Ha & Lim v NSW

[1997] HCATrans 71

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S45 of 1996

B e t w e e n -

NGO NGO HA

First Plaintiff

SOKHIENG LIM

Second Plaintiff

and

STATE OF NEW SOUTH WALES

First Defendant

BRUCE BUCHANAN

Second Defendant

R. G. SMITH

Third Defendant

Office of the Registry
  Sydney  No S165 of 1996

B e t w e e n -

WALTER HAMMOND & ASSOCIATES PTY LIMITED

Plaintiff

and

STATE OF NEW SOUTH WALES

First Defendant

BRUCE BUCHANAN

Second Defendant

I.P. SMITH

Third Defendant

Case Stated

BRENNAN CJ
DAWSON J
TOOHEY J
GAUDRON J
McHUGH J
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 13 MARCH 1997, AT 10.17 AM

(Continued from 12/3/97)

Copyright in the High Court of Australia

BRENNAN CJ:   Yes, Mr Solicitor for Western Australia.

MR MEADOWS: May it please the Court. May I just address an issue which was raised by Justice Gummow late yesterday about the test to be proposed. Western Australia accepts the test proposed in paragraph 2 of the defendants’ amended written submissions as the correct test for identifying a duty of excise for the purposes of section 90. In doing so we note that paragraph 4 of those submissions makes it clear that this question is to be answered as a matter of substance. Your Honours, I have spoken to my learned friends from the other States and Territories and I am in a position to advise that they all agree with this position. The effect of what we said in the second sentence in paragraph 2.2 of our submissions is simply that in most instances a tax may be identified as an excise where the tax discriminates against commodities produced or manufactured in Australia as against those commodities when imported.

TOOHEY J:   I am not clear how those two definitions gel, Mr Solicitor.  Are you speaking of paragraph 2 of the defendants’ amended written submissions?

MR MEADOWS:   Yes.

TOOHEY J:   What is the definition that you extract from that paragraph?

MR MEADOWS:   The ultimate point is that:

if the discrimen of their application includes their local origin.

And as it goes on to say:

A tax merely on dealing with goods in the course of distribution after production or manufacture is not an excise, so long as the ability to pay the tax does not depend upon the fact that the goods are locally produced.

TOOHEY J:   Not so much a definition as a description, really.

MR MEADOWS:   Yes, I suppose that is a better way to put it, your Honour.

BRENNAN CJ:   So we can take it that it is a criterion of liability test?

MR MEADOWS:   We would say not.  It is a question of characterisation, your Honour.

BRENNAN CJ:   It is exactly what criterion of liability is designed to do, to give a character of something.  Is this a criterion of liability test or it is a substantive test?

MR MEADOWS:   It is a substantive test, as we have pointed out.  If one goes to paragraph 4 of the submissions one looks at it as a matter of substance.

BRENNAN CJ:   If it is a question of a substantive test, how is it that it can be said in the last sentence of paragraph 2, that:

A tax merely on dealing with goods in the course of distribution -

et cetera.  What if is a tax on the first sale?

MR MEADOWS:   We would accept that that, in substance, could be an excise.

BRENNAN CJ:   Any sale of goods produced in Australia.

MR MEADOWS:   I am not quite sure I understand what your Honour is driving at.

BRENNAN CJ:   I am looking at the last sentence in paragraph 2.  If the proposition is that it will not be a duty of excise -

so long as the liability to pay the tax does not depend on the fact that the good are locally produced -

and the tax is imposed upon the sale of ‑ ‑ ‑

MR MEADOWS:   What we are saying, your Honour, is that in substance it could be a tax which depends upon the fact that the goods are locally produced.

BRENNAN CJ:   Yes, I see.  I must confess, for myself I do not understand how it is that the discrimen of their application includes gels with the proposition that it is a test of substance.

MR MEADOWS:   As my learned friend, Mr Spigelman, outlined it, we would say that that was quite apparent from his submission.  May it please the Court.

BRENNAN CJ:   Thank you, Mr Solicitor.  Mr Solicitor for South Australia.

MR SELWAY:   May it please the Court.  We have produced and handed up to the Court two written submissions.  The first of them had excerpts from the various materials which we have prepared, and the excerpts were in a small font.  It occurred to us that that may have been difficult to read.  We have produced another written submission, somewhat longer, which I hope your Honours have, where the excerpts are written in a larger font so that at least it can be easily read.  I apologise if any of your Honours had attempted to read the first version with the small font.

McHUGH J:   It is also helpful that you and Western Australia have prepared it in disks to the Court as well, for those of us who write judgments on computers.

MR SELWAY:   Your Honour the Chief Justice mentioned that matter at one of the directions hearings.  We have made some attempt to actually reduce all of our volumes to disk.  We were unable to do so, but at least the parts that we would wish to specifically refer the Court to are now on disk.

On the questioning of reopening, we adopt the submissions of New South Wales, Western Australia and Victoria.  In paragraph 1 of our written submissions, we analyse the differences between the majority and minority positions in Capital Duplicators and, in our submission, the differences relate to the different purpose ascribed to section 90, and to the different effect and consequence ascribed to the incidence of the tax upon goods.

Your Honours, on the question of purpose, we rely upon our written submissions, and we adopt the submissions made by New South Wales and Western Australia. In our submission, the purpose of the exclusive power in section 90 was to give to the Commonwealth the control over the relativity between the taxes upon the activity of importing goods as against the taxes upon the activity of production of goods. We say that that is what was meant at 1900, and is meant in the context of our submissions, by the terms “tariff policy” or “fiscal policy” ‑ ‑ ‑

KIRBY J:   What do you say in respect of Justice Dixon’s comment at 304 in Matthews that such a view “would expose the constitutional provision made by sec. 90 to evasion by easy subterfuges”?

MR SELWAY:   We say, your Honour, with the greatest respect to Justice Dixon, that he was not addressing the right question.

KIRBY J:   Sounds like a rather pertinent right question to me, given that the founders took the trouble to make an exclusive zone which, on your theory, can be so easily circumvented.

MR SELWAY:   No, your Honour.  It depends what the zone was.  If your Honour assumes, as Justice Dixon did in Parton, that the purpose of the provision was to give the Commonwealth national control over the taxation of goods, if your Honours accept that that is the proposition then clearly Parton was not wrongly decided, and the submissions we put should be rejected. 

The position we put is that his Honour has completely misunderstood the purpose of section 90. If the purpose of section 90 was, as we understand it, to give to the Commonwealth the control of the relativity between taxes upon production of goods and taxes upon importation of goods, then his Honour is wrong to say that you can avoid it by subterfuge. We are not trying to put a test that will avoid that purpose.

DAWSON J:   But the difference is not as stark as that in Parton, is it, because Parton was directed to home production.  What you gradually see in the cases then is a logical glide along the lines of, “Well, home production can be affected by taxes not directly imposed upon them”.  Then you get the concept of indirect taxes being introduced and then you get the idea that any tax really at any step along the stage before it reaches the consumer can affect home production.  Then home production disappears entirely from the thing and we just start to talk about taxes on all commodities so that it is a gradual progression.  But in Parton’s Cas,e home production was very much to the forefront.  Of course, now that the idea of a distinction between direct and indirect taxes for any relevant purpose is gone, a lot of the basis for the final conclusion is gone on one view.

