Commonwealth Bank of Australia Limited v The Commissioner of Taxation; Chase AMP Bank Limited v The Commissioner of Taxation

[1992] HCATrans 291

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S45 of 1992

B e t w e e n -

THE COMMONWEALTH BANK OF

AUSTRALIA LIMITED

Applicant

and

THE COMMISSIONER OF TAXATION

Respondent

Office of the Registry

Sydney No S46 of 1992

B e t w e e n -

CHASE AMP BANK LIMITED

Applicant

and

THE COMMISSIONER OF TAXATION

Respondent

Commonwealth 1 2/10/92

Applications for special leave

to appeal

DEANE J
DAWSON J

MCHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 2 OCTOBER 1992, AT 10.52 AM

Copyright in the High Court of Australia

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

my learned friend, MR B.J. SULLIVAN, for the

applicant in each of these matters.	(instructed by
Corrs Chambers Westgarth)

MR R.B.S. MacFARLAN, QC: If the Court pleases, I appear

with my learned friend, MR S.W. GIBB, for the

respondent in each matter. (instructed by

Australian Government Solicitor.

DEANE J: Yes, Mr MacFarlan. Mr Jackson.

MR JACKSON:  Your Honours, these cases give rise to narrow

but, it is submitted, important questions

concerning the reach of the Debits Tax

Administration Act 1982. Your Honours, may I state

the issue first, broadly, and then indicate more

exactly the narrow question of interpretation which

is involved.

Your Honours, the question, if I could state

it broadly, is whether the debits tax imposed by

the Debits Tax Act is exigible in respect of a

range of arrangements entered into between non-bank

financial institutions, such as building societies,

and banks, being arrangements, the purpose of which

is to enable members of those non-bank financial
institutions, such as members of building

societies, to draw cheques on accounts maintained

by the institutions with banks.	Your Honours, that
is the broad issue.	The narrower method of

expression of it is this: whether the accounts

maintained with the banks by the non-bank financial

institutions and the cheques drawn on the banks by

the members of the non-bank financial institutions
are respectively accounts and cheques within the
meaning of those terms in section 3(1) of the

Debits Tax Administration Act.

Now, Your Honours, before I go to the

legislation and the central reasons of the courts

below, may I indicate the factors which, in our

submission, make the cases of sufficient general

importance to merit the grant of special leave, and

those features are demonstrated from the material

which appears in four places in the application

book. Could I take Your Honours to page 78.	Now
Your Honours will see, in particular
paragraph 18(b) of Mr Lindwall's affidavit on

page 78, and also the document to which he refers

as being exhibit I appears at page 93, and

Your Honours will see in the second paragraph a

reference to the numbers of cheques involved and

the face value of the cheques.

Now, Your Honours, those are the first two

items. Your Honours will also see in effect mirror

Commonwealth 2 2/10/92

items at page 104, where in paragraph (b) at the

top of the page a reference to "facility

arrangements" being "in existence", and then,

exhibit K, to which reference is there made,

appears at page 135 and I would refer Your Honours

particularly to paragraphs 2 and 3 in that

document. Now, Your Honours, that is the general

importance of the matter and I cannot really

advance it beyond what is there.

Your Honours, could I go then to the legal

issue involved and may I do that by going first,

and very briefly, to the terms of the legislation

and then to the critical passages in Their Honours

reasons for judgment. Your Honours, one starts

from the Taxing Act, which is the Debits Tax Act

1982 which, by section 4(a), provides that it

imposes a tax on:

each taxable debit of not less than $1 made to

a taxable account.

Now, Your Honours, the terms "taxable debit" and

"taxable account" are defined in the Debits Tax
Administration Act in section 3(1) and,

Your Honours, the definition should be at page 6 of the copy which Your Honours have.

DEANE J: What about section 4(a) of the Debits Tax Act?

MR JACKSON:  Your Honour, all I was saying about it was, it

imposes a tax.

DEANE J: No, I am sorry: 4A says:

Tax is not imposed in respect of a debit made

on or after 1 January 1991.

