Commissioner of Taxation v Crown Insurance Services Ltd

[2013] HCATrans 129

[2013] HCATrans 129

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane   No B69 of 2012

B e t w e e n -

COMMISSIONER OF TAXATION

Applicant

and

CROWN INSURANCE SERVICES LTD

Respondent

Application for special leave to appeal

HAYNE J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 6 JUNE 2013, AT 10.19 AM

Copyright in the High Court of Australia

MR D.M.J. BENNETT, QC:   If the Court pleases, I appear with my learned friend, MS E. FORD, for the applicant Commissioner.  (instructed by Australian Government Solicitor)

MR A.H. SLATER, QC:   If the Court pleases, I appear with my friends, MR M.L. ROBERTSON and MR M.P. VAN DER WALT, for the respondent.  (instructed by Small Myers Hughes Lawyers)

HAYNE J:   Yes, Mr Bennett.

MR BENNETT:   If the Court pleases.  Your Honours, this case involves two important special leave questions.  The first concerns the distinction between a question of fact and a question of law, and the issue raised is this.  Where the primary facts are all clearly determined, we submit that the question whether they fall within a statutory provision is a question of law, even if minds may reasonably differ as to the answer.  That is a proposition which is accepted in some cases and not in others, and a number of cases have referred to the uncertainty and the difficulty in this area.

The leading case is Collector of Customs v Pozzolanic Enterprises Pty Ltd, which is at tab 2 of the volume your Honours have. It is reported in (1993) 43 FCR 280, and if I could just show your Honours – this case is regarded as the leading case in the area, but it contains, we would submit, clear contradictions as to the proposition which we assert. Your Honours see the familiar five general propositions are set out at page 287. I will not take your Honours through them, but the important ones are 2 and 5. Proposition 2 is:

The ordinary meaning of a word or its non-legal technical meaning is a question of fact –

and 5 –

The question whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of law –

Their Honours then cite with approval a passage from the judgment of Justice Fullagar in Hayes v Commissioner of Taxation ‑

“Where the factum probandum involves a term used in a statute, the question whether the accepted facta probantia establish that factum probandum will generally – so far as I can see, always – be a question of law.”

We so assert.  But their Honours then say the principle which we dispute –

This principle is qualified when a statute uses words according to their ordinary meaning and the question is whether the facts as found fall within those words.  Where it is reasonably open to hold that they do, then the question whether they do or not is one of fact –

But then their Honours go on to suggest the opposite.  They refer, lower down in that page, to Collector of Customs (Tas) v Davis, and they cite Justice Beaumont as saying –

“In the present case, it is not suggested that any of the material terms of the legislation have any special meaning.  It follows their ordinary meaning should be treated as a question of fact.  On the other hand . . . can it be said that the evidence before the Tribunal ‘reasonably admits of different conclusions as to whether the . . . operations fall within the ordinary meaning of the words as so determined?’  If so, a question of law is involved.”

That seems to suggest the opposite.  They refer in the following passage to the fact that that case involved the phrase “connected with the rearing of live‑stock”.  We say there is a close analogy between the words “connected with” there and the words “derived indirectly from a source in Australia” here.  In each case you are concerned with the connection between two things.  They go on to say:

The words “connected with” are capable of describing a spectrum of relationships –

and they refer to some cases about that.  The top of the next page ‑

The range of relationships to which the words apply . . . depends upon a judgement about that purpose.  The selection process involved is analogous to that used in determining what causal relationships between conduct and loss attract liability for the purpose of s 82 of the Trade Practices Act . . .   In the end this is not a process of fact finding.  The facts are found.  What is left is a value judgment about the range of the Act and that is a question of law.

That is the precise opposite to what their Honours have said at the top of the previous page in the passage which is applied in this case to say that this is a question of fact.  I must also remind your Honours of one of the cases criticising these distinctions, which is at tab 1, Collector of Customs v Agfa‑Gevaert Limited 186 CLR 389, and at page 395 the five Pozzolanic provisions are set out.  Then they say at the bottom of page 395:

In Pozzolanic, the Full Court qualified the fifth proposition.

