Commissioner of Territory Revenue v Alcan (NT) Alumina Pty Ltd

[2009] HCATrans 150

[2009] HCATrans 150

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Darwin  No D6 of 2009

B e t w e e n -

COMMISSIONER OF TERRITORY REVENUE

Appellant

and

ALCAN (NT) ALUMINA PTY LTD

Respondent

Office of the Registry
  Darwin  No D7 of 2009

B e t w e e n -

ALCAN (NT) ALUMINA PTY LTD

Appellant

and

COMMISSIONER OF TERRITORY REVENUE

Respondent

FRENCH CJ
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON TUESDAY, 23 JUNE 2009, AT 10.57 AM

Copyright in the High Court of Australia

__________________

MR D.J.S. JACKSON, QC:   May it please the Court, in appeal No D7 of 2009 I appear with my learned friend, MR P.G. BICKFORD, for the appellant and the respondent in D6 of 2009.  (instructed by Clayton Utz Lawyers)

MR A.H. SLATER, QC:   If the Court pleases, I appear for the Commissioner of Territory Revenue with my friend, MR T.W. ANDERSON, in both cases.  (instructed by Solicitor for the Northern Territory)

FRENCH CJ:   Thank you.  The Court would be assisted by hearing argument first on the matter of the option to renew on the construction question.

MR JACKSON:   Thank you, your Honour.  The question in the appeal, your Honours, is whether land, as it is used in section 56N(2)(b) of Division 8A of the Taxation (Administration) Act, takes its defined meaning, or as the Court of Appeal found, the contrary intention appears in the legislation so that it does not.  Could we briefly identify the very few relevant facts for the appeal and the documents that go with them and then we will move directly to Division 8A.  The transactions which raise the question as to the application of the section were, first, the acquisition by the appellant, Alcan, of 70 per cent of the shares in Gove Aluminium Limited, which is for short called GAL from CSR.  The share sale agreement, your Honours, appears in volume 4 of the appeal book page 1573.

FRENCH CJ:   This was associated with a buyback from AMP of 30 per cent so that Alcan became the sole shareholder, is it?

MR JACKSON:   Your Honour, yes, is the answer.  To be clear, CSR and AMP, which were the proprietors or shareholders in GAL, had 30 per cent of the joint venture.  Alcan had the other 70 per cent of the joint venture, but then Alcan, through the subsidiary, acquired the 30 per cent which had been held by GAL through the acquisition of GAL’s shares.  So, the share buyback occurs within GAL so that what happens is Alcan acquires 70 per cent of the shares in GAL by a direct acquisition.  The share buyback is, of the AMP interest, the remaining 30 per cent so that Alcan is the sole shareholder at the end of the transaction of all of the shares in GAL and it becomes a wholly owned subsidiary of the appellant.

The documents, your Honours, which affect that are the share sale agreement which is at page 1574 in volume 4.  The buyback, as your Honour the Chief Justice has mentioned, is at page 1712.  We do not think we need to take your Honours to any of the detail of them having expressed the transaction in that way.  The amount of the consideration for the share acquisition and the buyback was expressed in US dollars in those documents.  Converted into Australian dollars and adjusted, the amount was $740 million, which appears in the finding that was made by the primary judge at page 1797 at about line 30 where his Honour found that:

translated to an adjusted Australian dollar acquisition price of AUD $740.1m. 

GAL’s assets were those it employed in a bauxite mining and alumina refining business.  The business was based on an enterprise conducted as a joint venture of which GAL had the 30 per cent, as I mentioned briefly before.  The joint venture agreement, called the Gove Joint Venture Agreement, is in volume 3 of the appeal books at page 1323.  That page is clause 2 of that joint venture agreement where your Honours will see in clause 2.1 the participants, of which GAL was one, associated themselves for:

The mining, production, treatment, transportation, and shipment of Bauxite and Alumina –

The other joint venturer under the joint venture agreement was Swiss Aluminium Australia Limited which became a subsidiary of Alcan in due course.  The mining rights were sourced in an agreement between a joint venture company which was called Nabalco and the Government, which is in volume 1 of the application book annexed to a relevant Act, the Mining (Gove Peninsula Nabalco Agreement) and that is at page 87, in volume 1.  The agreement itself forms a schedule to the ordinance, as it was then.  So the ordinance begins at page 83 in volume 1 and the schedule, which is the agreement to which Nabalco was the party, is at page 87.

The mining rights then were conferred under a special mineral lease known as SML 11 and GAL was one of the lessees.  The special mineral lease, your Honours, begins at page 107 of volume 1 of the appeal book, and at line 30 one sees that GAL was a lessee with Swiss Aluminium Australia Pty Limited.  The interest as lessee was as to 30 per cent, which you can see from page 110 at about line 12:

as to thirty equal undivided one hundredth shares unto Gove Alumina Limited –

The demise was for 42 years, which appears at about line 18.  The rent was as for a mineral lease under the mining ordinance, which your Honours can see at page 120 where the rent is provided for in clause 6 starting at line 38.  But over on page 121 at the top of the page about line 8:

that rate of yearly rent that would be applicable in the case of a mineral lease of Crown land granted under the Ordinance –

which is the mining ordinance.

FRENCH CJ:   The lease was actually granted under the agreement ordinance, not under a general mining ordinance.

MR JACKSON:   Yes, quite, and it therefore forms ‑ ‑ ‑

FRENCH CJ:   There was a finding about that somewhere, was there not?

MR JACKSON:   Yes, there is, in the primary judge’s reasons, your Honour.  The lease contained an option to renew, which is at page 120 as well in clause 5 at about line 20 and your Honours will see at about line 30 that the option is:

for the further term of forty‑two years from the expiration of the said term –

and that is the option which causes the question of construction which is debated before this Court.  There are three different areas of land identified in the lease because the purposes for which each area may be used are different.  The first area is the area of the bauxite reserves and, if we take your Honours back to page 107 at about line 38, your Honours will see that the demise begins in terms of the land described with:

FIRSTLY, ALL THAT piece or parcel of land . . . 49,466 acres or thereabouts and particularly described and delineated in the Schedule –

That is, broadly speaking, the mining area which we will show your Honours in a picture in a moment.  The second area is the transport corridor where the conveyor from the mine to the refinery and the port is located, and that appears at page 108, about line 15, following the word “SECONDLY”, which is:

698 acres or thereabouts, being Northern Territory Portion 1205 and being the land delineated and coloured red on the plan marked ‘A attached –

The third area was demised for the lessees to use for the purposes of the building and operating a refinery to produce alumina and your Honours will see that, firstly at page 108 still.  Following the words “THIRDLY” there is a description of the land:

Containing . . . 600 acres or thereabouts being Northern Territory Portion 1196 and being the land delineated and coloured blue on the plan marked ‘B’ –

If one goes over to page 111 at about line 32, where the uses to which the three areas of land may be put are set out, paragraph numbered (3) provides for:

the land thirdly described – for the purpose of establishing, operating and maintaining a bauxite treatment plant and stock pile areas and facilities and works associated therewith –

and continues.  We promised your Honours a photo – it is still in volume 1, page 475 – which identifies the three relevant areas, if I can assist your Honours with that.  On 475 at the top of the page at about line 10 in the middle of the page “Mining Area” appears over an area that is slightly whiter or lighter in colour from that which surrounds.  That is the mining area.  The town to the left is Nhulunbuy which is on a separate lease, not SML 11, but it is on a different lease.  The corridor then exists from the mining area through to the “Refinery”, as it is marked towards the middle of the photograph, and then the “Port Facilities” are indicated out to the right‑hand side.  In fact, the photograph is cut off a bit.  If you want to see the port facilities better the actual jetty comes out from – where we are looking at this photograph at 475 – the bottom of the photograph towards the way in which we are looking, so that it exists to the south of the peninsula.

In terms of distances, there is approximately 18 kilometres from the mining area to the refinery.  So it gives your Honours some idea of the scale of the map or the picture.  The business of GAL entailed the production through the joint venture of bauxite and alumina and the sale, on its own account, by GAL of both products.  It was a single venture company.  So the value of the company was directly related to the value of the assets employed in the business and the right to obtain cash flows which those assets gave access to.  It also extended, not only for the term of the lease, but for the term of the renewal following the option which is to be exercised in 2011.  In the proceedings below the case was conducted on the footing that certainly the option would be exercised.  Although the mining operation will come to an end, one should observe, before the full option period of 42 years because the bauxite resource will run out well before then ‑ ‑ ‑

FRENCH CJ:   It is 2035, is it?

MR JACKSON:   Depending on what the assumptions are as at 2001, yes.  So it might be earlier if the rate of production is higher.  Could we take your Honours then directly to Division 8A and for that purpose could we ask your Honours to take up the annexure to the Commissioner’s submissions in this appeal, D7 at 2009, the respondent’s submissions, annexure A, legislation because it sets out conveniently all the relevant sections without any other unnecessary ones.  It is headed D7/2009 and it looks like this, your Honours.  If anyone wishes to be burdened with the paper, we have full copies of both the Taxation (Administration) Act and the Stamp Duty Act of the relevant date, which are available.

HAYNE J:   What date do you fix as the relevant date?

MR JACKSON:   1 January 2001, your Honour.  The principal section is section 56K, that is in Division 8A, which is on page 10 of this document.  If we take your Honours there to subsection (1), it provides:

Where by a relevant acquisition a person acquires a majority interest or a further interest in a corporation to which this subdivision applies, that person shall prepare and lodge with the Commissioner a statement in respect of that acquisition –

There are three conceptual or defined conceptual requirements employed in this section.  The first is that the company must be a corporation to which the division applies.  Your Honours will see the word “subdivision” is used in section 56K(1).  That is just an irrelevant drafting error.  It does not reappear anywhere else in the division and it is treated as being a division.

FRENCH CJ:   There is no subdivision in the division?

MR JACKSON:   No, there is not and never was.  Secondly, there must be a relevant acquisition which is the concept defined and, thirdly, the acquisition must be of a majority interest or a further interest.  If each of the requirements is satisfied, the obligation to lodge the statement is engaged.  Could we take your Honours then to page 11.  By subsection (5) of section 56K, which is about line 5 on the page that:

A statement under subsection (1) shall be deemed, for the purposes of this Act –

“of this Act” is the expression –

to be an instrument executed on the day on which the relevant acquisition occurred.

The deemed instrument attracts duty as if it were a conveyance of the proportionate interest in the land of the company and that follows from two sections.  The first is section 56M, which is also on page 11.  There is no 56L in the Act, your Honours, so we have not left it out.  The second section is 56R, to which we will go in a moment.  Section 56M has two elements itself for determining the duty which is payable on a particular relevant acquisition.  First, it chooses the rate which is the rate provided for in item 5 in Schedule 1 to the Stamp Duty Act and, loosely, we will call it the conveyance rate.

Secondly, it chooses the dutiable value by reference to other sections and for our purposes it is only section 56R(2) which will be relevant, and we will come to that in a moment.  Could we stay still on page 11 of this document.  Section 56N defines then the corporations to which the division applies by two steps.  The first step is in paragraph (a) where it excludes listed companies and the second is by paragraph (b) which requires the corporation to be a landholder as defined in subsection (2).  I should have said section 56N(1), I am sorry.  We will return to subsection (2) later.

On page 13, if we could go over there, section 56P defines what is a “relevant acquisition”.  That definition itself has two features.  The first is that it aggregates acquisitions in the 12‑month period preceding the particular acquisition for the purpose of determining whether it constitutes an acquisition of a majority interest and includes further interest acquired, after a majority interest is acquired.  The idea being that creeping acquisitions will in some circumstances be caught up.  The second is that it excludes acquisitions before a date in 1988, or those resulting from agreements made before that date.

If we then take your Honours over to page 14 – I appreciate we are rushing through this, but we will come back to the significance of it, or the parts of it that matter, in a moment.  Section 56Q defines what amounts to an “interest”, a “majority interest” or a “further interest” for the prior provisions which we have looked at, particularly section 56K.  Subsection (1) defines an interest for the purpose of section 56K and there are two steps again.  The first is it excludes acquisitions before a 1988 date and the second is that it limits the interests of concern to interest by way of shareholding that would entitle the person – the shareholder in this case – to participate in the distribution of the property of the company on a notional winding up.

That concept is used later to define the dutiable value in section 56R.  Subsection (2) defines then what is a majority interest, which was the relevant provision in this case.  It is where the shareholder’s entitlement on a notional winding up would be more than 50 per cent.  Still on page 14, your Honours, section 56R, as we have mentioned previously, defines the basis of the dutiable value for the statement as a deemed instrument.  There are again two steps.  The first is that under subsection (1) the value is:

the unencumbered value . . . of the land in the Territory to which the corporation is entitled.

The dutiable value, as defined in that subsection, is then restricted under subsection 56R(2) and the restriction is that the value is the same proportion of the value as the acquirer’s proportionate interest on the notional winding up.  We have already mentioned that the amount of duty with which the statement is charged is provided for in 56M.  If we take your Honours back there, which is page 11.  The way that the sections, we have raced through we appreciate, work is that in the case of a straight out acquisition of a majority interest the dutiable value is the value determined under section 56R(2) in paragraph (a) of 56M(1) and that is confirmed by that paragraph.  Then the rate is the rate under Schedule 1, being the rate in item 5, as we call it, conveyance duty. 

Could we go then back to page 2 of this document where there is set out extracts of Schedule 1 of the Stamp Duty Act under the heading “SCHEDULE 1” in the middle of the page.  The document is in the form of a table, as is the schedule to the Act, so that the item number is on the left, the class of instrument the middle column and the rate of stamp duty in the right‑hand column.  It is on page 2 of the annexure.  Your Honours will there see that the class of instrument for item 5 is a “Conveyance of Dutiable Property” and where the unencumbered value exceeds $500,000 in the right‑hand column about the middle of the page the rate is 5.4 per cent. 

