Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd

[2021] HCATrans 14

[2021] HCATrans 014

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S134 of 2020

B e t w e e n -

CHIEF COMMISSIONER OF STATE REVENUE ABN 81 913 830 179

Applicant

and

DOWNER EDI ENGINEERING PTY LIMITED ABN 66 057 593 503

Respondent

Application for special leave to appeal

GAGELER J
GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 11 FEBRUARY 2021, AT 10.55 AM

Copyright in the High Court of Australia

MS R.L. SEIDEN, SC:   May it please the Court, I appear with my learned friend, MS D.A. WOODS, for the applicant, the Chief Commissioner.  (instructed by Crown Solicitor’s Office (NSW))

MR N.J. YOUNG, QC:   If your Honours please, I appear with MS C.A. BURNETT, SC for the respondent.  (instructed by Ashurst Australia)

GAGELER J:   Ms Seiden.

MS SEIDEN:   Thank you, your Honour.  I think, formally, we still need to seek leave to file the application.  It was filed late.  There was an affidavit – at page ‑ ‑ ‑

GAGELER J:   Is that opposed, Mr Young?

MR YOUNG:   No, your Honour.

GAGELER J:   You can proceed.

MS SEIDEN:   May it please the Court.  Your Honours, we are here concerned with provisions of the Payroll Tax Act (NSW) in relation to payments for the performance of the work under contract and it is uncontentious that those provisions - and we are particularly concerned with two exemptions to those provisions - appear in similar terms in every State other than in Western Australia.

At the heart of the matter, is there meaning to be ascribed to the words “supply of goods” in section 32 - the actual legislation is at application book page 90 - we are particularly concerned with section 32(2)(a), the exemption for services that are:

ancillary to the supply of goods –

and (d) which is on page 91:

services ancillary to the conveyance of goods by means of a vehicle –

The context in which the provisions arise for consideration ‑ ‑ ‑

GAGELER J:   You can take it that we are generally familiar with the facts.

MS SEIDEN:   Indeed.  If I could simply raise that whilst it was a contract to deliver and install in circumstances where the owner of the goods, Foxtel, maintained title, it is submitted that nevertheless it has broader application to circumstances whenever there is a delivery of goods on behalf of someone other than – on behalf of someone else.

GORDON J:   Can I ask you, on application book 127, Chief Justice Bathurst in effect proposes that the question of construction in order to determine whether you are within these exemptions may be addressed by five questions.

MS SEIDEN:   Yes.

GORDON J:   Do you take issue with that splitting up of the analysis?

MS SEIDEN:   No, your Honour. 

GORDON J:   Right.  Which aspect do you complain about?

MS SEIDEN:   The meaning of the “supply of goods” ‑ ‑ ‑ 

GORDON J:   So question (ii)?

MS SEIDEN:   Indeed, and then having identified what the supply of goods is, whether that was by the subcontractor, which is (iii), and under the subcontract.  If I could start with - the learned primary judge held that the supply of goods was the mere delivery of the goods, so in context of that decision there could be no question that the delivery, if that was the supply of goods, was by the subcontractor under the contract.  The applicant had maintained from the start that the mere delivery of goods would not have been sufficient to constitute a supply under the Act because if really all we are talking about is a mere delivery ‑ ‑ ‑ 

EDELMAN J:   Australia Post would be a supplier of everything.

MS SEIDEN:   Indeed, and there would in fact be no work for the subsection (d), “conveyance by vehicle”, to do.  The Court of Appeal then gave the word “supply” a different meaning which was the transfer of the right to possession and it is in that circumstance ‑ ‑ ‑ 

GORDON J:   A bailment.

MS SEIDEN:   Indeed, and it is in that circumstance, your Honour, that subparagraphs (iii) and (iv) of the questions set out at paragraph 114 really became enlivened because, whilst it was plain that the subcontractor delivered the goods, in circumstances where the Court of Appeal found that the bailment of the subcontractor determined on installation, it simply could not be the case that the supply of the transfer of the right to possession was also by the subcontractor under the contract. 

Their Honours - there is some dispute between the parties as to what the Court of Appeal actually found the supply to be.  Our learned friends maintain that there is, in this case, the distinction between the right to possession and the passing lawfully of possession is a distinction without a difference, and maintain that the Court of Appeal found that the supply was the mere delivery.  However, at application book ‑ ‑ ‑ 

EDELMAN J:   There is no dispute, is there, that the title to the set‑top box and card was transferred from Foxtel to the customer?  Is that common ground?