MR SELWAY:   Yes, your Honour.  We certainly do not suggest that the analysis since Parton and the expansion, if you like, since Parton is not inherent in Justice Dixon’s analysis in Parton.  We would concede it is.  The references by the majority of the Court in Capital Duplicators back to Justice Dixon in Parton was a proper reference, but what we say is that his Honour Justice Dixon in Parton was in error.  That is the substance of our submission.  If that is accepted, if one can show by reason of the mischief, the text, the purpose and the analysis that his Honour Justice Dixon engaged in that there is an error, then your Honour does not have to go to the conclusion that the test we are proposing can be easily avoided.

It can only be easily avoided if your Honour starts with the assumption that Justice Dixon did, that the test ‑ that the purpose was to give the Commonwealth control of the taxation of commodities.  Once your Honour accepts that that is not the purpose, then the analysis just does not lead there.  Your Honour, I will come to this question in more detail on the issue of incidence, but what we do say for the moment is that if the relevant purpose is as we have stated it, then questions such as the total amount of Commonwealth tax revenue or even the amount of home production that might occur and how a tax might affect those issues are not relevant for this inquiry.

To that extent, your Honours, we would say, and join with my learned friend, Mr Solicitor for New South Wales, that paragraphs 2.17(c) and (d) and paragraphs 2.18 and following of the Commonwealth submissions simply do not address the submissions we have put; the 2.17(a) and (b) which are the examples, your Honours may recall, we need to deal with in more detail, but we say those paragraphs simply do not address the issue.

In our oral submissions, firstly, we propose to deal with two issues, the meaning of “excise” as at 1900 and the economic incidence of excise. Our researches suggest that there are three possible meanings of “excise” as at 1900. The first meaning, and the meaning that we say is relevant for the purpose of the Constitution, is that an excise is a duty on the activity of production or manufacture of goods. Your Honours, we say that that was the meaning that was adopted in economic literature in the late 19th century.

If I could perhaps - and I do not intend to take your Honours in any detail to these volumes, it is unnecessary - but if I could refer the Court to volume 4 of the South Australian materials at page 35.  Those of your Honours who sat in Capital Duplicators may recall that these materials were prepared and handed up by New South Wales and I must apologise because some of the submissions I will make will give some of your Honours a feeling of deja vu and I apologise for that.  It is a large report analysing a host of economic literature, but the conclusions are stated in paragraphs (a) and (b) on page 35:

A duty of excise was a tax on the production of commodities within a country.  It did not extend to taxing sale or distribution.

(b)  There was a distinction between “excise duty” and “excise revenue”, the latter including a miscellaneous group of taxes, sometimes called licence duties, excises or excise licences or collected by “the Excise” but which were not themselves duties of excise.

And perhaps to refer to (c):

Revenue from licences was seen as conceptually different from revenue from duties of excise.

Your Honours, as I say, that is a large report.  That is the conclusion which can be drawn from it.

Could I also, without taking your Honours to it, refer to another report within that volume set out at page 1, an article by Gordon, which seems to be an economic academic paper derived from the material in New South Wales’ submissions.  I assume that Mr Gordon either assisted with the research or something.  But, I only point out that to your Honours because it may be a shorter way of getting to the large amount of material if your Honours see it necessary.

I say “if your Honours see it necessary” because the conclusion that is drawn from that material is, in fact, the same conclusion that Justice Dixon seemed to draw from the economic literature in Matthews at pages 297 to 299.  Your Honours may recall my learned friend, the Solicitor for Queensland, took your Honours to that material yesterday where, at the end of that analysis of the economic material at page 299, his Honour Justice Dixon concluded that even so it was not binding on the meaning of excise.  In any event, what we say is that is what the economic meaning was as at 1900.  We also say, for reasons we will come to in a moment, that that was the meaning which was well understood in the Australian colonies at 1900.  Your Honours, the second meaning is a more difficult meaning to establish that it existed at 1900.  It is that an excise is an internal duty on goods.

GUMMOW J:   That was the view taken by Justice Story in his commentaries on the Constitution of the United States, paragraph 950.  He is construing “excise” as used in the United States Constitution.  He said it was “an inland imposition paid sometimes upon consumption of a commodity, frequently upon the retail sale being the last stage before consumption.”  So, it was not mysterious; it was in the leading United States constitutional text.  It has been there for 70 years.

MR SELWAY:   Your Honour, but what we say is we cannot find it in an English or an Australian text as such, but we will take your Honours to one reference which seems to lead to the same conclusion.

That test, “inland duty imposed upon goods” is, in fact, the test that was adopted by the majority in Capital Duplicators, and your Honours have been taken through the analysis of how that test developed from Parton. If I could take your Honours back to volume 4 at page 32 from Stephen’s Commentaries on the Laws of England, the relevant edition was published in 1914. At page 32 of our book there is reference to the meaning of “excise”, and your Honours will see that:

This is directly opposite in its nature to the customs duties; for it is an inland imposition, paid sometimes on the consumption of the commodity, frequently upon the retail sale.  Inasmuch as this duty is peculiarly liable to evasion,

and then it deals with the powers the officers have.  The next paragraph says:

The relationship of excise to customs duties is always of great importance; though the views taken of it naturally vary with the fiscal policy followed by the country at any given time.

Then it deals with the relationships between customs and excise and protectionism.  It then deals over the next page and onto page 33 of our book at about point 2 with the development of the concept and says at about line 5:

Since that period it has constantly formed part of the taxes of the nation, being, however, now limited to beer, spirits, chicory, coffee, glucose, and saccharin; though, under recent Acts of Parliament, many imposts, which are not properly in the nature of excise, have been classed, for greater convenience of collection, under this head -

and then deals with a number of licences.  Your Honours, we can find no reference to that meaning in Australia as at 1900, but we will come back to that in a moment.  Your Honours, the third meaning was a miscellany of taxes collected by the excise in England, including licence fees.  An example of that can be seen in the Encyclopaedia Britannica and that is contained in volume 4 of our materials at page 180 where your Honours will see, at the bottom of the first column, there is a definition of excise to mean:

a term now well known in public finance, signifying a duty charged on home goods, either in the process of their manufacture, or before their sale to the home consumers.

I might say that part of the definition was cited by his Honour Justice Dixon in Matthews, but if your Honours go to the next page, page 180, which is still dealing with a definition of excise at about point 5, the middle of the line:

The other excise duties remaining are chiefly in the form of licences, such as to kill game and to use and carry guns, to sell gold and silver plate, to pursue the business of appraisers or auctioneers, hawkers or pedlars, pawnbrokers or patent‑medicine vendors, to manufacture tobacco or snuff, to deal in sweets or in foreign wines, to make vinegar, to roast malt, or to use a still in chemistry or otherwise.  It may be presumed that the policy of the licence duties was at first not so much to collect revenue, though in the aggregate they yielded large sum, as to guard the main sources of excise, and to place certain classes of dealers, by registration and an annual payment to the exchequer, under a direct legal responsibility.

Your Honours, what we say is that that definition of excise, notwithstanding the narrow form in which it is given in the first column, clearly includes within that definition this miscellany of licences which has been referred to in the cases.

BRENNAN CJ:   Does that say anything about Dennis Hotels?