If we could come back, as we said earlier, to section 56N on page 11, it is subsection (2) that defines landholder for the purpose of subsection (1) and the first part of subsection (2)(a) asks whether the unencumbered value of the company’s land in the Territory, or the corporation’s land in the Territory, is not less than $500,000.  The second part of 56N(2)(b) asks whether the ratio of the unencumbered value of the corporation’s land whether in the Territory or elsewhere is 60 per cent or greater of the value of all the company’s property, or the property to which it is entitled, to use the precise language.  The sections we have traversed use land in a number of places but, in particular, we are interested in, of course, section 56N in the paragraph to which I have just taken your Honours, but also in section 56R. 

If we could take your Honours then back to page 4 of this annexure and to section 4 of the Taxation (Administration) Act which is extracted there, or parts of it.  There are a number of relevant definitions.  Your Honours will see that section 4 begins with the language “In this Act”, which is usual language, at about line 6.  The words “this Act”, which were also used in one of the sections we went to earlier, is in fact a defined expression which your Honours will see on page 5 at line 5.  So that those words include the Stamp Duty Act, as well as the Financial Institutions Duty Act, in addition to the Taxation (Administration) Act.  So the definitions have that application.  That is consistent with the Stamp Duty Act, which also expressly provides that it and this Act are to be read as one.

The scheme of the definitions in section 4 collects different species of property into particular defined terms.  The parent category, your Honours, is “dutiable property” which appears at about line 20 and it is defined to mean, among other things, land and dutiable property is the property which engages duty on an instrument of conveyance under item 5.  Dutiable property, as thus defined, picks up the expression “land” which is also defined and that is on page 4 and it is defined to include “a lease of land” and it is also defined to include, “a mining tenement” and information relating to, as your Honours will see in paragraph (b) as well as “a fixture” in paragraph (c). 

At the bottom of page 4 and running over to the top of page 5 of the document “lease” is defined to include a number of things.  It includes “a sub‑lease and an agreement for a lease” and, as your Honours will see, “a lease granted under an Act”, but does not include three things, one of which is in paragraph (c) on the top of page 5, “an option to renew a lease”.

FRENCH CJ:   Now, that exclusion considerably pre‑dated the enactment of Division 8A, did it not?

MR JACKSON:   Yes, it did.

FRENCH CJ:   Does that go back to 1988?

MR JACKSON:   1978, yes.

FRENCH CJ:   1978, yes.

MR JACKSON:   It does.  It was there at the commencement of the Act which was then an ordinance.

FRENCH CJ:   Are those two definitions both the same at the commencement?

MR JACKSON:   Yes, your Honour.

FRENCH CJ:   Land and lease, I mean.

MR JACKSON:   The answer is, so far as we are talking about the exclusion of those three paragraphs or the non‑inclusion of those three paragraphs, yes.  If we take your Honours back to page 4, the definition of “lease” has changed because the words “a lease granted under an Act” after the word “includes” were added fairly late in the piece and we will come to any of those changes that are necessary at a later time, but otherwise the three exclusions of (a), (b) and (c) are the same.  Though, in the interregnum there was another exclusion, which was Crown leases for more than five years, that was introduced into the definition in 1988 and subsequently repealed, which we will worry about later on.

The definition of “conveyance” if we could take your Honour back to page 4, is defined to include “a transfer or assignment”, if we could focus on those words, and, importantly, a “grant”, but not to include a lease.  So, your Honours will see “grant” in the second line and then the exclusion or non‑inclusion of the lease in the two last lines.  Before we go any further, could we make a few observations about how those definitions work, at least on their face. 

Under item 5 a conveyance of dutiable property includes a conveyance of land, because of the definition of “dutiable property”.  The definition of “land” provides for the meaning of “land” in the term “dutiable property” and, in our submission, there cannot be any doubt or dispute about that.  The definition of “land” itself includes things the drafter was apparently concerned to make land, whether or not there might otherwise have been land, by expressly including them, being a lease of land, a mining tenement and a fixture. 

The respondent contends that a lease would always have been land even if the definition of “land” had not expressly said so and, our submission is, that might be right, but it does not tell anyone much.  We know it was not necessarily thought to be right about mining tenements.  Could we take your Honours to page 34 of the annexure to show what we mean by that.  The insertion of the definition of “dutiable property” by the Taxation (Administration) Amendment Act No 2 1991 is set out on page 34 and it was “dutiable property” that was defined to include “land” which was defined to include “mining tenement”. 

In our submission, that was done plainly to make it clear that a mining tenement was to be picked up, in other words, the inclusive definition was intended to be used to expand the meaning of “land”.  So, it is not right to say that the common law meaning of “land” or the general meaning of “land” was not intended to be applied under the Act.  The defined meaning was intended to be applied, in our submission, and it is intended to be used in defining “dutiable property” back on page 4. 

If we could come back to page 4, the question which is raised by the debate in this case is, why might the drafter have defined “land” to include “lease”?  The answer, in our submission, lies in the operation of the definition in the imposition of duty on instruments of conveyance of lease.  “Lease”, as it is defined, includes the three things I have mentioned “a lease granted under an Act”, thereby picking up Crown leases; “a sub‑lease and an agreement for a lease” and because of the inclusion of those things, for example, the transfer of a Crown lease is clearly dutiable as an instrument of conveyance. 

For the same reason, the assignment of an agreement for lease is dutiable as an instrument of conveyance.  It would not otherwise have been dutiable as a transfer of a lease.  The same is true, in our submission, of the transfer of a sub‑lease, which is expressly included.  In those examples there is every reason to think, in our submission, that the inclusion of lease of land in the definition of “land” on page 4 was intended to pick up the defined meaning of “lease” on conveyance of dutiable property under item 5. 

If we turn to the rest of the definition of a “lease” and how it operates or can operate, our submission is that one comes to the same result.  There are three things which are excluded by paragraphs (a), (b) and (c) from the definition of “lease”.  Paragraph (a) is an attornment and our submission is that the logical postulation of where an attornment might occur in these circumstances is, for example, in a mortgage where under a mortgage of Torrens land, which we are talking about in the Territory, a mortgagor will attorn a tenant to a mortgagee. 

In accordance with the authority in this Court, the attornment operates as a tenancy by estoppel.  On transfer of the mortgage, the tenancy relationship would be reconstituted between the new parties and if the tenancy would otherwise have been a lease dutiable on conveyance, it is excluded from being dutiable on conveyance as a lease by its exclusion from the definition of “lease” in paragraph (a). 

If you take the second example, paragraph (b), a company shareholder’s right to occupy or use company land, on transfer of the shares to which the right of occupation attaches the transferee becomes entitled to the right of occupation.  If that right of occupation would otherwise have been a lease dutiable on conveyance, it is excluded from that by the definition of “lease” and therefore excluded from duty on conveyance.

We would submit in paragraph (c) the same is true of an option to renew a lease.  The option gives a right to renew the demise and to take a new term on transfer of the option to renew the lease if it might otherwise have been dutiable on conveyance as a lease because the lease included an option to renew.  The definition excludes the option from lease as defined and excludes the transfer of the option to renew from duty on conveyance.

What we take from this analysis is that on the ordinary meaning of the Act the definitions of “dutiable property”, “land” and “lease” all operate to give meaning to and affect the scope of what is an instrument in the class of a conveyance of dutiable property within the meaning of item 5.  They operate so that on the transfer of the lease an option to renew is excluded from the dutiable property that is to be valued.

Could we take that operation back into Division 8A.  Could we assume – taking your Honours back to page 10, and there are a lot of provisions here – that for the purpose of section 56K we are looking at whether there is a relevant acquisition, and we are assuming that there is, and one that satisfies the other elements under section 56K.  When the duty is to be calculated under section 56M, on page 11, the dutiable value which is to be taken under section 56R, which is on page 14, is the relevant proportion of the value of the unencumbered land.

We submit that the land to be valued there is the land as defined in section 4.  If it is not, then the calculation of the dutiable value will be different from that which would have been the dutiable value on a transaction of conveyance on an instrument of transfer.  Our submission is that would be inconsistent with the purpose of Division 8A as it appears from the way the sections operate and also from any other extrinsic materials.

Similarly, if we take your Honours back to 56 and to paragraph (b) on page 11 to see whether the 60 per cent threshold is achieved, the land in the Territory to be valued is land defined in the Act, in our submission.  Could we go then to the Court of Appeal’s reasons to come to a contrary conclusion and for excluding an option to renew starting in volume 4 of the appeal books at page 1895.

FRENCH CJ:   Just before you move to that, the non‑inclusion in the definition of “lease” of option to renew a lease then feeds into the valuation process.  In other words, it is not open to say that a lease can be valued, although the lease is defined not to include an option, and for the purposes of valuation regard can be had to the existence of the option.  You say that is simply excluded by the logic of the definition?

MR JACKSON:   Yes, your Honour.  Otherwise, what you are doing is, in the way in which we outlined in terms of the operation of item 5, charging duty on the option.  Could we take your Honours then to page 1895.  The conclusion to which Chief Justice Martin came in paragraph [78] was that:

The definition of “lease” does not apply to exclude an option to renew from “land” for the purposes of Div 8A.

The ultimate reasoning by which his Honour came to that conclusion is set out in paragraphs [76] and [77] on page 1894.  Paragraph [76] has a number of elements in it.  Could we use the appeal book line references rather than the report line references.  Starting at about line 24, his Honour says:

that the legislature has consistently intended to increase its stamp duty revenue.

Secondly, a couple of lines down at about line 26 on the appeal book page, he says in 1988 when Division 8A was established, real property would have included an option to renew.  We will come back to that.  Thirdly, at about line 28 his Honour says that when the definition of “dutiable property” was introduced there was no change to Division 8A.  The first point of those three is one, we submit, which is of no use or really not any use in answering a question like the present, and we will also come back to that, but in this reasoning there are two underlying assumptions which we want to try and draw out because they are critical, in our submission, to the other two reasons. 

The first is that in 1988 an option to renew was dutiable on conveyance of a lease, so it would have been dutiable as part of the real property of a corporation on a relevant transaction under Division 8A and our submission is that that assumption is an error.  The second is the assumption that was made by his Honour that because the expression “real property” was used in Division 8A and was used in 1992 still when the definition of “dutiable property” was introduced into the Act, those words operated to attract duty on a relevant acquisition without any regard to the operation of the definitions of “dutiable property”, “lease” and subsequently “land”.

We submit it was an error to conclude that the real property that is dutiable on value differs from the dutiable property of the corporation which would attract duty on conveyance.  Division 8A has, in our submission, never had the effect of making property dutiable as real property to be valued if it would not otherwise be land dutiable on a conveyance of real property or dutiable property, depending on the time at which you look at the Act.  Can we move to paragraph [77] of the reasons, and this is at about line 30 on the page.  His Honour acknowledges that:

the ordinary meaning of the provisions excludes an option to renew ‑

and he describes this as a literal application.  He then relies on three further propositions against that application.  At about line 33 on the page he says it would be contrary to the history of increasing capacity to raise stamp duty.  In the next line or so that excluding options to renew would reduce the capacity to raise revenue.  At about line 36, the second reading speech is contrary to any intention to reduce revenue.  Then at line 38 or thereabouts, if the definition of “lease” applies to “land”:

for the purposes of Div 8A would directly undermine the primary purpose of the legislation.

As we have seen from our earlier brief examination of the provisions, in our submission, lease does operate in Division 8A.  In referring to the definition of “lease” not applying for the purpose of Division 8A, his Honour was expressing himself too loosely, because otherwise you would not pick up the mining tenements and things of that sort which are included in the definition of “land” and you would not pick up the agreement for lease which is included in the definition of “lease”.

Could we take your Honours to page 40 of the respondent’s annexure setting out the statutory provisions to show this a little more clearly.  At page 40, the last page of the document, is an extract which is section 13 of the Taxation (Administration) Amendment Act 2000 which omitted the expression “real property” from section 56R and substituted “land”, the section that creates that which is dutiable property.  So we submit it was an error to conclude that the real property that is dutiable on value differs from the dutiable property of the corporation which would attract duty on conveyance.

Can we take your Honours back to page 39 of the document, which is the annexure.  At the same time as the change to land in the section, the definitions in section 4 were amended, and what happened was that the definition of “dutiable property” was amended to extract what had previously been included as land and defined as included in land as a new definition, but the text of it was not substantially different and then to simply use the word “land” in the definition of “dutiable property”, plainly leading to the inference that the definition of “land” is to be used.

We should say before we go on, that was the occasion for the creation of the separate definition of “land” and it follows, in our submission, inexorably that the definition in its entirety, including lease of land, applies in section 56R.  No one is suggesting, in our submission, that including a lease should be treated as a mistake.  What his Honour seems to be saying in the paragraph which we are looking at the moment is that the definition of “lease” was not picked up.  That seems to leave some other meaning of “lease” in the definition of “land”.  That seems odd, given the language was not altered, in our submission.

We submit that the definition of “dutiable property” previously picked up “lease” as it was defined when it included “land” in it and the definition of “land”, though being separated, did not change that.  It is important, it seems to us, to test what would be the case if his Honour were right about the idea of not picking up the definition of “lease”.

FRENCH CJ:   Sorry, just before you move on, there is no definition of “mining tenement” because that was adequately defined by reference to a mining tenement under the Mining Act.

MR JACKSON:   My memory is your Honour is correct about that.

FRENCH CJ:   And similarly, “fixture to land”, I do not think that is defined in ‑ ‑ ‑

MR JACKSON:   It was not defined separately.  My memory of the provision is that both those statements are correct, your Honour.