They go on and say:

when a statute uses words according to their ordinary meaning and it is reasonably open to hold that the facts of the case fall within those words, the question as to whether they do or do not is one of fact.

That is the proposition we dispute.  But their Honours go on to say ‑

Such general expositions of the law are helpful in many circumstances.  But they lose a degree of their utility when, as in the present case, the phrase or term in issue is complex or the inquiry . . . is not clear.

HAYNE J:   Now, would you have this Court, if leave were granted, say anything more than that?

MR BENNETT:   It would then be necessary for the matter to be sent back for it to be determined.  The majority of the Full Federal Court did not decide the second question because they said the appeal was incompetent because it was a question of fact.  The second question was decided in our favour by Justice Jessup who said that there was only one conclusion one could come to on the second question and that was in our favour.  It is also an important issue.  It involves the primary taxing provision in the Income ‑ ‑ ‑

HAYNE J:   I understand that.  But just on this law fact distinction, does the Commissioner seek to have the Court say anything more than has already been said in Agfa‑Gevaert?  I would have thought the answer was no, Mr Bennett, but perhaps I am mistaken.

MR BENNETT:   Well, in fact, I was rather using Agfa‑Gevaert to say that the distinctions are difficult and artificial and need to be resolved.

HAYNE J:   I thought the Court in Agfa‑Gevaert was saying beware of the single all‑encompassing silver bullet, but perhaps I am misreading what their Honours said.

MR BENNETT:   Yes.  Well, your Honour, it is a silver bullet which we submit is heavily tarnished.  Indeed, even in this case, the passages in the Full Court judgment – I will not take your Honours to them – where they say how difficult the law is in this area and so on.

HAYNE J:   Assume for the purposes of debate that this first issue were to be resolved in the manner suggested by Agfa‑Gevaert, would the Commissioner then seek to reopen Mitchum, and if not does not Mitchum conclude the point in this case?

MR BENNETT:   Your Honour, the Commissioner would seek to reopen Mitchum.

HAYNE J:   Why would we do that?  Mitchum is how old?

MR BENNETT:   Well, your Honour, it can be distinguished, in any event.  It is a case where there was a much more complex fact situation, whereas here there is a simple and frequently repeated fact situation, and the general question of whether in such a case one looks to the form or the substance to the paper trail and where documents are signed or to the underlying reality of the situation is one of importance.

HAYNE J:   But I must press you a little.  Forgive me for doing so.  Mitchum has stood for a long time, I think, has it not?

MR BENNETT:   Yes, it has, your Honour.

HAYNE J:   Would the Commissioner seek to have us embark on a wholesale rejigging of the law as established in Mitchum?  It is a very large proposition.

MR BENNETT:   Well, your Honour, the proposition we challenge is the one I stated at the beginning and that is as far as I need to go, particularly, I suppose, in relation to a word like “source” and “derived” but it is the ‑ ‑ ‑

HAYNE J:   This is heart and soul of the Act territory, is it not?

MR BENNETT:   Yes, it is, your Honour.  But, our primary concern is to say that whether simple straightforward facts, as found, fall within a statutory provision or not does not cease to be a question of law merely because minds may differ.  There are issues of fact on which minds may not reasonably differ, “Did the sun rise in the east this morning?”  There are issues of law as to which minds may reasonably differ and your Honours hear cases about them every day.  Why would one say if there are – if the question is one on which minds may reasonably differ it is a question of fact, but if it is the only one way you can decide it, it is a question of law.

It seems a peculiar criterion to apply in the circumstances.  We submit it is a criterion which should not be applied.  To the extent that Mitchum is one of the cases which applies it we would submit that it should be looked at.  Your Honour, on the second special leave question there is not a lot I need to add to what is in the written submissions.  Your Honours have seen the facts and your Honours have seen the dissenting judgment of

Justice Jessup who says that on those facts there is only one conclusion you can come to.

