Jalsoon P/L v State of Queensland
[2000] QDC 259
•20/09/2000
DISTRICT COURT OF QUEENSLAND
CITATION: Jalsoon Pty Ltd & Ors v. State of Queensland [2000] QDC
259PARTIES: JALSOON PTYLTD, GOOSIMA PTYLTD and
JARACORP PTY LTD (First plaintiffs)
And
BRIALKIM PTY LTD & OWEN PTY LTD (Second
plaintiffs)
v.
STATE OF QUEENSLAND (Defendant)FILE NO/S: Plaint 3711 of 1998 DIVISION: PROCEEDING: Trial ORIGINATING District Court Brisbane COURT: DELIVERED ON: 20 September 2000 DELIVERED AT: Brisbane HEARING DATE: 4 September 2000 JUDGE: McGill DCJ ORDER: [Licence fees not invalid; matter to be relisted for
application for amendment of pleading]CATCHWORDS: CONSTITUTIONAL LAW – Commonwealth Constitution –
taxation power – what is an excise duty and validity of state
acts – liquor licence fees – Liquor Act 1992 s.203LIQUOR LAW – licensing – licence fees – validity – Liquor
Act 1992 s. 203.Ha v. New South Wales (1997) 189 CLR 465 – applied
Dennis Hotels Pty Ltd v. Victoria (1960) 104 CLR 529 -
followed
Whitehouse v. Queensland (1960) 104 CLR 609 - followed
Philip Morris Ltd v. Commissioner of Business Franchises
(Victoria) (1989) 167 CLR 399 - applied
Coastace Pty Ltd v. New South Wales (1989) 167 CLR 503 –
cited
Dickenson's Arcade Pty Ltd v. Tasmania (1974) 130 CLR
177 – followed
H C Sleigh Ltd v. South Australia (1977) 136 CLR 475 –
cited
Matthews v. Chicory Marketing Board (1938) 60 CLR 263 –
cited
Re: Imperial Hotel Mackay [1980] Qd.R. 195 – citedCOUNSEL: J.E. Gallagher Q.C., with him E.J. Morzone, for the plaintiffs
P.A. Keane Q.C., S-G., with him P.A. Freeburn for the
defendantSOLICITORS: Ebsworth & Ebsworth for the plaintiffs
Crown Solicitors for the defendants
On 13 February 1997 general licence number 41114238 under the Liquor Act 1992 (“the 1992 Act”) was issued to the three companies who are the first plaintiffs as licensees: Exhibit 1, p. 1. On 21 May 1997 general licence number 41114260 under the 1992 Act was issued to the two companies who are the second plaintiffs as licensees: Exhibit 1, p.2. In each case the licence was in respect of new premises. On 5 August 1997, the High Court delivered judgment in Ha v. New South Wales (1997) 189 CLR 465, holding that licence fees imposed under the Business Franchise Licences (Tobacco) Act 1987 of New South Wales were duties of excise within s.90 of the Constitution and hence invalid. As a result of that decision, or perhaps the reasoning of the majority of the Court, the Queensland Government decided that it would no longer collect liquor licence fees as from 1 July 1997: Exhibit 1, p.5. However, on 28 August 1997, assessments issued purportedly made under s.203(2) of the 1992 Act assessing what were described as initial licence fees for each of the licensed premises. These amounts were paid by the respective plaintiffs, although under protest.
I should say something about the circumstances under which these amounts were paid. Prior to the date when the assessments issued (28 August 1997) the plaintiffs had already made a prepayment towards the 1997-98 licence fee. The plaintiffs took advantage of an offer from the defendant to pay the fees in two instalments (Exhibit 2), with the first instalment payable with the annual return filed under s.205 and the second instalment payable by 13 January the following year: pp. 7-8. For the premises owned by the second plaintiffs, the first payment was in the sum of $13,710, which is why this figure was deducted in the letter of 28 August 1997 at p.5, Exhibit 1. The 1997-98 licence fee was not collected at all, because of the Government’s response to the decision in Ha, but because this amount had been paid already, it was credited towards the licence fee assessed for that part of the previous year during which the premises had been licensed. For practical purposes therefore, the fees assessed in respect of the 1996-97 financial year were paid partly by applying the pre-paid part of the 1997-98 licence fee, which would otherwise, I suppose, have been refunded, and partly by a further payment made in response to the notices of assessment, to avoid the threat of the automatic suspension of the licence under s.209 if the payment was not made. The licence fees for that part of the 1996-97 financial year during which the hotels were trading was less than what one would expect if the hotels had been trading all year: p.9.