CRENNAN J:   There is no Cooper Brookes point in relation to this matter, is there?

MR JACKSON:   No, your Honour.  In our submission, Cooper Brookes takes you to a question of, is it absurd, and that is not the problem.  The problem here is, what is the better view and is it clear enough?  If his Honour were right that the definition of “lease” is not picked up, it would affect other aspects of how the Act operates.  In particular, a lease, or possibly a lease, granted under an Act but, in particular, an agreement for lease might not be land within the meaning of section 56R because they were expressly included in what is a lease, defined by the definition of “lease”.

In our submission, there is nothing else that would include an agreement for lease in land unless you choose the definition of “lease” and that would be an erroneous construction to adopt of section 56R.  There was, in our submission, no intention to pick up land by the 2000 amendments but to leave “lease” as defined behind.  If that is accepted, as we submit it should be, the true question for discussion is really a narrow one, is there some intention that appears to leave the exclusion from lease of an option to renew behind that can be seen from the context of the 2000 Act?

Our submission is that nothing is added to the discussion of that question by his Honour’s references to the history of increasing the revenue or reducing the revenue or undermining the primary purpose of the legislation.  They are based on another assumption, as we have said before, that on the conveyance by transfer or assignment of a lease the option to renew was in the dutiable property to be valued where value is the basis of the assessment.  If the consideration is the basis of the assessment, one does not get to this.  If that assumption is not true, there is no reducing, in our submission, involved and no undermining. 

The basis on which his Honour concluded that on conveyance by transfer or assignment of the lease an option to renew was in the dutiable property to be valued takes a little time to trace through in the reasons.  If your Honours will bear with us, we will try and do it as briefly as we can so that we at least expose the process of reasoning.  His Honour did not do it by detailed reference to the legislation as it appeared in 2000, as we have examined the legislation now.  Instead, he focused on the operation of the provisions of the original ordinances as they were passed in 1978. 

To see that, we can take your Honours back to page 1883 of the appeal book in volume 4 where the process starts in paragraph [26].  We will not read or drag your Honours through all of that, but if we go over the page to 1884 and paragraph [35] at about line 28, using the appeal book line numbers, his Honour sets out a submission which was made by the Commissioner:

In the Commissioner’s contention, the legislature did not intend duty to be assessed by reference to the rent payable on the renewable term because that term might never come into operation.

Then if we go to page 1887 in paragraph [45] your Honours will see how that argument was, in effect, accepted where his Honour, at about line 1 on the page, says:

In my opinion, the definition of “lease” in s 4 of the 1978 Taxation Ordinance did not apply to the conveyance of a lease.  The reason for applying the definition to an instrument for a lease does not exist when a lease is transferred.

His Honour goes on to give a number of other reasons.  Could we summarise the reasons without reading the whole paragraph.  The one at line 8 that I have just read out is that the reason for applying the definition does not exist.  At line 10 his Honour states that a dissection of the options value would create an air of unreality.  In the next line, the legislature intended to apply duty to market value of a lease and exclusion of the option would distort that.  At about line 13 on the page, exclusion would reduce the revenue.  Then at about line 15, his Honour was unable to discern any sound reason for applying the definition.

FRENCH CJ:   So the contrary intention appears on a view of a coherent operation of the Act that his Honour posits.

MR JACKSON:   But the reason was to deal with ‑ ‑ ‑

FRENCH CJ:   There was a narrower purpose for the exclusion.

MR JACKSON:   Yes.

FRENCH CJ:   And that supports the contrary intention.

MR JACKSON:   As his Honour found, yes.  We will come to that in a moment.  Could we take your Honours back to paragraph [27] on page 1883.  Your Honours will see there that his Honour refers to item 5 of the schedule as applying duty on conveyance not being the grant of a lease at a rate determined by value.  In the next paragraph, about line 20 on the page, his Honour sets out item 12 of Schedule 1, which is the item relating to the grant of a lease under Schedule 1.  He did not, however, as your Honours can see, pay close attention to how the definition of “lease” affected the potential operation of item 5 in the way we have just analysed it.

For the same reasons that we mentioned in relation to paragraph [78], the conclusion in paragraph [45] as to the definition of “lease” not applying, in our respectful submission, are erroneous or too wide.  The definition of “lease” did apply, in our submission, on a conveyance or transfer under item 5 because that was the way in which the transfer of an agreement for lease would be dutiable as a conveyance under that item.  If the definition of “lease” did not apply, that would not have been dutiable as a conveyance.

The way in which your Honours can see that most clearly is at page 20 of our learned friend’s annexure.  Page 20 sets out the definitions as they appeared in 1978 in the Taxation (Administration) Ordinance 1978.  Your Honours will there see that the definition of a “lease” includes a sublease and an agreement for lease.  So it is by the definition that the agreement for lease on conveyance became dutiable and the definition does apply, in our submission. 

The definition of “conveyance”, which is on that page, is something we should pay attention to as at 1978.  Your Honours will see that “conveyance” as it was then defined in the first three words “means a lease”, which is harking back perhaps to an older expression or use of “conveyance” in the context of stamp duties legislation which is that the grant as well as the transfer assignment was conveyance.

That inclusion of a lease was removed from the Act in 1979.  It does not actually, as we submit, at the end of the day trouble the reader about what the right solution is.  But it is important to realise that the definitions change in significant conceptual ways on the way through.  The transfer of an agreement for lease was a conveyance because it was a transfer of a lease in the language of those two definitions, is the point we make here.

Can we go back to page 19 then.  That is item 5 as it appeared in 1978 in the Stamp Duty Act.  It provided for three categories of conveyance or transfer in subparagraphs which were numbered (1), (2) and (3).  The third one is on page 20.  Category 1 was a conveyance of an estate in fee simple, leaving aside the unnecessary words.  Category 2 was a conveyance or transfer of a Crown lease but only where the term of the Crown lease was for more than five years, as appears from the words on the top of page 20.  Category 3 was a conveyance of a lease or transfer of a lease not a Crown lease.

If it were right that the definition of “lease” did not apply to the conveyance of a lease in 1978, it would also have been true in 1978 that an agreement for lease and a sublease were not expressly made leases and might therefore not have attracted conveyance duty on transfer.  In our submission, that would be an erroneous construction.  The question is again a narrower one.  Is there a contrary intention that appears in the legislation or does the definition of “lease” operate in respect of an instrument of conveyance of lease at 1978 in not including the option to renew only?  Our submission is that his Honour did not really specifically address that narrower question or make any analysis of the section which showed that the other non‑inclusions or exclusions from the definition of “lease” plainly had a role to play.

Could we then come back to paragraph [45] on page 1887.  Can we expand as briefly as we can on the first conclusion, which is that the reason to apply the definition to an instrument of lease does not exist which refers back to the Commissioner’s contention that we showed your Honours in paragraph [35], which we can summarise as being that the exclusion of option to renew was to prevent it from being separately dutiable as a grant of lease because it was an agreement for lease.  That is the concept, as we understand it, that is being advanced.

Can we take your Honours back to page 20 of the respondent’s annexures which sets out, at the top of the page, item 12 of Schedule 1 of the 1978 ordinance which made an instrument of lease dutiable and it did so for two classes of land.  One was where there was an existing estate in fee simple and the second was where there was a grant of a Crown lease for more than five years and the duty was payable, as it is expressed, in respect of the rent payable during the term. 

What his Honour seems to have had in mind at paragraph [45], as we have submitted, is that the definition of “lease” included an agreement for lease and the reason referred to in [45] for the exclusion was to stop the agreement for lease including an option and therefore being dutiable under item 12.  That is the contention which is made by the Commissioner in the appeal in greater detail.  If we could take your Honours in this appeal to the primary submissions of the respondent on page 16 of the written submissions of the respondent where in paragraph 45 our learned friends say, “the existing state of authority concerning leases reveals the context” and they set out a number of propositions from paragraph (a) on page 16 through to paragraph (d) on page 17, the last of which is:

an agreement that the lessee might have a further term on giving notice electing to do so was, or could be characterised as, an agreement for lease conditional on the giving of such notice.

Your Honours will see reference there to cases, including Laybutt’s Case decided in 1974 in this Court.  The cases before vacillate one way and the other.  If we go back to page 16 of the written submissions, your Honours will see that the Commissioner points to the 1969 Australian Capital Territory Act that had similarities to the 1978 ordinance that we have been looking at most recently.  The submission is made, as we have just read from it in paragraph 45, that the context in which the 1969 Australian Capital Territory Act was enacted included those things.

There are two difficulties with that analysis, we submit.  The first is that Laybutt’s Case, which is relied on, was not decided until 1974, after 1969 when the Act in the ACT was passed.  A second submission which is a difficulty with that contention is that, in our submission, contemporary opinion was not that an option to renew constituted an agreement for lease within the meaning of similar statutes to this.  We have included an example of contemporary opinion in our materials or authorities which are included in the list of authorities that your Honours we think have in three bundles of agreed authorities.

It is in volume 3 that we wish to take your Honours to an extract from Justice Hills’ book in 1970.  In volume 3 behind tab 33 and on the first of the copied pages in the extract, and we hope your Honours have page 133 of the book with a copy of section 76.  From that you will see that in the New South Wales Act at the time:

For the purposes of this Act the expression “lease” includes any promise of or agreement for a lease of any property –

similar to the way in which “lease” is defined in the section in 1978 in the Northern Territory ordinance.  If we take your Honours then over to page 136, the author discussed the proposition that an option for renewal might be an agreement for lease or stampable and in the paragraph which is identified as 76/7 expressed the opinion that:

Where a lease for a term grants to the lessee the option for a further term, the term of the lease does not include the term of the renewal and hence duty is charged without reference to the rent payable during the renewal.

Reference is made to Hand v Hall, which is in our learned friend’s cases.  Hand v Hall is in the context of a different statute but it is authority for that general proposition.  Then it continues:

The option for renewal is not itself stampable as a lease within the definition since until exercise it does not amount to an agreement for lease, nor does it confer upon the tenant the right to use property.

That is a statement, as we would submit, of contemporary opinion.  We also included behind tab 35 an extract from Sargeant and Sims on the equivalent provisions of the UK Act of the time which at page 155 picks up Hand v Hall in the second paragraph and states that:

A lease for a definite term of x years, with an option to the tenant to renew for a further y years, is chargeable as a lease for x years not as a lease for x+y years.

The discussion there is not as explicit about the agreement for lease.  So they are two reasons why, in our submission, the contention which is made by the Commissioner does not seem to be obviously correct.  The Commissioner’s submission is not based in any clear or clearly known state of affairs, in our submission, and it also treats the conditional option as the same as an unconditional agreement for lease.  That does not mean, can we would be blunt about this, that it cannot possibly have been the reason.  We just cannot say one way or the other, as we stand here in 2009. 

Other possibilities exist and can we explore one with your Honours to show that the view opted for by the Court of Appeal is not the only possibility.  It is a possibility which would admit that the drafter may have been concerned about the possible operation of the definition of “lease” in relation to instruments of transfer of lease in using the exclusion or non‑inclusion of an option to renew.  If you start with the assumption that an option to renew is an agreement for lease, which is the hypothesis, and therefore a lease is defined, a transfer of a lease by way of assignment might then have operated as a conveyance of both the lease comprised in the term and as a conveyance of the option as an agreement for lease. 

It may have been the drafter’s concern to avoid that possibility and the means chosen was to exclude an option to renew from leases defined.  We accept, for the purposes of this discussion, that that too is a possibility that lies, just like the first one, in the realm of conjecture, but it is no less sensible than the one which was adopted, in our submission, by Chief Justice Martin and which is urged by the Commissioner.  It means that the purpose of the exclusion or non‑inclusion in paragraph (c) was to operate in relation to instruments of conveyance, contrary to his Honour’s conclusion. 

Whilst we are at that point of analysing the reasons for concluding that the exclusion of the option to renew was only intended to operate on a grant, may we mention two other inconsistent points, points that are against that conclusion.  The first comes from the text of the legislation in 1978.  If we take your Honours back to page 20 which contains the definitions as at 1978, your Honours will see, at about line 30, that “rent” is there defined, it being the rent which is the matter that engages the duty in item 12 set out above the page. 

If the aim of the drafter was only to prevent the rent which would become payable if the option was exercised from being used in the calculation of duty under item 12, it would have been more appropriate, in our submission, to amend the definition of rent to exclude rent under an option to renew, which has not been exercised.  Secondly, prior to 1987 – this is another contextual requirement – your Honours saw that item 5 – and this is back on page 19 – had excluded conveyances of Crown leases for a term not exceeding five years, going over to the top of page 20. 

If we take your Honours over to page 24, in 1987, by the Stamp Duty Amendment Act (No 2) 1987, item 5 was omitted and substituted in those terms and the new categories of conveyance, being (1) through to (4), no longer dealt with excluding Crown leases which were for less than five years.  But if your Honours go back to the prior page, page 23, at the same time an amendment was made to the Taxation (Administration) Act 1978 which, on the top of page 24, added paragraph (aa) to exclude from lease “a Crown lease for a term not exceeding 5 years”.  That exclusion from lease was another one plainly intended, in our submission, to operate in connection with a lease on an instrument of conveyance, just like the other exclusions.  Could we take your Honours then to page 1889, to paragraph [57] of the Chief Justice’s reasons.  In that paragraph his Honour says:

Even if I am in error as to the operation of the definition of “lease” in connection with a direct conveyance of a lease in 1988 –

His Honour had already concluded at 1988 was not different from 1978 –

I remain of the view that the definition of “lease” had no role to play in the operation of Div 8A as first enacted in 1988.  The legislature chose to apply Div 8A to corporations entitled to “real property” of a specified value as “real property” was understood in law at that time and chose not to create a statutory connection between “real property” in Div 8A and the definition of the “lease” in s 4.