MR JACKSON:	Yes, I am sorry, Your Honour.
DEANE J: They have reimposed it, have they?

MR JACKSON:  No, Your Honour. Your Honour, that limits the

potential operation, of course.

DAWSON J: It has gone, has it?

MR JACKSON:  Yes, Your Honour. So, we are talking about

taxation in the past, and what that does do, of

course, is to limit the potential operation of
it - the potential operation of the case and one

accepts that proposition, but what is involved, we

would submit, is a decision that relates at least

to two cases and potentially to others.

DAWSON J: And a lot of money.

Commonwealth	3	2/10/92
MR JACKSON:	Yes, Your Honour.	Now, Your Honours, if I

could just go very briefly to the relevant

provisions. The relevant provisions of the

definition of "taxable account" and "taxable debit"

appear at page 6. A taxable account is:

an account (other than an exempt account) kept

in Australia;

"taxable debit" means a debit (other than an

exempt debit) made to an account.

Now, Your Honours, the definitions take one to the definition of "account" in the same provision at

page 1, and Your Honours will see that that

definition consists of two parts, the relevant one

of which is the first part, paragraph (a).

Your Honours, as is apparent from the terms of that

definition, there are several criteria which must

be satisfied in order for there to be an account

within the meaning of the Act; the first is that

in each case was held with them.

the account must be kept with a bank and, account

Your Honours, the second requirement is that the

payments which may be debited to the account by the

bank are in respect of cheques, a defined term to

which I will come:

drawn on the bank by the account holder.

Your Honours, the position under the arrangements in each case was that the account holder was the building society, cheques might be drawn on the

account by certain members of the society, but they

might not be drawn by the society itself, and the

cheques were drawn for purposes of the member, of

course, not of the society.

Your Honours, at first instance,

Mr Justice Gurnrnow found that members of the society

were not the agents of the society and, accordingly	the cheques signed by them were not drawn on behalf
of the society. Your Honours, the relevance of the
expression "on behalf of" appears from the
definitions of "cheque", where it is said, on
page 2:

"cheque", in relation to an account, means an

order in writing, drawn on a bank by or on

behalf of the account holder.

and then Your Honours will see the remainder of it. finding that the members were not the agents of the

society - I should say, did not expressly reverse

that, but nevertheless held that the cheques were

drawn on behalf of the society.

Commonwealth 4 2/10/92

Your Honours, could I indicate the passages in the judgments where one sees the reasons and then

proceed, when I go to the part of the Full Court,

to indicate the reasons why, in our submission,

Their Honour's conclusion is not correct. The

primary judge's approach may be seen at page 7,

commencing at line 19. Your Honours will see that

he says that:

The evidence shows that during the relevant

period, the only cheques in fact debited to

the Control Account were cheques drawn by

members of the Society and the Society itself

did not draw cheques -

He later finds they could not.

Now, Your Honours, he goes on to describe, on

that page, through to page 8, line 15, the events

which took place in, to put it shortly - he then

goes on to describe the issues on the remainder of

page 8. Your Honours will see the first issue

being between lines 25 and 30, the second one being

between lines 40 and 45. Now, Your Honours will

then see that His Honour proceeded to deal with the

Commissioner's approach at page 9, commencing at

line 15, and Your Honours will see that on the

remainder of that page he set out two submissions

made on behalf of the Commissioner, commencing

between lines 35 and 40 and 45 and 50.

In passages to which I do not need to take

Your Honours he proceeded to deal with various

provisions of the agreement, and then at page 15,

commencing at line 36, returned to the submissions.

Now, Your Honours will see the passages dealing

with the reasons are at page 16, lines 1 to 26,

that is the first paragraph on page 16.

Your Honours will then see, at the bottom of that

page, line 46 through to page 17 line 25 - Your

Honours, I am not making any comment about these

because they are all in our favour in effect - the

primary judge - that goes through to line 25 on
page 17, and then in the next passage commencing at

page 17 line 30, going through to page 18 line 24,

His Honour rejects the proposition that the society

might have drawn cheques on the control account.