By this action, the plaintiffs seek to recover these fee payments on restitutionary grounds, and alleged in the Statement of Claim that the licence fees were duties of excise so that the 1992 Act, insofar as it purported to authorise their collection, was contrary to s.90 of the Constitution and therefore invalid. The defendant did not dispute that, if that proposition is correct, the licence fees are recoverable, but submitted that the 1992 Act did not contravene s.90. Notices have been given as required by s.78B of the Judiciary Act 1903: affidavit of K.R. Moore sworn 1.9.00.
Background
The 1992 Act replaced the Liquor Act 1912 (“the 1912 Act”) which had been extensively amended over the years before it was finally repealed. The High Court in Dennis Hotels Pty Ltd v. Victoria (1960) 104 CLR 529 held by a majority that the provisions of the Victorian Licensing Acts which imposed licence fees on hotels in Victoria did not impose duties of excise and so were not contrary to s.90 of the Constitution. In Whitehouse v. Queensland (1960) 104 CLR 609 the same majority, applying the decision in Dennis Hotels Pty Ltd which was handed down the same day, held that the provision of the 1912 Act which imposed licence fees on the holders of licences to sell liquor by retail under that Act did not impose duties of excise contrary to s.90.
The issue arose because s.18 of the 1912 Act provided for a licence fee which was to be paid annually equal to 4% of the gross amount paid or payable for and in respect of all liquor which during the previous 12 months (ending on the last day of June in the preceding year) was purchased or otherwise obtained for the licensed premises. The fee payable was therefore related to the turnover, that is the volume of liquor purchased (and presumably sold), although during the previous financial year rather than the year of the licence for which the fee was paid. The majority held, for reasons which differed somewhat, that the fees charged were not duties of excise. That basic structure was preserved in the 1912 Act until it was replaced by the 1992 Act, which also preserved that structure: although a licence continues in force until it is cancelled or surrendered (s.201(1)), there were licence periods which correspond to financial years (s.200(1)) and fees were payable in respect of each such licence period, in the case of a general licence in an amount that was 10% of the gross amount paid or payable for liquor purchased or otherwise obtained for the business conducted on the licensed premises during the previous financial year: s.203(1)(a), s.200(2). Unless the fee was paid when due, the licence was automatically suspended and, unless paid within 14 days, cancelled: s.209. The fee must be paid or the licensee is not allowed to continue to carry on the business.
It appears that the High Court has not subsequently considered a case dealing specifically with either the 1912 Act or the 1992 Act. There were, however, after Dennis Hotels, a number of other cases dealing with a variety of licence fees where the same general mechanism was employed, that is the fee for the licence in respect of a particular period was related to the turnover during the previous period. A detailed analysis of the various cases was made by Brennan J (as his Honour then was) in his dissenting judgment in Philip Morris Ltd v. Commissioner of Business Franchises (Victoria) (1989) 167 CLR 399, commencing at p.442, where His Honour identified what he called the Dennis Hotels formula as one where “a rate of tax was applied to the value of a commodity in which prescribed transactions had taken place in a period prior to the period for which the licence was to be current”. That decision concerned the validity of the Business Franchise (Tobacco) Act 1974 of Victoria, which was upheld (by majority). However, the High Court in Ha (supra) revisited the question, and by majority overruled Philip Morris Ltd (supra) and Coastace Pty Ltd v. New South Wales (1989) 167 CLR 503, where the court had previously considered the New South Wales tobacco franchise licence fee legislation.
