Aymsheen Pty Ltd v Chief Commissioner of State Revenue

[2023] NSWSC 1237

Supreme Court

New South Wales

Medium Neutral Citation:

Aymsheen Pty Ltd v Chief Commissioner of State Revenue [2023] NSWSC 1237

Hearing dates:

5 October 2023

Date of orders:

5 October 2023

Decision date:

05 October 2023

Jurisdiction:

Equity - Revenue List

Before:

Richmond J

Decision:

Plaintiff’s motion dismissed.

Catchwords:

CIVIL PROCEDURE — separate determination of questions — where appropriate — constitutional validity of imposition of payroll tax

Legislation Cited:

Civil Procedure Act2005 (NSW)

Commonwealth Constitution

Payroll Tax Act 2007 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

AinsworthvCriminal Justice Commission (1992) 175 CLR 564; [1992] HCA 10

HavNew South Wales (1997) 189 CLR 465 at 490; [1997] HCA 34

LambertvWeichelt (1954) 28 ALJ 282

Mineralogy Pty LtdvWestern Australia (2021) 274 CLR 219; [2021] HCA 30

SouthwellvBennett [2010] NSWSC 1372

Western Australia v Chamberlain Industries Pty Ltd (1970) 121 CLR 1; [1970] HCA 5

Category:

Procedural rulings

Parties:

Aymsheen Pty Ltd (Plaintiff)
Chief Commissioner of State Revenue (Defendant)

Representation:

Counsel:
R Seiden SC and W R Johnson (Plaintiff)
Z Heger (Defendant)

Solicitors:
Johnson Winter Slattery (Plaintiff)
Crown Solicitors Office (Defendant)

File Number(s):

2023/116760

Publication restriction:

Nil

JUDGMENT — Ex Tempore (Revised)

1. Before the Court is the Plaintiff's notice of motion for the determination, as a separate question, under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), of the question whether the imposition of payroll tax through s 6 and Pt 8 of the Payroll Tax Act 2007 (NSW) (Act) on the payments made by the Plaintiff to Fleet Owners (as defined in the Plaintiff's Appeal Statement at [4]) in the relevant period is a duty of excise and therefore invalid under s 90 of the Commonwealth Constitution.

2. The Plaintiff does not say that s 6 and Pt 8 are in all circumstances a duty of excise.  Rather it says that the payroll tax imposed by the Act through s 6 and Pt 8 on the amounts paid by the Plaintiff to the Fleet Owners for the haulage of goods in the relevant period is an excise because it is a tax on the distribution of goods: see the Plaintiff's Appeal Statement at [8(a)] and [37(a)].

3. That argument relies on what was said in Western Australia v Chamberlain Industries Pty Ltd (1970) 121 CLR 1 at 14­–15; [1970] HCA 5, where Barwick CJ rejected the argument that a tax imposed by a statute of a State will not be struck down by s 90 unless the tax is in all circumstances to which it is intended to apply a duty of excise. Barwick CJ said (at 14) that the true question is: "whether tax as it is, and in the circumstances in which it is, imposed by the Act is a duty of excise: it is not a question as to the nature of the Act which imposes the tax."

4. The constitutional issue raised by the Plaintiff's Appeal Statement at [8(a)] and [37(a)] is whether the payroll tax imposed by s 6 of the Act, read with Pt 8, on the amounts the Plaintiff paid to Fleet Owners for the haulage of goods is an excise. I have no difficulty with accepting that this is a correct statement of the constitutional issue which arises. However, there is a difficulty accepting that it is an appropriate question for determination as a threshold question, which is the effect of treating it as a separate question under UCPR r 28.2. This is because, as it is expressed, it is a hypothetical question until the question of whether the Act does impose payroll tax on payments by the Plaintiff to Fleet Owners has been determined. The Court steers away from determining hypothetical questions: see for example Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582; [1992] HCA 10. That was a case regarding the question whether a declaration should be made, and the plurality said that declarations are not made in respect of hypothetical questions. The relief sought in the present case in relation to the constitutional issue is also declaratory relief.