So His Honour found in our favour, and he

reached similar conclusions in the Chase AMP case -

I have been referring to the Commonwealth Bank - at

page 30, line 21 through to page 31, line 19.

Your Honours, could I go then to the reasons for

judgment in the Full Court, and the principal

reasons are in the Commonwealth Bank case

commencing at page 43.	The discussion of the
critical issue commences at page 48.	Your Honours

Commonwealth 2/10/92

will see the heading at line 40 and, after, in

effect, some narrative relating to the activities -

the view of the primary judge, Their Honours

commenced to deal with the matter themselves at

page SO, commencing at about line 40.

Now they say the real question is whether the

control account is not an account - is not an
account for the reason the cheques drawn on the

Bank and debited to the account are not cheques

drawn by or on behalf of the account holder. Now

Your Honours will see the passage that commences at

that point; goes through to the bottom of that page

and goes through to the whole of the next page, to

the top of page 52, namely at about line 15. Could

I indicate to Your Honours where what appear to be

the important part of Their Honours' reasoning are

to be found in that regard. The first is at the

bottom of page SO, the last two lines:

In our view, it is accurate to characterise

the cheques not in question as cheques drawn

either "by" the Society or, alternatively, "on

behalf of" the society.

It is clear that Their Honours are not intending to

convey that the society, itself, in any sense, drew

the cheque, in any sense of signing it, or signing

it by anyone of its employees, because they then go

on to define what they mean by the term "by", that

is, "through the agency or efficacy of" it. And

the remainder of the passage to which I have been

referring is one in which they say the cheques are

drawn by the society, because the society

established the facility which it then made

available to its members.

Now, Your Honours, in relation to that, may we

say several things. The first, Your Honours, is

that there appears to be some reliance upon what

had been said by Mr Justice Pinkus in the

Federal Court in Lilydale Pastoral Pty Ltd v
Federal Commissioner of Taxation.	May I take

Your Honours very briefly to that, 72 ALR 70, at

page 79, and what was there said by His Honour

seems, with great respect, quite remote from the

present case. Your Honours, what was being dealt

with in that case appears relevantly at the bottom

of page 78 where Your Honours will see, in the last

few lines, His Honour refers to section 128A(S)(b),

which says that:

subject to para (a) which is irrelevant, each

receipt of moneys by a borrower under a

contract ..... shall be deemed to be raising of

a loan.

Commonwealth 6 2/10/92

And it is a receipt of moneys by a borrower. The

question he was dealing with was whether, where
moneys were paid by the direction of the borrower

to someone else, they were yet paid by the

borrower. And that that is so appears at page 79,

commencing at line 12, where, if Your Honours look

at the paragraph commencing then and going through

the whole of that paragraph and then going through
to line 45, what is really quite apparent is that

His Honour is dealing with a particular meaning of

the term "by" in a particular context, and without

having the slightest criticism of what His Honour

said there, it really has nothing at all to do with

the present position.

Your Honours, the second thing, and that was a

relatively trivial point, of course, that I made,

the second thing is this; that if the construction

adopted by the Full Court was right, the

definitions of "account" and "cheque" in

section 3(1) contain a lot of unnecessary words

because, if one goes to the definition of

"account", and the approach taken by Their Honours

was correct, what you have is a situation where the
words:

by the account holder, or by any one or more

of the account holders -

would be otiose. There is no need for them to be

there if that construction is right. Now,

Your Honours, even if it were thought to be right,

or necessary, or perhaps just desirable, to have

the words "by the account holder" there, the words

"or by any one or more of the account holders"

would be unnecessary on that approach and,

Your Honours, if one goes to the definition of

"cheque", then to put it at the lowest, the words

"on behalf of" in the definition of "cheque" would

be unnecessary.

Now, Your Honours, that is one of the two

approaches taken by the Full Court. The second

approach I can deal with very briefly and it was to

the effect that if the first approach were not
correct, then the cheques were drawn on behalf of

the society in terms of the definition of "cheque".