MS SEIDEN:   Not title, with respect, your Honour, but the right to possession.  The contract between the customer and Foxtel was not in evidence.  There was a work order form in evidence which is referred to at paragraph 124 that identified that the customer accepted the goods and accepted Foxtel’s terms and conditions.

If one pairs that with the finding that the subcontractor’s bailment, determined on installation, this is not a situation where there could be a chain of bailments and it is simply the case that if the supply is the transfer of the rights to possession, that is simply not something that is within the subcontractor’s gift.  It is not within his remit.  It is not within his power.  His rights to that box, the set‑top box or the consignment equipment, ended.

GAGELER J:   Acting within the terms of his contract with Downer, the subcontractor performed an act which resulted in his bailment being determined and the customer becoming a bailee of the same goods.

MS SEIDEN:   Your Honour, we would say there is an extra step and that was that the customer consented to or accepted the goods.

GAGELER J:   Yes.

MS SEIDEN:   And that was critical, and that with that additional fact or factor, it could not be said that the supply, the transfer of the right to possession, was by the subcontractor.

GORDON J:   Why not?

MS SEIDEN:   For the reason, your Honour, that it was something that happened – if it had been a chain of bailments, that might have been different.  However, the rights arise between Foxtel and the customer on the customer ‑ ‑ ‑

GORDON J:   Is that not just compartmentalising particular facts without looking at the chronology of all of them?  As Justice Gageler put to you, the subcontractor holds the goods as bailee.  He then transfers them over to the customer, having arranged, as I understand the facts – tell me if I have them wrong – for the customer to sign the contract between the customer and Foxtel.  He is the person who delivers the goods, his bailment ceases and bailment of the customer takes hold.  Am I not right?

MS SEIDEN:   With respect, we would accept your Honour’s chronology.  However, we again cavil with the proposition that the bailment of the customer somehow arises because of what the subcontractor has done.  He has delivered the goods, but his right, title - interest in the goods ends and then a new relationship springs up between the customer and Foxtel.

EDELMAN J:   But the relationship between the customer and Foxtel has nothing to do with Downer.

MS SEIDEN:   Indeed, your Honour.

EDELMAN J:   As I understand, that is a relationship of hire, is it not?

MS SEIDEN:   Indeed, your Honour, and we would say that precisely is the point that the applicant really focuses on.

EDELMAN J:   Your submission really comes down to the fact that there cannot be two suppliers.

MS SEIDEN:   That is certainly ‑ ‑ ‑

EDELMAN J:   You say Foxtel is a supplier because there is a hire between Foxtel and the customer.

MS SEIDEN:   Indeed.

EDELMAN J:   But you say that there cannot be a second supplier by an intermediary bailee.

MS SEIDEN:   Indeed.  On the facts, having regard to the way that the bailment of the subcontractor was determined, there was not a chain of bailments and it is hardly surprising.  In any delivery, one would not expect the person doing the delivery to remain on risk for the goods.  So one would not have a cascading chain of bailments.  There was no evidence, your Honour, as to that exact arrangement between Foxtel and the customer.

GORDON J:   Well, 117 at application book 128, they have set out, in a sense, what they infer, as I understand:

not in evidence.  However, it is evident from –

and they make some findings as to the relationships.

MS SEIDEN:   Indeed, your Honour, and we say that really accords with what would happen normally in a case of delivery, that the person who is delivering the goods does not stay on risk for the goods for the term of the customer’s hire, and that really breaks the chain between what the subcontractor has done and what the customer is supplied with.  There is no doubt that the subcontractor delivered, and that then would come to be looked at under the exemption for conveyance, but the supply, that is, the right to possession, was supplied by Foxtel, not by the subcontractor or Downer.

EDELMAN J:   Is your case really that in relation to the set‑top box and the card, Downer is in no different position from a courier or Australia Post or a postal delivery person?

MS SEIDEN:   Precisely, your Honour, precisely.  If that is not the case, then again we are back to the situation where there is nothing for a conveyance provision to do because if one starts with the proposition that the supply of the right to possession is effectuated by the mere delivery, again, it is just a conveyance, it is just a delivery and again it ‑ ‑ ‑ 

GORDON J:   Well, it is not just a delivery, here, though, is it?  That is the problem.  It is delivery with certain contractual and other arrangements attached to it and that is the basis upon which it may be possible to distinguish it.