MR SELWAY:   It may, your Honour, and I will come to that in a moment if I can.  Perhaps for completeness we should refer your Honours to a fourth meaning which seems to be a more modern economic meaning.  There is a reference to it in the materials, an article by Cnossen.  It is in volume 4 at page 15.  I do not need to take your Honours to it, but the effect of that definition is that a broad‑based retail tax is not an excise, but a selective tax on goods is an excise.  So that, for example, a tax on tobacco would be an excise but a tax on all retail sales of all goods would not be.  Your Honours, that seems to be the definition as applied in the more recent economic literature.  No one suggests that it was the definition as at 1900 but we merely refer the Court to that definition because, if your Honours are reading the economic literature, it may be confusing unless your Honours are aware that that may be the definition they are using.

KIRBY J: Given that the Constitution is to be interpreted not in a rigid or frozen way, and given the way under the jurisprudence of this Court the meaning has developed, given that this is the way economists now regard an excise, given the development of other heads of power under the Constitution beyond that which was contemplated in 1901, why should we ignore modern concepts of what an excise is?

MR SELWAY: We would say a couple of things, your Honour. Firstly, we would say that in interpreting the Constitution it is not in effect a subjective exercise over a course of time and that it does not depend upon the perceptions of a judge at a particular point in time. If that is so, then the Constitution must have a real meaning. If the Constitution has a real meaning, the proper place to find that meaning in the course of ordinary interpretation, not only of the Constitution but of any document, is its meaning and purpose as at the time it was made, 1900. Accepting that there has to be flexibility within that approach because one is dealing with the Constitution and not an ordinary statute, nevertheless ‑ ‑ ‑

KIRBY J: If that view had been taken of postal, telegraphic and other like services or of other provisions in the Constitution, the Constitution would have been frozen in time and it just would not have been able to respond to the situation upon which it had to govern. When one adds to that the relative inflexibility of the formal amendment mechanism, then we would really have been tied to the chariot wheels of the 1890s, and that really is not a very sound constitutional interpretive document, at least as I think.

MR SELWAY: With respect, your Honour, we say that any other interpretive doctrine of the Constitution necessarily leads into the subjective views of individual judges. But what we say is that the Court does have the capacity within that framework of developing the common law, of developing the denotation of words rather than the connotation, to identify how the Constitution should apply to better achieve its purpose and meaning in current times. No one is denying that.

What we are saying, though, your Honour, is that one cannot start - if we take section 92 - one cannot start with a view that current social policy would be better served by an “individual rights” theory of section 92, put that into the Constitution and change its meaning and effect. Now, in Cole v Whitfield, South Australia certainly, and others, argued that that is what had happened; that the court had got away from the meaning and effect of the words - admittedly words of imprecise meaning - and, on the basis of that, had constructed a meaning of the Constitution which could not be sustained in view of proper constitutional interpretation, looking at the meaning and effect.

That does not deny, as I say, that the Court can have a look at how the Constitution applies in current circumstances and can interpret the words in an appropriate manner to give effect to the purpose and meaning as at 1900. We are not denying that proposition. But to go from that to say that the Court can ignore that purpose and that meaning, we say, is a constitutional error.

KIRBY J:   I am not suggesting that, but I just question the originalist concept of constitutional interpretation upon which a lot of these submissions appear to be founded.

MR SELWAY:   Well, your Honour, and it may well be put against us that that is the approach.  What we would say, though, is that the reference to convention debates in history has freed this Court from the problem that Justice Dixon had in Parton, where his Honour had to come up with a purpose for section 90. With respect to his Honour, you cannot find that purpose in the text, you cannot find it in the structure. His Honour assumed it. His Honour said he assumed it.

Now, what we say is the appropriate method, that was not then open to his Honour, was to go back to history and back to the convention debates and to see if one can ascertain what the purpose is.  It may be that, at the end of the day, we have not convinced your Honours what the purpose is, and that is the risk we run.  But if your Honours are convinced that the purpose is what we ascribe it as, and not what Justice Dixon ascribed it as in Parton, then the conclusion that his Honour drew from that purpose must be doubtful.

Your Honour, that does not involve an original intent analysis, that involves trying to work out what section 90 means. If one says, for example - leaving aside economists, because our position would be that the popular meaning of “excise” out in the business community in Australia today is the same as it was in 1900, an excise is a tax on production, and that for the simple reason that every excise imposed in this country has always been of that nature.

McHUGH J:   I am not sure about that.  You say a tax on production.  Why not a tax on commodities that are individually enumerated as opposed to general taxes, such as a sales tax, which refer to any things, but if you have a tax on liquor or coats, why are they not excises?

MR SELWAY:   What we would say is if your Honour is looking for the popular meaning of “excise” today, leaving aside dictionaries, effective as they are by constitutional interpretation and English meanings, but if your Honour is looking for a popular meaning, the businessman knows what an excise is is a tax on producers in respect of goods produced and a sales tax is a tax on wholesalers in respect of the wholesale sale.  Those are the distinguishing features of those taxes.

McHUGH J:   But you concede that an economist today do not see it in that light.  If economists do not see it in that light, it is unlikely that business persons would see it in that light.

MR SELWAY:   I am only making the point, your Honour, that that is what excises have always been in this country.

McHUGH J:   Yes, but quite apart from authority, I would be very interested if you could demonstrate to my satisfaction that the true purpose of section 90 is to be found in the debates, because it seems to me you are seeking to read down what could be regarded as the ordinary meaning of the term “excise”, or certainly one of the meanings of the term “excise”, as it was understood in 1900, and you want to put a gloss on it.

MR SELWAY:   I take your Honour’s point.  Could I deal with the matter this way?  My part of the task is to deal with the meaning of “excise” in 1900.  In dealing with that question, I have to touch on purposes I will go through, but we rely on our written submissions primarily for purpose, and I can refer your Honours to those where we identify what we say the purpose is to be ascertained and it is the same purpose that those of your Honours who sat in Cole v Whitfield saw in that case and in Cole v Whitfield we put that section 90 was one of the examples of the tariff policy and the equality of trade question, one of the issues.

McHUGH J:   I mentioned yesterday a problem I have about interpreting the Constitution in terms of purpose. Whose purpose? Those who were at the convention debates, the English Parliament, the people? Whose purpose are we talking about?

MR SELWAY: What I can say to your Honour is two things. Firstly, it may be then that your Honour, at the end of the day, will not be convinced that a proper purpose has been identified, but we would say that it is appropriate to have a look at history and surrounding events and the history and surrounding events in respect of the Constitution. The convention debates are of importance, even if it is not put ‑ ‑ ‑

DAWSON J:   You are really using “purpose” in the sense of mischief, are you not?

MR SELWAY: Yes, your Honour, to identify what the problem was and why they were addressing it and why section 90 was there for in the first place. If one is looking at that as an historical fact, the convention debates serve that purpose. The second thing we would say is that what we are faced with in Parton is an analysis of section 90 based upon an assumption of purpose by his Honour Justice Dixon and, clearly, the submissions for the intervening States and New South Wales have been addressed to that purpose and attacking that proposition. To the extent your Honour says, “Well, purpose is irrelevant”, to the extent that it cannot be understood ‑ ‑ ‑

McHUGH J:   No, no, I am not saying it is irrelevant but there is a real problem.  I have said in I think Theophanous and maybe McGinty that one is entitled to look at the background facts because they are the sorts of things that are in the mind, perhaps unconsciously, in the minds of any author of an instrument. There is a problem about who the author of this Constitution is for interpretative purposes.

MR SELWAY: I take your Honour’s point. At the end of the day if the reference we have made to these materials is not enough to satisfy your Honour that a relevant purpose for relevant purposes can be identified, then we take the risk that that is where your Honour will come out. We certainly do not say that the convention debates are the be all and end all and that the reference to Mr Carruthers saying something or other necessarily has some consequence on the interpretation of the Constitution. One cannot put that proposition.