That appears, Your Honours, at page 52, line 19,

through to page 53 line 30. Now, Your Honours, in

that passage what Your Honours will see

particularly is, at about line 50 - this appears to

be the relevant reasoning:

As has been noted, the Society established the

account by its arrangements with the Bank and

thus it may be said that the cheque facility

was the Society's facility. The operation of

Commonwealth 7 2/10/92

the account, including the drawing of the

cheques, was done, vis-a-vis members, in

accordance with the wishes and directions of

the Society.

And Their Honours then proceed to the remainder of

that paragraph, saying:

In our view, establishing and maintaining the

cheque facility was something done "on behalf"

of the Society.

But, Your Honours, the critical question, the one

posed by the definition, was whether the cheques

were drawn on behalf of the society. Your Honours,

in our submission, the case is one where it is

submitted there is a sufficiently arguable case

that the decision of the the Full Court was in

error.

DAWSON J: But the payment was certainly on behalf of the

society, was it not?

MR JACKSON:  Well no, Your Honour. Your Honour is talking

about the payment, the subject of each cheque?

DAWSON J: Yes.

MR JACKSON:  No, on behalf of the member, Your Honour. They

were not cheques - a member was paying his bills,

for example.

DAWSON J: It was this society's money.

MR JACKSON:  Indeed, Your Honour. I would not - - -

DAWSON J: So, when it was paid out it was paid in

accordance with the direction of the society on

behalf of the society.

MR JACKSON: Well, Your Honour, the society enabled the

member to do that, but that was pursuant to - - -

DAWSON J:  No, authorized the Bank to pay the money.

MR JACKSON: Well, Your Honour, authorized the Bank to pay

the money, certainly - - -

DAWSON J: When a demand was made by a member.

MR JACKSON:  Yes. Your Honour, I accept that, but it was a

tripartite arrangement, in fact. And it is not as

if there was just an authority given by the society

to the Bank, it is a case where, as well, there was

an arrangement between the member and the Bank.

Commonwealth	2/10/92
McHUGH J:	Your point is that the words "on behalf of" is

not the same as "authorized by"?

MR JACKSON:  Yes, Your Honour. And, Your Honour, there is

no doubt, Your Honour, as the difference in the

judgments below indicates, it is a matter on which

different views might be taken, but in our

submission the better view of the two is that taken

by Mr Justice Gurnmow, that it is simply speaking of

transactions contemplating agents fees.

Your Honours, I cannot advance the matter beyond

that.

DEANE J:  The Court need not trouble you, Mr MacFarlan.

MR MacFARLAN: If the Court pleases.

DEANE J:  An appeal in this case would involve no question

of general principle, but merely a narrow question
of statutory construction of a provision which is

no longer operative. In all the circumstances the

Court does not consider it would be appropriate to

grant special leave to appeal. The application is

accordingly refused.

MR MacFARLAN:  I would ask for costs, if Your Honours

please.

MR JACKSON:	I have nothing to say about that, Your Honour.
DEANE J:	The application is refused with costs.

AT 11.15 AM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

UPON RESUMING AT 11.36 AM:

MR JACKSON:  Your Honours, I am sorry to be here like the

spirit of Christmas past, but a matter was drawn to

my attention, of which I was not aware at the time

when the application was heard, and of which my

learned friend was not aware, either, that is that
the Commonwealth ceased to impose the tax in

question, thereby giving, in effect, the power to

the States, which have now - at least New South

Wales - which impose the tax in the same terms.

That is the Debits Tax Act 1990, the same

definitions being involved and that would affect at

least one of the grounds adopted by the Court.

Commonwealth 9 2/10/92

DEANE J: Well, it did seem surprising that a tax like that

had disappeared.

MR JACKSON:	Yes.
DEANE J:	Mr Jackson, that was a factor, but it does not

affect our decision, and I might add, since we have

reached this stage, that some members of the Court

also had in mind their views as to the prospects of

an appeal succeeding.

MR JACKSON: If Your Honour pleases.

AT 11.39 THE MATTER WAS ADJOURNED SINE DIE

Commonwealth 10 2/10/92