Chief Commissioner of State Revenue v Telstra Corporation Limited

[2007] HCATrans 314

[2007] HCATrans 314

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S37 of 2007

B e t w e e n -

CHIEF COMMISSIONER OF STATE REVENUE

Applicant

and

TELSTRA CORPORATION LIMITED

Respondent

Application for special leave to appeal

GUMMOW J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 15 JUNE 2007, AT 4.03 PM

Copyright in the High Court of Australia

MR J.E. GRIFFITHS, SC:   I appear with MR H.R. SORENSEN, if the Court pleases.  (instructed by Crown Solicitor’s Office – Sydney)

MR M. RICHMOND:   If the Court pleases, I appear for the respondent.  (instructed by Mallesons Stephen Jaques)

GUMMOW J:   Yes, Mr Griffiths.

MR GRIFFITHS:   Thank you, your Honour.  Your Honours, the special leave questions relate to the proper construction of an exclusion provision in the Duties Act (NSW) concerning hire of goods. In our submission, a common thread linking the questions is whether the Court of Appeal and the majority of the appeal panel gave proper effect to the word “solely” in construing and applying the exclusion provision.

GUMMOW J:   Can we just see the provision itself?  Could you just take us to the Act, which we have, the Duties Act?

MR GRIFFITHS:   Yes.  The Court has our authorities.  The Duties Act appears first in those materials.  If your Honours go to section 186(1)(f) your Honours see the exclusion provision.  It is:

an arrangement for the use of goods the provision of which is incidental and ancillary to the provision of a service if the provision of the goods is solely to enable the contractual provision of the service.

Your Honours, it is convenient for me just to observe that there was no issue at any stage in the proceedings that the use of the goods was incidental and ancillary to the provision of a service.  The issue in dispute relates to the second part of the exclusion, namely, whether or not:

the provision of the goods is solely to enable the contractual provision of the service.

Your Honours might also care to note while you have section 186 open, paragraph (d), another exclusion referring to:

arrangement for the provision of goods to a trader –

where express reference your Honours see is made to:

for the purpose of displaying or demonstrating the goods –

So the word “purpose” appears expressly in that paragraph and is not explicit in (f).  Your Honours might also note because of the emphasis that we place upon the need to give effect to the term “solely”, that in section 181, turning back two pages in the materials, subsection (1) it is provided that:

This Chapter applies to the hire of goods and to a person who hires out goods only if the goods are used solely or predominantly –

So we have, if you like, a softer test of not just “solely” as we see in (f) but “solely or predominantly” and indeed that collocation, “solely or predominantly” also appears in section 193 of the Act.

Your Honours will have appreciated from reading our summary of argument that there are three other jurisdictions which have or, have until recently had, an exclusion in their revenue legislation in identical terms to paragraph (f), which is the provision which we say has been misconstrued.  Those jurisdictions are Western Australia, Victoria and the ACT.  But, as we also indicate in our summary of argument, the relevant exclusion provision was abolished in Western Australia and Victoria, effective 1 January this year and it will expire in New South Wales and the ACT in two weeks time.

The question immediately arises, why then, in those circumstances, would the Court grant special leave, a matter which I will turn to immediately before returning to address the grounds for appeal on the special leave questions themselves.

The reason why we say special leave is appropriate is, first, because of the amount of revenue involved.  It is not insignificant.  If the Court of Appeal’s decision stands, Telstra will be entitled to a refund in New South Wales alone of a figure which is estimated to be almost $5 million.

The second reason is that the proper construction of the exclusion provision has implications for other jurisdictions, the three that I have just mentioned, in addition to New South Wales, where Telstra has also presumably paid the duty on rented handsets and, in this context, we would draw to the Court’s attention the fact that even with the provisions having expired in Victoria and Western Australia and are about to expire in New South Wales and the ACT, under the legislation reassessment for such duty can occur for a further three to five years, depending upon the particular jurisdiction, so it is not as though the matter will be rendered academic, insofar as this State is concerned, in two weeks time.  There will be a five‑year period within which reassessments can occur.

Thirdly, we say that the proper construction of the exclusion provision, your Honours, has potential relevance to other hire goods arrangements in New South Wales involving at least two financial institutions.  Those matters are the subject of an affidavit from Mr Emmerik which is at pages 118 and 199 of the application book.

We would make two observations.  The first is that the financial institutions in question are national operators, so again it is likely that the issues will have application or relevance beyond this State.  We should indicate to the Court, however, that the good in question in those other two matters is not telephone handsets but is another good and we should also indicate to the Court that in those other two instances there is no question of any universal service obligation or statutory obligation applying which is one of the features of the Telstra litigation.