McHUGH J:   Could I just say one final thing.  The tendency in my mind is to look at reader’s meaning rather speaker’s meaning in terms of constitutional interpretations.

BRENNAN CJ:   Mr Solicitor, if there are a number of possible meanings of excise as at 1900, clearly enough the purpose or, as Justice Dawson put to you, the mischief which the term was intended to address would be of great assistance in determining the connotation of the term.

MR SELWAY:   Yes, your Honour.

BRENNAN CJ:   But if the evidence is equivocal as to what that mischief was, what does the Court then do?

MR SELWAY:   Your Honour, that was a matter I was going to make later in the submissions but it is perhaps convenient to put it now.  We have put the submissions and my learned friends have put submissions attempting to convince the Court of what the meaning is as derived from the text, from the historical materials, from the mischief and so forth.  We have also analysed the reasoning in Parton and the cases around it and tried to identify errors.  It seems to us there are three things the Court can do with that analysis.  The first is the Court can accept it and overrule Parton.  To do that we accept your Honours are going to have to be convinced of the rightness of the propositions we have put.

The second possibility is the Court can say that our submissions are wrong and can identify some error within them, in which case your Honours would confirm Parton and proceed to consider whether Dennis Hotels should be distinguished or overruled. 

The third possibility is the one that your Honour the Chief Justice puts to me and your Honour Justice McHugh raised yesterday, where your Honours say, “Look, if we were sitting in Parton we might have decided it another way but we now have 50 years of authority and we are bound.”  What we say is that where your Honours reached that conclusion on the basis of uncertainty as to the meaning of excise, then it not only has consequences in respect of overruling Parton, it also has consequences in respect of Dennis Hotels.  Dennis Hotels has stood for 40 years.  South Australia has put the submission on overruling three times in the last 10 years.

McHUGH J:   That is one of the problems.  There is a fourth - Mr Spigelman put a most powerful argument here in the last two days but so did Mr Doyle back in 1993, and powerful though Mr Doyle’s argument was in 1993 it just did not carry me all the way, having regard to authority.  What has changed, apart from the reference to ‘bounties”, which I do not recollect being referred to in the argument in 1993?

MR SELWAY:   It may be that for your Honour nothing has changed, and I certainly do not pretend that I can put the argument as well as my predecessor but, in the context of what the result of that is, we say if your Honour has reached the conclusion that the meaning is uncertain and consequently we will not depart from the settled meaning established in Parton, then what we say is:  us too.  What about Dennis Hotels?  That stood for 40 years.  What has happened in those 40 years, particularly since Hematite - and there is no surprise that we have four challenges to the tobacco franchise since Hematite - is that the authority of Dennis Hotels has been significantly reduced or diminished.

What we say is that if the Court takes the view that the reason for upholding Parton is the uncertainty as to the meaning of “excise”, then the proper approach for the Court to take is not to attempt the analysis that the Court did for Philip Morris but rather to say we have a line of authority.  Dennis Hotels stands for a proposition in that line of authority.  It is not our task to diminish that authority; it is not our task to reduce it; it is not our task to try to explain it away.  If Dennis Hotels stands, it stands for what it decided.  If it stands for what it decided, then, with respect, that was explained by the Court in a unanimous judgment in Bolton v Madsen.  The Court can properly say, “We’re not going to apply a criterion of liability from now on”, but that is the basis upon which Dennis Hotels is rightly decided.  It is the basis upon which Dickenson’s Arcade is properly decided.

What we say is that if the Court comes to the view that because of the uncertainty as to the meaning of “excise” the proper approach is to confirm Parton, then we say for the same reason the proper approach is to confirm Dennis Hotels and hold valid this tax instead of, as I say, in Philip Morris identifying the limits of the reasoning in Dennis Hotels inducing us to another two challenges subsequent to it.  To a certain extent the majority took that position in Capital Duplicators.  As we read Capital Duplicators, particularly at pages 592 and 593, the Court more or less confirmed that tobacco and liquor franchise fees were valid.  The majority left open the question of petrol depending on the size of the fee, but there is no suggestion at page 593 that the size of the fee is then seen as relevant by the majority in Capital Duplicators for tobacco.

KIRBY J:   Do you support or seek to sustain the separate treatment of alcohol and tobacco with all your knowledge of the history of the 1890s and of excise?  It just seems completely unconceptual.

MR SELWAY:   What we say, your Honour, is that we are caught on the horns here.  We say if your Honours say Dennis Hotels cannot be justified within terms of the current test based on Parton, Dennis Hotels has stood for 40 years.  Let us have a look at the Parton test.  We say if your Honours are going to throw out Dennis Hotels, how can your Honours throw out Dennis Hotels which has stood for 40 years without saying, “Well, let’s have a look at Parton and let’s see which of the two reasonings which are possible is the best reasoning on the meaning of ‘excise’?”  If on the other hand your Honours say, “The meaning of ‘excise’ is uncertain; we ‑ ‑ ‑

BRENNAN CJ:   Which two meanings are you speaking of there?

MR SELWAY:   If you like, the Capital Duplicators majority meaning of an inland tax on goods and the meaning we put forward which is a tax on goods in respect of the activity of production.

BRENNAN CJ:   Yes, I see.

MR SELWAY:   We say if your Honours look at our analysis and compare it with the analysis in Parton, compare it with respect to the analysis put forward in this case by the Commonwealth, your Honours will come to the conclusion that the analysis we put forward is a preferable view.  We say it is the right view.  If your Honours say, “Well, we’re not convinced about that even if we were in Parton we might agree with Chief Justice Latham”, then we say that has consequences.  The moment your Honours say, “The reason we’re not interfering is because of the uncertainty of the meaning of ‘excise’ and we are not convinced that we should overturn 50 years of authority”, we say fine; do not be convinced you should overturn 40 years of authority either.

McHUGH J:   Except there may not be much academic support from this Court’s jurisprudence on excise, but at least there is a long string of cases which apply the Parton definition, but there is not too much support anywhere for the franchise cases.

MR SELWAY:   With respect, your Honour, there is a host of authority of this Court.

McHUGH J:   Except they have been followed as a matter of authority, but really in the last 20 years their supporters are fairly thin on the ground, are they not?

MR SELWAY:   Your Honour, one can understand it if your Honour is applying Parton as understood in Hematite, and it is no surprise that since Hematite this is the fourth challenge.  It is no surprise perhaps that since Hematite South Australia has been here three times saying, “Let us have another look.”  We do not deny that, but what we say is, if the premise upon which your Honours support Parton is not that your Honours are convinced Parton is right, but that your Honours are not sufficiently convinced we are, then that has consequences in the way your Honours deal with Dennis Hotels.  What we would not wish the Court to misunderstand is that distinguishing Dennis Hotels has the same catastrophic effect on the States as overruling it.

DAWSON J:   Have you finished what you want to say, Mr Solicitor?

MR SELWAY:   I am sorry, your Honour, yes.

DAWSON J:   You seem to assent to the proposition that there is a lot of support for Parton.  I do not know whether by that you mean support in this Court or outside.  Is there any outside commentator you would say that supports the present position in relation to Parton?  Do you know of any?

McHUGH J:   I think there is one.  I think Mr Dennis Ray ‑ ‑ ‑

MR SELWAY:   Yes, I was going to make mention of him, your Honour.