MS SEIDEN:   Well, your Honour, we rely very firmly on the finding which is set out at 124 at application book 130, and the references by the Court of Appeal to the sub‑bailment lasting until installation, I think, and the clause 10, which was in evidence, is at application book 104.  So at clause 10.1.5:

The Subcontractor agrees and acknowledges that it is a bailee and its personnel are sub‑bailees, of the Contractor, regarding Consignment Equipment and, accordingly, the Subcontractor and its personnel owe the Contractor a duty of care from the time:

(a)the Subcontractor takes possession of the Consignment Equipment until that Consignment Equipment is installed; and -

then, again, if they have to pick it up.  But that squarely identifies that, so far as the subcontractor is concerned, his rights are determined and he cannot somehow pass them to the customer.  We say that that would be the ordinary course of a delivery where somebody is delivering something that is not theirs.

EDELMAN J:   Do you accept that there will be some circumstances in which a bailee, properly so‑called, can supply goods to a customer and fall within the provision?

MS SEIDEN:   We do, your Honour.

EDELMAN J:   So is this not then just a case where you need to assess on the particular facts whether or not Downer is in the position of that type of bailee or whether it is in the position of a courier or a postal service where the only real supply is between the hirer and the hiree?

MS SEIDEN:   Your Honour, with respect, two matters that arise.  The first is that in this case the reason that their Honours found that the supply was by the subcontractor under the subcontract is just because of the physical delivery.  So then again, whether we are in the chain or bailments or discrete bailments arising, the problem ‑ ‑ ‑

GORDON J:   Is that right?  The way I read it is it is not just the physical delivery, it is terms and conditions of, in effect, the chronology you went through.

MS SEIDEN:   It was the delivery and the installation, your Honour.  However, whether that extra installation occurred, as I apprehend it, the distinction that was being put was when one has effectively a chain of bailments as opposed to two discrete – the first bailment which is determined and a second one springing up, and that might arise whether one is installing or not.  So we really see the critical distinction is whether there is a chain of bailments, but we say the reason that it is a suitable vehicle for special leave is because on the way that the court analysed the supply – if I take your Honours to 124 – or if I start with paragraph 119 at application book 129, their Honours identified that supply which the applicants say is supply of the right to possession was:

by the subcontractor.  Up to the time that the goods were installed the subcontractor was a sub‑bailee –

So up until that time of the consignment:

and in fulfilment of his or her contractual obligations –

which your Honour Justice Gordon has put to me:

lawfully passed possession –

In other words, in fulfilment of the contractual obligations they delivered on behalf of Foxtel.  So it is submitted that the Court of Appeal very much had in mind the delivery as the reason why the supply occurred, or the delivery was the mechanism which effectuated the supply and they say in that sense there was a supply by the subcontractor.

GAGELER J:   You say that is in error, do you?

MS SEIDEN:   Indeed.

GAGELER J:   Legally in error?

MS SEIDEN:   Indeed.  At 124 your Honours will see a similar analysis for how the supply is under, so:

In the present case, the subcontractor had a contractual obligation to deliver the Consignment Equipment which he or she held as sub‑bailee and the other equipment . . . The supply -

That is, the supply of the right to possession:

occurred in fulfilment of that contractual obligation –

In other words, the supply of the right to possession occurred in fulfilment of the delivery obligation, so we say that there is again synonymising of the right to possession with the delivery, and again we are in the situation that even though the Court of Appeal identified that one needed to give the word “supply” something extra from the mere delivery, the way that their Honours then said, well, how did that supply happen, it happened by the subcontractor under the subcontract because of the delivery.

GORDON J:   How else could it have been delivered?  How else could it have been supplied – other than on that analysis?  What is the alternative?

MS SEIDEN:   We say it was supplied when the customer consented to and accepted possession.  So, the bailment between the customer and Foxtel arose at that point but not because of anything that the subcontractor did.  If the distinction is so narrow that it all turns on delivery, then we are still, effectively, back in the same position we were before the learned primary judge and there is no difference between somebody who delivers goods and

somebody who conveys goods.  Then we are back to having no work for (a) and (d), your Honour.

Your Honours, as to the other points, we rely, in particular, on the disquiet expressed by the Chief Justice in relation to the alternative case – whether it was just a conveyance of goods – whether those installation services were ancillary to that.  That is at paragraph 140, at application book 135. 

Your Honours, even though there may be circumstances where there might be different – factual circumstances arising, because this is such an everyday occurrence it is submitted that the matter has wide implication and, on the analysis of the Court of Appeal, how the supply came to be, we say, is an important thing.  It is particularly important in the distinction between paragraphs (a) and (d) – and particularly important who the supply is by.  Your Honours, I note the time.  They are the submissions of the applicant.

GAGELER J:   Thank you.  Mr Young, we do not need to hear from you.

In our opinion, an appeal would have insufficient prospects of success to warrant the grant of special leave.  Special leave to appeal is refused with costs.

AT 11.16 AM THE MATTER WAS CONCLUDED