Commissioner of Taxation v Energy Resources of Australia Ltd

[2004] HCATrans 509

[2004] HCATrans 509

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S35 of 2004

B e t w e e n -

COMMISSIONER OF TAXATION

Applicant

and

ENERGY RESOURCES OF AUSTRALIA LIMITED

Respondent

Application for special leave to appeal

McHUGH J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 30 NOVEMBER 2004, AT 10.10 AM

Copyright in the High Court of Australia

MR A.H. SLATER, QC:   If the Court pleases, I appear with my friend, MR M. RICHMOND, for the applicant.  (instructed by Australian Government Solicitor)

MR B.J. SULLIVAN:   If it please the Court, I appear with my learned friend, MR J.H. MOMSEN, for the respondent.  (instructed by Freehills)

McHUGH J:   Yes.  Mr Slater.

MR SLATER:   Your Honours, the essential error in the judgments below was one of statutory construction, a misunderstanding of the purpose to which the provisions were directed.  The relevant provisions are at page 3 of the application book but I will return to those after addressing the ‑ ‑ ‑

KIRBY J:   I wonder why the joint reasons in the Full Court could suggest - could they suggest that the Board of Review was exercising judicial power, unless there is some notion in the background that this is going to be the long awaited challenge to the Boilermakers’ Case.

MR SLATER:   Your Honour, I said at the beginning the essential error was one of statutory construction, but we accept that an error in statutory construction in the income tax context is one which this Court has said on a number of occasions does not, of itself, warrant a grant of special leave.  What causes us to bring this application is the point your Honour has directed attention to and that is the reasoning process by which the majority reached the conclusion which it did.

KIRBY J:   But it is only a little step in their reasoning, is it not?  It was not embraced by Justice Allsop.

MR SLATER:   No.

KIRBY J:   It was specifically disaffirmed by Justice Lindgren at trial.

MR SLATER:   It was not raised at trial, your Honour.

KIRBY J:   It was not, I think, a submission of the parties.

MR SLATER:   No, your Honour.

KIRBY J:   It was just a little heresy thrown in by the joint reasons.

MR SLATER:   Unfortunately, your Honour, it is more than just a little heresy thrown in.  It is the bedrock of the ratio ‑ ‑ ‑

KIRBY J:   Sometimes heresies grow into orthodoxies.

MR SLATER:   Not, I think, on this occasion, your Honour.  It is common ground between us that this was an error and an egregious error.

KIRBY J:   “Egregious” is putting it a bit high by the standards of what we see.

MR SLATER:   No, your Honour.  We do not often get to say things like that in tax cases.

KIRBY J:   The question is, is that a determinative mistake?  I would accept it is a mistake and I do not think the respondent suggests otherwise, but is it a determinative mistake when actually the question is the construction of the Act and its application upon which there are two judges of the Federal Court who did not make that mistake and came to the conclusion.  We are not here to review reasons, as such, we are here to review orders and if the order is right and the fact that there has been a mistake on the path to it is not a ground for special leave.

MR SLATER:   If the order were right, I would accept that, your Honour, but we say the order is wrong.

KIRBY J:   And you say it gives you the key to get into the Court?

MR SLATER:   Not ordinarily.  Ordinarily an error in statutory interpretation is something that your Honours would leave to the Full Court to resolve, but in this particular case the way in which the Full Court has gone about the process of reaching its conclusion is one which, in our submission, is likely to be productive of a great deal of confusion in the future administration.

KIRBY J:   So it is a key to the outer door.

MR SLATER:   Yes, your Honour.

KIRBY J:   You still have to get to the substance.

MR SLATER:   I have still got to get to the point of persuading your Honour that there is something which warrants your Honour’s attention and the way in which we do that is to say that the reasoning process of the majority of the Full Court in this case gives to decisions of the Board of Review a higher authority than, for example, a decision of Justice Fullagar in this Court.  Justice Fullagar was of the view that the position contended for by the applicant, the Commissioner, was correct.  The Boards were of a different view.  What the majority in the Full Court has done is to say the Boards were exercising judicial power and therefore should be followed.