McHUGH J:   I do not think anybody else does.

DAWSON J:   And when you look at judicial support, of course, Bolton v Madsen is said to be the logical result of Parton, but that has been abandoned judicially.

MR SELWAY:   Which is perhaps the reason we are here.

DAWSON J:   Yes, and I do not know that you can say even that the support for the present position is support of Parton as such.

MR SELWAY:   We would put it this way, your Honour.  We acknowledge that there is a long running line of authority stretching from Parton to the majority position in Capital Duplicators, which can be analysed from, in effect, Justice Dixon’s analysis in Parton.  That can be done.

DAWSON J:   The only time, I think - correct me if I am wrong - that a majority was clearly reached in favour of one test was in Bolton v Madsen and that has been abandoned.  Is that not right?

MR SELWAY:   It is right in those terms, your Honour, but one would say that unless the majority in Chamberlain adopted the Parton test, they could not have come to the result they came to compared to our test; unless the majority in Capital Duplicators adopted, if you like, the Parton test as interpreted in Capital Duplicators, they could not have come to the result that they did come to in Capital Duplicators.  So to that extent, and leaving aside academic authority which, with all respect to academics, does not have the same weight as the judgments of this Court, we would not deny that there is a line of authority that we have to overturn.  Consequently we seek leave to overrule.  Anyway, that is the submission we put, your Honour, on the 50 years.

BRENNAN CJ:   There is a step in it, though, which does require some consideration.  If one starts from a proposition that the connotation of excise is uncertain, Parton gave it a particular meaning.  Because of that there has been a development of the concept up to Capital Duplicators and that is a logical development of Parton.  If we come then to the Dennis Hotels line of cases, one can approach it in one of two ways.  One can say, “Because we were never certain about the reasoning in Parton, we will just leave everything stand,” which is what I have understood you to be saying.

MR SELWAY:   Yes, your Honour.

BRENNAN CJ:   The other is to say, “Once Parton is accepted, there is a logical difficulty about Dennis Hotels and if there is a logical difficulty about Dennis Hotels, accepting the Parton line of authority, the authority of Dennis Hotels is to that extent eroded.”  Then the question of Dennis Hotels turns not on logical grounds, but turns upon the Evda Nominees grounds, which, of course, you have also mentioned, but from the Court’s point of view one has to determine whether or not Parton is going to be accepted as authority or otherwise.

MR SELWAY:   I understand what your Honour is saying, but what we put is that that analysis, which we understand, nevertheless requires the Court to give a preference, if you like, to Parton over Dennis Hotels.  Dennis Hotels is also authority of this Court that stood, as I say, for 40 years, and the Court then has to say, “Instead of trying to put them together, we accept that they cannot stand together and we will prefer Parton.”

BRENNAN CJ:   Except that Dennis Hotels was expressed in a fashion which was intended to make it consistent with Parton.

MR SELWAY:   I understand that, and Bolton v Madsen explained how and, subsequent to that the ‑ ‑ ‑

DAWSON J:   Well, Bolton v Madsen came out of Dennis Hotels. 

MR SELWAY:   Yes, your Honour.

DAWSON J:   It came from Justice Kitto’s judgment in Dennis Hotels.

MR SELWAY:   And one can see Bolton v Madsen, to a certain extent, as those Justices who sat in that case, who had, if you like, preferred the test we put forward, having moved their position to form a majority that could define the test.  Clearly, that test and that arrangement - that agreement, if you like - as to what the law on excise should be has broken down.  Consequently, we have got the challenges to these franchise fees.

BRENNAN CJ:   Where do you say the breakdown took place?

MR SELWAY:   It may be, your Honour, that the breakdown was always inevitable because of the tensions in ‑ ‑ ‑

BRENNAN CJ:   But where do you say it is evidenced?

MR SELWAY:   Hematite is the place where the breakdown became clear.  Not so much the result of Hematite, which one may have been able to get to even by the criterion of liability test, but the reasoning in Hematite made it plain that the judgment in Bolton v Madsen about criterion of liability - the narrow test that you looked at the statute to find out what the criterion of liability was, rather than the substance - that that test was no longer going to be followed.

DAWSON J:   So, it was the abandonment of Bolton v Madsen - the Bolton v Madsen test as the sole determinant which was the breakdown.

MR SELWAY:   That is what we would say, because the moment that one is looking at effects, it becomes difficult - we do not say impossible, we support the submissions put by the Solicitor for Tasmania - but it becomes more difficult to justify the franchise fee cases.  That is clear by what my learned friend, Mr Jackson, put.

BRENNAN CJ:   Well, I can only say if that is the way in which you put the breakdown of Bolton v Madsen, for my part, you will have to explain away what I have said, both in Hematite and in Philip Morris.

MR SELWAY:   Yes.  Your Honours, we do not deny, as I say - what we understand your Honour said in those cases referred, in effect, to the inevitable tension, and the way that tension was resolved, and that criterion of liability, as your Honour understood it, was not, and never was, a limitation on looking at an Act, but always involved a substantive issue.

McHUGH J:   Well, Homebush Mills would have suggested that.

MR SELWAY:   Yes, your Honour.  I am not suggesting that Bolton v Madsen can be interpreted consistent with some of the cases before and around Parton. Your Honours, if I could move from that back to the question of excises at 1900. I do not need to take a great deal of the Court’s time with this, though the volumes ‑ ‑ ‑

GUMMOW J:   Can I just take you back to page 12 of your volume, that is the Cnossen book?

MR SELWAY:   Sorry, which book is that one, your Honour?

GUMMOW J:   Excise Systems by Cnossen.

MR SELWAY:   Yes.  Sorry, your Honour.

GUMMOW J:   Page 12.  It is tab 11B.  That does not seem to have footnotes reproduced.  For example, footnote 4 on page 7, page 15 of the book, 7 of the text, it might be interesting to have.  Mine does not have any of these footnotes.  Is that possible?

MR SELWAY:   Yes, I apologise, they should be there.  We will get them and provide them to the Court.

GUMMOW J:   Can they?  Yes.  I am just suspicious of reading texts without knowing ‑ ‑ ‑

MR SELWAY:   Yes, I understand, your Honour.  So am I.  If I could then return to the meaning of “colonial taxes”.  We can be relatively quick about that because there is not actually, I do not think, any dispute between any of us in respect of it.  As at 1900, the only colonial taxes described as excises were taxes on the production of goods, the amount being determined by the quantity or value of the goods produced or manufactured, and the goods on which those taxes were imposed were spirits, beer and tobacco.  Your Honours, that point has been made by my learned friend, Mr Jackson.

KIRBY J:   I thought there was a statement in the Commonwealth submission -  I may have misunderstood it or misrecollected it - that there were others that you did not exhaust to categories that - - -

MR SELWAY:   No, your Honour, they make a point about the logical result of that proposition, which I will come to in a moment, as I understand their submission.

I do not need to take your Honours to it, but if I could refer your Honours to it in case any of your Honours are actually interested, the proposition that we just made is set out in paragraphs 18 and 19 of our written submission.  There is more detail on the taxes that were actually imposed in the colonies, which is contained in appendix 9 which is in volume 1 of our materials, and the more detailed material in turn refers to further detail which is contained in volume 2 of the materials.  As well as that there is a selection of the relevant State statutes - colonial statutes which is contained in volume 3 of the materials.  As I say there is a fair heap of stuff on it.  I do not think your Honours are actually going to have to delve into it because, as I say, I do not think the propositions are contentious.

