Commissioner of Taxation v World Book (Australia) Pty Ltd

[1993] HCATrans 30

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S95 of 1992

B e t w e e n -

COMMISSIONER OF TAXATION

Applicant

and

WORLD BOOK (AUSTRALIA) PTY LTD

Respondent

Application for special leave

to appeal

MASON CJ
TOOHEY J

McHUGH J

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TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 FEBRUARY 1993, AT 9.30 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:  May it please the Court, I appear with

my learned friends, MR A. ROBERTSON and

MR P.J. RENEHAN, for the applicant. (instructed by

the Commonwealth Director of Public Prosecutions)

MR J.J. De MEYRICK:  May it please the Court, I appear for

the respondent. (instructed by Davis Toltz &

Associates)

MR JACKSON:	Your Honours, may I invite Your Honours to see our outline of submissions which Your Honours will
have before you.

MASON CJ: Yes, I have just seen it. Yes.

MR JACKSON:  Thank you, Your Honour. Your Honours, as is

apparent from the outline of submissions, the

application is concerned with the meaning to be

attributed to the provisions of section 221A of the

Income Tax Assessment Act. The relevant importance

of the issue, we would submit, is demonstrated by

paragraph 15 of Mr Pritchard's affidavit in support

of the application which appears at pages 47 and

48.      Your Honours, I shall not read that out but I

would invite Your Honours to look at paragraphs 14

and 15. They demonstrate, we would submit, that

the issue is one of potentially significant

application.

May I turn then to the substance of the

matter? The relevant provisions which are in
question are set out in material form in the

reasons for judgment of Mr Justice Meagher at

page 21.

MASON CJ: Those provisions have been since amended, have

they not?

MR JACKSON:  I am sorry, Your Honour, I am not conscious of

that being in any relevant respect.

MASON CJ:  I have been told that they were amended, I think,

in 1991, Mr Jackson, by section 71 of the Taxation

Laws Amendment Act No 3. The question I wanted to

raise with you was, as the provisions have been

amended, does it serve any useful purpose if we

were to grant special leave to appeal?

MR JACKSON:  Your Honour, the present provisions were in

force for a considerable period from 1983 until the

time to which Your Honour refers, and there are a

large number of cases potentially covered by that.
It is a long period and a large number of

instances. If there has been a significant change

to the legislation after that, then, of course,

some of the matters referred to are not valid, and

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I apologize, Your Honour, for not being aware of the difference.

MASON CJ: Yes. As I understand it, what has happened is

that the phrase "an employee as such", has been

deleted from the definition of "salary or wages"

and there has been substituted the expression "an

eligible person as such" and that expression,

"eligible person" is defined to mean a person who

is an employee within the ordinary meaning of that

expression.

MR JACKSON:	Your Honour, that would take away the point, of course, in so far as the future is concerned.
MASON CJ:	I am not sure it would, Mr Jackson, but it seems

to me that it would, none the less, give the

provisions a different complexion; in other words,

a decision on the section as it now stands would

not necessarily be of any guidance in relation to

the amended provision.

MR JACKSON:  Your Honour, I accept what Your Honour puts to

me. However, as I said, it covers - the existing

provision was in being for quite some years.

Your Honours, I was going to say the relevant

provisions are set out at pages 21 and 22, and the
terms of paragraph (a) of the definition of "salary
or wages", appearing half-way down the page, are

the same as those which were in force at the time

of Neale v Atlas Products, (1955) 94 CLR 419 and,

in particular, could I refer Your Honours to page

424 of that decision.

Your Honours, at page 424, Your Honours will

see, set out half-way down the page, section 221C,

and the relevant provision is set out between

point 5 and about point 8, and what Your Honours

will see there is that that provision is the same

as the provision set out at pages 21 and 22, with

two exceptions.	The first is that the word now
used in the provisions at page 21 is "principally";

the word used before was "substantially", and that

difference, if I might observe in passing,

emphasizes the presence of elements additional to

labour does not automatically make the provision

inapplicable.

Your Honours, the provision of importance is

paragraph (b), which is the second difference, and

that was added in 1983. Your Honours will see,

from its terms, that it looks to the identity of

the performer of the work or to the reasonable

expectation as to the identity of the performer of

the work. Your Honours, if one looks at the words

used in paragraph (b), the question which must be

asked, we would submit, is simply whether the

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contract satisfies the description of being "wholly
or principally for the labour of the person to whom
the payments are made" by reason of a matter set

out at paragraph (b).