In Ha, the majority at p.504 said:
“The decision of this court is not to overrule Dennis Hotels or Dickenson’s Arcade. They may stand as authorities for the validity of the imposts therein considered. Properly understood, the test of ‘no closer connection’ as stated by Kitto J in Dennis Hotels and explained by Brennan J in Philip Morris is maintained.”
Dickenson’s Arcade is a reference to Dickenson’s Arcade Pty Ltd v. Tasmania (1974) 130 CLR 177, a case involving a fee charged for a licence for the retail sale of tobacco, in a way similar to that approved in Dennis Hotels. The fact that the High Court did not overrule Dennis Hotels is, in my opinion, significant. Although no mention is made in Ha of the decision in Whitehouse, since the court in Whitehouse simply followed the reasoning in Dennis Hotels, I think it follows that the court in Ha should be taken as not having overruled Whitehouse either. It follows that the authority of the decisions in Dennis Hotels and Whitehouse remains and I am bound by them. It was not simply that some aspect of the reasoning in those decisions was confirmed or followed; the essential statement at p.504 is that “they may stand as authorities for the validity of the imposts therein considered”. In other words, the imposts considered in Dennis Hotels remain, in the opinion of the majority in Ha, valid. For that reason I reject the argument advanced on behalf of the plaintiffs that I should now apply the approach of the dissenting judges in Dennis Hotels, particular Dixon CJ.
| [8] | In my opinion, this needed to be understood in the way in which it was expressed by Sir Garfield Barwick in Dickenson’s Arcade at p.188: |
“There being no reason for decision common to the majority of the Justices, the court’s decision in Dennis Hotels … , in my opinion, is authority only in relation to the statutory and factual situation it resolved and in relation to a case which has, if not precisely, at least substantially and indistinguishably, the same statutory and factual situation.”
| [9] | Barwick CJ repeated this approach in H C Sleigh Ltd v. South Australia (1977) 136 CLR 475 at 488: |
“The court has now decided to maintain the decision of Dennis Hotels Pty Ltd v. Victoria, for what, upon its facts and relevant legislation, it decides. Consequently, legislation operating in indistinguishable terms will be supported as not imposing a duty of excise.”
In my opinion, it follows that the High Court, by confirming the authority of Dennis Hotels in respect of the validity of the particular licence fee considered there, has also confirmed the validity of other licence fees which have substantially and indistinguishably the same statutory and factual situation (see also Philip Morris at p.460.3 per Brennan J).
In my opinion, therefore, what has to be decided is:
(a)
Is the 1992 Act sufficiently similar to the 1912 Act that the validity of the impost under the 1912 Act means that the fee imposed on the holder of the general licence under the 1992 Act is also valid?
(b)
Does it matter that the fee imposed in this case is in respect of the initial period of operation of the licence?
Can Any Dennis Hotels Formula Statute Survive Ha?
The majority in Ha did not decide that any licence fee calculated by reference to the volume of goods sold was invalid, nor was the test which was upheld one which would confine a licence fee to one which could be characterised as a fee for service. This follows not only from the express confirmation of the decisions in Dennis Hotels and Dickenson’s Arcade, but also from the confirmation of the test of ‘no closer connection’ as stated by Kitto J in Dennis Hotels and explained by Brennan J in Philip Morris: p.504. It also follows more generally from the discussion of the concept of a fee for a licence to carry on a business commencing at p.500.
The majority in Ha concluded that the licensing system in that case was but an adjunct to a revenue statute (p.502); by way of contrast, in Philip Morris, Brennan J said that the nature of the commodities liquor and tobacco was such that licensing schemes which affect them may be treated as regulatory and that feature of the licensing scheme was relevant to the character of the fee exacted for a licence: p.459. This passage was cited with approval by the majority in Ha at p.500-501. His Honour also said at p.456:
“If Dennis Hotels is to stand as an authority for the proposition that liquor licensing fees calculated on the Dennis Hotels formula are not duties of excise, and if that proposition is to be reconciled with the test of ‘no closer connection’ the factor which permits the reconciliation is the regulatory nature of the scheme for licensing liquor sellers and the premises from which liquor is sold.”