In paragraph 3.2 of the Commonwealth’s submissions, the point is made - if I could refer the Court to page 19 of their submissions about line 3:

the historical background to the use of the term “excise” is more consistent -

I am sorry, your Honour, if I can refer to page 18 first and I will come to the bit on page 19 in due course.  The Commonwealth makes the point that:

other forms of inland taxes on commodities were simply not in use and their classification did not arise.

Your Honour, we accept that as a logical proposition.  The mere fact that a group of taxes are described as an excise does not necessarily have the consequence that taxes that were not imposed would not have been described as excise if they were.  What the material does show, though, is that a tax on production where the amount of the tax was determined by quantity or value was an excise - it does show that.  It also shows that the third possible meaning is excluded.  Your Honours will recall the third possible meaning was a broad tax including a miscellany of licence fees.  It shows that because the States in, the colonies in fact imposed such licences but did not describe them as excises.

If I could just give your Honours a very quick reference to show how that works.  In volume 3 of our materials at page 7 there is the Tobacco Act (No 2) 1884 of New South Wales.  Section 7 of that Act imposed a flat registration fee on tobacco sellers:

No person shall sell tobacco cigars or cigarettes unless -

he is registered.  “The annual fee” for the licence is “five shillings”.  I think my learned friend, Mr Jackson, made the point as well:  there were these flat fees.  If I could just show your Honours how those flat fees were dealt with at the time.  At volume 2 of our materials, page 32, are the financial statistics for New South Wales.  Your Honours can see at about point 5:

Excise -
.....
Duty on Tobacco, Cigars, and Cigarettes -

and then the amount of the excise.  If I could take your Honours to the bottom of the page, “Licences”.  Your Honours can see:

Licenses to sell Tobacco, Cigars, and Cigarettes

That is separately dealt with from excise.  The same analysis can be done for Victoria and other States.

So what we say is that that material is helpful at least to show that in the colonies there was a distinction drawn between excise and this broader conception that appeared to exist in England of this miscellany of taxes.  As we say, consistent with what my learned friend, Mr Jackson, put, flat fee licences were not described as excise.

BRENNAN CJ:   Unless perhaps they are on a tobacco factory which, I would have thought, supported your argument.

MR SELWAY:   I am sorry, your Honour, tobacco licence fee?  Yes, your Honour.  There is an explanation of how those work in volume 1 of our materials at page 18, and your Honours will see there is a general discussion there of all the fees and how they were worked in each of the colonies and how they were described.  Your Honour can see that:

There were extra fees payable by a producer where the relevant amount was determined by the quantity of tobacco, cigars and cigarettes manufactured (see Appendix 9C).

Appendix 9C, your Honours, is in volume 2 at page 35, which is the tobacco factory licence fee regulations and I take your Honours to page 37, which is the fees payable for that licence.  Your Honours will see that the amount of the fee varied depending on the amount of production.

McHUGH J:   But this material only shows that the taxes were laid on a limited class of goods and at the point of manufacture.  They are not conclusive, if they are any evidence at all, as to what the meaning of “excise” was in Australia in 1900.

MR SELWAY:   Your Honour, what we say is accepting our first proposition, which was that there were three meanings at 1900, we say that that material and the matters we have taken your Honours to, exclude, if you like, the broad English meaning involving miscellany of licence fees.  I do not think anyone argues for the contrary, but in terms of actually analysing it to show why that is true, we say that is the analysis; never been attempted before in the cases; that is how you get to that result.

It still leaves open the question of whether an excise can mean an internal tax on goods, which is the second test, and we accept that taking your Honours to that does not exclude that possibility.  But as to that possibility, we say that the discussions in the convention debates do help to show that negative, because what they show is that nobody was in contemplation of confusion about that possible meaning.  There was lots in the convention debates saying ‑ ‑ ‑

McHUGH J:   This comes very close to trespassing on forbidden ground, does it not? You seem to be wanting to give the words the meaning by what those in the convention may understood the words in the Constitution to mean.

MR SELWAY:   We are trying to do the opposite, your Honour.  What we are trying to say is, “Here is a possible meaning which is suggested as the meaning of ‘excise’”.  We can take the Court to discussions at the time, 1900, a decade before - of discussions of the meaning of “excise”, where this possible meaning is not alluded to but the other possible meanings are.  We are trying to do the negative, if you like, your Honour.  We are trying to say, “Here are the three possible meanings; this one is excluded by the historical material which shows that it was not used in that way.”

If one goes to the Victorian report before the 1897 convention and the convention debates themselves, we can see confusion and concern about whether the meaning could be a tax on production or whether it could be one of these British miscellany of taxes including licence fees.  No suggestion by anybody that there was any possibility it could be an inland tax.  All we say from that is here is a bit of the debate, we are trying to prove a negative.  If such a meaning was in contemplation, someone would have referred to it.

We cannot take the matter any further than that, but that is the proposition we put, that the end of the day, there is no evidence before the Court anywhere than anybody in Australia was aware of this meaning at 1900.  I take your Honour’s point.

DAWSON J:   Which meaning?

MR SELWAY:   The meaning of an inland tax on goods.

DAWSON J:   Mr Isaacs was.

MR SELWAY:   No, your Honour.  His concern was not an inland tax on goods, his concern was a miscellany of taxes including licence fees.

DAWSON J:   I see.

MR SELWAY:   Those were the two possibilities.  They were also the two possibilities considered in Peterswald v Bartley.

GUMMOW J:   The only two.

MR SELWAY:   The only two, yes, your Honour.  What conclusion we draw we draw from that fact.  Whether it is a permissible conclusion or not is another matter; but those are the facts and that is the conclusion we draw from it.  Your Honours, if we could just refer the Court quickly - and I do not need to take the Court to it in any detail - volume 1 of our materials in appendix 10 at page 20 ‑ we have set out what we understand to be the relevant parts of the convention debates in a general and descriptive way.

Your Honours, there really is very little discussion in the convention debates about the meaning of excise.  One cannot get beyond it.  At about 20 point 5 there is some of the discussion in the 1891 convention about it, and your Honours will see that what is described there is, if you like, confusion about whether it is a very broad meaning, including licences, or a tax on production.  Just to give as an example, Gordon, at the bottom of the page:

“The dictionary definition of excise embraces a good deal more than the local Parliaments will give up.  According to the English definition of the word it embraces licences; but the definition which I have no doubt every member of the Convention intends, is simply duties upon articles of home production, especially spirits”

I cannot rely upon the last bit, but what I do rely upon is the first; that is to say what he identifies as the broader meaning, if I can call the English meaning. 

McHUGH J:   Then you have a statement like Sir Thomas McIlwraith, who said at the 1891 convention, as your submissions point out, that excise duties are confined in all the colonies and only the three articles of beer, spirits and tobacco.  That rather implies that the ordinary meaning of excise was understood in a much wider ‑ ‑ ‑

MR SELWAY:   There is no doubt that it cannot be restricted to, on whatever view it is, it cannot be restricted to those three items.  I do not think that can be doubted.  Mr friend, Mr Jackson, properly draws from it how peculiar it is that of the three items two of them are now subject to the franchise fees.  The other part of the debate that is relevant is the discussion involving the Victorian Treasury paper.  My learned friend, the Solicitor for Western Australia, took the Court to that discussion yesterday, if your Honours will recall the discussion between Barton and Isaacs about the possible meaning.