In other words, here is a second ground, as we would read it, of concluding that Division 8A was intended to operate in a different way.  Our submission is that that is an error in the construction of the operation of Division 8A for several reasons.  Two of them we have already covered, that is, that the duty which was payable under section 56M was always the conveyance duty.  The purpose of the division was always to charge the acquisition of the interest, whether it be the majority interest or further interest, in a proportion of ways if there had been a conveyance of the land.  There is no reason, looking at the external context, why in Division 8A it was intended that the land would be different for one purpose than it would be for the other.  They should be the same.  That is supported by another section which we should point to, which is section 56U.  That is on page 16.  Section 56U provides and always provided that:

This Division does not apply to or in relation to –

(a)an acquisition by a person of an interest in a corporation relating to property if a conveyance of the property to the person would not have been liable to duty under item 5 –

Our submission is that that section plus the other considerations we have mentioned are directly against his Honour’s conclusion in paragraph [57] and we submit that Division 8A was never intended to operate to charge duty at the rate applicable to a conveyance in real property of a corporation which would not have attracted duty if it had been conveyed.  If we are correct in that, there is no basis for his Honour concluding that Division 8A was to be applied and duty was to be calculated on the value of an option to renew even if the conveyance of a lease was not. 

Our submission is there is no clear intention that appears that the exclusion of options to renew from lease was not intended to operate in the defined meaning of “land” in Division 8A generally and including specifically section 56N.  At the best, for the reasons we have just canvassed for those opposite, there is a proffered reason which is one possible explanation for the exclusion in the definition of “lease”, but it is not the only one and the matter is left unclear. 

Our learned friends obviously contend that is not so or, even if it is, that their explanation should be preferred.  It is at that point that our submissions travel to the principles to be applied in determining the legal meaning of the section as a matter of construction from the point of departure just mentioned.  We rely at that point on the principles set out in Anderson’s Case, being Anderson v Federal Commissioner of Taxation 57 CLR 233.

Can we go directly to Anderson which you will see in volume 1 behind tab 2 and can we go there having flagged but not yet focusing on the proposition that the failure to lodge the statement in question which turns on this question of construction is also an offence under section 56K(6).  In Anderson the central passage we rely upon, which is well known, is at page 243 in the joint judgment of Justices Rich and Dixon. It starts with the words, “We are unable to accept this interpretation of the section”. We will come back to the context in a moment.

Their Honours in that passage refer to three other cases in the House of Lords, or the Privy Council, being Brunton, Milne and Ormond.  Your Honours will see that, using what I might describe as the central words, in the passage their Honours spoke of cases which themselves spoke in terms of requiring “clear and unambiguous language”, at about line 15, that having come from Brunton.  A couple of lines further down from Milne “clear and unambiguous words” just before the reference to Ormond Investments, another seven lines down “plain terms”, and in the second last line in the passage, or the last three lines, “clearly showing an intention” and “the words of the statute must be adhered to”. 

The context we submit, though, in which that discussion occurs is also relevant.  The question for consideration was whether particular property formed part of the estate of a deceased chargeable with death duty, which your Honours can see from page 240 at about point 3 on the page wherein the joint judgment their Honours state the question.  The particular section was section 174 of the 1928 Victorian Act that is set out on page 240 which dealt with some cases where the person on whose death duty was claimed had caused the property to be transferred to or vested in himself and another person who took a survivor.  Relying on the words of the section, the taxpayer contended it did not apply if the survivor had not acquired his or her interest as a joint tenant or volunteer.  Your Honours can see that at about point 4 on the page on 241 where it is starting at about point 3:

On behalf of the executors, who are the appellants, it is said that the section has no application . . . For this view two reasons are given –

and then the submission is set out.  The Crown relied importantly on an analysis of a number of prior enactments of a similar kind from which the section had been composed, as your Honours can see from page 241 starting at about point 7, and that discussion proceeds over to page 242 with reference to cases that interpret the prior provisions and on to 243 where the passage we rely upon begins.  At page 244, if we could go to the dispositive part of the reasoning, in the second line, their Honours say:

The condition is that the deceased shall have been absolutely entitled to the property which he has caused to be vested in himself and the survivor and in which the beneficial interest accrues by survivorship . . . The condition has plainly not been satisfied, if the words bear their ordinary meaning.  They are unambiguous and definite.  The claim of the Crown can be made out only by adding to their ordinary meaning a secondary or extended meaning which as a matter of English they are incapable of bearing.  It may be true that the bracketed words are neither easily understood nor explained, and that the purpose of the words immediately following is not very clear.  But to base upon them an implication destroying the effect of a clearly expressed condition of liability appears to us to be placing a liability upon the subject by means of uncertain inferences drawn from obscure language‑

It is the last part that we rely on. 

FRENCH CJ:   Incidentally, is there a provision in the Interpretation Act (NT) equivalent to, I think it is, 15A or 15AB in the Acts Interpretation Act relating to the weight to be given to the desirability of applying the ordinary meaning of words?

MR JACKSON:   Subsection (3) I think your Honour has in mind and I think the answer is no.  That subsection, which stemmed from a recommendation of Bennion which was adopted in the Commonwealth legislation, has not found its way into the Northern Territory equivalent. 

In our opponent’s submissions, if I could take your Honours there briefly, at paragraph 22, they would only allow Anderson to stand for the rejection of an economic substance over statutory text as a criterion for liability, as your Honours will see in the last three lines of paragraph 22.  In paragraph 23, they submit that the statements in Anderson cannot stand with a purposive approach which has been taken in this Court since 1990.  Our submission is that that goes too far.  Accepting that the modern principles of statutory interpretation are to be applied in the construction of taxing Acts, as well as other Acts, our submission is that where a doubtful interpretation remains after application of those principles, the principle in Anderson requires that the doubt be resolved in favour of the taxpayer. 

There are two reasons why we urge that this Court accept that approach.  The first is that it accepts the proper role of the modern law in principles of statutory interpretation, we do not urge on the Court to change anything about that at all.  The second reason is that it remains as true today as it did even 100 years ago, that the ascertainment of the purpose of many taxing Acts, or the provisions of the taxing Acts, must be gleaned from the text and the context that the provision has in the Act in question.  That does not say that there are not cases where context will provide the answer.  It says there will be cases where context, even the wider context allowed under modern statutory interpretation and principles, will not always provide the answer.  Where the doubt remains, in our submission, the principle in Anderson should still operate to resolve the doubt in favour of the taxpayer.

HAYNE J:   Much may turn, may it not, on the content of the intermediate step that lies between the observations made about past versions of the Act and the conclusion reached about the construction of the current Act?

MR JACKSON:   Yes.

HAYNE J:   What exactly is the intermediate step that is taken to go from observations about the way the Act operated or is supposed to have operated in the past to the conclusion that the Act as it presently stands bears one meaning rather than the other?

MR JACKSON:   I do not think I can answer that question, with respect, your Honour, with a single proposition.  The cases, as we looked for that kind of examination, do not seem to articulate an intermediate step or process by which ‑ ‑ ‑

HAYNE J:   But in this case, what is that intermediate step or what are those intermediate steps?

MR JACKSON:   Our submission is that in this case it does not appear as at 1978 that the purpose of the exclusion in the definition of lease was confined, as the Commissioner submitted, that the inference should be drawn was.  So it was not just to take out of an instrument of a lease which was dutiable the option to renew as an agreement for lease and the rent.  It was not clearly that.  Our submission is that could be shown by the fact that it would have operated just as arguably in the case of an instrument of conveyance, being an instrument of transfer.

FRENCH CJ:   Is it too simple to say that you rest your submissions upon the ordinary meaning of the language as it presently stands and deny the existence of any bridge between past and present that would assist the Commissioner?

MR JACKSON:   I am grateful to your Honour for that because I was going to say next that I started at the back when, in fact, I should start at the front.  The proposition is the ordinary language operates and operates consistently and workably in the way in which we submitted.  In order to find a contrary intention, there has to be something which merges and that step, which was taken for the reason that I have just discussed, is not one that is clear.  The way I put that, and the two ways in which it is put, raise another potential question of statutory interpretation.  It does not seem to ever have been addressed, I am not sure it needs to be, which is that, is there some difference in approach when one is testing whether a contrary intention appears to the application of the language which is otherwise the ordinary meaning as opposed to looking at a section where they are not the words under consideration?  Is the construction question different in one approach than from the other?  There is no authority which suggests particularly that it is or it is not, but I will come to that in a moment. 

To then come back squarely to your Honour’s question, what is the step that gets from the language as it appears to the narrower meaning, that is, excluding the operation?  There is none, we submit, in this case but if there were to be one, it should be that you can see clearly enough that the intention was to operate in a constrained way that is contended for both by our learned friend’s opposite and it was found by the Chief Justice.

HAYNE J:   It would seem to me that, at least at this stage in development of the argument, that the intermediate step must be one which says that this division had a particular operation in the past and that operation has not changed over time, the operation being one that, it is said, runs against your interests.  At the moment it is not plain to me, and Mr Slater has yet to be heard, but it is not yet plain to me what other bridge it is sought to build between past and present versions of the Act.

MR JACKSON:   Yes, and to take that process of reasoning further, your Honour, there seem to be two pylons, to use the metaphor, under the bridge that are relied on, one being the 1978 construction of the operation of the definition of an instrument conveyance and the second being that the 1988 language “real property” for some reason indicated a different intention at that time.  We have addressed both of those.  If we come then back to Anderson’s Case which your Honours will observe we rely upon effectively as a game breaker, to use the vernacular language. 

HAYNE J:   I would not carry the metaphor too far.  There will be references to throwing up Hail Mary passes on the buzzer.

MR JACKSON:   Luckily, your Honour, we are going to the United States soon.  Paragraph 99 of our submissions, which I was mistakenly going to take your Honours to a few moments ago, if we could go there, that is the principle in Anderson, we rely on it rather like the approach that has been taken in this Court in the interpretation of penal provisions, which we invoke because of section 56K(6) that makes it an offence not to lodge a statement.  Your Honours will see that in paragraph 99 – and we go here rather than to the case itself because our learned friends have relied on the same passage so there is no dispute about this – a passage that appeared in the joint judgment in this Court in Waugh v Kippen which was taken itself from the judgment of Justice Gibbs, as his Honour then was, in Beckwith. The paragraph appears in those lines between about 8 and 15 which we will not read out loud. 

There are only a couple of observations that I will make about that.  First is that we submit that the same approach can be taken to the application of the principle in Anderson’s Case.  The second is that to the extent that the description is one that the rule of last resort, that should not be overemphasised.  The true question is, is there a doubtful interpretation that remains.  One should not desperately seek to decide the answer before that.  If on application of the principles there is a doubt remaining promptly, then the rule can be applied according to its tenure. 

As we have submitted, we rely on that because of section 56K(6) and the point of substance here is that on any view, in our submission, that the interpretation of land in Division 8A, which has found favour the Court of Appeal, was not one readily ascertainable.  It was driven by context which comprised analysis of the reason for the adoption of the particular language in the 1978 Act many times removed from the current context and, as we have submitted this morning, that interpretation itself was plainly disputable. 

When the context, in our submission, is one that is as obscure as that and it drives the outcome of the legal meaning, there is a further reason, we would submit, to conclude that the interpretation of the provision remains doubtful, given that the consequence of one meaning or the other as the commission of a criminal offence without any wilful or mental element.  We develop that in paragraphs 82 to 90 of our written submissions. 

The response to that proposition by our opponents has two limbs, and could we take your Honours to our opponent’s submissions to show that response, which appears in paragraph 29 on page 10.  The first point they take is that the principle of construction only has application to relief against the possible sanction of the criminal law – you will see in the last line on page 10 in paragraph 29:

or in enlivening the relief against the possible sanctions of criminal law afforded by provisions such as section 30(2) of the NT Criminal Code. 

Could we take your Honours to section 30(2), which is on page 18 of the annexure, and your Honours will see that it is the provision which excuses from criminal responsibility an omission which is:

made with respect to, or for an event caused to, property in the exercise of an honest claim of right –

Our submission is it is irrelevant to the present question.  Previously, not in this written submission, the Commissioner had relied on section 32 as well, which is set out at the bottom of that page, but he does not seem to press that suggestion anymore.  The second submission which is relied upon against our invocation of the principle in WaughvKippen in this case is that the principle which applies to penal statutes has no application where the provision in question has a general effect in the regulation of business affairs or civil affairs.  Your Honour will see that in paragraph 27 of the respondent’s submissions in the first two lines and reference then is made to a number of cases.

We have been through those cases carefully.  None of them is authority which directly supports the contention.  We are not aware of any case in this Court – I may be wrong about this – one way or the other about the suggested qualification on the principle.  But the same contention has, in fact, been considered by the United States Supreme Court and rejected by that court.  Could we take your Honours briefly there to show what assistance the decisions of that court might give on the point.  It is in volume 3 that we go behind tab 27 to the decision of United States v Thompson/Center Arms Co 504 US 505. It seems to be, not uncommon, a case concerned with firearms.

The National Firearms Act, which was the subject of the case, imposed a tax upon anyone making a firearm and required the maker to register it.  The failure to comply with the provisions of the NFA, as it is called in the judgments, including a failure to pay the tax was subject to a criminal penalty and the word “firearm” was defined to mean, among other things, a rifle of a particular length.  Thompson made a pistol which could be assembled with a stock and different barrels which when assembled in some form satisfied the criteria for the definition of “firearm” but in others it did not because of its length.

