which spoke of an 'association … formed … for the purpose of carrying on any … business', Brett LJ said, Ch D at 277–8; All ER Rep at 1130: 'The expression "carrying on" implies a repetition of acts, and excludes the case of an association formed for doing one particular act which is never to be repeated.' In Kirkwood v Gadd [1910] AC 422; [1908–10] All ER Rep 768 Lord Loreburn LC said (AC at 423): 'What is carrying on business? It imports a series or repetition of acts.' In the same case Lord Atkinson (at 431) referred with apparent approval to the statement of Brett LJ in Smith v Anderson. Similarly, in Premier Automatic Tickets Issuers Ltd FC of T (1933) 50 CLR 268 at 298, Dixon J, in a passage frequently quoted, said that 'the carrying on or carrying out of any profit-making undertaking or scheme' in a taxation statute, 'appears to cover, on the one hand, the habitual pursuit of a course of conduct, and, on the other, the carrying into execution of a plan or venture which does not involve repetition or system …'. The decision in Cornelius v Phillips [1918] AC 199; [1916–17] All ER Rep 685, is not authority for any different view of the meaning of the expression. It was there held that a money-lender had carried on the business of money-lending at an hotel which was not his registered address although he had effected only one transaction at the hotel. In that case, which was recently discussed and distinguished in Yango Pastoral Co Pty Ltd v First Chicago Aust Ltd (1978) 21 ALR 585; 53 ALJR 1, the single transaction which fell within the statutory prohibition was conducted by a person who was, on any view, carrying on a money-lending business. Similarly, in Lowe v Cant [1961] SASR 333, it was held that a milk vendor who had been allotted a zone under regulations governing the supply of milk and who, on one occasion, delivered milk to a householder in another zone, had carried on business as a retail vendor of milk within a zone other than that allotted to him. Again, there was no doubt that the milk vendor was carrying on business as such or that the isolated transaction which occurred outside his allotted zone was done in the course of carrying on that business. In these cases, although the defendant engaged in only one transaction of the kind proscribed, that transaction was done in the course of carrying on a business. A single transaction may amount to the carrying on of a business, although no other transaction has so far been effected, if it is proved that there was an intention to carry on a business and that the transaction was undertaken in pursuance of that intention: Fairway Estates Pty Ltd v F C of T (1970) 123 CLR 153 at 164-5. It seems clear that a solitary transaction of sale or purchase of skins in New South Wales will only constitute an offence against s 105(a) of the Act, if the sale or purchase has been made by the defendant with the intention that it shall be the first of several transactions in a business which he thereby commences to carry on, or if it has been made in the course of a business which the defendant is carrying on elsewhere." [39] As the very last part of that statement indicates, a company may be found to be carrying on business "in" a particular geographic area even though the bulk of its business is conducted elsewhere. Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 concerned a company that operated overland tours in which passengers were transported by bus and provided with food and camping accommodation purchased by the company in fulfilment of its contractual obligations to customers. The despatch of busloads of passengers through Western Australia and the undertaking of commercial transactions there in support of their transportation entailed the carrying on of business in Western Australia. And this was so even though none of the tours ever started or finished in Western Australia and it was rare for anyone to join a tour in Western Australia (and anyone who did so always left it outside Western Australia). It was held by majority (Gibbs, Stephen, Mason and Jacobs JJ, Barwick CJ dissenting) that this was sufficient to warrant a finding that the company carried on business in Western Australia, even allowing for the operation of statutory exceptions of the kind now found in s.21(3) of the Corporations Act. [40] Dunlop Pneumatic Tyre Co Ltd v Aktien-Gesellschaft Fur Motor Und Motorfahrzeugbau Vorm Cudell & Co [1902] 1 KB 342, concerned a German company which hired a stand at a trade fair in London for nine days and placed there an employee whose function it was "to explain the working of the articles exhibited, and to take orders for and press the sale of the defendants' goods". The employee was held to be "a person sent over by the defendant corporation as their representative to do for them in this country business of theirs, which, not being a concrete entity, they could not do for themselves like an ordinary individual, namely, the business of exhibiting and vending their wares at the show at the Crystal Palace". [41] In Actiesselskabet Dampskib "Hercules" v Grand Trunk Pacific Railway Company [1912] 1 KB 222, it was held that the activity of raising loans in London for use in the company's railway operations in Canada amounted to carrying on business in England. The rationale appears from the judgment of Buckley LJ (at p.228): "The cardinal factors are that the company does acts within the jurisdiction which are part of its business as a company, and does them at a fixed place within the jurisdiction. The raising of this loan capital is part of the company's business, and it is done here by a London committee constituted of the directors resident in England. They are the company's agents in this country for that purpose." 