In Philip Morris Ltd Brennan J concluded that:
“With the possible exception of Dennis Hotels, the franchise cases cannot be satisfactorily reconciled with the existing principles by which the character of the fee for a licence to produce or distribute a commodity is to be determined unless the franchise cases are confined to their particular circumstances. Once it is accepted that a licence fee calculated by reference to the value of a commodity in which transactions took place in a previous period may be a duty of excise and that the character of the fee is to be determined by reference to its actual effect (if any) on a step in production or distribution and not merely by reference to the statutory criterion of liability, the franchise cases cannot stand as a source of inconsistent principle. The tension between general principle and the applicability of cases as precedents when they cannot be satisfactorily reconciled with general principle must be resolved by restricting the applicability of the cases to circumstances which are substantially the same. This imposes a strict limitation on the applicability of each of the franchise cases as a precedent by which to decide future cases.” (p.459-460).
Regulatory Nature of 1992 Act
In my opinion, an examination of the 1992 Act[1] indicates that it establishes a genuine regulatory scheme controlling the sale and supply of liquor. Its long title is “An Act to regulate the sale and supply of liquor” and the objects of the Act are set out in s.3:
[1] 1“The objects of this Act are –
(a) to facilitate and regulate the optimum development of the tourist, liquor and hospitality industries of the State having regard to the welfare, needs and interests of the community and the economic implications of change; and (b) to provide for a Liquor Appeals Tribunal with jurisdiction to hear and decide appeals authorised by this Act; and (c) to provide for a flexible, practical system for regulation of the liquor industry of the State with minimal formality, technicality or intervention consistent with the proper and efficient administration of this Act; and (d) to regulate the liquor industry in a way compatible with –
(i) minimising harm arising from misuse of liquor; and (ii) the aims of the National Health Policy on Alcohol; and (e) to provide revenue for the State to enable the attainment of the objects of this Act and for other purposes of Government.”
The Act therefore frankly recognises that revenue raising is one of the purposes of the legislation; this was regarded by Brennan J in Philip Morris as a factor which tended to show that the tobacco licence fee imposed under the legislation then being considered was in substance a tax on the tobacco sold in the relevant period or to be sold in a licence period: p.463.
However, there was a revenue raising aspect to the licence fees imposed under the 1912 Act as well. The fee then imposed by the Act was at the rate of 4%, subsequently raised to 6% in line with the fee imposed by the Victorian Act considered in Dennis Hotels. That there was some element of revenue raising associated with the imposition of this fee was recognised by the majority in that case. Fullagar J, one of the majority judges at p.550 said:
“It is true also that the elaborate State licensing systems are designed to effectuate a strict general control of the trade, and not as mere machinery for the collection of revenue.”
Kitto J spoke of the licence fee as a tax, but a tax which was not a duty of excise: p.560. A tax is a compulsory exaction of money for public purposes enforceable by law, that is ordinarily a device to raise revenue, in contrast to a fee for service: Matthews v. Chicory Marketing Board (1938) 60 CLR 263 at 276. Taylor J also spoke of the licence fee as a tax, although not upon the sales or the subject matter of the sales: p.576. Menzies J also considered the argument that in a general way the Act was concerned to raise as revenue 6% of the value of all liquor sold by licensed persons to non-licensed persons: p.579. Clearly he did not regard this as conclusive against validity. I do not think that the legislative frankness in s.3(e) is a vital distinguishing feature between the 1912 Act and the 1992 Act.
The 1992 Act provides for a system of granting licences or permits authorising the sale of liquor by way of exemption from the general prohibition contained in s.169 of the sale of liquor other than under the authority of a licence or permit (or in the case of wine a certificate of registration under the Wine Industry Act 1974), or of the sale of a quantity not authorised by the relevant licence or permit. In addition, by s.170, a licensee or permittee is confined to selling or supplying liquor on or from premises to which the licence or permit relates. It is also made an offence by s.171 to carry liquor for sale or expose liquor for sale in any premises without the authority of a licence or permit relating to the premises, and by s.173 every occupier and every owner of unlicensed premises who permits or knowingly allows the sale of liquor on the premises is taken to have sold the liquor and is liable to be punished as if the person had actually sold the liquor. The Act therefore confines the selling of liquor to licensees and to identified premises.