One interesting feature of the judgment of the Tribunal is that it does not refer to or discuss the significance of the word “indirectly” and it refers to a number of cases which deal with source where the cases were dealing with other statutes, like the New Zealand one, which did not have the words “directly” or “indirectly” in them at the time.

Of course, those words, as were said by this Court in Nathan, make a very big difference and that, we submit, is an important issue.  In this case, we would say that one does not look to things like where a contract is signed or where a claim is accepted.  Today in the globalised world in which we live where events like that take place is often a matter of very little significance.  One sees developments of this area of law in relation to the proper law of the contract, and even in relation to citizenship by birth as opposed to parentage where a child can be born in a transit lounge in a country that no one has any other connection with.

Now, the point is that the approach taken by the Tribunal is one of favouring form over substance, and we submit that the facts clearly show, at the very least, an indirect source in Australia and probably a direct source.  I do not know if your Honours wish me to go through the facts to demonstrate that, but I think they ‑ ‑ ‑

HAYNE J:   I think we are probably sufficiently familiar, but I am not stopping you from such course as you think necessary.

MR BENNETT:   No.  Well, the relevant facts are the ones set out in our submissions in the application book at paragraphs 11 to 16 on pages 82 to 83, and they are short, undisputed facts.  My learned friends in their submissions in reply do not take issue with any of those matters; they add a couple of conclusory facts.  Those primary facts, we say, are such that, first, as Justice Jessup said, are facts on which there is only one conclusion, namely, that there is at least an indirect source in Australia and, secondly, if your Honours are with us on the first proposition we would ultimately be submitting that, simply on balancing, those facts indicate the same thing.  For those reasons, your Honours, we submit that this is an appropriate case for special leave to appeal.

HAYNE J:   Mr Slater.

MR SLATER:   Thank you, your Honours.  Your Honours, we have three points to make about the applicant’s first special leave question and two to make about the second.  On the first special leave question, our first point is that there is no new question here.  The first question advanced as a special leave question ‑ ‑ ‑

HAYNE J:   I think they say a new answer has been given; that is their complaint.  No new question, but a new answer that ‑ ‑ ‑

MR SLATER:   We say there is no new answer either, your Honour.

HAYNE J:   Yes.

MR SLATER:   The question which is advanced as a special leave question, which is set out on page 81 and was articulated by my friend orally:

Is the question whether facts as found fall within a statutory provision properly construed a question of law where those facts reasonably admit of more than one conclusion as to whether or not they fall within the terms of the provision –

that question has been asked and answered on more than one occasion in this Court.  At page 41 of the application book it is set out almost in precisely those terms in the judgment of Justice Kitto in Associated Blue‑Metal.  Your Honours see it about line 15 on that page:

“The next question must be whether the material before the Court reasonably admits of different conclusions as to whether the appellant’s operations fall within the ordinary meaning of the words as so determined; and that is a question of law . . . If different conclusions are reasonably possible, it is necessary to decide which is the correct conclusion; and that is a question of fact –

That passage is a passage – that particular quotation is a quotation which was adopted by Justice Mason speaking for the Court in Hope v The Council of the City of Bathurst and it has been adopted many times since.  There is nothing novel about this.  There is no need to re‑answer the question or to re‑investigate it.  It is, in essence, the same as the fifth proposition in Pozzolanic which is set out over the page.

My friend’s oral argument was largely based on what the Full Federal Court said in Pozzolanic, but the decision in that case was fully examined by this Court in Agfa‑Gevaert and the questions which my friends sought to raise controversy about between the second and fifth propositions were the subject of full consideration by this Court in Agfa‑Gevaert and there is, with respect, no need for the Court to traverse that ground again.  So that, your Honours, is our first point.