The approach taken by the Court of Appeal was

to accept that the provision went beyond contracts

of service but the Court of Appeal, in our

submission, then added a qualification, not itself

found in the provision.

Your Honours, may I, in that regard, go to the

central part of the Court of Appeal's reasoning

which appears at page 35, line 14. It is a passage

which goes through to page 36, about line 6. The

essence of what the Court of Appeal has done has

been to say - and Your Honours will see that at

about line 25 on page 35:

It may be that there are contracts for

services which are wholly or principally for

the labour of a person and which are not

undertaken by the contractor to produce a

given result.

And they say, in effect, that the section would

apply only to those.

But a contract ..... to produce a given result

is not ..... wholly or principally -

et cetera. Now, Your Honours, in our submission

that is to add a qualification not justified by the

words of the provision and the question in every

case is simply whether the words of the section are

satisfied.

TOOHEY J: Paragraph (b) does not take you any further,

Mr Jackson, does it, unless you jump the initial

hurdle of a contract that is "wholly or principally

for the labour of any person"?

MR JACKSON:  Your Honour, the difference - could I just say

this: in a sense, that is right but if one looks

at the legislative history of the provision, one

sees the meaning given to the provision in the

Atlas case and it seems obvious enough, we would

submit, with respect, that what was intended by the

addition of the provisions and the change of the

word perhaps from "substantially" to "principally"

was to have the result that the whole provision was

to be read somewhat differently from what had gone

before. ·

In that regard, Your Honours, could I take

Your Honours for just a moment to page 425 of Neale v Atlas Products? Your Honours will see at about

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point 3 on the page, in a passage which goes to

about point 7 - it is the passage commencing, "In

the argument addressed to this Court" - that the

intention of the amendments seems to have been to

make the argument that had been advanced there, in

effect, the argument which reflected the

construction of the provision.

So that, Your Honours, what we would say is

that one has to look at the provision in toto and,

if one looks at the provision in toto, what one

sees is that the provision that has been added in

(b) is that it says that:

a payment ..... shall be taken to be a payment

made under -

such -

a contract ..... if -

and then the matters that are then set out at

paragraphs (i) and (ii).

Your Honours, those are the submissions we

would advance.

MASON CJ:  Yes. Thank you, Mr Jackson. Mr De Meyrick?

MR De MEYRICK:  Thank you, Your Honour. Your Honours, the

respondent opposes special leave for five grounds:

the first being that the matter is primarily an

issue of fact, not law; secondly, that there is

really no fundamental issue of statutory

interpretation involved; thirdly, that the

judgments below, except for the judgment of

Justice Roden at first instance, are unattended by

any doubt; fourthly, that we are looking at a

construction of a particular contract and may well

be quite a different situation for other contracts

and other circumstances; and, finally, that there

is no policy or major issue of public interest,

really, involved.

If I may hand up to the Court some points of opposition stated in short form to which you may

care to give attention before I address.

MASON CJ:  Mr De Meyrick, there is, I think, no occasion to

take us through all of this. The real question is, having regard to the case as it has been presented

by Mr Jackson, is it a case in respect of which we

should grant special leave to appeal?

MR De MEYRICK:  We say, no, Your Honours, for these reasons

and, in particular, the fact that the matter is one

on its particular facts. It is dealing with a case

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that - if one looks at the circumstances of the

case below and if you look at the facts that the

magistrate dealt with, in terms of that particular

contract and how that contract was operated, it

seems clearly that, in relation to that contract,

there was a finding that it did not fall within

this section.

MASON CJ: Yes, but the first question is is the contract,

on its proper construction, one susceptible only of

an interpretation that brings it within the

statutory provisions?

MR De MEYRICK:  We say it is one which does not bring it

within the statutory provisions on its own

interpretation of those facts and it is so clear

that it is not a matter which the High Court should

entertain any special leave.

MASON CJ: Yes. Well, that is the first point you seek to

raise.	Now, the second point you seek to raise is
to say	-?

MR De MEYRICK:  You see, that is the crux on my learned

friend's submission to you. He says that this

section needs some sort of interpretation; that it

is unclear, that since it has been changed in 1983

it now creates a problem.

MASON CJ: Yes, but what he is saying is that the Court of

Appeal misdirected itself in terms of interpreting the section.