Part 4 of the Act then provides for licences and permits. The licences which may be granted under the Act are a general licence, residential licence, on premises licence, producers/wholesaler licence, club licence, special facility licence and limited licence: s.58. By s.59, a general licence authorises the licensee:
(a) To sell liquor on the licensed premises, for consumption on or hours extended by an extended hours permit; and
(b) to sell liquor on the licensed premises, for consumption on or off the premises, at any time to a resident on the premises; and (c) to sell liquor on the licensed premises, for consumption on the premises, at any time to a guest of a resident on the premises while the guest is in the resident’s company; and (d) to sell liquor on premises approved by the chief executive for sale of liquor under authority of the general licence, for consumption – (i) off the premises; or
(ii) on the premises in the amount and in the circumstances prescribed by regulation.
Provision may also be made for sale off the licensed premises while the licensee is catering for a function: subsection (2). A general licence may be granted only if the primary purpose of the business to be conducted on the premises to which the licence would relate is the sale of liquor for consumption on the premises or on and off the premises, and the provision of entertainment on the premises, and the business to be conducted on the premises includes the provision of meals and accommodation to the extent required by the Chief Executive: s.60.
The Chief Executive may grant an application for a licence or permit only if the Chief Executive is satisfied the applicant is a fit and proper person having regard to certain matters set out in the statute, and satisfied that the premises are suitable for conduct of business under authority of the licence or permit: s.107. The section contemplates that there will be an investigation of the criminal history of the applicant or a nominee of a licensee: subsections (5), (6). The position of a nominee is governed by s.109; he or she is a person “responsible for ensuring that liquor is supplied or had in possession on the premises only in accordance with the authority conferred by the licence or permit … ”. (subsection (6)). The Act confines the hours during which liquor may be sold on licensed premises to “ordinary trading hours” as defined in s.9, although there is a procedure for granting an extended hours permit: s.106A, 110. Any transfer of the licence is subject to control by the Chief Executive, even where the licensee has been lawfully evicted from or has abandoned the licensed premises: s.113. The Act contemplates that a franchise might be granted for licensed premises, and requires the approval of the Chief Executive for that, or for licensed premises to be let or sublet or for the right to sell liquor to be let or sublet: s.115.
A licence approval or permit will only be granted where the applicant can satisfy the Chief Executive that it is “necessary to provide for the reasonable requirements of the public for liquor and related services in the locality to which the application relates”:s.116(2). A number of factors are set out in the section which are relevant to the determination of that issue. The Chief Executive is to consult local government and in certain circumstances the police service in relation to this issue (s.117), and in the case of certain decisions by the Chief Executive, essentially those likely to be of some lasting effect, the application must be advertised (s.118) and members of the public may make submissions in relation to the issue of public need (s.118A) or may object to the granting of the application: s.119. The Chief Executive may hold a conference of concerned persons, and must have regard to various matters, including objections to the grant of the application and comments from the local Government, and the impact on the amenity of the community concerned when making a decision: s.121. Provision is made to deal with the situation where a licensee is dead or bankrupt or being wound up or is under official management or has had a guardian or administrator or manager of the estate appointed: Part 5 Division 2.
There is a mechanism for cancellation, suspension or varying of a permit if the Chief Executive is satisfied by a number of things including that the use of the premises in respect to which the permit is held at the time authorised by the permit or the behaviour of persons entering or leaving the premises at or about those times, is causing undue annoyance or disturbance to persons living, working or doing business in the neighbourhood of the premises, or is causing disorderly conduct in, or in the neighbourhood of, the premises: s.134. There is also provision for cancellation of licences in similar circumstances, or if the licensee is convicted of an offence against the Act, or an offence under the Health Act 1937 or the Food Act 1981 in respect of the licensed premises or liquor, or an offence that the Chief Executive considered indicates the licensee’s unsuitability to hold the licence, or is not a fit and proper person to conduct business under the authority of a licence, or for various other reasons: s.136. The Chief Executive may also suspend the licence, require licensed premises to be closed for a specified period, or impose conditions or limit the authority conferred by the licence, disqualify the licensee from holding any licence, require the licensee to pay a monetary penalty up to $10,000 or reprimand the licensee: s.137.
