Cosco Holdings v Commissioner of Tax

[1994] HCATrans 102

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
              Brisbane         No B25 of 1994

B e t w e e n -

COSCO HOLDINGS PTY LTD

Applicant

and

COMMISSIONER OF TAXATION

Respondent

Application for special leave
  to appeal

MASON CJ
GAUDRON J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 18 NOVEMBER 1994, AT 9.37 AM

Copyright in the High Court of Australia

MR D.E. HORTON, QC:  If Your Honours please, I appear with my learned friend, MR R.G. BAIN, QC, for the applicant.  (instructed by Minter Ellison Morris Fletcher)

MR D.F. JACKSON, QC:  If the Court pleases, I appear with my learned friend, MR J.A. LOGAN, for the respondent.  (instructed by the Australian Government Solicitor)

MASON CJ:   Mr Horton.

MR HORTON:   Your Honours, there is just one matter, a typographical error in our submissions, entirely my fault, I should have picked it up.  I have given Your Honour’s associate the correction which Your Honours need.  It is not of significance.  The name of that case of Diethelm Manufacturing was left out.

Your Honours, the two special leave points are set out in our submissions and I do not want to repeat what is in there but, as Your Honours will have read, the special leave points involve a conflict between the two otherwise, apart from this Court, final appellate courts in relation to tax matters, the Court of Appeal in New South Wales and the Full Federal Court.

GAUDRON J:   Do you say there is a conflict of principle?

MR HORTON:   Yes, Your Honour.

GAUDRON J:   Is it not just conflict, if there be one at all, in application of the words of the definition?

MR HORTON:   Certainly the latter, Your Honour, but for the other reasons which we advance in the submission as the second special leave point, we would submit as a conflict of principle, because what the Full Federal Court has done is to look to see if the words “facial tissues” in those words appear in the schedule and finding they do not appear, they conclude that it is not proper to see if the product is otherwise designated by reference to the purpose for which it is fitted to achieve in the schedule, so that that is the principle involved in the case.  We have submitted, Your Honours, that for this type of Act one should not employ the technique of looking back through legislation for - in this case for, let me think, 60‑odd years - comparing the form of the Act on one day with the form of it in its present operative sense and concluding, because of changes, words not found in the Act now although found in the Act in previous years, are to be taken as by necessary implication as a matter of construction to be excluded from that part of the statute.

I do not want to repeat what is in the submission because Your Honours have no doubt read it, but that brings me to the second point, and that is that in this type of self-assessing taxing Act, it is critical that what are called the “taxpayer” loosely, that is to say in these sort of cases the manufacturer or retailer, can readily identify a product which is liable to tax and the rate of tax.  And it is just not possible for him to indulge in statutory construction in the ordinary way in which lawyers do it or the court does it.

The only passage in the affidavit which is at page 61 of the application papers of Mr Gracie that I would seek to draw Your Honours’ attention to is on page 64 of the application papers where Your Honours see at paragraph 7 that some large retailers have made sales tax refunds in respect of the matters in issue in this application; that those particular retailers have the lion’s share of the market and, on the next page, page 65 of the papers, it is said by the deponent that it is a question which is exercising the mind of the trade as to whether or not the Court of Appeal decision is one to be applied or the Full Federal Court.  About the middle of that paragraph 9 the deponent says that in the trade the people are waiting for a determination of, in short, which of the two courts are right.  They obviously cannot both be right - - -

GAUDRON J:   I do not see why they cannot be both right.  We are dealing with quite different products.  We are dealing with what, in one case, some people refer to as “Wet Ones”, which is quite different from ‑ ‑ ‑

MR HORTON:   And the other ones, “Dry Ones”, Your Honour.

GAUDRON J:   Yes.

MR HORTON:   Like the argument, Your Honour, dry ones.  But, Your Honour, one happens to be wet when sold, and other may become wet in use.  That is the only significant difference, the adding of water or anything else, for that matter, of a liquid nature.

But if the Court of Appeal’s approach is right, that is to look at the words of the statute, observe that it says goods which are face washers attract a certain rate of duty, then the fact that one is wet and one is dry is of no significance, provided they are properly described as face washers, in which case you have a choice; so does the Commissioner at the moment.  One either selects the Full Federal Court’s view of the Court of Appeal’s view, depending no doubt on the effect upon one’s hip pocket, if I may put it that way.

So that other manufacturers, of which there are half a dozen, they say, have that choice legitimately enough at the moment.  We do not, of course.  There is an issue estoppel against us that the Full Federal Court is right but our competitors have the choice, legitimately enough.  So, of course, does the Commissioner, and yet it is obvious which way he will choose.

Now, Your Honours, I do not want to take Your Honours’ time, but this Court and the Full Federal Court have in recent days said that there should not be a departure by one Court of Appeal from the view of another unless the decision is clearly wrong.  Now, in this case, the Kentucky case could not be said to be clearly wrong.