1. In Valve Corporation v Australian Competition and Consumer Commission (2017) 258 FCR 190; [2017] FCAFC 224 the Full Federal Court observed: "[149] Although Gebo Investments concerned different statutory provisions, we consider the discussion of principles regarding carrying on business generally to be of assistance for present purposes. We do not, however, see the reference to "human instrumentalities" in the last sentence of [33] as laying down an inflexible rule or condition as to the circumstances in which an overseas company may be taken to be carrying on business in Australia. We would instead place emphasis on the statement at [31] of Gebo Investments that the case law makes clear that the territorial concept of carrying on business involves acts within the relevant territory that amount to, or are ancillary to, transactions that make up or support the business. [150] Applying these principles in the present case, we do not consider any error to be shown in the primary judge's conclusion that Valve was carrying on business in Australia for the purposes of s 5(1)(g) of the Competition and Consumer Act. His Honour concluded that Valve carried on business in Australia for the following six reasons (at [199]-[204]): (a) Valve had many customers in Australia, with approximately 2.2 million Australian accounts. It earned significant revenue from Australian customers on an ongoing basis. (b) Steam content was "deposited" on Valve's three servers in Australia when requested by a subscriber. That content would stay on the Australian server if a subscriber requested it again in a particular period of time. (c) Valve had significant personal property and servers located in Australia which, at the time of acquisition, had a retail value of $1.2 million. Its Australian servers were initially configured by an employee who travelled to Australia. They were updated in 2013 by another employee who visited Australia. Valve paid invoices including, in one case $436,389, to an Australian company (Equinix) into its Australian bank account for equipment involving servers. (d) Valve incurred tens of thousands of dollars per month of expenses in Australia for rack space and power for its servers. Those expenses were paid by Valve to the Australian bank account of an Australian company (Equinix). (e) Valve relied on relationships with third party members of content delivery providers in Australia (such as Internode or ixaustralia) who provided proxy caching for Valve in Australia. (f) Valve had entered into contracts with third party service providers, including companies such as Highwinds, who provided content around the world, including in Australia. Valve was aware that Highwinds had servers in Australia and that it was sometimes more efficient for customers in Australia to be provided content from servers in Australia." 1. I conclude, on the basis of these authorities and analysis of the authorities contained therein, that for the purposes of Part 5 of the Payroll Tax Act (on the assumption that it refers only to a business carried on in NSW), a corporation will carry on business "in" NSW in circumstances where, at least: 1. the corporation has a place of business located within NSW; and 2. members of the corporation's management engaged in activity on behalf of the business are resident in NSW and performing tasks on behalf of the business in NSW. 1. It is clear that a company may be carrying on business "in" NSW even though it has no employees in NSW and pays no wages in NSW. 2. I reject the submission which pervaded Winlina's case, that "[j]ust because Mr Soong resides in NSW, and arguably himself 'carries on' business in NSW", does not mean that Winlina itself "carries on" business in NSW for the purposes of the Payroll Tax Act. Mr Steven Soong was the sole director of Winlina in the relevant period. His acts, on behalf of Winlina, were Winlina's acts. It was Winlina's burden to prove that Mr Soong did not perform acts on behalf of Winlina "in" NSW. Winlina did not even attempt to do so. 3. It will be recalled that at all relevant times Winlina's registered office and principal place of business were located in NSW. Winlina chose not to explain how that came about, and merely asserted in submissions that the registration in NSW was for "administrative purposes only". It was implied, although not proven, that the identification by Winlina of Winlina's principal place of business as being in NSW during the relevant period was a mistake. 