The Chief Executive may close licensed premises if the health or safety of members of the public are endangered because of a variety of matters until the premises have been made safe: s.140. In addition, an investigator, a magistrate or two justices may order licensed premises to be closed for a period in the locality “in which a riot or tumult is happening or is reasonably expected to happen”: s.142. There are restrictions on betting or gaming which may take place in the licensed premises (s.151) and on the businesses conducted or services supplied to the public on the licensed premises: s.152. The licensee must ensure that a minor is not on licensed premises, subject to certain exceptions: s.155. Liquor must not be supplied on licensed premises to a minor or a person who is unduly intoxicated or disorderly: s.156. There are other provisions in the Act designed to restrict the availability of liquor to minors: s.145B, s.157, s.158, s.159. There are provisions designed to prevent people from being drunk or disorderly or creating a disturbance on licensed premises, or to assist licensees to evict persons from licensed premises: s.164, 165.
There are various restrictions on the consumption of liquor in public places in Division 4 of Part 6, and special provisions affecting communities of Aborigines or Islanders in Part 8 of the Act, all of which appear to be entirely regulatory in nature.
Comparison with Legislation approved by High Court
It follows that the licensing scheme provided for under the 1992 Act is a system designed to effectuate a strict general control of the trade, as was the scheme put in place in the legislation considered in Dennis Hotels. In my opinion, this is a licensing scheme which is essentially regulatory, and it cannot be said of this scheme, as was said of the licensing scheme in Ha, that it is but an adjunct to a revenue statute. In that case it was said that the Act contained minimal provisions controlling businesses selling tobacco (p.502) a striking contrast to the detailed restrictions which I have summarised above. I should mention that I have not attempted to refer to all of the restrictions and controls imposed by the legislation, but concentrated on those which do not appear to have any direct relation to the ascertainment, collection and enforcement of payment of the licence fees.
One difference between the legislation considered in Dennis Hotels and the 1992 Act, which was relied on on behalf of the plaintiff, was that under the Act considered in Dennis Hotels, the percentage used to assess the licence fee was 6%, whereas under the 1992 Act the percentage used is 10%. In Ha, the court noted that “the early franchise cases admitted that ad valorem imposts of small amounts might properly be classified merely as licence fees having ‘no closer connection’ with duties of excise.” (p.502.). The court went on however to treat the level of the fees imposed by the legislation then under consideration, an amount equal to 75% or 100% of the value of the tobacco sold during the relevant period, as an amount which “could not conceivably be regarded as a mere fee for a licence required as an element in a scheme for regulatory control of businesses selling tobacco”. Of course, in a sense, there is some relationship between the level of the fee imposed and the regulation of the sale of tobacco, in that the higher the fee the higher the price of the tobacco product, and charging a high price for such products is sometimes spoken of as a control mechanism directed to restricting their use. Clearly, however, the court in Ha did not regard that sort of connection as a factor supporting the validity of the licence fees, and my impression from the judgment is that broadly speaking, the lower the percentage used to calculate the fee, the lower the risk that it would be classified as a duty of excise.
In Dickenson's Arcade there was a system of licence fees for tobacco retailers under which a fee was paid which depended on the value of tobacco handled during a particular assessment period. A percentage rate of 30% is used as part of the process by which this fee is calculated, but it seems to me that that decision proceeded on the basis that the effective tax rate was much less than 30% of the total value of sales. The effect of the regulations fixing the licence fees was summarised by Gibbs J at p.216 as follows:
“The effect of these provisions is that the fee payable is 2½ % of the value of the tobacco handled in the relevant assessment period where that value is not less than $7,200; where that value is less than $7,200 but more than $6,000 the fee is in effect 2½% of a sum, less than that value, calculated as shown in the schedule, and where that value is $6,000 or less, a fixed fee of $2 is payable.”
