Crown Melbourne Limited v Commissioner of Taxation; Burswood Nominees Limited as Trustee for the Burswood Property Trust v Commissioner of Taxation

[2022] HCATrans 93

[2022] HCATrans 093

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S136 of 2021
  No S138 of 2021

B e t w e e n -

CROWN MELBOURNE LIMITED (ACN 006 973 262)

Applicant

and

COMMISSIONER OF TAXATION

Respondent

Office of the Registry
  Sydney  No S137 of 2021
  No S139 of 2021

B e t w e e n -

BURSWOOD NOMINEES LIMITED AS TRUSTEE FOR THE BURSWOOD PROPERTY TRUST

Applicant

and

COMMISSIONER OF TAXATION

Respondent

Applications for special leave to appeal

KIEFEL CJ
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 MAY 2022, AT 10.52 AM

Copyright in the High Court of Australia

____________________

MR M.L. ROBERTSON, QC:   If the Court pleases, I appear with MR B.L. JONES for the applicant in each matter.  (instructed by MinterEllison)

MR D.F.C. THOMAS, SC:   If the Court pleases, I appear with MS M.E. ELLICOT for the respondent in each matter.  (instructed by Australian Government Solicitor)

KIEFEL CJ:   Yes, Mr Robertson.

MR ROBERTSON:   If the Court pleases.  Could I please take the Court to application book at 89 to set out the essential factual context of this matter.  At 89 at paragraph 41, we see at the conclusion of a junket program there would be a calculation made by the casino which would:

give rise to a single amount owing by, or to, the casino for the junket.

We say that that is the amount which falls within the statutory descriptions of total monetary prizes payable by the casino or total amount wages being the consideration won by the casino.

EDELMAN J: So, ultimately your question is really one about the application of a definitions section in the confined part of the 1999 GST Act to a bespoke contractual arrangement?

MR ROBERTSON: Well, our principal submission is one of procedural fairness, but we do have a question of whether an assessment of an amount which does not meet the specific definitions that your Honour is talking to is authorised by the GST Act and, if so, whether it should nevertheless be assessed on that basis having regard to the principles in Lend Lease.

EDELMAN J:   What is the question of public importance that you say is raised by those issues?

MR ROBERTSON:   Well, the question of public importance as identified by this Court in the QBE Insurance Case is a simple miscarriage of justice.  If the court has not identified the parties’ grounds of appeal and considered those and not considered the submissions in the cases referred to, then that is itself a matter that warrants intervention of this Court. 

As for the question of construction of the GST Act, we have a clear case of the amount assessed not falling within the statutory descriptions within the specific provisions, but another amount being replaced with it, which is a notional amount which does not fall within the statutory descriptions, and the Commissioner says that he is nevertheless empowered by the GST Act to substitute a notional amount which does not meet the terms of the Act, impose tax upon it.

EDELMAN J:   Mr Robertson, you would not say that these gambling junkets involve transactions that are exempt from GST, would you?

MR ROBERTSON:   No, not at all.  We in fact say, on the facts, that to take the example which has been used throughout the hearing and here in the special leave application, of a 72.5 per cent rebate program.  So, what we have is a special gambling arrangement where whatever the notional gross win is at the end of the junket, the amount to be paid is 27.5 per cent of that amount.  So, if our notional gross win is $1 million – so if the casino has lost $1 million notionally -, its legal obligation in Green v Farmer terms or in all those cases, is only $275,000.

But, the Commissioner says the casino gets a deduction of $1 million dollars on its construction.  So, on that example, the casino artificially gets a deduction of $1 million which can offset its actual gambling revenues.  So, we have a situation where, on Green v Farmer principles, on that example, the only monetary obligation that exists ever is an obligation to pay $275,000, yet we have a distortive construction which makes the casino liable to tax on $1 million ‑ ‑ ‑

EDELMAN J:   Even if that is right, on any view, one has to distort the operation of 126‑5 to make it apply to this bespoke‑type situation.

MR ROBERTSON: Not at all and that is what the Full Court said, but what they failed to do is consider the correct interaction between Chapter 2 and Chapter 4 of the GST Act.

KIEFEL CJ:   Essentially for the Full Court to overturn, it would be necessary to hold that the commissions and rebates form either part of the total monetary prizes or total amount of wages.  Is that really what it comes down to?