Our second point is that there is a suggestion in our friend’s written submissions that there is a need to change the law in this area.  Your Honours, the law on classification of an alleged error as comprising a question of law or a question of fact does not require changing.  It is not a matter for changing or revising the law.  It is not like questions such as that which arose in Burnie Port Authority v General Jones where the relationship between negligence, nuisance and the rule in Rylands v Fletcher needed review and revision; nor is it like the more recent decisions of this Court in PGA v The Queen last year where the common law marital exemption to rape was reviewed, or earlier this year in Beckett v New South Wales where review of the onus in action for malicious prosecution was revealed.  Those are cases where the Court might need to review and possibly change the law.

One cannot by a process such as was undertaken in those cases change a question of law into a question of fact, or vice versa.  All one can do is decide on which side a given question falls, and the answer to that will depend on the specific circumstances.  It is like the question whether a term is express or implied in a contract, or whether an estate is vested or contingent.  It turns on the quality of the term or the quality of the estate or, in this case, the quality of the question.  They are not questions which can be changed by any decision of the Court.  All the Court can do is restate the criteria by reference to which the classification of a question as one of law or as fact are examined and, in our respectful submission, for the reasons we have given there is no need for such restatement.  It has been comprehensively examined and it is now just a matter of deciding particular cases.

Your Honours, our third point in relation to the first special leave question is that it would not resolve the appeal.  To establish that different conclusions are reasonably open on the facts as found by the Tribunal does not determine the appeal.  Whether the correct conclusion is that propounded by the applicant or that found by the Tribunal is a question of fact and that takes it outside the scope of section 44, and that much is not in issue.

My friend orally suggested, somewhat on the fly, that this matter might be sent back to the Full Court, presumably so as not to vex your Honours with an investigation of the facts.  As to that we would point out that it is not a ground of appeal or it is not an order sought in the draft notice of appeal at page 79 and one might ask, “What is it to be sent back to the Full Court for?  What is the Full Court to do with the matter if it is sent back to them?”  It is an off the cuff suggestion and, with respect, it is an inappropriate one.

HAYNE J:   I think we need not trouble you further, Mr Slater.

MR SLATER:   Thank you, your Honours.

HAYNE J:   Yes, Mr Bennett.

MR BENNETT:   Your Honour, on that last point, the Full Court, because of the conclusion it came to on the first question, did not consider the second question at all, it simply held the appeal to be incompetent so there is nothing surprising or unusual about the prospect that the consequence would be it be sent back.  Of course, this Court could deal with the other point which we say is a question of law, if the Court so decided.  We have said it is a special leave point in its own right.

So far as the cases are concerned, we simply point out that this is an area where although the proposition put against us is referred to in a number of cases it is a proposition which has been put as laying down a distinction that involves some difficulties and some inconsistencies and Pozzolanic itself, as I have shown your Honours, goes on to put precisely the opposite proposition in relation to words similar to the words in the current statute.

It is not a situation where the issue is firmly fixed and decided for all time.  The doubts expressed in Agfa‑Gevaert are, in my respectful submission, of significance in showing that it is an issue that does need further examination by this Court.  It is a very fundamental question, what is a question of fact and what is a question of law and how does one distinguish between them.  It is one courts have to wrestle with with great frequency and, in my respectful submission, this is an appropriate vehicle to deal with and clarify the legal situation.  If the Court pleases.

HAYNE J:   In light of the decisions of this Court in Nathan v Federal Commissioner of Taxation (1918) 25 CLR 183, Federal Commissioner of Taxation v Mitchum (1965) 113 CLR 401 and Collector of Customs v Agfa‑Gevaert (1996) 186 CLR 389, this is not a convenient vehicle in which to explore the distinction between questions of fact and questions of law. Special leave to appeal is refused.

MR BENNETT:   If the Court pleases.

MR SLATER:   With costs, your Honour?

HAYNE J:   Can you resist costs?

MR BENNETT:   No, your Honour.

HAYNE J:   With costs.

The Court will adjourn to reconstitute.

AT 10.43 AM THE MATTER WAS CONCLUDED