Hence the maximum rate of the fee imposed was 2½%.
There was also in consideration in that case a further charge imposed at a rate of 7½% on the consumption of tobacco, and that charge was, also by a majority, held not to impose a duty of excise. However, the majority treated that tax as a tax on consumption in the strict sense, rather than a tax on the last retail sale of tobacco: see Gibbs J at p.224. The decision is therefore not authority that an overall tax “take” of 10% is not inconsistent with the prohibition in s.90. In circumstances where it is clear that 6% is not too high, and 75% is far too high, and what is required for validity is that it be no more than a small amount, the fact that the 1992 Act the percentage is 10% is certainly a potential point of distinction. What level of impost can still be described as a small amount is essentially a matter of judgment and impression.
The High Court did not say that the decision in Dennis Hotels represented the highest percentage still regarded as acceptable and 6% would seem to me to be a strange point at which to draw the line, unless it was drawn on the basis that, but for the fact that there was already a decision accepting 6%, the court would have preferred a lower figure. There is nothing in Ha to indicate that that was the approach of the court. Indeed, my impression is that the percentage adopted for the fee, although important, was not the only consideration, and the court was not saying that there was some particular percentage which would be acceptable in all circumstances, with no higher percentage being acceptable. In my opinion, it is one of a number of relevant factors which must be taken together. A 10% licence fee, where the licensing system was merely an adjunct to a revenue statute, would be much more likely to be held invalid under s.90 on the approach adopted in Ha than a scheme where the licence fee was imposed in connection with a regime which is truly regulatory.
There are differences in detail between the regulation imposed by the 1912 Act and the regulation imposed by the 1992 Act. Some of the restrictions imposed by the 1912 Act are gone, including the prohibition on the supply of liquor to any female in any bar other than in a lounge bar or in a licensed club (s.58, 59A)[2] or the prohibition on dancing or public singing in any part of the licensed premises open to public resort, or any public musical performance or performance by any person for entertainment purposes of whatever kind or description, without prior permission from a Magistrates Court or a principal officer of the Police: s.75. Although trading hours are still regulated under the 1992 Act they are less restrictive than they were under the 1912 Act (s.69) which among other things provided strict limitations on the supply of liquor on Sundays. There are certainly differences in the detail of the regulation imposed by the two Acts, but both Acts contain provisions for closely regulating a number of aspects of the process of the sale and supply of liquor to the public so as to give effect to the public interest in there being fairly strict controls on that process. That, I think, is a proposition which remains as true as it was in 1912, even though the detailed content of the controls has varied somewhat over the years, as community expectations of such matters have changed.[3]
[2] [3]In Dennis Hotels, Fullagar J commented at p.550 that “the elaborate state licensing systems are designed to effectuate a strict general control of the trade … ” although his decision turned on the proposition that the tax was not imposed upon the production or manufacture of goods. For that reason the detail of the regulation was not considered by him. Kitto J at p.561 made some reference to the detail of the restrictions imposed by the Act there considered, noting that there were 11 different types of licences, 9 of which were in force from year to year. “Each licence authorises the licensee to sell liquor, subject to restrictions. In some cases the hours of sale are limited, in some cases the kinds of liquor that may be sold, and in all cases, the places where it may be sold. Each licence except a victuallers’ licence authorises only the selling of liquor at particular premises or on board a particular vessel… ”. He noted as well that the selling of liquor without a licence was an offence punishable by fine or imprisonment so that the possession of the licence conferred a privilege of carrying on for a limited period a business which otherwise would be unlawful, and of carrying it on free of competition except such as may be offered by other licensees selling liquor at the places to which their licences apply. All of these factors apply to the 1992 Act, save only for the (I think immaterial) difference in the number of categories of licence. The limitation on competition is of some significance since the Chief Executive must have regard to the reasonable needs of the neighbourhood in deciding whether or not to grant a licence, which indicates that a particular area is, broadly speaking, not to be provided with more licensed premises than it really needs.