MR De MEYRICK:  We would say, with respect, that it has not,

it is so clear - certainly that section is not well

drafted. When one analyses it and sets it out, it

is still the same section in terms of its effect.

Indeed, it is perhaps even clearer because the

change was made from the word "substantially" to

"principally". Now, there might have been some

argument in my friend's case if "substantially" had

remained because it is a quantification of labour,

whereas, if one looks at it now it is quite clear

that a contract does not need to be one which
involves only labour. It talks about "a contract

for labour". Now, all contracts of employment involve some kind of labour. So, too, do most

contracts which are contractor-type arrangements.

So, it is not the question of whether it is labour

that one is looking at, it is whether that section

is used to divide between a contractor, as such,

and an employee, as such.

Now, if one looks at the section, there is really not much that is to be interpreted, it is

very clear. It is even clearer in the change that

was made in 1983.

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McHUGH J:  But the argument against you is that in

section 221A(2), (b)(i) and (b)(ii) are really

meaningless unless you in some way almost read out

the words "under a contract that is wholly or

principally" in that paragraph.

MR De MEYRICK:  Your Honour, that could be one way of

looking at that section.	On the other hand, I
think that - - -

McHUGH J: Could I just interrupt you to ask you this? On

your submission, do subparagraphs (i) and (ii) have

any ef~ect at all?

MR De MEYRICK:  Yes. They have the effect that provided it

is a contract wholly and principally for labour and

provided it is one that may be performed by any
person, it then having managed to get through those

two elements, you then turn to the question of

whether it was one that was - principally part of

that labour was performed by the person to whom the

payment was made or to whom, if it was paid as a

pre-payment, that it was one which the payer
believed that the payee would carry out the

contract.

McHUGH J: Yes, but on your argument you never reach (b), do

you, because it would be caught by (a), and if it

is not caught by (a), it is not caught by (b), is

it?

MR De MEYRICK: That is one construction, Your Honour, but

the point is if it is caught by (a), then it may

also be one of those - (c) and (d) may come later.

McHUGH J:  I know that, but does it not come to this, that

if you cannot catch it under (a), you cannot catch

it under (b), on your argument?

MR De MEYRICK:  If you cannot catch it under (a) it is

therefore a contract that is for employment with an

employee. If it is caught under (a) as, let us

say, a de facto-type contractor situation, which is

a device - - -

McHUGH J:  I appreciate that but I am looking at the

negative. I mean, (a) and (b), one would assume,

have some different function to play but if he

cannot get you under (a) then he automatically

cannot get you under (b), on your argument.

MR De MEYRICK: That is true because it sets out - - -

McHUGH J: Well, that seems strange.

MR De MEYRICK:  - - - elements of the definition and many

definitions have a barrier through which you pass

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to the next element of the definition and then
perhaps another element of the definition, but it
is not impossible to have a situation where all of

those four elements of that definition would apply.

MASON CJ:	But is not (b) designed to overcome the existence of a power of delegation?
MR De MEYRICK:	If that is its intention, it does not do it.

It does not achieve it. Now, this is the point.

You see, what my friend would ask the High Court to

do is to reinterpret that section in a way in which

Parliament has not either intended or has not, in

fact, done.

McHUGH J:  I think, in the modern jargon, we would be asked

to give it a purposive construction.

MR De MEYRICK:  Give it a purpose. Like my learned friend,

I am not aware of any change that has been made

since. I am aware that there was a policy

statement that they intended to change that

section. But if the section has been changed, as

Your Honour has indicated, then, with respect, I

say it would still remain as the Court of Appeal

has interpreted it. It has not really changed

anything because who is an eligible person as such

is still defined as an employee.

So, we have really got a problem that the

Parliament, if we assume the Parliament has intended to bring within this definition

contractors as such, has not achieved that. If

they did achieve it, as His Honour Justice Meagher

pointed out in his judgment, you would have quite a

dilemma in deciding what kind of contracts as such

were those that fell within section 221A definition

and those which were genuine contracts.

What we submit is that the matter also is one which relates to a particular employee with a

particular set of circumstances which certainly

does not require or attract the special leave and

the attention of the High Court.

MASON CJ:  I am not sure what your paragraph 2 is designed

to convey, but are you really submitting this case

raises no general principle of statutory

interpretation?