Justice Souter, who was joined by the Chief Justice and Justice O’Connor, wrote what became the plurality judgment and together with Justices Scalia’s and Thomas’ joint reasons, those judges constituted the majority of the court.  In Justice Souter’s reasons in sections I and II, starting on page 507 and going to the succeeding pages, and I will not drag your Honours through them, his Honour carefully examined the text of the statute and its structure coming at page 513 at about point 7 on the page under number “1” to the conclusion that:

Neither the statute’s language nor its structure provides any definitive guidance.

He then started to look at the context of other Acts, then the reasons continue that way, with a view to seeing whether they provided anything of assistance and to the purpose which is now, at page 516, an history of the NFA which were all relied upon by Thompson and deciding that they did not solve the problem.  Your Honours will see that the purpose and history were raised by Thompson on page 516 under the number “2”.  In the third section of the reasons at page 517, at the beginning of that section, his Honour concluded that:

After applying the ordinary rules of statutory construction, then, we are left with an ambiguous statute.  The key to resolving the ambiguity lies in recognizing that although it is a tax statute that we construe now in a civil setting, the NFA has criminal applications that carry no additional requirement of wilfulness.

That is the passage we rely on in particular.  His Honour compared Cheek’s Case.  Then over the page at page 518 continued:

Making a firearm without approval may be subject to criminal sanction, as is possession of an unregistered firearm and failure to pay the tax on one . . . It is proper, therefore, to apply the rule of lenity and resolve the ambiguity in Thompson/Center’s favour.  See Crandon v United States, 494 US 152, 168 (1990) (applying lenity in interpreting a criminal statute invoked in a civil action).

Your Honours will also then see a reference in the next sentence:

Accordingly, we conclude that the Contender pistol and carbine kit when packaged together by Thompson/Center have not been “made” into a short‑barreled rifle for purposes of the NFA.

Footnote 10 refers to the reasons of Justice Stevens which follow in the report and as his Honour analysed that.  It was that:

JUSTICE STEVENS contends that lenity should not be applied because this is a “‘tax statute,’” post, at 526, rather than a “criminal statute,” –

referring to Crandon’s Case again –

But this tax statute has criminal applications, and we know of no other basis for determining when the essential nature of a statute is “criminal”. Surely, JUSTICE STEVENS cannot mean to suggest that in order for the rule of lenity to apply, the statute must be contained in the Criminal Code.

Then at the foot of the page:

JUSTICE STEVENS further suggests that lenity is inappropriate because we construe the statute today “‘in a civil setting,’” rather than a “criminal prosecution.”

FRENCH CJ:   How does the rule of lenity stand with what Justice Gibbs said in Beckwith?

MR JACKSON:   It is the same principle, your Honours, and we include two other cases to try and show that.

HEYDON J:   Have you anything good from Justice Scalia?  He was part of the ‑ ‑ ‑

MR JACKSON:   Justice Scalia, your Honour, concurred.  He applied the rule of lenity and came to the same result, but he found that the plurality had in fact got the ambiguity wrong.  There was another one, not the one they chose and he relied on, as your Honour will not be surprised to hear, purely textual considerations to come to his conclusion.  Your Honours, I think, can see that at page 519 in the second paragraph, “I agree with the plurality”.

CRENNAN J:   Here there are penalty provisions, are there not, for not putting in the statement?

MR JACKSON:   There are two consequences.  One is that there is a direct offence under section 56K(5).  The second is under section 94, when the Commissioner makes a default assessment, then penalty provisions will apply and the penalty is double the duty.  So there is also that aspect of penalty that is involved, yes, your Honour.  I have just answered your Honour’s question that the principle in terms of the rule of lenity is the same as that in Waugh v Kippen.  Can we take your Honours directly to one case in the United States Supreme Court to which we point for that submission, which is Muscarello.  It is in volume 2 behind tab 20.

The full name is Muscarello v United States 524 US 125 (1998). The page to which we would take your Honours is page 138 in the opinion of the court which was a majority opinion. The cases we have used – of course there are many about this principle in the United States Supreme Court – we have used it for two reasons. One is that it has an articulation of both a view for and against the application of the rules, and your Honours can see the language, and the other is it seems to be frequently referred to in the text writing about the rule of lenity in that country.

At page 138 your Honours will see in the last paragraph on the page in the opinion of the court delivered by Justice Breyer on behalf of the majority starting with the word “Finally” and it continues over to page 139 and it is a rejection of the application of the principle.  Your Honours will see that the rejection is because the ambiguity was not grievous enough.  On page 148 in the judgment of Justice Ginsburg for the dissenting minority, your Honours will see a discussion of the rule of lenity in the paragraph beginning at about point 3 on the page:

The sharp division in the Court on the proper reading of the measure confirms –

and the passage goes to the end of that page.  Our submission is that this Court should invoke not the precise expressions used in the United States Supreme Court but that the rule of lenity and its application are, in substance, counterparts of the principle applied in this Court in Waugh v Kippen.

FRENCH CJ:   How much longer are you likely to be, Mr Jackson?

MR JACKSON:   Your Honour, not much longer.  About 10 minutes, I think.

FRENCH CJ:   The Court will adjourn until 2.15.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.14 PM:

FRENCH CJ:   Yes, Mr Jackson?

MR JACKSON:   Thank you, your Honour.  Before leaving the United States cases, we seek to obtain one other piece of assistance from the Supreme Court’s decisions about the rule of lenity.  One of the cases which was referred to in Thompson/Center, which we took your Honours to before lunch was Crandon v United States 494 US 152 (1990) and a copy of that appears in volume 1 of our bundle of authorities behind tab 10. The case concerned the proper interpretation of the section which prohibited the making of payments to government employees as a supplement to compensation for their government service. The passage we rely on concern the reasons which informed the rule of lenity rather than another statement of the rule itself. They appear firstly at page 158 in the judgment of the opinion of the court. There were no dissents though. There was a concurring opinion.

HEYDON J:   I personally do not have that.  I have a very large number of page 152s.  Could you read it?

MR JACKSON:   I am sorry, your Honour.  I will read the passage out.  They are fairly short.  It starts:

In determining the meaning of the statute, we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy . . . Moreover, because the governing standard is set forth in a criminal statute, it is appropriate to apply the rule of lenity in resolving any ambiguity in the ambit of the statute’s coverage.  To the extent that the language or history of § 209 is uncertain, this “time‑honored interpretive guideline” serves to ensure both –

and these are the bits that we rely on –

that there is fair warning of the boundaries of criminal conduct and that legislatures, not courts, define criminal liability.

It is the concept of the rule or the reasons of the rule being fair warning which we seek to bring into our argument.  Could we hand up a copy.  Hopefully your Honour’s copy is the only one that is erroneous like this.  The other page is at page 160 where the same propositions were prised at about point 6 on the page where their Honours said:

Because construction of a criminal statute must be guided by the need for fair warning, it is rare that legislative history or statutory policies will support a construction of a statute broader than that clearly warranted by the text.

All cognate concepts to those on which we rely, and also to the one that your Honour the Chief Justice raised with me about section 15AB(3) of the Acts Interpretation Act (Cth) before lunch.  I mentioned that Bennion argues for a view about that at common law, but I did not take your Honours to that.

FRENCH CJ:   I think Justice Gaudron said something about it, albeit in dissent, but not relevantly, to the dissent in Yuill’s Case.

MR JACKSON:   Now that your Honour says it, I cannot remember it, I am sorry.

FRENCH CJ:   It is basically about the emphasis that he placed of a primacy of the ordinary meaning of words as a matter of fairness to the reader, to those to be bound by the laws.

MR JACKSON:   In Bennion, in volume 3, tab 31, and the relevant passage in section 201is that:

It is a rule of law . . . that the person who construes an enactment must infer that the legislator, when settling its wording, intended it to be given a fully informed, rather than a purely literal, interpretation –

Then the author continues over into section 203 on page 590:

In determining under the informed interpretation rule –

which is why I go to section 201 –

whether consideration should be given to any informative material, and if so what weight should be given to it, regard is to be had to:

(a)the desirability of persons being able to rely on the ordinary meaning –

The author then verses section 15AB of the Acts Interpretation Act (Cth) and says it was in turn derived from his draft bill in an earlier iteration of this book.  So he argues for it as a common law principle in the same fashion.

FRENCH CJ:   Your primary position relies upon – perhaps your only position – the ordinary meaning of the words in their context.  You say there is no ambiguity and everything else you have said is a kind of rejection of the Court of Appeal’s reasoning and pre‑emptive strike.

MR JACKSON:   Yes, and I suppose I also tried to play a back ball and say, if there is ambiguity, it is not clear what the outcome is and we go back to the principle ‑ ‑ ‑

FRENCH CJ:   Then the ambiguity is not clear.

MR JACKSON:   If the outcome of what the meaning is is not clear.  It is still a doubtful meaning.  Your Honours, could we take you then to the matter that I said we would return to in the Court of Appeal’s reasons which are the statements made Chief Justice Martin as to the intention to increase or not reduce the revenue.  To make this as brief as we may, could we take you to our written submissions on page 13, paragraph 79 at line 20 about that subject matter.  What we do in paragraph 79 is collect six references in the order they appear in the judgment from the reasons of the Chief Justice which I pick up a general intention, if we may call it, to increase or not to reduce the revenue.  May we ask your Honours to read them briefly rather than drag through the paragraphs of the reasons themselves. 

Included in the relevant paragraphs your Honours will see are paragraphs 45 and 76 which are two of the vital paragraphs that we have analysed in detail before.  This extraction of references shows, in our submission, that an important part of the Chief Justice’s reasoning was an intention which he derived at a general level that the legislature wanted to increase the revenue or would have wanted to decrease the revenue by the result of one interpretation or the other.  In our submission, in the absence of other textual or contextual indications, his Honour relied on that thinking or approach as of assistance in resolving the answer to the question of construction.

We submit that at that level of generality an intention to increase or reduce the revenue is not a relevant statutory purpose which assists in the construction of a particular provision and in support of our submission in that respect we rely on a passage in the judgment of Chief Justice Gleeson in this Court in 2007, in Carr v Western Australia 232 CLR 138, which is volume 1 of the bundle of authorities behind tab 6. The question under consideration in Carr was the meaning of a section of the Criminal Code (WA), but it was apt in the circumstances for his Honour to make some observations about the section of the Interpretation Act that required that in the interpretation of the provision of an Act a construction that would promote the purpose or object underlying the Act is to be preferred to one that would not. Your Honours will see that at page 143. His Honour observed on that page in paragraph 5 about six lines up from paragraph 6 that:

Legislation rarely pursues a single purpose at all costs.  Where the problem is one of doubt about the extent to which the legislation pursues a purpose, stating the purpose is unlikely to solve the problem.

Then in paragraph 6 his Honour goes on to give an example of that kind of case and he instances tax legislation which has the underlying purpose to raise revenue for government and says that:

No one would seriously suggest that s 15AA of the Acts Interpretation Act has the result that all federal income tax legislation is to be construed so as to advance that purpose.

Our submission is that, in effect, in the passages we have extracted in paragraph 79 of our written submission, that is what Chief Justice Martin fell back on in the absence of anything else that gave him assistance.  The ultimate question, of course, in the case is whether a contrary intention appears to the meaning for which we contend.  We deal with that in our written submissions on page 18, if we could take the Court there briefly.

FRENCH CJ:   You are really falling back on Pearce and Geddes, are you not?

MR JACKSON:   Yes.  What we have done there, your Honours, is to collect – we were not looking for, as it were, the analysis of text writers.  We also did some other earlier research, if that is the right way to put it, as to what had been said about this as a matter of approach or principle in terms of statutory interpretation.  We did not come up with much.  The statement that we have extracted from Pearce and Geddes appears in paragraph 101 of our outline.  Neither Bennion nor Craies devotes much attention to the subject matter. 

Your Honours will see on page 19 in footnote 51 Dean of Ely v Bliss, which is one of the advantages of the having the English Reports on internet accessible research is one can search across the reports.  That appears to be the earliest occasion in the reports where there has been a consideration of the effect of using that sort of language as a matter of statutory interpretation, but nothing, as we have looked at the cases, seems to emerge in terms of any detailed exposition of it beyond the clearest statement which we have extracted on the top of page 19 from the Privy Council’s decision in Blue Metal Industries. 

We have also in paragraph 104 extracted what might be described as the critical words in the more recent decision of this Court in Pfeiffer v Stevens about the application of those words in the legislation, but beyond that, there is not a tremendous amount in terms of judicial writing about whether there is any particular approach to be adopted.  As far as we can tell, there is no detailed statement in this Court about it.

Our submission is that if one looks at those sorts of statements, the general character of the Act, or Division 8 in this case does not supply the answer to the question, nor can the answer be actually found in the Act and nor can the intention be described as manifest.  They are all expressions extracted from the relevant statements or decisions in this Court.  So, accordingly, no contrary intention appears, in our submission, to give the meaning of “land” a meaning other than its defined meaning in the sections in question in Division 8.  They are our submissions in substance.

There is one other matter that I wanted to deal with, though.  Your Honour Justice Crennan raised the question of penalties before lunch and I referred briefly to section 94.  We checked the sections which are not in the bundle that we have given to your Honour in the respondent’s annexures to see that any of the other sections including section 94 are in volume 3 and we found section 94 is not fully copied, but sections 95 and 96 are.  May we just hand up complete copies of sections 94, 95, and 96 which deal with the fault assessments and penalties, 94 being the default assessment section, 96 being the section which provides for penalties under default assessment in the amount that I mentioned before lunch.  Your Honour, if one goes to section 94(1):

(c)the Commissioner has reason to believe or suspect that a person is liable to pay duty –

in this case –

the Commissioner may make an assessment . . . create a memorandum . . . which memorandum shall be deemed to be an instrument –

Then section 96(1):

Where a person is liable to pay duty or tax by virtue of an assessment made under section 94, that person is liable to pay, by way of

penalty, in addition to the amount of the duty or tax, an amount equal to double the amount of that duty or tax.