MR ROBERTSON:   Not at all.  We say that the essential error of the court – well, first of all, the question before the court in any tax appeal is the excessiveness of the GST assessment.  The GST assessment, if we look at application book 89 at 41, was only on the notional ordinary gambling win, the $1 million that we are talking about.  Now, in conformity with Dalco’s Case, the judicial power is attracted because the controversy is whether the assessment is correct.  The taxpayer is not there to attack the Commissioner’s process of assessment – the reasoning process by which he reached the amount assessed.  That is what Dalco says.  The Full Court defended that process.

What the Full Court should have done is ask the simple question – is the $1 million, which is the notional ordinary gambling win – or loss – within the statutory descriptions of a prize that the casino is liable to pay, or money that the casino has received as consideration for its taxable supplies.  The focus is not on the process ‑ ‑ ‑

EDELMAN J:   Mr Robertson, one does need to interpret the statutory provisions and in interpreting statutory provisions one needs to work out what process the application of those provisions requires.

MR ROBERTSON:   Yes, and ‑ ‑ ‑

EDELMAN J:   That is exactly what the Full Court attempted to do, whether they did so correctly or not.

MR ROBERTSON:   If I can take your Honours to what the Full Court did, at paragraph 4 of its judgment, page 79 of the application book, your Honours.  If we go to paragraph 2 and the introduction, the way the Full Court framed the issue was whether the commissions and rebates payable fell within the statutory description, as the Chief Justice said.

The submission that was made was that the rebates and commissions were not payable in law at all.  They were not monetary obligations at all.  They were simply integers in an agreed formula.  So, the Full Court completely bypassed the taxpayer’s principal submission in the case, which was that the commissions and rebates were not legal monetary obligations.  What the Commissioner ‑ ‑ ‑

KIEFEL CJ:   This is your argument for a single monetary outcome of the process out of the transaction?

MR ROBERTSON:   Not in the way that it was framed by the Full Court.  The Full Court considered the argument to be there are four separate monetary obligations which are all offset against each other in a…..case sense to give rise to a net amount.  The taxpayer’s case was not that at all.  It was there was one gross outcome as a result of a contract which was not, and could not, be divided into separate debts which were offset against each other.

EDELMAN J:   That submission does not quite fit the definitions though, does it, in 126‑10?

MR ROBERTSON:   We go back to my point, your Honour.  The definitions in 126‑35 is what we have to start with, and we have to start with whether there is a gambling supply, and a gambling supply is a taxable supply.  So, the first thing we have to do is ask whether there is a taxable supply within Chapter 2 and the first thing we must do is ask what is the amount payable to the taxpayer or by the taxpayer. 

So, the first question before we even get into the provisions in Division 126 – and this was not addressed by the Full Court – is what is the amount payable in law by the casino, and the only amount payable in law by the casino on the example that we have been using is $275,000.  That is the starting point for the taxation of the taxpayer.  GST is imposed on $275,000 because that is the only consideration within the definition.  The question then is, accepting that is taxable under Chapter 2, is that modified by Chapter 4. 

So, the starting point is what is the consideration, which is a defined term – the payment – what is the payment in a transaction where there is a promise to pay $1,000 on one side and $300 on the other.  Green v Farmer and all the authorities I took the Court to say that that is a single monetary obligation for, on that example, $700.  It is not an obligation to pay $1,000 and an obligation to pay $700. 

It is one single obligation and that is quite different, Chief Justice, from the way the Full Court approached it where they considered that what the taxpayer was arguing was there is an obligation to pay $1,000, a counter‑obligation to pay $700, and they are netted off.  What we are looking at is the taxation character of the only payment that results at the end of a junket.

EDELMAN J:   Which in one sense is the question to be asked and answered as to whether or not you can aggregate the notional amounts that are gambled for the purposes of that underlying contract.

MR ROBERTSON:   Perhaps I do not understand what you are saying.  We are saying that if we enter into a contract where the only monetary consideration is 30 per cent of monopoly money ‑ ‑ ‑

EDELMAN J:   This is a contract with the junket operator.

MR ROBERTSON:   That is right, it is a contract by the casino.

EDELMAN J:   Yes.