Before I turn to address the special leave questions, your Honour, can I make two important points by way of emphasis because they bear upon the central question of construction of the exclusion provision and the application of the key phrase “solely to enable the contractual provision of the service”.

In particular, the points I wish to make highlight the importance in that phrase of the word “solely” and the need to give it meaning and effect.  The first point is this.  It has been common ground at all times that Telstra was statutorily obliged as part of its universal service obligations to provide upon request both a voice telephony carriage service and a standard telephone handset.  The relevant material dealing with that uncontroversial point is set out in the statement of agreed facts which your Honours find in the application book at page 86, lines 25 and following.

Your Honours see there under the heading “Statutory Obligation to Provide a Handset on request” an agreed statement of the regulatory framework within which that statutory obligation arises.  The meaning of terms such as “universal service provider”, “standard telephone service” and the obligation to provide a telephone handset as an aspect of supplying a standard telephone service are set out in the Telecommunications (Consumer Protection and Service Standards) Act 1999, sections 6, 9 and 9E respectively.

The relevant provisions, your Honours, will find most conveniently set out in Justice Hodgson’s judgment in the Court of Appeal starting at page 82 of the application book with section 6 and the definition of “Standard telephone service”, the standard telephone service of course being the “carriage service” which is to be contrasted with the goods which are of course the telephone handset which your Honours see referred to in section 9E on page 84 of the application book where the provision, in effect, provides that for the purposes of the Part:

the supply of a standard telephone service includes a reference to the supply of –

and paragraph (b)(i) is the relevant provision, your Honours:

a telephone handset that does not have switching functions –

So although a telephone handset is not within the definition of “standard telephone service” itself, it is picked up under section 9E as being contained within the notion of “the supply of a standard telephone service”.

The difficulty, as a matter of law, we would respectfully submit, with the Court of Appeal’s decision, of concluding that for the purposes of the exclusion provision in paragraph (f) that Telstra’s provision of the handset was “solely to enable the contractual provision of the service”, the service being the voice telephony carriage service, is how that conclusion could be reached affirmatively in circumstances where Telstra was under a statutory obligation to provide the handset upon request.  In those circumstances we respectfully submit that the provision was misconstrued and proper effect was not given to the word “solely”.

GUMMOW J:   I do not quite understand that.

MR GRIFFITHS:   To put it another way, your Honour, the exclusion provision operates in respect of the provision of the goods where they are “solely to enable the contractual provision of the service”.  It is common ground that in part, at least, why Telstra was providing the handset ‑ ‑ ‑

GUMMOW J:   It was obliged to make contractual provisions, I suppose, by statute, is that the point?  That means it was not solely to enable contractual provision.

MR GRIFFITHS:   Rather, it entered into a contractual relationship at the option of the customer to provide the handset, but in doing so not doing it solely to enable the contractual provision of the service, namely, the voice telephony carriage service but in part, at least, to comply with its statutory obligation.  The second point that we wish to emphasise that it was also common ground that Telstra’s handsets could be used not only to access Telstra’s voice telephony carriage service, which is the service for the purposes of paragraph (f), but also to access other carrier’s carriage services.  If your Honours have the application book page 94 handy, at line 40 – this is again from Justice Hodgson’s judgment:

It is also possible for a customer to use the connection to the network, and the handset, only for making calls pursuant to a contract with another service provider such as Optus; but in my opinion it was plainly open to the Appeal Panel to decide, as a matter of fact, that the provision of handsets was for use of Telstra’s service for receiving telephone calls and for making telephone calls covered by the SFOA.

GUMMOW J:   The reason that there is another Optus – Optus is another service provider is another consequence of the federal regulatory system, is it not?

MR GRIFFITHS:   It is a service provider.

GUMMOW J:   We have a case about this in the Court at the moment.

MR GRIFFITHS:   Yes.  It is not the primary universal service provider which Telstra ‑ ‑ ‑

GUMMOW J:   I think Mr Richmond’s client complains about it enough in another context but it is a fact of commercial life within which this provision in the Stamp Duties Act has to be given some operation that is not commercially nonsensical, if possible.

MR GRIFFITHS:   That is correct and the exclusion in the Duties Act of course was one of the exclusions that was there when that Act first commenced back in 1998 at a time when, of course, we already had competition in the telecommunications industry in this country.  It should be assumed that there was an awareness that there was competition and of course the imposition of the regulatory obligations on Telstra as per the Standards Act which is dated 1999, of course also were made in the context of an awareness that voice telephony carriage services are provided not just by Telstra, but of course by a range of other competitors, including Optus.