MR De MEYRICK: Precisely, Your Honour. What I have

attempted to do in paragraph 2 is to dissect that

section 221A(2)(b) - - -

MASON CJ: Into its constituent parts.

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MR De MEYRICK:	- - - into its constituent parts.	I believe

that I have done that. It is not an easy section
to interpret or to analyse, but if that is, in

fact, the way it stands, then the barrier that one

must first encounter is that the contract has to be

one that is wholly or principally for labour. substantially for labour.

MASON CJ:  Why do you say it is not a contract principally

for labour?

MR De MEYRICK:  Because the important thing, as I have

pointed out over the page, is that it is not one -

the operative word is "for". The contract has to

be for the labour; not a contract that involves

labour because, indeed, as I pointed out earlier,

all contracts, whether they be for employment or

for some other purpose, involve some element of

labour. The difficulty is to distinguish between

those which are, indeed, for labour alone and those

which are for some result, some contractual result.

It is a bit like a hippopotamus, you know, it is

not easy to explain but when you have seen one you

know one and certainly an employment contract is

one which employers and employees are aware of and

they know they have an employment contract. If you

have a contract which is for a result, you know you

have one for a result, certainly as it has been

pointed out there is a merger of the elements that

are involved.

I think it is important to also note,

Your Honours, that my learned friend has put a fair

emphasis on the fact that there is some great

public importance in the interpretation. As much,

he talks about some $100 million that could be

lost. That is a matter for tax administration.

Our respectful submission is that it is not a

question of tax avoidance, that all the

Commissioner is looking at there is the perception

that under the PAYE system it is probably more

likely to collect the tax than if it was under some

provisional tax system. It is not a tax evasion

situation that arises. There is no public policy

there.	They are my submissions, may the Court
please.

MASON CJ: Yes, thank you, Mr De Meyrick. Yes, Mr Jackson?

MR JACKSON: 

Your Honours, may I say two things? First in

relation to the amendments to which Your Honour
referred earlier: they really seem, with respect,
to have made a difference only in a definitional

sense for practical purposes.  By that, I mean that

the definition of "salary or wages" picks up again

section 221A(2) which appears to be, in all

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relevant respects, the same as the provision in

question here. "Salary or wages" is then taken

over to the definition of "employee" which means:

a person who receives, or is entitled to

receive, salary or wages

and "eligible person" means -

a person who is an employee within the

ordinary meaning -

of that expression.

MASON CJ:	What was the point of that amendment?
MR JACKSON:	Your Honour, I really cannot say, I am sorry,

in a quick look at the matter.

MASON CJ:  I mean, it seems strange to do something that

seems to give more emphasis than before to the

ordinary meaning of "employee".

MR JACKSON:  Your Honour, that seems right. More than that,

I cannot advance it, I am sorry, at the moment. Your Honours, the point I would seek to make is

that whilst there has been a change, the relevance

of the definition of "salary or wages" appears to

remain, perhaps in a lesser form.

McHUGH J: Perhaps that is what was the result of a previous

amendment. It did not make any change either.

MR JACKSON: 

Your Honour, that is a possibility, of course,

but what we would say is that whether the
rhinoceros is to remain a rhinoceros, there has to
be at least a beast. We are really not asking the

Court to give particularly purposive construction,

we would like it to give a construction, as it

were.

MASON CJ:  Mr Jackson, is it a relevant consideration that

the respondent succeeded at first instance, the

charge was dismissed and that dismissal was

confirmed by the intermediate Court of Appeal? In

other words, is it right that a respondent should

be brought up to this Court in order to become the

vehicle for a determination of this question?

MR JACKSON:  Your Honour, the case was one that was

designed, in a sense, to be a test case and what

occurred in that regard -

MASON CJ: But, surely, not by the respondent.

MR JACKSON:  Your Honour, I do not know if that is right,

with respect. Your Honours will see in one of the

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documents that we gave Your Honours in a folder the

stated case. Now, the history of the matter is

that the information was dismissed and Your Honours

will then see that we requested there be a case

stated. When the matter came before the primary

judge in that regard, it was apparently made

apparent to him by both sides that the parties

wanted a determination of the issue and the

situation which then obtained was that we

succeeded, of course, at first instance, and it is

then a question of what happened in the Court of

Appeal.