If I could take the Court to the Victorian Treasury paper which led to that debate, that is contained in volume 2 of our materials. The relevant part is at page 91. Your Honours, the importance of that paper should not be limited. That paper and the financial statistics within it form the basis for the financial solution. Most of the relevant parts of this were read from in Mr Barton’s speech which my learned friend read from yesterday, so I do not need to read it in detail. What we do say it stands for is it identifies two meanings of excise: a tax on home production; and this broader English meaning including a miscellany of taxes. It says, “It is possible that this broader English meaning could be adopted, therefore, we had better define it in a more limited sense.” It also says that for the purposes of their analysis of all the financial statistics, what will be collected in customs and what will be collected in excise and how these need to be dealt with within the Constitution, for that purpose they have adopted that definition.

Your Honours will recall that that led to the debate between Isaacs and Barton, Isaacs saying, “We’d better amend”, Barton saying, “There’s no need”, in effect.  But again we point to the fact that there are only two meanings identified:  the miscellany of taxes, including licence fees, and a tax on home production.  Your Honours will recall that Quick and Garran identified those same two possible meanings and adopted the narrower one.  That is set out in paragraph 21 of our written submissions.

DAWSON J:   The relationship between duties of excise and customs is clearly set out at the top of page 92 of the report.

MR SELWAY:   Yes, your Honour.  What we put is that we cannot find any material which suggests that the meaning of “excise” as an internal tax on goods was used in that sense anywhere in Australia at 1900, yet that is the meaning we have ended up with.  Of course, we also say that the mischief and the purpose and the constitutional text confirms the meaning we contend for:  an excise is a tax on home production.  The contrary argument is put by the Commonwealth in paragraph 3.2 of their written submissions at page 19, the bit that I almost took your Honours to earlier, where they say that:

the historical background to the use of the term “excise” is more consistent with the composite term “duties of customs and of excise” covering all taxes on commodities, as Dixon J demonstrated in Matthews v Chicory Marketing Board (Vic).

If I can put it this way:  the Commonwealth does not go to the historical material; they go to his Honour Justice Dixon.  My learned friend the Solicitor for Queensland took the Court to Matthews and I will not do so, except to make this proposition.  The analysis of Justice Dixon in Matthews was subject to detailed analysis by South Australia in Capital Duplicators and it was submitted that that analysis relied primarily on the broader English meaning which included licence fees limited only by reference to the interpretation of indirect tax in Canada.  What we submitted then and we submit now is that, once it is accepted that “excise” was understood in Australia in a narrower sense than it was understood in England, it is not obvious why English or Canadian analogies are of any significance whatever, even assuming that the analysis that was made was correct.

What we say is that where English analysis is not relied upon, then the judgments of the Court have been consistent as to what the meaning of “excise” was at 1900.  If I could refer the Court quickly to Justice Mason in Hematite Petroleum v Victoria 151 CLR 599 at 628, where his Honour says:

At the outset of any discussion of “duties of ... excise” in s 90 three points need to be made. The first is that at its inception in England an excise duty was a tax imposing a burden on home production or manufacture. It was a tax on the production or manufacture of articles which could not be taxed through the customs house. However, it came subsequently to denote a tax on the licences of those who dealt in “excisable commodities”.....The second point is that the close juxtaposition of the references to “duties of customs” and “duties of ... excise” in s 90 together with the reference in s 93 to duties of excise “paid on goods produced or manufactured in a State” impressed the Court in Peterswald v Bartley.  This consideration more than any other led their Honours to the conclusion that the constitutional conception of an excise was narrower than the English notion, being limited to “... a duty analogous to a customs duty imposed upon goods either in relation to quantity or value.....The third point is that the broad effect of the later stream of authority has been to expand the concept of duties of excise and to extend it to taxes imposed upon the sale and distribution of commodities in some circumstances at least, after the process of production and manufacture has been completed.

Your Honours, we say that is a correct description of how things have occurred and to go back now and make an analysis of “excise” based upon the English meaning serves no useful purpose.

The last Judge of this Court who made that sort of analysis was Justice Windeyer in Dennis Hotels 104 CLR 529 at 592 to 593. We say none of the Judges in Capital Duplicators relied upon that sort of analysis and they were correct not to do so.

KIRBY J:   Do you challenge the legitimacy of the third point?

MR SELWAY:   Certainly that has been the effect of the decisions since Peterswald and there is no doubt about that.

KIRBY J: This is quite important for me that you really want to have a frozen concept of the word and I just find that very difficult to reconcile with a Constitution.

MR SELWAY:   Your Honour, we will come in due course, hopefully shortly, to what we say our test is and hopefully that should satisfy your Honour that we are not talking about a frozen concept, but we are saying that excise has a definite meaning.  It may be a meaning that is hard to discern but once discerned it is definite, and if that is true then we see nothing inappropriate in saying to the Court that it should apply that meaning.

GAUDRON J:   But what if it were a percentage?  What if it were, say, 1 per cent of the value of all grocery products?

MR GRIFFITH:   Of goods coming in?  Your Honour, because of our definition there is no problem.  It is an excise in every case.

GAUDRON J:   No.

MR GRIFFITH: But we are talking about these specific examples just to test what has been put and what we say is, your Honour, that it is just contrary to the federal compact for the New South Wales and the Queensland sugar industry to be capable of being held hostage by a State such as Victoria, who might wish to prohibit, by prohibitory we say excise impost, to deter persons who might otherwise use sugar to use other substitutes, saccharin, something artificial, and we say, your Honour, that that is not something which the Constitution permits in that within Australia, we say as for all industries, the sugar industry is one industry which is entitled to sell its goods throughout Australia, bearing only imposts which are imposed on them by Commonwealth law, being imposts on goods.

Can I give another example, and that is in respect of cars.  What if a non‑manufacturing State such as New South Wales took the view that it did not like Victoria and South Australia very much, that the Australian car industry is based in those States, to wage an industrial war on their industries, it imposed a tax of $20,000 on every six‑cylinder car sold in New South Wales.  That would be quite non‑discriminatory.  One can assume the fact that most imported cars are four‑cylinder cars but the impost is imposed on all cars sold when sold; when you register them, you pay it, $20,000.

The effect of that might be to not just ravage but entirely destroy the Australian car industry.  In our submission, that is impermissible not because it is bad politics, but because the imposition of a tax indiscriminately of whether the cars were manufactured in New South Wales, any other State or Territory, or imported, would be an excise.  We say it can be nothing else.  The fact that I can postulate that example, in our submission, does corroborate absolutely our submission that such imposts ‑ ‑ ‑

GAUDRON J:   I do not know that it would necessarily survive.

MR GRIFFITH:   Survive what, your Honour?

GAUDRON J:   The States’ proposed definition of excise.  I do not think that would survive it.

MR GRIFFITH:   Why not, your Honour?

GAUDRON J:   Because, if most of the imported cars are four‑cylinder cars, its operation would be discriminatory.  It would operate in a discriminatory fashion against cars that came from South Australia and Victoria and therefore fail.

MR GRIFFITH:   By section 92?

GAUDRON J: It might fail section 92 too, but it would also fail section 90 on paragraph 2 of Mr Spigelman’s submissions.