Unless there anything else, your Honours, they are our submissions.

FRENCH CJ:   Thank you, Mr Jackson.  Yes Mr Slater?

MR SLATER:   Thank you, your Honour.  Your Honours, on matters of general interpretation principles, although there is some skirmishing and jostling for advantage between parties, there is substantial underlying agreement, except perhaps in relation to what our friends call the lenity principle or the principle in Anderson’s Case.  The real contest is as to the application of the interpretive principles to Division 8A.  My learned friend in opening his case formulated the issue as being whether in Division 8A “land” has the meaning given to it by section 4.  That formulation rather subsumes the point which divides the parties, which is whether paragraph (c) of the definition of “lease” in section 4 has the effect that a lease which is property of a relevant corporation is to be taken to operate as if it did not include any option for renewal in considering its value for Division 8A purposes.

By the end of these submissions I think it is probably fair to say that this was the point which was at issue in my friend’s case.  What divides the parties is whether taking into account the language, the context, and the purpose and history of the provisions, Division 8A brings to account in making a calculation in section 56N the full value of a leasehold estate or whether the effect of the definition in section 4 and, in particular, paragraph (c) of that definition, is to require that the value attributable to a covenant for renewal should be excluded in making the section 56N calculation.

Your Honours, if I could turn first to questions of general principle and do so fairly briefly.  I will follow broadly, subject to your Honours’ intervention, the structure of our written submissions.  Firstly, on the questions of general interpretation, the course of authority in this Court, which has considered this question many, many times in recent years, makes it clear, in our submission, that all of these are important; the text or language of the statute, the context of a provision within the statute, its relationship with other provisions, context outside the statute, the relationship of the provision and the statutes with other statutes, the mischief at which it is directed and the purpose of the provision, both the legislative scheme and the purpose of particular provisions and, as a means of ascertaining those matters, the legislative history, the previous position, the effect of the new text, the reasons why it was enacted, and such information as is vouched safed by recourse to extrinsic materials.

Your Honours, no one of these is exclusively determinative, although, in the end, all of them give meaning to the words used in the text of the legislation.  Although the process of interpretation may start with one aspect, recourse to another may give the first a quite different aspect, so that, for example, the purpose of a provision may be clear but looking at the text may show that it simply was not achieved or, conversely, as the Court said in CIC Insurance, apparently a play words may bear a different appearance when looked at in the context of the mischief at which they were directed and different statutes may call for a different pathway to interpretation.

I appreciate, your Honours, that that is equivalent to teaching one’s grandmother to suck eggs, to use an old expression, and none of it is new, but it bears repeating because our friends stand by their written submissions and an attempt is made in their written submissions to adopt one of the available avenues of interpretation largely to the exclusion of the others. 

The second general matter to which we wished to draw the Court’s attention is what has been said about the use which is to be made of definition provisions.  Our friend’s argument largely depends on formulating a meaning for the definition of “lease”, importing that into the definition of “land” and then taking that as a portmanteau expression and applying it to everything else in the Act.  That, in our submission, is not the way that it should be approached.

FRENCH CJ:   On the face of it, it is simple and detractive logic, is it not, though, for the ordinary, even informed reader, land includes lease, lease does not include option to renew?

MR SLATER:   Yes, it is simple and perhaps a little too simple in the sense that if the context into which that simple syllogism is imported then produces a result which shows that that is not what was intended to be achieved, then that is not an appropriate course to follow.

FRENCH CJ:   It is not a matter then of just equating different avenues of interpretation, which was I think the way you were putting it in your opening remarks, but showing some basis for departing from that simple logic.

MR SLATER:   Yes, your Honour, except that what we would submit is that Justice Mahoney in the passage which is reproduced in Justice Martin’s decision at page 1886 of the record.  That is what Justice Martin and what Justice McHugh said.  One looks at the operative provision with the definition read into it to decide whether the operative provision is one in which the definition has an effect which is consistent with the operation of the statute.  I had in mind particularly the passage which is italicised by the Chief Justice:

it is sufficient if the result of the application of the definition to a section results in the operation of the section in a way which clearly the legislature did not intend –

That is not entirely and precisely on point, but what Justice McHugh said both in Kelly’s Case and in his adoption of it later in Allianz Australia Insurance, which is on the bottom half of page 1886, is to the same effect, that is, that one does not decide first what the interpretive provision means in an abstract sense and then mould the substantive provision to the interpretation provision, rather, the interpretation provision is moulded to the substantive provision. 

One other matter that emerged from looking at our friend’s extracts from Mr Bennion’s Code is that he refers in section 199 of his code to a decision which is truncated in the extract which is provided to the Court. If your Honours would to go to that under tab 31, your Honours will see on page 569 Mr Bennion suggests that “A contrary intention may apply to a part only of a definition” and gives an example. An example to which reference is made is to a decision of the Court of Appeal in a matter of Starke v Inland Revenue Commissioners, and I apologise for providing this so belatedly, but it did not come to our attention until this morning.  If I could hand up copies.

FRENCH CJ:   The reference to Starke v Inland Revenue Commissioners?

MR SLATER:   I am sorry, your Honours, it is [1996] 1 All ER 622. There is probably a better reference than that, but that is the only one I could find.

FRENCH CJ:   Thank you.

MR SLATER:   The point is perhaps made succinctly in the first five or so lines of the statement of the holding in the headnote:

While the inclusions required to be made by s 5 of the 1978 Act to the word ‘land’ when used in s 115(2) of the 1984 Act were plainly not excluded in their entirety, a contrary intention to exclude buildings and other structures from the definition of ‘land’ was indicated by various parts of the 1984 Act. 

We advance that simply as an illustration of a case in which the contrary intention limitation upon use of a definition extends not simply to the definition as a whole, but to some part of the definition when read in the context of the operative provision.  The case before the Court today is, in our submission, one case where if the operation of paragraph (c) is, as our friends would have it, then its application to section 56N is one which is the subject of a contrary intention in the scheme of Division 8A.

HAYNE J:   Do you, in your written submission, collect the matters which you say evidence that contrary intention?

MR SLATER:   Not in so many words, I think, your Honour.

HAYNE J:   I had not understood the written submissions as collecting them in a particular place.

MR SLATER:   Not a particular place, no, your Honour .

HAYNE J:   At some point in your argument I would be assisted if you could attempt some collection of what it is that evidences the contrary intention.

MR SLATER:   I will endeavour to do that, your Honour.

HAYNE J:   Thank you.

MR SLATER:   Your Honour, could I then turn to the question of the significance of a statute being a taxing statute as opposed to a general statute.  Last Friday I was reminded rather abruptly by Justice Gummow that taxing statutes do not stand in some special class of their own.  It is a point which Justice Kirby had more than once previously made.  The notion of strict literalism in tax statutes had its origin at a time when tax statutes were regarded by the courts as rather more penal in nature.  It was especially prevalent towards the end of the 19th century and the earlier part of the 20th century when the courts in England were considering death duty statutes whose social purpose was to break up the land into states for social governance reasons, and the comments which are made in death duty cases at the time were aimed at not broadening the penal consequences.

In our written submissions we have illustrated that with reference to an observation of Lord McNaghten in the Duke of Richmond and Gordon’s Case where he said that the text was to be read literally to ensure that “an impost which I am afraid many people still think unequal and unfair” should not be given any wider scope than is essential.  One aspect of the debate which we would submit the Court should take into account is that the context in which observations of that sort were made and most of the observations which are relied upon in support of what our friends call the principle in Anderson’s Case derive directly or indirectly from that time.

It is no longer the case that tax is regarded as a penalty or an unfair imposition or a burden.  This Court has said in more recent times, and I had in mind particularly the observations in Commissioner v Spotless Services (1996) 186 CLR 404, that tax is what we pay for civilised society and that tax statutes are not now to be read by reference to muffled echoes of old arguments concerning other legislation. Those passages are in our written submissions at ‑ ‑ ‑

HAYNE J:   I thought the muffled echoes reference was concerning the relationship between Part VIA and section 260 ‑ ‑ ‑

MR SLATER:   It was, your Honour, yes.

HAYNE J:   I thought so.

MR SLATER:   But it is an apt comment in the present context.  Your Honours, the approach which should be taken to tax statutes, according to the House of Lords, is one which may offer some assistance to your Honours when considering the debate which has occurred today.  May I hand up a copy of the most recent statement of the House on that issue.  It is in Barclays Mercantile Business Finance Ld v Mawson [2005] 1 AC 684. I have handed up to your Honours a slightly abridged version of the report.

That was a case concerning an arrangement by which a company claimed the benefit of some specific capital allowances.  The investment was, in effect, funded by a transaction which was aptly described as circular.  The revenue argued that what was called the Ramsay principle, should be applied, the Ramsay principle being one derived from what had been said by Lord Wilberforce in WT Ramsay Ltd v Inland Revenue Commissioners in 1982.  If your Honours were to turn to page 694 of the report in [2005] AC, your Honours would see a heading at about the middle of the page, “The Ramsay principle”.  If I could direct your Honours’ attention briefly to some of what Lord Nicholls had to say there.  In paragraph 28 his Lordship says:

As Lord Steyn explained in Inland Revenue Comrs v McGuckian [1997] 1 WLR 991, 999, the modern approach to statutory construction is to have regard to the purpose of a particular provision and interpret its language, so far as possible, in a way which best gives effect to that purpose. Until the Ramsay case, however, revenue statutes were “remarkably resistant to the new non‑formalist methods of interpretation”.  The particular vice of formalism in this area of the law was the insistence of the courts on treating every transaction which had an individual legal identity (such as a payment of money, transfer of property, creating of a debt, etc) as having its own separate tax consequences, whatever might be the terms of the statute.

Then passing down to paragraph 29:

The Ramsay case [1982] AC 300 liberated the construction of revenue statutes from being both literal and blinkered. It is worth quoting two passages from the influential speech of Lord Wilberforce. First, at p 323, on the general approach to construction:

“What are ‘clear words’ is to be ascertained upon normal principles:  these do not confine the courts to a literal interpretation.  There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.”

Then in the second passage:

“It is the task of the court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence –

Then at the foot of that page, 32:

The essence of the new approach was to give the statutory provision a purposive construction in order to determine the nature of the transaction to which it was intended to apply and then to decide whether the actual transaction . . . answered to the statutory description.

Over the page in a regrettable side swipe at the lawyer, his Lordship said that:

33       The simplicity of this question . . . shows that the Ramsay case did not introduce a new doctrine operating within the special field of revenue statutes.  On the contrary, as Lord Steyn observed in McGuckian [1977] 1 WLR 991, 999 it rescued tax law from being “some island of literal interpretation” and brought it within generally applicable principles.

34       Unfortunately, the novelty for tax lawyers of this exposure to ordinary principles of statutory construction produced a tendency to regard Ramsay as establishing a new jurisprudence governed by special rules of its own.

His Lordship goes on to say that is not so.  We find that a regrettable development.  It is best to have a priestly cast.  Ultimately, your Honours, words which are truly ambiguous will not impose a tax but to find that they are truly ambiguous goes close to an admission of defeat.  The court presumes that Parliament does not legislate in vain and the courts will look to the text, the context, the purpose and the history to find a meaning in legislation.  It is a rare case where those considerations, the tools which the court brings to the task of statutory interpretation, will not find a meaning and one is left to fall back on some such principle as the Ramsay principle.

FRENCH CJ:   We are not here concerned, are we, with ambiguity in a strict sense?  We are concerned with the application or non‑application of a definition or part of a definition, at least paragraph (c).

MR SLATER:   Yes.  That is not really a case for the application of any lenity principle, in our submission.  Your Honours, two more matters of general discussion.  Our friends place some significant reliance on the penalties for non‑compliance.  We agree that there is a rule that penal statutes will be read in favour of the defendant where they are, in the words which have been in this Court “cloudy or ambiguous”, but we also, and I think is now common ground, say that that is very much a rule of last resort.

The course which was taken by this Court in Waugh v Kippen, which is under tab 29 in the bundle of materials, rather illustrates the point.  The decision is Waugh v Kippen (1986) 160 CLR 156 and the passage which is relevant for the present purposes is on page 164 where their Honours in the paragraph first beginning on the page notice the tension which attended the construction of the legislation there in question. On the one hand it was legislation which was enacted in furtherance of:

industrial safety.  In that character it should be construed “so as to give the fullest relief which the fair meaning of its language will allow” . . . On the other hand . . . a breach of cl 25 is attended with a penal sanction.

Then they pick up those words from Beckwith v The Queen.  At the foot of the page:

If such a conflict was to arise, the court must proceed with its primary task of extracting the intention of the legislature from the fair meaning of words by which it has expressed that intention, remembering that it is a remedial measure passed for the protection of the worker.  It should not be construed so strictly as to deprive the worker of the protection which Parliament intended that he should have . . . In such a context the strict construction rule is indeed one of last resort.

But they go on a couple of lines further down to say:

The legislature cannot speak with a forked tongue.  Although the standard of proof applicable to criminal proceedings for a breach of the obligation will differ from that applicable to civil proceedings and the law may provide specific defences . . . [but] the elements that make up the obligation will be the same in each case.

I think that, again, is common ground between us.  To the extent our written submissions suggested otherwise, they should not be taken to do so.

FRENCH CJ:   Where is the battleline drawn between strict and non‑strict construction in the context of the application of a definition?  We are not talking about what the definition means.  We all know what the definition means, or at least paragraph (c), so how do these norms engage with the problem?

MR SLATER:   We do not see them as usefully engaged at all, your Honour.  We think that this argument is too remote, but insofar as they are engaged, they are engaged in the process of construing Division 8A and the extent to which the definitions are to be read into Division 8A and then considering whether that construction is one which is so ambiguous as to invoke this contra proferentem rule or the rule identified by Justice Gibbs in Beckwith’s Case.  It is quite a distant transaction.