TOOHEY J: Although it went by way of case stated, it seems

to have been dealt with on the basis that unless it

could be shown that on the proper construction of

the section, the result come to by the magistrate

was one that could not possibly have been reached,

then the original judgment should stand.

MR JACKSON:  Your Honour, that is the approach that was

taken, yes.

TOOHEY J: So, if, in fact, the judgment below - that is the

judgment of the magistrate - turned on the facts or

to the extent that it did turn on the facts, it

really removes or, at least, limits the scope for

appeal. ·

MR JACKSON:  Yes. Your Honour, it was not really a matter

of disputed fact, should I say that? Your Honour

will see the base facts that were simply set out at

the magistrate's stated case and Your Honours will
then see the findings that he made about it and

Your Honours will see also, at the bottom of page 4 of that, the various other facts were included for the purposes of a hearing before the judge at the request of the other side.

TOOHEY J: But the point still remains that on the facts as

found, it would have to be demonstrated that the

magistrate could have reached no other conclusion

than the one he did.

MR JACKSON:  Your Honour, I accept that and, Your Honour,

that in a sense, may be to some degree -

TOOHEY J: Perhaps I put that around the wrong way: that

the magistrate could not have reached the

conclusion that he did.

MR JACKSON:	Yes. Well, Your Honour, the base facts appear simply in paragraph (2) and, in particular, in
paragraphs  ( 2) ( b) , ( 2) ( c) , ( 2) ( d) , ( 2 ) ( e) , ( 2) ( f)
and through to the end of paragraph (k). Now,
Your Honours, I do not want to go into it in any
detail.  We would submit that the - - -

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MASON CJ:  Mr Jackson, to what extent is it relevant that

this legislation is amended at least four times a

year and that, therefore, any difficulties that

confront revenue collection can be readily overcome

by a legislative amendment?

MR JACKSON:  Your Honour, the fact of the matter is that any

legislation can be amended from time to time. In

the case of the revenue legislation, various fiscal
considerations and a number of other matters, no

doubt, lead to the amendment of the legislation,

perhaps more frequently than others. But,

Your Honour, mere frequency should not be, with

respect, treated as being - the ability exists in

the case of all legislation and, Your Honour, one

must bear in mind that any government seeking to

amend does not have the ability to amend by itself.

The matter has to go through the houses of the

Parliament and be dealt with, and differing views may be taken by differing houses in the matter.

Your Honour, all I am seeking to say about it

is that frequency of amendment does not reflect,

really, any more than perhaps the overall nature of

the legislation and does not reflect a greater

ability in the case of it to change more than in

the case of any other legislation. Indeed, in the

case of other legislation, it may well be that

there is an opportunity to give a rather more

lengthy consideration to the exact needs for

change.

McHUGH J:  Mr Jackson, am I correct in thinking that, on the

Court of Appeal construction, (b) does not really

add anything to (a)?

MR JACKSON:  Your Honour, that seems to be the effect of it,

Your Honour, although I should say perhaps there is

just one qualification to that and that appears in

the passage to which I referred earlier.

Your Honour, I think it is probably right to say

that what was intended by Mr Justice Sheller in the

passage - it is the part at the bottom of page 35,

commencing at line 25. Your Honour, that sentence

and the next one: one suspects that His Honour was

intending to give the amendment a slightly wider
conceptual operation than perhaps had been the case
before it. But, Your Honour, it does not elaborate

on the detail of it.

MASON CJ:  The Court will take a short adjournment in order
to consider the course it will take in this matter.

AT 10.03 AM SHORT ADJOURNMENT

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UPON RESUMING AT 10.06 AM:

MASON CJ:  On the facts of this case, the Court is not

persuaded that it gives rise to any general

principle of statutory interpretation. As such,

the case is not appropriate for the grant of

special leave to appeal and the application is

refused.

MR De MEYRICK:  I make a submission for costs.

MASON CJ: Is there an agreement between the parties as to

costs or not?

MR JACKSON:	No, Your Honour.
MR De MEYRICK:	No.

MR JACKSON: There is nothing I want to say in opposition.

MASON CJ:	You ask for costs, do you?
MR De MEYRICK:	We are seeking costs.

MR JACKSON: There is nothing I can say.

MASON CJ:	You do not oppose it?
MR JACKSON:	No, Your Honour.
MASON CJ:	The application is refused with costs.

AT 10.07 AM THE MATTER WAS ADJOURNED SINE DIE

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