4. The Corporations Act 2001 (Cth) deals with the requirements upon a corporation to notify its registered office and principal place of business. It is a strict liability offence to fail to notify ASIC of a change in the registered office and a further strict liability offence to fail to notify a change of a company's principal place of business. The applicable penalty for each offence is 60 penalty units: Corporations Act, Sch 3. [3] The Corporations Act provides: Part 2B.5 – Registered office and places of business 142 Registered office (1) A company must have a registered office in this jurisdiction. Communications and notices to the company may be addressed to its registered office. Note 1: A document may be served on a company by leaving it at, or posting it to, the company's registered office (see subsection 109X(1)). Note 2: Communications and notices from ASIC may also be addressed to the company's contact address (see section 146A). (2) A company must lodge notice of a change of address of its registered office with ASIC not later than 28 days after the date on which the change occurs. The notice must be in the prescribed form. Note: If the company is not to be the occupier of premises at the address of its new registered office, the notice must state that the occupier has consented to the address being specified in the notice and has not withdrawn that consent (see section 100). (2A) An offence based on subsection (1) or (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. (3) A notice of change of address takes effect from the later of: (a) the seventh day after the notice was lodged; or (b) a later day specified in the notice as the date from which the change is to take effect. … 146 Change of address of principal place of business (1) A company must lodge with ASIC notice of a change of the address of its principal place of business not later than 28 days after the date on which the change occurs. The notice must be in the prescribed form. (2) An offence based on subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. 1. Winlina chose not to explain in the voluminous evidence tendered in this case how it was that the Court could conclude that Winlina did not carry on business in NSW in the face of the clear admission by Winlina that the corporate regulator had been told, on pain of penalty, that Winlina's registered office and principal place of business were "in" NSW throughout the relevant period. As Winlina chose not to explain that matter in evidence, Winlina fails at the first hurdle in demonstrating that it did not carry on business "in" NSW. 2. I am, in any event, comfortably satisfied on the basis of all of the evidence that Winlina did carry on business in NSW throughout the relevant period. Throughout the period addressed by the assessments: 1. the directors and shareholders of Winlina were resident in NSW. Winlina's sole director, Mr Steven Soong, who was responsible for the day-to-day management of the company, was resident in NSW and conducted business on Winlina's behalf from NSW. Mr Warren Soong, the sole shareholder in Winlina (and in the deregistered Panlirn), resided in NSW. Winlina chose not to prove where the official acts of the company, such as general meetings, took place; 2. Winlina's operative trading bank accounts were held with bank branches located within NSW and the statements were sent to post office boxes also located in NSW. While the existence of a bank account in NSW, of itself, would not necessarily be sufficient to prove that Winlina carried on business "in" NSW, the only evidence of bank transactions on behalf of Winlina before me was that those transactions occurred "in" NSW. If financial transactions on behalf of Winlina were not conducted in NSW, Winlina failed to prove that matter. Further, s 67 of the Payroll Tax Act is expressed inclusively. Winlina carried on business in NSW by virtue of having its office and its bank accounts in NSW supporting its operations in Queensland; 3. Winlina engaged in a systematic and continuous course of dealings with Yelturn and Larsay, by which it provided administrative services to those companies for a fee, gain or reward. At all material times, Yelturn and Larsay were registered and trading in NSW, had their registered office and principal place of business in NSW and their directors and shareholders were resident in NSW. Despite proving that Yelturn and Larsay also carried on business in Queensland, Winlina failed to prove that its systematic and continuous course of dealings with Yelturn and Larsay did not take place "in" NSW; and 4. Winlina loaned monies to Fyna Nuform and Banfirn. I infer that the location of those debts was in NSW, as Fyna Nuform and Banfirn were both companies registered and trading in NSW. In any event, Winlina failed to prove that those debts with Yelturn and Larsay were not located "in" NSW. 1. Even on Winlina's construction of the Payroll Tax Act, during the relevant period Winlina carried on business "in" NSW. 2. That conclusion is sufficient to affirm the assessments and dismiss Winlina's summons. The proper construction of Part 5 of the Payroll Tax Act 1. If, contrary to my principal findings set out above, Winlina did not carry on business in NSW during the relevant period, it is then necessary to consider whether the relevant expressions in s 72 should be read subject to a geographical restriction to the effect that the relevant business must be carried on within NSW. 2. There is much to commend the Chief Commissioner's submission that as a state of facts does not exist which makes it necessary to decide such questions I should not do so. However given the history of litigation by members of this payroll tax group, [4] I will address this issue. 