What actually happened in Waugh v Kippen was this, that their Honours observed that the rule did not impose absolute liability on the employer.  This is in the paragraph last beginning on page 165:

The proscription is in terms of “permitted or allowed”.  These words presuppose an awareness –

and they went on from there.  So that the rule was applied rather to the provision which imposed the penalty than to the provision which identified, in that case the obligation to provide a working system, in the present case the obligation to pay tax.  In the present case there are two penal provisions which are relied upon by our friends.  One is section 56K.  When one looks at section 56K it applies where a person fails to lodge something.

We have not addressed this to any elaborate extent in our submissions but in paragraph 29 of our submissions, footnote 43, we have given your Honours a reference to a couple of decisions, copies of which I am sorry to say are not in the bundle of materials which have been provided to the Court, but the burden of them is summarised in the footnote.  One of them is Commissioner of Taxation v Ganke  The summary offence there in question was failing to furnish information.

FRENCH CJ:   I am sorry, the reference?

MR SLATER: It is [1975] 1 NSWLR 252. The question there was whether the taxpayer, or the defendant, had failed to furnish information as and when required. The ultimate decision was that he had not been given sufficient notice for the criminal sanction to be engaged, but in the course of reaching that conclusion, the trial judge referred to what had earlier been said by Sir Frederick Jordan in Ingram v Ingram. This case is not referred to anywhere else in the materials. It is (1938) 38 SR (NSW) 407 at page 410 where his Honour had referred to the various possible meanings of the word “fails”.

The meaning which was taken up in Ganke’s Case was a meaning which involved some element of delinquency.  If one were looking at whether or not a penal sanction attached to the consequences of not lodging a statement under section 56K were engaged, one would look rather to applying this rule of lenity to the interpretation of the provision which imposes the penalty, that is section 56K(6) which provides that:

A person who fails to comply with subsection (1), (2) or (3) commits an offence.

The essence of our friend’s submission is that the question posed by the statute is sufficiently difficult that nobody should be penalised for getting it wrong and therefore it should be read in a fashion favourable to the taxpayer.  We would submit that that is not a conclusion which one can draw from the conjunction of the charging provision to tax and the penal provision in subsection (6).  The penalty is applicable where there is a failure and, in our submission, failure in this sense involves some element of delinquency and merely getting it wrong did not attract it.

The other aspect of a penal nature which our friends rely upon is the administrative penalty in the materials which were handed up this afternoon.  We have two things to say about those.  The first is that those materials are modelled on the legislation which has been part of Commonwealth income tax I think since 1915 but in any event since 1922 by which a penalty is imposed upon taxpayers who fail to file a correct return and the penalty for many years up until 1984 was at the rate of 200 per cent with a power to remit.

There is a corresponding power to remit in the penalty provisions which are to be found towards the end of section 98.  Your Honours, two things to be said about this are, first, that in this particular case the penalty was remitted down to the level at which the penalty left was no more than an amount attributable to the taxpayer having the use of the money between the events of 2001 and the time that the tax was assessed.  There was no penal element in the penalty.  That appears from the appeal book at page 60 of the record.  I will give your Honours the reference without reading it to you.  It is page 60 in the paragraph at line 30. 

The other thing to be said about this is that those provisions in the Income Tax Assessment Act 1936, they were in Part VII, currently they are in Division 284 in Schedule 1 to the Taxation (Administration) Act (Cth).  Provisions which impose a penalty for filing an incorrect return have been part of the law for a very long time.  There is, so far as my researches have revealed, no case in which the meaning of an operative provision of the Assessment Act or of the corresponding provisions of the Estate Duty Assessment Act or the Gift Duty Assessment Act or the sales tax legislation have been read down because an administrative penalty is imposed.  Where the administrative penalties liability is attracted the amelioration of penalty, having regard to the difficulty of identifying the scope of the legislation, is dealt with by the power to remit the penalty rather than ‑ ‑ ‑

FRENCH CJ:   Has the question ever arisen in a case that you have been able to find?

MR SLATER:   Not that I have been able to find.  I am reminded, your Honour, that the remission power is in section 96(6) of the Taxation (Administration) Act as it stood in 2001.  Your Honours will see in footnote 43 also a reference to a decision of the High Court in Murphy v Farmer which is to the same general effect.  The point is not whether a particular penalty is in fact attracted but whether some supervening rule should be applied, and we say that it should not.  It is no different from the last resort rule in taxing statutes, that is, it only applies where the language is truly intractable and the present case, in our submission, is not one such case.

One final observation in this regard is that when considering the Thompson/Center Case in the United States Supreme Court it is material to notice, as my friend said, that it is a case concerning rifles and rifles are a very hot topic politically.  The decision and the reasoning in that case can perhaps be read in the light of that.  Your Honours, if I could then turn to the statutory text which is in issue in this case and first make the submission that there is no contest between the parties about the general legislative purpose of Division 8A.  It is to levy duty on a transaction which indirectly affects a change in the ownership of real property.

Our friends placed some reliance on section 56U of Division 8A.  The text of that is at page 16 of annexure A to our submissions which our friends took your Honours to this morning.  Section 56U does not have any bearing on the present case because on any view of the matter this was an acquisition of an interest in a corporation which had property, being land, and a conveyance of that land would have attracted a liability to stamp duty whether the view of paragraph (c) which our friends contend for or the view which we contend for is adopted, that is to say, the leaseholder state which was conveyed was a leaseholder state which – I am sorry, which was the property of the company, the ownership of which changed, was a leaseholder state which in 2001 still had some 10 years to run.  So that there was an existing leaseholder state, a term of which was an option to renew and that leaseholder state was enough to exclude any operation of section 56U.

Your Honours, as to the definitions in section 4 of the Act in 2001, there is in our friend’s written submissions some suggestion that the operation of the Interpretation Act is immaterial to the Administration Act because there is a specific definition of “land” in the Administration Act but the definition of “land” in the Administration Act begins with the words, ““land” means land in the Territory”. As our friends say, the words in the territory impose a territory limit but the word “land” has the meaning which is given to it by section 19. Section 19 is on page 17 of the submissions. I should add, your Honours, that section 19 was subsequently renumbered, as I think section 17, so that there may be some confusion in references. One of the things to note is that “land” is defined in the Interpretation Act to:

includes all messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description and whatever may be the estate or interest –

So that it broadens it beyond land merely in the physical sense of that upon which one can walk.  The word “includes” in the definition of “land” is there not by way of limitation but by way of confirmation.  So that a lease of land is something which is land in any event if it is a demise and if it is not a demise but merely an agreement for demise, for example, if it is a Torrens title land where the lease had not been registered, nonetheless, there is an equitable interest in land conferred by the lease and that is land within the ordinary meaning.  So that the addition of the words “includes a lease of land” serve rather to confirm than either to expand or contract the definition.  The same can be said of the other paragraphs.

Then turning to the definition of “lease”, the first thing to note about it is that it is not an exhaustive definition and that is most obvious in the circumstance that none of the words in it bring within its scope a private demise of land.  I do not think there is any issue between the parties about that.  We would submit that what is included by the words “includes” and following down to “sub‑lease” are things which extend the ordinary meaning of a lease rather than define it.  An agreement without entry does not constitute a lease at law.  The issue was considered in the decision of the Court of Appeal in Mena House Ltd v Commissioner of Stamp Duties to which I think there is a reference in the written submissions.

HAYNE J:   Just before we come to Mena House, I understand that that is a necessary step or an important step in your argument, can I just understand, though, where we are with your treatment of the definitions. You say ““land” means land in the Territory”, see section 19 of the Interpretation Act. The word “includes” in the definition of “land” is confirming of what otherwise would follow from the definition of “land” in section 19. Thus far so good?

MR SLATER:   Yes, your Honour.

HAYNE J:   “Lease” you say “includes”, that is not exhaustive.

MR SLATER:   Yes.

HAYNE J:   The expression “but does not include” you describe in paragraph 41 of your submissions as not being an affirmative excision from what comprises land in the Territory within the opening words of the definition of “land”.  I do not understand what you are saying there.  Can you explain it?

MR SLATER:   I will endeavour to do so, your Honour.  We do so on two levels.  First, those things which are not included are things which could be characterised as being included by the inclusive part of the definition so that it is a counterbalance to the inclusive part.  By way of example, an attornment in a mortgage, as my friend put to your Honours this morning, operates by way of estoppel but not by way of demise.  Shareholder’s rights come under what could be said to be within the statutory agreement in the articles so as to be an agreement for lease, but they are not included by reason of that. 

An option to renew was the subject of what Sir Owen Dixon in 1961 called a standing controversy as to the nature of an option.  In that sense, we would say that a fair reading of the words “not include” is that those are things which might otherwise have been taken to be included by the inclusive part but are not to be so taken.  But more than that, that is an observation about the general interpretation of the statute, but applying it to the particular case with which we are concerned here – may I approach it in this way.  We are charged with advancing what our friend’s call a strained meaning for the provisions in the statute.  We would challenge that.  We would say that, as a matter of ordinary meaning, the words of the definition do not have the effect which our friends impute to them.

HAYNE J:   So it is not a contrary intention case?  You say that the definition is on their proper construction?

MR SLATER:   On this part of our argument, yes, your Honour.

HAYNE J:   I see.

MR SLATER:   As a matter of the ordinary meaning of the definition, the word “lease” is to be taken to refer to or include the things which are identified in the opening part of the definition, that is to say:

a lease granted under an Act, a sub‑lease and an agreement for a lease or sub‑lease –

Those words are taken to be included within the ordinary meaning of the word “lease” and those words which appear after the words “but does not include” are not to be taken to be included within the ordinary meaning of the word “lease”.

HAYNE J: But do, do you say, fall within the ordinary meaning, as understood in light of section 19, do fall within the word “land” in the Territory, do they?

MR SLATER:   That question does not really arise, your Honour, because, although much of the debate has been formulated around the words “do not include an option to renew a lease”, we are not concerned with an option to renew a lease as an independent right or contract.  We are concerned with what is included in the property of Gove Aluminium Limited as at January 2001 and that is the leasehold estate conferred by special mining lease 11.  It is a term of that leasehold estate that there is an option to renew, but there is no independent option to renew.  We are not concerned with an option to renew itself.

HAYNE J:   Why are we not concerned with that in applying the provisions for determining dutiable value which ultimately depend upon the basis of the unencumbered value of the land identified, I think, in accordance with 56N?

MR SLATER:   What we are concerned with is the leasehold estate.  That is the property which is to be valued.  It does fall to be valued and it falls to be valued by reference to the circumstance that it includes, as a term of contractual rights embodied in the lease, an option to renew, but it is still the leasehold estate and not an independent right being an option to renew which is the property of the company and the subject matter of the valuation.

FRENCH CJ:   Does that mean – and this really reflects a proposition I put to Mr Jackson – that you could apply 56N to value land including by reference to the value of a lease taking into account the existence of an option to renew within the lease and yet accept the application of the definition on the basis so that it simply means that an option to renew is not a lease?

MR SLATER:   Yes.

FRENCH CJ:   Was that a position that was put below at any point?

MR SLATER:   Yes, it was, your Honour.  It was put to the Court of Appeal.  It was put fairly succinctly to the trial judge because the conclusion that the trial judge came to was not one which was to any great extent at issue between the parties.

HEYDON J:   Did the Court of Appeal deal with the submission?

MR SLATER:   The Chief Justice rested his conclusion rather on the contrary intention aspect of the definition.  The argument was put and your Honours can see a reflection of the argument in paragraph [45] on page 1887 of the record in the sentence beginning on the fourth line, but his Honour in paragraph [77] on page 1894 rested his decision rather on the contrary intention which his Honour found in the language of Division 8A.

HAYNE J:   Just to understand where we have got to so far, if we can, 56R you say was to be applied, charge duty on the basis of the unencumbered value of the land in the territory to which the corporation is entitled?  The land in the territory to which the corporation is entitled included leasehold interests.  Those leasehold interests happened to have options to renew as part of those leaseholds.

MR SLATER:   As an incident of them, but not as separate and distinct property.

HAYNE J:   Is it the next step in this branch of the argument to say that the definitions of “land” and “lease” in section 4(1) are not engaged at all, or is it that the definitions are engaged and they are engaged in a way which depends upon assigning the meaning to but does not include in “lease” that we have explored between us in our exchanges a moment ago?

MR SLATER:   They are engaged in this way, your Honour, that the words “but does not include an option to renew” do not require that the language or text of the lease be edited to remove the covenant which confers the option.  The leasehold estate is a single indivisible estate and its attributes are not to be written down by language which is apt to provide for substitution for words for other words in reading a statute but not to alter the nature of the leasehold estate which is part of the property of the company.

FRENCH CJ:   No question of the contrary intention arises on this branch of the argument.  It is simply that the exclusion does not impact on the question of valuation.

MR SLATER:   Yes.  It does not operate to alter the nature of the leasehold estate which clearly is land and is part of the assets of the company.  It does not require it to be treated as being something other than what it is, because that is not the function of the definition provision.  The definition provision does not alter the facts upon which the definition operates.

FRENCH CJ:   Can you just take us to the part in your written submissions where that is made clear?

HEYDON J:   Paragraph 39?

MR SLATER:   Paragraphs 39 and 40, more perhaps the end of paragraph 40.  What our friend’s argument seeks to do is not to replace words in Division 8A with other words, but rather to alter the text of the lease itself, to take out of the lease the option.  If the lease is simply there, it is a lease, it is within the definition of land, it is not itself an option to renew.  It has a value by reference of all of its terms, one of which is a term giving the option to renew, but that is a term of the lease.  It is not independent property which is excluded from the property of the company by force of any definition provision.  On that point I think the parties are very much at issue between them.