KIRBY J:   But you are battering against an open door on this.  If it was a mistake to say, as I think it was, that the Boards were exercising the judicial power of the Commonwealth or judicial power then that is just something that is accepted.  It still leaves you to attack the decision, and, therefore, the construction, and to make the point that this is a matter of general importance that attracts the attention of this Court.

MR SLATER:   What is of general importance, your Honour, is the way in which the Court has made its error.  Once we attract your Honours’ attention to dealing with the matter then we say that the conclusion which they reached both at first instance and in the Full Court below was an erroneous conclusion.  If your Honours wish to hear me on that point immediately I will deal with it but I was endeavouring to persuade your Honours that the point was worth your Honours’ attention.

KIRBY J:   Your strong point is, you say, that the joint reasons made two mistakes.  They attributed the judicial power of the Commonwealth to the Board of Review, and they attributed a breathtaking interest by the Federal Parliament in decisions of the Board of Review, which may not be true.

MR SLATER:   And they reached an erroneous conclusion as to the way in which the relevant statutory provisions operated.

KIRBY J:   Those arguments alert you and, therefore, as a judge of this Court you start to look at it, but when you actually get into the substance and you look at what Justice Allsop said and what Justice Lindgren said – Justice Lindgren merely said, “Well, I happen to agree with the Board of Review”.  We are not bound by it.  He specifically said, “I am not bound by it.”

MR SLATER:   Yes, indeed.

KIRBY J:   Then you just bypass this mistake and, therefore, the fascination and the interesting point you raise is just bypassed.  We are not concerned with it.

MR SLATER:   Except for this, your Honours, that in the report of this case between the Commissioner v Energy Resources in the Australian Law Reports, which is the only general report of the case to date, the decision is reported as being a decision founded on the proposition that the Board has exercised judicial power and the Parliament enacted in recognition of that.  That report is ‑ ‑ ‑

KIRBY J:   Is that the headnote writers?

MR SLATER:   That is the headnote writer, yes, your Honour.

KIRBY J:   We are not here to have appeals from headnotes.

MR SLATER:   No, but the point is this, your Honour.  First, the headnote writer, in our submission, is right in the conclusion that this is the foundation of the decision because insofar as their Honours in the majority dealt with other points they dealt with it by saying another reason for reaching this conclusion is, or even in the absence of this conclusion.  So that they found their decision on the proposition that the Board has exercised judicial power.

McHUGH J:   The premise on which the court operated, in any event, is dubious to say the least.  Long ago, Sir Owen Dixon pointed out that it is quite artificial to think that Parliament in re-enacting legislation is giving it the same meaning that courts had attributed to it in earlier cases.  Lord Radcliffe described it as almost a mystical way of interpreting legislation.

MR SLATER:   Yes, your Honour.  We would say that the majority’s approach, both in founding its decision on the notion that the Board exercised judicial review and in the way in which it used that conclusion in interpreting the statute, is erroneous.  The problem lies in this, your Honour - it is a similar problem to the point which Mr Cowdery raised in the previous application.  This is a decision of the Full Court  It is binding on all judges of the Federal Court sitting at first instance.  It is binding on the Tribunal.  Neither of those is entitled to say, “Well, the Full Court said that but we know better because the High Court said something different earlier”.  They are bound to follow the Full Court.

McHUGH J:   No, they are bound to follow the High Court and the Privy Council insofar as its decisions are relative.  I would have thought Shell Oil Company put the matter beyond doubt.

MR SLATER:   We would have thought so, too, your Honour.  The problem lies in this, that both in the administration of the legislation in appeal provisions and in collection provisions, the Commissioner is going to encounter repeatedly contentions either that tax should not be payable because there is a Board decision which has not been appealed which is in favour of the taxpayer, or, that the decision of a tribunal which goes in favour of the Commissioner should be set aside because there is a Full Court decision saying it is exercising judicial power and the Privy Council has said quite clearly that if it is exercising judicial power it is an invalidly

constituted tribunal.  That was the point in the first British Imperial Oil Co Case back in 1925.