Again, the short point that we make is that in those circumstances where the handset is provided by Telstra to customers who wish to take the handset in circumstances where Telstra is aware that the handset is used not only to enable the contractual provision of Telstra’s voice telephony service but is also used to enable the contractual provision of voice telephony services by competitors of Telstra leaves a situation where it is very difficult to conclude that the exclusion provides, again because of the term “solely” being inserted in there.

CALLINAN J:   Would that be illegal under the federal regime if, on your construction, access were available only with the handset to a Telstra service?  Would that infringe federal law then?

MR GRIFFITHS:   Yes, that is right.  As Mr Sorensen reminds me, I believe that there are licence conditions applying to carriers which prevent them from denying access to their networks.

CALLINAN J:   So you could only get the benefit of that clause if you broke federal law?

MR GRIFFITHS:   When you say you could only get the benefit of it, your Honour ‑ ‑ ‑

CALLINAN J:   It would only apply – whenever it applied there would be a federal infringement.

MR GRIFFITHS:   Taken to its extreme, that would be correct.

CALLINAN J:   Taken to any case.

MR GRIFFITHS:   Yes.  To the extent, of course, that the provision is being looked at simply in the context of telecommunications operators and the hire of handsets as opposed ‑ ‑ ‑

CALLINAN J:   That is the area ‑ ‑ ‑

MR GRIFFITHS:   That is what area we are concerned in here, although ‑ ‑ ‑

CALLINAN J:   I know, there are all sorts of other goods but so far as telephonic services are concerned.

MR GRIFFITHS:   Yes.  The fact that the handsets could be used to enable the contractual provision of telephony services by carriers other than Telstra was one of the key reasons for the dissent of the judicial member in the appeal panel decision which was then, of course, the subject of appeal to the Court of Appeal.  Justice Hodgson dealt with these matters – the two points that I have just raised, your Honours, at application book 97, paragraph 28.  His Honour sets out the two points that I have just drawn attention to and in paragraph 29 he refers to an analogy put to him by Mr Williams acting for my client in the Court of Appeal about:

pay television services.  While provision of a dedicated set‑top box unit could aptly be described as being “solely to enable the contractual provision of the service”, provision of a television set which could be used to access other programs could not be so described.

Then against that background his Honour then deals with the two points in paragraphs 30 and following.  At paragraph 30 his Honour said that:

what is under consideration –

in construing and applying paragraph (f):

is what the provision of the goods is for –

Your Honours see that at line 12 on page 98 –

and that requires consideration of the intention, of those responsible for the provision, as to the use for which the goods are provided.

GUMMOW J:   His Honour then said the test was objective.

MR GRIFFITHS:   His Honour goes on to say that it is to be considered objectively but your Honour sees at line 28:

it is only the intention of the provider, and/or the Parliament that required the provision to be made –

So one focuses on intention of the provider or the Parliament in a situation like here where you have a universal service obligation.  His Honour is effectively reading into, in our respectful submission, paragraph (f) a test of intention or purpose which is simply not supportable or sustained by the terms of the provision.

CALLINAN J:   Mr Griffiths, might it not be that the contractual provision of the service refers to a contract which as a result of federal law inevitably involves a service going beyond what Telstra provides?  In other words, you are making a provision.  You are enabling a contractual provision of the service because the contract – you just cannot make a contract of the kind which would deny access to anybody except Telstra.  That is the contract.  That is a contract effected by and expanded by federal law.

MR GRIFFITHS:   Yes.  Of course, the contract that is referred to in (f) is the contract relating to the provision of the service.

CALLINAN J:   I understand that.

MR GRIFFITHS:   It is a requirement, of course, that the provision of the goods be incidental to or ancillary to that service.  I would respectfully strongly doubt if what underlies your Honour’s question to me that paragraph (f) was drafted in a way which contemplated the sorts of factual circumstances that we have here as takes us back to the discussion we had

some time ago when I said it is obviously meant to be an ambulatory provision although immediately, of course, we are faced with a particular fact situation under federal law.

GUMMOW J:   Thank you.

MR GRIFFITHS:   If the Court pleases.

GUMMOW J:   We do not need to call on you, Mr Richmond.

There are insufficient prospects in demonstrating error in the decision of the New South Wales Court of Appeal to warrant a grant of special leave.  Special leave is refused with costs.

The Court will adjourn until 2.15 pm on Monday next, 18 June, in Brisbane.

AT 4.25 PM THE MATTER WAS CONCLUDED