MR ROBERTSON:   So the casino is prepared, whoever is walking through the door, to say if you play with these notional tracking chips – which cannot be cashed out – whatever the face value of those excess of chips is at the end of your gambling junket is concerned, we will give you 30 per cent of the face value, or you will give us 30 per cent of the face value.  So, the only amount that could be sued for in the Supreme Court is our 30 per cent amount.  That is the starting point for GST. 

That argument was never considered by the Full Court and it was the taxpayer’s principal argument in this case, and I have transmitted to your Honours yesterday our written submissions to the Full Court which are at tab 2 of the documents I have transmitted to you.

You will see at paragraphs 5 to 14 of those written submissions, they are devoted solely to that issue.  Your Honours, I have also included the transcript, because at pages 45 to 49 of the transcript, I made submissions at length on all the authorities to demonstrate the underlying premise of the Full Court’s decision and the Commissioner’s assessment that there were commissions and rebates payable in law was false. 

Now, none of those submissions was recorded in the judgment, and none of the cases were considered by the Full Court in their judgment.  They assumed that the Commissioner’s assessment of $1 million dollars – the notional amount – was a legal amount payable to the casino or by the casino, and then conducted an arid exercise based on false facts, contrary to their factual context, that there were legal obligations to pay commission.

So, Justice Edelman, this is a case not of aggregation, this is a case where, as a matter of construction of the GST Act, there could be a notional disaggregation which then brings into the question that Justice Davies looked at in whether the Lend Lease Case and whether the principle set out there for stamp duty applied to GST consideration. 

In Lend Lease, the Court said that even if this aggregation was possible, where you have an indivisible transaction, where both elements of it clearly move the transaction, there cannot be a disaggregation of it.  Here, the casino is only betting with the junket – or the players – on the basis that the special gambling terms apply, and that they will only pay 30 per cent of the notional winnings, and they will only receive 30 per cent of the notional losses.

So, even if the GST statute allowed disaggregation, it should not have in this case.  But if I return to the starting point, your Honour, the statutory question before the Court, that which exercised its constitutional jurisdiction, was to determine what amount was owing to the Commonwealth under the assessment.  They did not do that.  The assessment was only of integer (a), at paragraph 41, and they did not consider whether integer (a) met the statutory descriptions. 

We did not embark upon an exercise of characterising the commissions or the rebates, because they were not part of the assessment.  We just simply said ‑ ‑ ‑

KIEFEL CJ:   You mean as to whether they were prizes or not?

MR ROBERTSON:   No, as to whether they fell within prizes or not, because they were not part of the assessment.  We were simply saying, you have assessed us on a pretend amount, which does not meet the statutory description.  The GST assessment is plainly excessive.  We did not receive $1 million dollars in cash.  We did not pay out $1 million dollars as a prize.  The GST assessment is plainly wrong.  That was a ‑ ‑ ‑

EDELMAN J:   Your basic point is that the Full Court, despite all your submissions, has proceeded on the wrong basis, and not realised that the case is really about 126‑35, and should have just stopped at 126‑35 taxable supply.

MR ROBERTSON:   And stopped and said the only taxable supply here is a taxable supply for, on the example, $275,000.

EDELMAN J:   So that is the core base upon which your whole case was run before the Full Court.

MR ROBERTSON:   Exactly.  Yes, the core basis.  If the Court pleases, I think that I have made my point clear.

KIEFEL CJ:   The Court will adjourn to consider the course that it will take.

AT 11.12 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.13 AM:

KIEFEL CJ:   Mr Thomas, we would like to hear from you, but only on the question of procedural fairness and the suggestion that the Full Court misapprehended the applicants’ case.

MR THOMAS:   Yes, your Honour.  In our submission, that contention is without merit, and I will explain why.  Can I take your Honours please, firstly, to CB 104 where the Full Court recorded in full the notice of contention filed by my learned friend.  The sole ground of that notice of contention that is said not to have been considered by the court was ground 3.

Can I ask your Honours before looking at the ground to look at the heading, “There is only one relevant gambling contract”, and then in ground 3 there is a reference and a challenge to a single sentence in a single paragraph of Justice Davies.  That is the final sentence of paragraph 69 of her Honour’s reasons.  That can be found – and could I ask your Honours to go to it – at CB 41, paragraph 69.