KIEFEL J:   You are focusing on the matter conveyed rather than the conveyance itself?

MR SLATER:   This is not a conveyance at all, your Honour.  This is a change in ownership of company.  But were it a conveyance, it would simply a be a conveyance of the leasehold estate.  That would be all there was.  The only instrument would be an instrument of assignment of the leasehold.  There will be no reference in that to an assignment of an option, there would not need to be.

HAYNE J:   A competing point of view might perhaps be expressed as being what the dutiable subject matter is not all of the rights, that it may be associated with that part of the geographical surface of the earth which were vested in the relevant company.  The dutiable subject matter is that part of the bundle of rights relating to that geographical area that is identified in the definitions of the Act.  That is perhaps the competition between the parties, is it, in this branch of the argument?

MR SLATER:   Yes, I think it is, your Honour.  Your Honours, I think we have covered the key point in that area.  The only other submission we would seek to make in this regard is this, that there is an element of implausibility in the argument which is advanced by our friends.  The scheme of the Act is to levy duty on the higher of the value of the property under consideration given for a conveyance of the property.  The consideration given for a conveyance of the lease is, assume it to be at market value, it is the full market value of the lease. 

It is difficult to see that there is any object or purpose in legislative terms served by requiring the lease to be treated for duty purposes as if the option to renew within it were segregated out, which would seem to be contrary to the general purpose of these provisions.  I appreciate that our friends say that a taxing statute does not have a general purpose other than to raise tax, but on the other hand it does have a general purpose of raising tax and a provision which eviscerates the charge to tax is a curious provision to find in a definition section. 

Your Honours, the other thing to notice about Division 8A is that the particular concatenation of provisions upon which our friends rely to say that the property of the company at the date of acquisition includes only so much of the leasehold estate as subsists up to the end of the first term without any regard to the value of the option for a further term, is one which is only to be found as a result of the amendment in 2000.  Up to that point, the definition of lease had no relevance to the operation of Division 8A.

One can see that by looking at the language of the division as it stood immediately before the 2000 amendment, and your Honours will find that at page 36 of annexure A.  One sees that section 56N then applied to a corporation which was entitled to real property in the Territory, the unencumbered value of which was $1 million and the value of which was 80 per cent or more.  The 80 per cent number was later changed.  But there is no reference in Division 8A as it stood immediately before the 2000 amendments to lease or to land, so that the definitions in section 4 were not in any way engaged.

Our friends say that “real property” should be read there as if it imported the definition of “land” in section 4.  That seems to us, with respect, to be a very ambitious contention, that is, it requires two steps to be taken.  One is that words should be taken out of the Act and replaced by other words, namely “real property” should be taken out and replaced by “land”, and then the word “interpolated” should itself be taken out and replaced by the statutory definition. 

There is no reason to suppose that when the legislature used the word “real property” it did not mean simply “real property” and somehow meant to import or anticipate a combination of definitions which would not emerge until 2000.  The reason for the amendment made in the 2000 year is apparent from the second reading speech which accompanied its introduction.  Your Honours should have a bundle of extrinsic materials which shows the full tenor of the second reading speech.

FRENCH CJ:   This is a document entitled, Index to the Legislative Material?  It appears to contain a bundle of debates.

MR SLATER:   Yes, it is, your Honour.  It is, I am happy to say, paginated and page 35 is the page of the materials which deals with the amendment to this Act.  Your Honours will see that in the first column the leader of government business refers to the Taxation (Administration) Amendment Bill and observes that it is in eight parts.  “Part 2 of the bill proposes four anti‑avoidance measures”.  That part of the speech which reads from the middle of the first column down to the end of the paragraph first beginning in the second column is concerned with the amendments made to Division 8A and to the definition of “land” and “lease”.  What is conspicuous about that explanation is that there is no suggestion that it was intended that the tax base in Division 8A should be narrowed.  Quite the contrary; it was intended that it should be extended.

Our friends have cavilled with the references to legislative purpose in the judgment of the Chief Justice below.  The process of extracting words into a series of abbreviated quotes has the effect of condensing and emphasising the words extracted, but it also has the effect of taking them out of context.  When one looks at those words in context, one sees that what the Chief Justice was referring to was the purpose which might be divined of each of the amendments rather than an overarching purpose of imposing greater tax and more concerned with whether the amendments were intended to alter the provisions so as to diminish tax in the manner in which our friend’s submissions would have the consequence be.

In our submissions, if the definition of “lease” was so to be read as to require, as Justice Hayne put it to me – I trust I am not misrepresenting what was put to me – an apportionment of the lease into juristic qualities rather than an amendment of the text, then if it were to be so read, then, in our submission, the context of Division 8A indicates that at least that paragraph of the definition of “lease” is not one which sits comfortably with the legislative scheme in Division 8A.  There is no rational reason for amending or reading Division 8A such that of all the incidents of an estate in land which could be directly dealt with and could be the subject of a charge to duty upon a change in ownership of the company owning them, an option to renew should be excluded.

When one looks at the context of Division 8A, there is no reason, either in the purpose or the context of the text of as it stands at 2001, to treat a least which has a value referable to all of its provisions as if it had a value referable to only some of them and there is no reason in the purpose or the context or the extrinsic materials to suppose that the 2000 amendment was intended to have the effect that a leasehold estate was to be treated as being so edited down.

HAYNE J:   Apropos of this notion of editing or the like that you have mentioned, Mr Slater, I had in mind what four members of the Court said in Yanner v Eaton (1999) 201 CLR 351 particularly at 366, paragraph 18, whereby the Court cited Professor Gray’s when he said that:

Much of our false thinking about property stems from the residual perception that ‘property’ is itself a thing or resource rather than a legally endorsed concentration of power over things and resources.

Here what we are concerned with is those aspects of rights rather than the subject in respect of which the rights are to be exercised, namely, land.

MR SLATER:   There is a similar discussion in the judgment of the Chief Justice in.....

HAYNE J:   We took it up again in Yarmirr too, I think, which is 208 CLR 1.

MR SLATER:   Yes, but this is not a debate about land as something that one walks on as against land as something the subject of estates and legal rights.

HAYNE J:   Yes, the focus is upon the rights.  The question is whether the legislature is fastening on particular aspects of the bundle of rights that might have been created in connection with land.

MR SLATER:   In this case, in our submission, one starts with a proposition that one has a lease an incident of which is the option.  One does not by force of a definition provision carve that lease up as if it were two different items, and that is ‑ ‑ ‑

FRENCH CJ:   The interpretative principles to which you were taking us before Justice Hayne’s reference to Yanner v Eaton did not seem to me to go to contrary intention so much as supportive of the proposition in your

interests that Justice Hayne identified as one of the two competing propositions.

MR SLATER:   That may be right, your Honour.  There is a significant area of overlap between the contrary intention concept and the interpretation which we advance.  Your Honours, I think that the issue between the parties is identified.  I trust that I have answered your Honour Justice Hayne’s question.  If your Honours please, those are our submissions on the interpretation point.  Do your Honours wish to hear my friend on the interpretation point and then me on the goodwill point?

FRENCH CJ:   Yes.  Just bear with us for a moment, Mr Slater.  Yes, we will hear Mr Jackson in reply first on the interpretation question.

MR JACKSON:   Your Honours, there are only a few brief points.  The first of them is our learned friend – and we are sure no wrong was intended by this – that it is common ground between us that the principle that applies in the case of penal statutes is a rule of last resort.  Could we refer your Honours to paragraph 8 of our submissions in reply where in referring to that passage out of Waugh v Kippen extracting passage from Justice Gibbs’ reasons in Beckwith where his Honour said, perhaps as a principle of last resort we urge that there is no real reason and it is unnecessary to describe it as a principle of last resort.

What is common ground is we accept that one applies the usual principles of interpretation.  It is not as though one starts with this concept, but you do not need to use language like “last resort” to emphasise that it can only be done in a gesture or step of desperation.  If, in our submission, ambiguity remains having applied the usual principles, then there is no difficulty which requires it to be called that. 

The second point we wanted to make is in relation to our learned friend’s references and reliance upon Ganke and Ingram’s Case.  He mentioned that they had not included Ganke in the cases which are in the bundle, which is a bit unfortunate, but at page 257 of the reasons in Ganke in the judgment of Justice Nagle at letter D ‑ ‑ ‑

FRENCH CJ:   Would you mind repeating the reference just for the transcript please?

MR JACKSON:   Page 257, letter D in Justice Nagle’s reasons.

FRENCH CJ:   The report reference.

MR JACKSON: I am, sorry your Honour, I apologise. I did not understand what you were asking me. It is (1975) 1 NSWLR 252. There is reference to Ingram’s Case and this is what his Honour said about it:

as has been pointed out by Sir Frederick Jordan in Ingram v Ingram, there may be various interpretations given to the word “fail”.  He said:  “As to the first point, where it is provided by statute that certain consequences shall follow if a person fails to do something which is directed to be done, the meaning of the word ‘fail’ depends upon the context in which it is found.  In some contexts it may mean simply the omission to do the thing in question, irrespectively of any reason which may have existed for his not doing it . . . In other cases it may mean an omission to do the thing by reason of some carelessness or delinquency on his part, but not omission caused by impossibility for which the person in question is not responsible . . . In other cases it may mean omission to do the thing, but so that omission caused by impossibility arising from some causes is included and from others is excluded . . . In the case of s 11 . . . I am of opinion that the mere fact that the directions of the restitution decree have not been performed, although supplying evidence of failure to comply with the decree, does not establish such failure conclusively; and that evidence that the non‑performance has been occasioned by some supervening impossibility to which no carelessness or delinquency on the part of the respondent in any way contributed would justify the inference that there had been no failure to comply with the decree.”

He is talking about a context which it appears to be is one rather like contempt of court.  In our respectful submission, impossibility as an excuse for failing to do something really does not add much to the discussion of the sections before your Honours this morning and Ganke’s Case does not help.

The third submission we wanted to make is that our learned friends say section 56U is not engaged because there would, in any event, be a lease, but our submission is that section 56U in the paragraph to which we took your Honours is one that refers to the way in which the division applies in relation to the acquisition which would entail the consequence which we submitted this morning, namely that there is no reason consistent with the purpose of that section to interpret Division 8A as operating more widely than would the sections on conveyance of dutiable property by way of assignment or transfer of a lease.

The fourth submission we wanted to make is that our learned friend in referring to the definition of agreement for lease appeared to suggest that what is being included in the definition of “lease” is an equitable lease, being one that is not registered, as he said, under Torrens title.  In our submission, an agreement for lease is much wider than that.  It may include a case where there is an agreement for lease which has formed an equitable lease or constitute an equitable lease according to the usual principles.  We will not take your Honours back to Walsh v Lonsdale as that principle has been applied in this Court, but it also includes just a straight executory agreement for lease which does not constitute an equitable lease at law.

In our submission, an agreement for lease of that kind is included in the definition of “lease” by the words in the section.  At one point our learned friends decried our submissions on the footing that we are describing the construction for which the Commissioner contends and which was adopted in the Court of Appeal as a strained construction.  We use that expression in the sense as it is used by Bennion.  Bennion uses it to identify a case where the construction or interpretation which is adopted is strained because one factor points one way and another factor points the other; that is the strain.  If the literal or ordinary meaning of the words points one way, the context or purpose of the provision points another, that is strained.  It is no more complex than that.

Our learned friends at one point appear to submit that one should not worry about an independent option to renew in terms of the analysis of the section and, in our submission, that is right because the option to renew as described as an incident of the lease is not independent in the usual sense.  It is not conveyed separately.  In our respectful submission, the section still requires that an option to renew be treated as a purpose of analysing the bundle of rights, to use the language picked up by your Honour Justice Hayne, as something separate and that is simply what the text of the section requires.

I think the other matters which I had noted here have already been covered by the submissions or what has passed between our learned friends and your Honours.  There is only one last reference, which is that our learned friends relied on a recent decision in the House of Lords in Mawson’s Case in 2005 of which they gave us notice this morning.  Your Honours will recall that the passage which was extracted was one from Lord Wilberforce’s reasons in Ramsay’s Case.  Could we hand up copies of Ramsay’s Case so that we can add to the extract?

In Mawson’s Case there is a reference to clear words in the passage our learned friends read with these words, “What are ‘clear words’ is to be ascertained upon normal principles”.  In Ramsay’s Case – this is at page 323 of the report.

FRENCH CJ: [1982] AC 300?

MR JACKSON: The report is [1982] AC 300. The passage we are referring in the report is at page 323. The extract that appears in Mawson starts at the line above letter C with:

A subject is only to be taxed upon clear words, not upon “intendment” or upon the “equity” of an Act . . . What are “clear words” –

Lastly, your Honours, our learned friends did refer in passing in their submissions to the proposition that a Tax Act is not penal or it is certainly not perhaps regarded as penal now as it was before and a reference was made to a passage in Spotless where this Court extracted a statement by Justice Holmes.  In Spotless the context was not about the principles of interpretation of the Act, as also was the other extract that your Honour Justice Hayne referred to in our learned friend’s submissions.

Justice Holmes would have been surprised, we suspect, to hear the passage cited in a context such as this because in dissent in the case for which the passage is taken he was considering the operation of the fourteenth amendment of the United States Constitution, nothing to do with Tax Acts at all.

FRENCH CJ:   Thank you, Mr Jackson.  The Court will adjourn briefly.

AT 3.49 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.53 PM:

FRENCH CJ:   The Court proposes to consider the appeal on which we have heard argument and to adjourn the hearing of the other appeal until a date to be advised.  The Court will now adjourn.

AT 3.54 PM THE MATTER WAS ADJOURNED