MR GRIFFITH:   Your Honour, it would survive Mr Bales’ two pounds of kangaroo meat.  Perhaps the States can come back to that one and try and explain it, your Honour, but our point is that it is just an obvious demonstration of a point we make, that manufacturers of goods in Australia, importers of goods into Australia are entitled to take their goods to all other parts of Australia and to sell them without paying an impost which is an impost on the goods as they go to those other States and Territories.  They may be affected by other aspects, such as the cost of taking their product to Western Australia, by payroll tax, by some other impost that arises from trading in a State, but we say they cannot constitutionally be affected by an impost on the goods which is imposed merely because a State law applies only, whether indiscriminately within the State or not, to those goods.

By definition, it is accepted by those who postulate a new test that the States cannot pass a law which is limited to production or manufacture throughout Australia. They accept that limitation. In our submission, there is an equal limitation of equal force arising directly by the provisions of the Constitution which apply to such a law merely because it happens to be more broadly expressed indiscriminatory of whether the goods are first imported to another State or Territory before they come into the State which imposes the impost.

Perhaps to give another example, your Honour, if States can impose sales taxes, there is nothing to stop one State imposing a sales tax of 100 per cent, another none at all.  We say, your Honour, that could have a corrupting influence on trade within Australia.

DAWSON J:   It is a consequence which has been accepted without any dire results in America.  I do not know about Canada.  There are State sales taxes.  It does not seem to have made the economy collapse.

McHUGH J:   I think Dr Patterson pointed out in his dissenting trade report in the constitutional commission that United States and European experience is not a good guide, because there are massive subsidies to industries over the ‑ ‑ ‑

MR GRIFFITH:   Your Honours, I could call an expert witness.  I was talking to my daughter last night who lives in Brooklyn and she is managing a cafe and I said I am working very hard.  She said, “What are you doing?”  I said, “I’m arguing a case about whether States can impose sales taxes”.  “Oh”, she said, “they shouldn’t be able to do that; it hasn’t worked here”.

DAWSON J:   That is only because it is very irritating, but ‑ ‑ ‑

MR GRIFFITH:   Your Honour, I said I might pass that on to the Court as a view from America.  A further suggestion was, “Well, perhaps you should limit it to tax on funerals”, but I do not know why she said that.

McHUGH J:   It does distort trade within the United States.  In January, New York had a free week from sales tax because business was going to New Jersey where there was a different rate of tax, a lower rate of tax.

DAWSON J: No one suggests it is not a distortion. The question is, is it a distortion which is allowed or disallowed by the Constitution.

MR GRIFFITH:   Well, our submission is that the Constitution prohibits it, your Honour.

DAWSON J:   Yes.  Well, we are going back, and round and round.

MR GRIFFITH:   I hate to pick up an example out of the franchise cases, but we see here from the blanks on the schedules that Queensland does not impose a franchise fee on tobacco, or on petrol. One sees, firstly, the disproportionate difference in gross revenue arising because of that, but obviously the result is one can expect then a distortion at the border of - one can expect unhealthy activity, such as smuggling and these sort of activities, which just should not arise between States. There should not be smuggling between States, because it should be, in our submission - well, no, not a matter of “should”, but we say mandated by the Constitution.

DAWSON J:   Well, you could avoid all of this by a fully integrated economy.  But that we do not have.  There are certain sacrifices to be made for Federation.

MR GRIFFITH:   Your Honour, but we say the colonies did make the sacrifice to establish Federation with respect to imposts on goods.

DAWSON J:   If they had been told at that time that they were entering into an integrated economy, we would not have Federation now.

MR GRIFFITH: Your Honour, what they did know is that they were handing over the majority of the revenue to the Commonwealth and what we enlarge in our submissions, your Honour, is that that was done with perfect knowledge of the consequence. This whole question of losing control of your revenue base was known and the way it was dealt with was by the specific provisions of the Constitution providing for a return of the surplus, optimistic that there would be one, and for continuing arrangements on the basis that the Commonwealth would not need all these moneys for Commonwealth purposes and would return it to the States.

We say, your Honour, that it was - this is why we have the whole point about the lion in the path. The States - the last thing they wanted to do was to lose their revenue, but they had to pay that prices, they had to settle the differences on protection against free trade and leave that for the new Parliament to get the union which they desired and they regarded the price as being worth the result and, indeed, it is unthinkable now, almost 100 years further on, that the colonies could have maintained a status of being, in effect, independent body politics as they were then. Our submission is that this was something directly and specifically done and that the same group of constitutional provisions we refer to make what those who drew the Constitution intended as appropriate provision to deal with the consequences of what they did.

Perhaps it is dangerous ground for me, bearing in mind our formal submissions on the franchise cases, but it is quite clear that after 6 October 1991 none of the States could have imposed any of the imposts on liquor, spirits, beer or tobacco which were operative up to that time.

DAWSON J:   Can you tell me were there income taxes at the time of Federation, Mr Solicitor?

MR GRIFFITH:   Your Honour, Harrison Moore, 2nd Edition, footnote 2 on page 336 would indicate there is a Victorian Income Tax Act 1890;  New South Wales Land and Income Tax Assessment Act 1895;  Queensland Dividend Duty Act.  That seems to be the three citations.  I do not know what the rates were.

DAWSON J:   Yes, thank you.

MR GRIFFITH: But they were known. Your Honours, so our point, by our examples, is to apply section 90 in the manner which is sought by the States and Territories would be to re-erect the boundaries which this Court unanimously in Cole v Whitfield found, as indeed was the case, were to be permanently dismantled at Federation. We say it is fundamentally inconsistent with the Constitution and we say a position flatly denied by the decision in Capital Duplicators [No 1] and [No 2].

We have already made the point that section 92 alone would not eliminate those trade barriers because of their discriminatory laws point, and I do not think there is any need for me to enlarge on that.  Your Honour, could I say something about time now?

BRENNAN CJ:   Yes.

MR GRIFFITH:   Your Honour, I appreciate that for the purpose of division of time we are regarded as appearing in common interest with Mr Jackson.  We do not, your Honour, because he is here on a Dennis Hotels Case and we are not.  Your Honour, in the division of time, by my calculations, your Honour, on the present division, we have about nine hours each, if one splits down the middle.

BRENNAN CJ:   Ten and a quarter on my calculations.

MR GRIFFITH:   How many, your Honour?

BRENNAN CJ:   Ten and a quarter.  That is if we ran into the full ‑ ‑ ‑

MR GRIFFITH:   That is after taking out the half day that was originally there, your Honour.  I must defer to Mr Jackson, because he is a party and we are an intervener, your Honour, and he took two hours rather than three and a half in-chief, but he tells me he wishes to have two hours in reply, your Honour, and I must not ‑ ‑ ‑

BRENNAN CJ:   How long do you expect that the rest of your submission will take?

MR GRIFFITH:   Your Honour, I would hope to finish on Tuesday.

BRENNAN CJ:   Any time on Tuesday?

MR GRIFFITH:   I would hopefully be finished on Tuesday, your Honour.  Which means that we would meet the finish by lunchtime Wednesday, your Honour, but I am sorry I am not able to promise more than that.  It is an important case for the Commonwealth, your Honour.

BRENNAN CJ:   Mr Jackson, your estimate is two hours?

MR JACKSON:   Yes, your Honour.

BRENNAN CJ:   Mr Spigelman?

MR SPIGELMAN:   Still the 45 minutes, your Honour, which I think I was allocated.

BRENNAN CJ:   Yes.  This matter will stand adjourned until Tuesday next.

AT 4.17 PM THE MATTER WAS ADJOURNED
UNTIL TUESDAY, 18 MARCH 1997