GAUDRON J:   But it is a different product.  You must fact up to that, must you not?  It is a different product.

MR HORTON:   It is a different product, but if ‑ ‑ ‑

GAUDRON J:   And it serves a different purpose.

MR HORTON:   It could do, Your Honour.  It depends which part of one’s anatomy one is washing, I suppose; one’s hand or one’s face.  But if it can be described as a face washer in both instances, then they both fall within the description.

GAUDRON J:   I do not understand how, on any view, you could call your ordinary tissues face washers.

MASON CJ:   Nor do I.

McHUGH J:   Nor do I.

MR HORTON:   That creates a problem for me, I suppose, Your Honours.

MASON CJ:   One that I would have thought was staring you in the face for a long time, Mr Horton.

MR HORTON:   It did occur to me as being something of a problem that I would have to persuade Your Honours did not exist.  All I can suggest is that five Judges have concluded that the submission that I am putting to Your Honours is right, that they are face washers.  That being so, one can hardly say - I mean this Court can, of course - but one can hardly, apart from a decision of this Court, say that the decision that they are face washers is plainly wrong, when five Judges have said they are.

Now, Your Honours, the fact is that there are two views open, we would submit.  It is not, of course, proper to argue the appeal at the moment in order to determine which view is ultimately the right one.  Your Honours, if Your Honours grant leave, will tell us one day which is the right one.  But that is not my task at the moment to persuade Your Honours which is right but only to persuade Your Honours that it is a truly triable issue. 

The other point is of perhaps more general importance and that is that one cannot resort, as the Full Court did, to words in the statute which are “facial tissue” in the singular or “facial tissues” in order to conclude that therefore face washer does not include that particular product.  Because to do that, if that is the right way of construing these sort of statutes, makes them commercially unworkable.  And this Court has held before that that commercial convenience is a matter to be taken into account in construing this particular odd sort of legislation. 

Now, Your Honours, I will be only a moment longer, I trust, but can I just urge this upon Your Honours.  We have said in paragraph 8 of our submissions that the words “facial tissues” did appear in the Sales Tax legislation years ago.  That was not referred to in the courts below because nobody knew about it until we looked into the old statutes a bit more for the purpose of this application and it came in in 1940 and stayed there until 1947, no doubt as a part of the austerity measures administered, if I remember correctly, by a minister whose task in life was to make life as austere and colourless as possible in order to advance the war effort.  My friend reminds me he was aptly called Mr Deadman, Your Honours probably recollect.  That stayed in only during the war and then they came out.  Then in 1982 the category of household equipment and furnishings, including face washers, went in.

Now, Your Honours, we would submit that it would be a mistake to look back to the 1940 legislation and to construe the legislation at present by reference to what was introduced during the war.  Equally it is a mistake to look at legislation introduced, as the Full Court did, in order to give some advantage to recycled paper.

If the approach that we urge upon Your Honours is correct, then a problem which would plague this sort of legislation would be avoided because if products are to be taxed by reference to their common name or trade name, it is of course the work of a moment - perhaps a little longer than that, you have to get it adopted by the public, I suppose - to change the name.  If I can give Your Honours an example: years ago I was in a passing‑off case for a company called Revlon which makes cosmetics, I think, and various other things against a manufacturer who had imitated the get‑up of a bottle in which it sold a product for washing one’s hair.  After the injunction was granted on the way back to chambers I asked one of the executives why the defendant called its product shampoo and he called the Revlon product medicated foam.  I said, “What’s the

difference?”  He said, “A few cents, because medicated foam does not fall within the sales tax schedules and shampoo does.” 

Now Your Honours see a mere change of name takes you out of the taxing regime.  So that that is why it is critical to adhere to the principle that the earlier cases have established, that one looks at the description of a product, finds if the particular one one is concerned with answers it and assesses its liability to tax accordingly.  Once you use proper names, or even common nouns, it is open to confusion, if not perhaps even abuse.

So, for those reasons, Your Honours, we would submit that although this is a very short point, we concede that, and the hearing if Your Honours granted leave would probably be over in half a day, none the less, as a matter of principle ‑ ‑ ‑

MASON CJ:   I think you may over-estimate the time it would take, Mr Horton.

MR HORTON:   I know that my friend is against me, Your Honour, so I have to allow for that.  Those are our submissions.  We are much obliged to Your Honours.

MASON CJ:   The Court need not trouble you, Mr Jackson. 

The proposed appeal raises no more than a question of application of a statutory classification expressed in ordinary language.  It raises no question of general principle.  In any event, the decision of the Full Court of the Federal Court is plainly right.  The application is therefore refused.

MR JACKSON:   I ask for costs, Your Honour.

MASON CJ:   You do not oppose that, Mr Horton?  The application is refused with costs.

AT 9.51 AM THE MATTER WAS ADJOURNED SINE DIE