3. Section 72 of the Payroll Tax Act is the key provision. As noted above, it constitutes as a "group" the persons who carry on two "businesses", if the same person or group of persons has a "controlling interest" in both businesses. The other provisions of s 72 define the circumstances in which a person or persons have a "controlling interest" in a business. The consequence of a person being part of a "group" is, relevantly here, potential liability under s 81 for amounts payable by other members of the group. 4. In addressing this question of construction I propose to proceed on the basis that in Federal Commissioner of Taxation v Consolidated Media Holdings (2012) 250 CLR 503; [2012] HCA 55 at [39], the High Court, quoting Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47] (Hayne, Heydon, Crennan and Kiefel JJ), stated: "This Court has stated on many occasions that 'the task of statutory construction must begin with a consideration of the [statutory] text'. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself." (Footnote omitted.) 1. Although statutory construction must begin with a consideration of the text, the statutory text must be considered in its context, that context including legislative history and extrinsic materials. 2. The issue raised by Winlina is whether the class of "businesses" capable of engaging s 72(1) is geographically limited. The subject matter, scope and purpose of the Payroll Tax Act strongly suggest no such limitation. 3. Section 12(1)(b) of the Interpretation Act is the statutory manifestation of a common law presumption that statutes are prima facie read as being restricted in their operation within territorial limits. However, s 12(1)(b) only applies subject to any contrary intention in the relevant Act or instrument: Interpretation Act, s 5(2). The common law presumption is similarly rebutted when an intention to do so is clearly apparent from the object, subject matter or history of the relevant Act. 4. In the present case, the proper construction of the text of Part 5 of the Act, considered in light of its context and purpose, requires the conclusion that no geographical limit be placed on its application to the effect that group members must "carry on" a business "in" NSW. 5. Division 2 of Part 2 of the Payroll Tax Act contains its own comprehensive geographic limitation. Section 10 of the Payroll Tax Act provides that "taxable wages are wages that are taxable in this jurisdiction". Thus, by operation of Division 2 of Part 2 of the Payroll Tax Act and substantially similar provisions in other jurisdictions, [5] no employer or group member may be liable for payroll tax in more than one State or Territory in respect of the same wages. 6. Mr Hale SC accepted that the geographic limitation in s 12 of the Interpretation Act did not apply to Division 2 of Part 2 of the Payroll Tax Act: "HALE: … the implication under s 12 [of the Interpretation Act] in relation to these earlier provisions doesn't apply because of the quite specific way in which the regime is identified and, similarly, also in 11A, 11B and 11C …" 1. Part 5 of the Payroll Tax Act contains a further relevant limitation. A company which carries on its business independently of, and in a manner unconnected with, the carrying on of businesses by the other group members can apply to be excluded from the payroll tax group under s 79 of the Payroll Tax Act. It will be recalled that Winlina in the present case applied for exclusion under s 79. The Chief Commissioner refused Winlina's application and Winlina did not submit in this case that the Chief Commissioner erred in so concluding. The extravagant submissions made by Winlina about the potential reach of the grouping provisions must be considered in that context. The text of the Payroll Tax Act tends strongly against the construction of Part 5 proffered by Winlina. 2. I have concluded that Winlina's construction is also inconsistent with the anti-tax avoidance purpose of Part 5 of the Payroll Tax Act as explained in Tasty Chicks and Smeaton Grange. The suggested additional geographical limitations Winlina advances would be inconsistent with ensuring the collection of payroll tax from members of the group, simply because a group member is based in another State. The Payroll Tax Act could readily be avoided by establishing a related corporate entity outside NSW and ensuring that the assets of the NSW-based members of the group were vested in that entity. The entities with the primary obligation to pay payroll tax would be allowed, as were the entities with the primary obligation to pay payroll tax here, to be wound up in insolvency, not having met their payroll tax obligations, and deregistered. 