Colby Corporation Pty Ltd v Commissioner for Taxation

[2008] HCATrans 298

[2008] HCATrans 298

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P5 of 2008

B e t w e e n -

COLBY CORPORATION PTY LTD

Applicant

and

COMMISSIONER OF TAXATION

Respondent

Application for special leave to appeal

GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO PERTH

ON FRIDAY, 8 AUGUST 2008, AT 12.39 PM

Copyright in the High Court of Australia

MR D.H. SOLOMON:   May it please the Court, I appear for the applicant.  (instructed by Solomon Brothers)

MR E.M. CORBOY, SC:   May it please the Court, I appear for the respondent.  (instructed by Australian Government Solicitor - Perth)

GUMMOW J:   Yes, thank you.

MR SOLOMON:   Your Honours, there are two issues in this matter which should give rise to the grant of special leave.  The first is the appropriate test in order to establish whether or not a person has purchased diesel fuel within the meaning of the relevant legislation.  In particular, that question can be put this way.

GUMMOW J:   It has to be understood though in the context of the GST, does it not, as well, as part of the commercial realities governing this situation?

MR SOLOMON:   The GST would be a consequence of there being a purchase and if GST legislation has not been complied with that is a separate question.  But that would be a consequence of there being a purchase, not a determining factor.  What we say the question is, is does the relevant evidence which may be relied upon to establish a purchase of diesel fuel for the purposes of the relevant legislation include a preliminary agreement made by a drilling contractor with its customer to reduce its per metre charge in exchange for supply of diesel fuel by the customer to be used in drilling in circumstances where that preliminary agreement – albeit established on the evidence, indeed, uncontested – was not formally recorded as a separate and discrete part of the formal drilling contracts that were entered into.  All that was recorded was the composite effect that the rate to be paid per metre would be reduced, that fuel would be supplied – one contract using the words, “free of charge or at no further cost”. 

So my client is in this position, your Honours, that prior to making this arrangement it purchases diesel fuel, gets the tax rebate for doing so, passes on the net cost to its customer, makes an arrangement where, as far as it is concerned, it purchases the fuel by reducing its drilling rate, but it still acquired the fuel by reducing its drilling rate.  It has paid a price for it by reducing its drilling rate.  The net effect is it has purchased the fuel, but it has purchased the fuel from its customer and the only issue is do the rules of construction of formal contracts prevent us proving that matter?

There was no question at the hearing before the Tribunal that the matter was established on uncontested evidence.  We are not dealing with a question of fact.  If I could take your Honours to paragraph 7 of the Tribunal’s reasons at page 11 of the application book, paragraphs 7.1 which refers to the witness’s evidence, and 7.2; 7.5 records that the respondent’s witnesses agreed that the prices were reduced to take account of the fuel supplied by Robe as asserted by Mr ‑ ‑ ‑

GUMMOW J:   We are looking at the Tribunal’s reasons.  What do you say about page 16 of the application book, paragraphs 9.17 through to 9.21?

MR SOLOMON:   Your Honour, what the Tribunal did was to embark on a process of construing the written contracts without regard to that evidence.  If one goes back to page 13, paragraph 9.4, which is the determining paragraph with respect to the paragraphs that your Honour has referred me to, and similarly at paragraph 10.4 at page 18, that in looking for ‑ ‑ ‑

GUMMOW J:   All I am putting to you is if you succeeded in getting special leave and you got yourself into the High Court page 16 might loom large if you want to apply Codelfa, as no doubt you would.  You would have to put into the matrix those matters there, I imagine.

MR SOLOMON:   All we say, your Honour, is that that is a separate question whether in the circumstances that we have here that there is a preliminary arrangement made to vary how things were operating before that we will no longer purchase our diesel elsewhere.  Instead, we will in effect purchase it from our customer by reducing our rate.  Now, whether that is then a supply under the GST legislation which attracts goods and services tax is another question.

If it does attract goods and services tax, well, we may well owe that tax and if we have not paid it, there may be a penalty about it.  But the question of whether there is a supply under the goods and services tax legislation is entirely different from the question of whether there is a purchase of diesel fuel for the purposes of the diesel fuel rebate legislation.

Our submission is that in looking at the true question, that is whether there is a purchase, that is not a matter of merely construing the written contracts and excluding the evidence of the preliminary agreement because it would not be admissible on a matter of construction, if one accepts for the purposes of argument that it would not, where what it does demonstrate is a separate and discrete agreement, albeit that it did not continue in operation other than through being given effect to in the formal agreements.  Why are we thereby precluded from proving a purchase?

The way this was put to their Honours in the Full Court, their Honours quoted from the oral submissions at paragraph 30 at page 42 and then proceeded to reject the submission at paragraph 31 on the basis that as we had gone ahead with formal contracts which did not actually

record that separate and discrete preliminary agreement as a separate agreement, we were contending untenably that the rules of construction of the formal agreement should be ignored.  We were not.

We were contending that we can prove that preliminary agreement because it is relevant and admissible to satisfy the statutory test of whether there is a purchase and if the purchase took place by way of making a preliminary agreement – and we proved that it did, it was uncontested that it did – it is a complete gloss and a wrong gloss on the statute to say you can only prove a purchase by proving a separate contract of purchase rather than proving that there was a component of an ultimate agreement which plainly gave rise to a purchase.  That, we say, is the first point.

The second point is the point that we did not get property in the fuel, and it is held both in the tribunal and the Full Court that we got a mere licence.  We would express the point as this way.  Does a drilling contractor who takes possession of diesel fuel to consume it in drilling operations and retain any residue at the end of the contract acquire property in the diesel fuel or a mere licence to consume it?  We say that the Full Court is entirely wrong, with respect, in suggesting that this concept of a mere licence to consume the fuel when we took possession of it - we are entitled to possession of it, we consume it and we keep any residue – is quite wrong.  It is a notion not previously known to the law of Australia and it is not a notion that should continue as part of the law of Australia and that is the second point that we seek to agitate, your Honours.

GUMMOW J:   Thank you.

MR SOLOMON:   I think that is all I wish to say in my oral submissions.  If it please the Court.

GUMMOW J:   Yes, thank you, Mr Solomon.  We do not need to call on you, Mr Corboy.

No controversial questions of general principle concerning the construction of contracts would fall for consideration if there were to be a grant of special leave.  An appeal to this Court would enjoy insufficient prospects of success to warrant a grant of special leave.  Accordingly, special leave is refused with costs.

The Court will now adjourn to reconstitute.

AT 12.48 PM THE MATTER WAS CONCLUDED