5. This is part of the explanation for the prudential approach taken to constitutional questions referred to by the High Court in Mineralogy Pty Ltd v Western Australia (2021) 274 CLR 219; [2021] HCA 30 at [56]–[60], a case relied upon by the Defendant, where the High Court emphasised that constitutional questions should not be decided unless “there exists a state of facts which makes it necessary to decide the question in order to do justice in the given case and to determine the rights of the parties”: see [56] referring to Lambert v Weichelt (1954) 28 ALJ 282 at 283.

6. Put another way, the constitutional issue identified in the Plaintiff's Appeal Statement at [8(a)] and [37(a)] cannot be answered without first dealing with the question whether the Act in fact imposes tax on the relevant payments made by the Plaintiff.

7. It seems to me that this problem cannot be solved by reframing the constitutional issue in the way that the Plaintiff does in the notice of motion and its written submissions at [1] as being whether the payroll tax levied by the Defendant under the Act in respect of the relevant period on amounts the Plaintiff paid to Fleet Owners for the haulage of goods is an excise.  Going back to what Barwick CJ said in Chamberlain Industries, the question for the Court on the constitutional issue is whether the tax as it is, and in the circumstances in which it is, imposed by the Act is a duty of excise.  Until the Court determines whether the tax is imposed by the Act and why, the constitutional question simply does not arise.

8. It seems to me that this is a strong reason why an order under r 28.2 should not be made and indeed is an insuperable problem with such an order. However, in case I am wrong in that view I have also considered carefully the applicable principles for whether such an order should be made which were summarised in Southwell v Bennett [2010] NSWSC 1372 at [15], which the parties agree sets out the relevant factors to be taken into account. It is recognised in the cases which have dealt with this issue that in a particular case there may be some of these factors pointing in one direction and others pointing in the other, so that a balancing exercise is involved, bearing in mind in particular the overriding purpose of s 56 of the Civil Procedure Act2005 (NSW) which is the just, quick and cheap resolution of the real issues in the proceedings.

9. Here there are some factors which might favour a separate question, assuming I am wrong on the hypothetical question point, such as the potential saving in cost.  I appreciate the importance to the parties of avoiding costs in litigation where they can be avoided, given the evidence here as to what those costs are likely to be.  However, there are two factors mentioned in the list in Southwell which weigh, in my view, heavily against ordering a separate question here, which are the potential overlapping of the evidence (factors (h) and (o)) and delay (factor (j)).

10. On the question of overlap, the constitutional issue, however it is framed, will require evidence regarding the businesses of BIND and BSG and the way that the Plaintiff and the Fleet Owners interact with those businesses in the distribution of the relevant goods.  This is because ultimately the constitutional issue is whether the payroll tax here is a tax on goods, ie a tax on a step in the production or distribution of the goods to the point of receipt by the consumer: see Ha v New South Wales (1997) 189 CLR 465 at 490; [1997] HCA 34. That evidence will overlap with the evidence relevant to the application of Pt 8 of the Act. I do not think it is possible at this early stage to say how significant that overlap will be, but it raises the real prospect of inconsistent factual findings if the constitutional issue is dealt with separately.

11. Second, in relation to factor (j) it must be possible to clearly see that the separate question will facilitate the quicker and cheaper resolution of the proceedings. If the separate question is determined in favour of the Plaintiff the Defendant can be expected to appeal, so at least one further hearing will be required, and perhaps two if the matter goes to the High Court.  If, on the other hand, the separate question is determined against the Plaintiff, and given the concession made by the Plaintiff, the matter would come back for a trial of the other issues. This presents potential for multiplicity of proceedings, and I do not think it can be said to be clear that the determination of the separate question would facilitate the quicker and cheaper resolution of the proceedings.

12. So, for all these reasons I decline to make an order for the separate determination of the constitutional issue under r 28.2. My preliminary view is that the costs of the motion should be costs in the cause, but I will hear the parties on that question if they wish.

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Decision last updated: 18 October 2023