3. Neither the text nor context of the Payroll Tax Act supports Winlina's construction of Part 5. Winlina's constitutional argument 1. Section 5 of the Constitution Act 1902 (NSW) provides: 5 General legislative powers The Legislature shall, subject to the provisions of the Commonwealth of Australia Constitution Act, have power to make laws for the peace, welfare, and good government of New South Wales in all cases whatsoever: Provided that all Bills for appropriating any part of the public revenue, or for imposing any new rate, tax or impost, shall originate in the Legislative Assembly. 1. Section 2 of the Australia Act 1986 (Cth) provides: 2 Legislative powers of Parliaments of States (1) It is hereby declared and enacted that the legislative powers of the Parliament of each State include full power to make laws for the peace, order and good government of that State that have extra‑territorial operation. (2) It is hereby further declared and enacted that the legislative powers of the Parliament of each State include all legislative powers that the Parliament of the United Kingdom might have exercised before the commencement of this Act for the peace, order and good government of that State but nothing in this subsection confers on a State any capacity that the State did not have immediately before the commencement of this Act to engage in relations with countries outside Australia. 1. For a law to be "for the peace, welfare, and good government of New South Wales", there must be a connection between the persons or circumstances upon which the legislation operates and the State. The history of the connection required and its relationship with the Australia Act is explained by Professor Twomey in her classic text, The Constitution of New South Wales (2004, Federation Press). At pages 53 to 54 of Professor Twomey's text there is a discussion of the historical position and the older cases. At page 55, Professor Twomey explains that the rationale for the test and its manner of application have been reassessed in recent years and refers to Pearce v Florenca (1976) 135 CLR 507 at 518; [1976] HCA 26 where Gibbs J at 519 noted: "The principle that legislation enacted by a State and operating outside its territory must be connected in some relevant way with the State if it is to be valid may have been appropriate to the so-called dependent and inferior legislatures of colonial times, but its only modern justification is that it may avoid conflicts with other rules of law applicable to the area in which the legislation is intended to operate." After explaining the decision of the High Court in Mobil Oil Australia Pty Ltd v State of Victoria (2002) 211 CLR 1; [2002] HCA 27 Professor Twomey addresses the Australia Act, and at page 56 concludes: "Section 2 of the Australia Act may do no more than recognise the position existing before its enactment." 1. In the present case, I have already determined (on the contingent hypothesis that Winlina's construction of the Payroll Tax Act is correct) that Winlina was carrying on a business in NSW. That conclusion provides a sufficient basis to dismiss Winlina's case. To address Winlina's constitutional argument I would need to assume that different facts applied. It is undesirable to address the constitutional validity of a law when the facts necessary to address such an argument have not been proved. This is all the more so in circumstances where the grouping provisions of the Payroll Tax Act are part of a national scheme and any conclusion I reach may have an effect on those provisions. Orders 1. For the foregoing reasons the orders of the Court are: 1. Summons dismissed. 2. Plaintiffs to pay the costs of the defendant as agreed or assessed. ********** Endnotes 1. Pages 190-194, 201-206, 207-211, 254-257, 261-265, 277-306, 327-328 and 822-823 of Exhibit A are correspondence between the parties. Those documents were read, subject to a limitation order made under s 136 of the Evidence Act, that they not be received as to the truth of the assertions in that correspondence, but only as evidence that the assertions were made and the correspondence passed between the parties. 2. From 3 October 2017 Mrs Desley Soong, the mother of Steven and Warren Soong, was the sole director of Winlina and was a resident of NSW. 3. "Penalty unit" means the amount of $210 subject to indexation: Crimes Act 1914 (Cth), s 4AA. 4. See Fyna Projects Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 1220 (Leeming JA dismissing the proceedings); [2018] NSWCA 331 (Court of Appeal dismissing the appeal); [2019] HCASL 181 (High Court dismissing the special leave application). 5. See [61] above. 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: 28 August 2019