Unless the decision of the Full Court is disposed of by being held by this Court to be clearly wrong, that sort of groundless contention founded upon a mistaken judgment will go on vexing the administration of the taxation system indefinitely and those are the grounds on which we say that this is a matter which warrants your Honours’ attention.

Beyond that, as to the point of statutory interpretation, your Honours have read what has been said by both parties and what has been said in the court below.  We say that is wrong, but I would not have thought that at this point I need address your Honours on that point.  If your Honours please.

McHUGH J:   Yes.  Mr Sullivan, what do you say about this proposition that the Tribunal was exercising judicial power?

MR SULLIVAN:   We agree, your Honour, that that was in error and ‑ ‑ ‑

KIRBY J:   You did not ever advance that ‑ ‑ ‑

MR SULLIVAN:   No, we did not, your Honour.

KIRBY J:   What do you say about the proposition that the Parliament is watching, breathlessly, every decision of the Administrative Appeals Tribunal now, in tax matters?

MR SULLIVAN:   We are dubious of that, your Honour, particularly since the Board of Review in this case was abolished 18 years ago.  We do note, your Honour, that in the amendments that replaced section 29, that was the Income Tax Assessment Act 1997, section 70‑40, the explanatory memorandum ‑ ‑ ‑

KIRBY J:   This is in the so‑called “plain English” version of the Act?

MR SULLIVAN:   Yes.  The explanatory memorandum to those amendments which dealt with the issue in this case did identify as a reason for dealing with it these Board of Review decisions.

KIRBY J:   That does happen from time to time, but I think this Court in a case called Zickar, which is a workers compensation case, said something to the effect that these are fictions that Parliament is watching closely every word that courts, and still more, tribunals say about statutes and it is a fiction and not too much attention should be paid to it.

MR SULLIVAN:   Yes.  Your Honour, as we see the reasons of the majority in the Full Court, the essential error is that contained at paragraph 12 where the majority said that the Board was exercising judicial power.  That which follows in paragraphs ‑ ‑ ‑

McHUGH J:   We need not hear you any further, Mr Sullivan.

MR SULLIVAN:   Thank you, your Honour.

McHUGH J:   Have you anything, Mr Slater, in reply to that?

MR SLATER:   No, your Honour.

McHUGH J:   In our view, their Honours Justices Ryan and Finkelstein in the Full Court of the Federal Court of Australia erred when they said at paragraphs 12 to 13 of their joint reasons that the former Taxation Board of Review exercised judicial power, meaning thereby the judicial power of the Commonwealth.

Mr Sullivan, who appears for the respondent, did not seek to support that proposition and accepts that that statement of their Honours is wrong.  Having regard to constitutional doctrine their Honours’ statement was erroneous.

Similarly, the assignment of importance to the suggestion by their Honours that Parliament is taken to have known and accepted the construction placed on legislation by the Board of Review is not persuasive. 

This Court has pointed out that such a view in relation to the interpretation of legislation by courts is quite artificial and weight should not generally be given to it in deriving the meaning of legislation.  It is equally unpersuasive in relation to decisions of an expert administrative tribunal.

Nevertheless, such criticisms of the reasoning of the Federal Court do not provide a ground for the grant of special leave to appeal.  The decisions of the primary judge and the Full Court are otherwise sound.  Neither the primary judge, Justice Lindgren, nor the other member of the Full Court, Justice Allsop, referred to these considerations of judicial power and Parliament accepting an interpretation placed on the legislation in an earlier decision.

Justice Lindgren specifically stated that the decisions of the Taxation Board of Review were not binding on him, but happened to accord with his views as to the proper construction of section 29 of the Income Tax Assessment Act.  In substance, Justice Allsop agreed in the reasons of Justice Lindgren.  The mistake in relation to the suggested exercise of judicial power is therefore not sufficient to attract special leave because the decision of the Federal Court is not otherwise attended by doubt.

Accordingly, special leave must be refused with costs.

AT 10.27 AM THE MATTER WAS CONCLUDED