This was the first of three reasons that her Honour identified in favour of the applicant.  That was that there was a tripartite contractual relationship in this case between the casino, the junket tour operator and each of the junket players.  Her Honour expressly applied, or sought to apply, the Satanita Case about yachtsmen off the Isle of Wight who were taken to have agreed and thereby to have been parties to a contract. 

It was in that context that in the final sentence of paragraph 69 her Honour identified under those terms there was an amount either paid by or to the junket operator to be calculated by the collective wins and losses and then adjusted by the commission and rebate.  In other words, the finding that was challenged in the ground was premised on the existence of a Satanita tripartite relationship.

If your Honours go immediately then back to the Full Court, their Honours expressly considered the Satanita proposition at CB 111, paragraph 91, where their Honours rejected the existence of a tripartite contractual relationship for three reasons:  firstly, because the Satanita Case was distinguishable; secondly, that there was no evidence – I am halfway through paragraph 91:

no evidence before the Court at first instance that individual participants saw or were otherwise aware of the specific terms of the Junket Program Agreement . . . Thirdly, the existence of a tripartite contractual relationship is inconsistent with, or at least does not sit easily with, cl 4.10 of the Promotion Agreement -

So, pausing there, their Honours have rejected the premise of the ground and said that there was no tripartite contractual relationship.  If there is no tripartite contractual relationship, then the ground 3 notice of contention is not reached and, in my respectful submission, it has never been the case that a court, lest it be found guilty of procedural unfairness, is required to consider alternatives against its primary conclusion.  That is not the position.  But while I am at 111, can I go on to paragraph 92 where their Honours expressly considered where there was a so‑called:

“integrated and indivisible transaction of which the commission and rebates ... are inseverable components”.

Again, their Honours rejected the existence of that so‑called transaction by reference to the facts, but also to the scheme which applies and requires disintegration into two ledgers:  total amounts wagered on the one hand and total monetary prizes on the other.  If your Honours recall from ground 3 of the notice of contention at page 104, the nub of that ground was that there was a tripartite contractual arrangement that gave rise to a so‑called inseverable notional component of an integrated and indivisible gambling contract.

EDELMAN J:   That disposes of the taxable supply issue ‑ ‑ ‑

MR THOMAS:   Yes, it does.  So, for those reasons we say the procedural  unfairness ground lacks merit and there is no other reason why your Honours would be minded to grant special leave, in our submission.

KIEFEL CJ:   Yes, thank you, Mr Thomas.  Do you have anything in reply, Mr Robertson?

MR ROBERTSON:   Your Honour, the submission that was made in our written submissions that I have taken your Honours to, 5 to 14, has absolutely nothing to do with The Satanita – nothing whatsoever to do with tripartite arrangement.  It was simply that there were not, as we set out at paragraph 3 – when Justice Davies made her decision in our favour on the basis that the commissions were paid and therefore the total amount was also paid, she then applied the Lend Lease reasoning to say that because they were inseverable they should nevertheless be all treated as part of the one gambling supply. 

That is nothing to do with the submission we made to the Full Court and pointing out Justice Davies’ mistake to say there were no commissions paid.  There was only one amount paid to the casino, and it does not matter who paid it, but the only amount that was paid, whether it is by the junket tour operator or the players, was $275,000, and that is the only amount which satisfies the statutory description. 

Now, my learned friend has not pointed to anywhere in the judgment where that submission was recorded or dealt with.  It was a very simple submission.  It was almost exclusively pressed in written submissions and in oral submissions and it is not dealt with anywhere.  We have 10 authorities which the court was taken to on this very point and they do not appear in the judgment.  That is why we are here. 

We are not looking at the character of commissions and rebates paid.  Our submission was they were never paid.  They were just an integer in a formula as found by the Full Court in its factual context which gave rise to the single monetary liability.  So, the court, having found that there was only a single monetary liability, not offsetting liabilities, did not engage with their own findings of fact.  If the Court pleases.

KIEFEL CJ:   In our view the proposed appeals raise no question of general principle.  The decisions below are not attended with sufficient doubt to warrant grants of special leave.  There is no substance to the claim of procedural fairness.  Special leave is refused with costs.

The Court will now adjourn.

AT 11.21 AM THE MATTERS WERE CONCLUDED