Taylor J, at p.576, spoke of the use of licences as “a traditionally accepted method of regulating a trade which the public interest demands shall be subject to strict supervision. In other words, the requirement that liquor shall not be sold or disposed of without a licence appears as a substantive provision and not merely as an adjunct to a revenue statute.” He went on to note that this meant that licensees enjoyed partial monopolies so that licensed premises will, as such, achieve an enhanced value, with the result that the fee bore some resemblance to the payments required by English legislation as a condition for the grant of justices’ licences, namely payments to secure to the public some monopoly value which was represented by the difference in value of premises for the benefit of a licence under a licensing scheme, and premises where there was either no scheme or a scheme with unlimited entry (as was apparently the case under the tobacco licensing scheme considered in Ha).
Because there is some restriction on the number of licences made available, there is some opportunity for holders of such licences to earn more profit than would be earned under a scheme involving unlimited entry, at least in accordance with traditional free market economic theory. In such circumstances, a seller has the opportunity to make what is described (in technical economic terms) as an excess profit. This is not profit from the sale of goods except in the sense that carrying on the business of selling the goods is the source of the profit; in economic terms, the source of the profit is the limitation of entry into the market, and that is a function of the legislative restrictions on the right of entry, so that the licence fee may be recognised as a process by which some or all of this “excess profit” which is generated by the existence of the legislative licensing scheme is recouped for the benefit of the public generally. Although the mechanisms are different in the 1912 Act and the 1992 Act, both involve restrictions on entry so that holders of licences under the 1992 Act still have the partial monopoly rights discussed by Taylor J at p.577. Menzies J at p. 591 spoke of the fee as “the price for his franchise to carry on a business” but did not discuss the detail of the regulatory scheme. In Whitehouse, the majority of the judges did not analyse the terms of the Queensland legislation, and Dixon CJ (who was dissenting) did not speak of the regulatory aspects of the legislation.
Removal of Cap on Licence Numbers
One feature of the 1912 Act which is not presently in the 1992 Act is that by s.17 of the former Act the number of licensed victuallers licences was capped at the number existing at the passing of the Liquor Act Amendment Act 1935 (25 November 1935). That feature of the regulation is relevant to the element of partial monopoly discussed by Taylor J, but I think it is of some importance to place that feature in context. There has been for many years a general decline in the number of individual licensed premises, particularly in rural areas where they are now much less common than was formerly the case. Anyone who as visited a range of country towns and cities in Queensland will notice the frequent appearance of buildings which have obviously in the past been hotels, but are not longer used for that purpose, and it is not uncommon for small towns to boast of having possessed in their hey day a number of hotels which is dramatically larger than the number of those which survive. Even today, in Queensland, older established areas and rural towns tend to be quite generously supplied with licensed premises, whereas newer areas or areas which have experienced significant growth in recent decades tend to have only a small number of larger premises. This is partly a function of the population drift away from rural areas to the cities, and partly a function of increased personal mobility with the expanding popularity of the motor vehicle which has reduced the extent to which drinkers were confined in a practical sense to those establishments which were within walking distance.
The cap was introduced by the Liquor Act Amendments Act 1935. When the Bill for this Act was introduced into the Legislative Assembly in Committee by the Home Secretary, Mr. Hanlon, (Hansard 7.11.35, p.1104), he noted that there had been a significant decline in licensed victuallers premises in Queensland, from 1653 in 1912 to 1346 in 1934, notwithstanding that 116 new licences were granted during this period. Wine sellers licenses had decreased from 54 in 1915 to 33 in 1934, and during the same period wholesale spirit merchants licenses had decreased from 155 to 137, although club licences had increased by two. That decline continued after the introduction of the cap which fixed the maximum number of licensed victuallers licences at 1342. By 30 June 1958, the number had reduced to 1,188 and during no intervening year was there an increase in the number. This occurred despite the increase in population, and resulted in a change from 723 persons in Queensland per hotel in December 1935 to 1,194 persons per hotel in 1958: 22nd Annual Report of the Licensing Commission for the Year ended 30 June 1958, Queensland Parliamentary Papers, 1958-59, vol. 2, p.1131. The number of wine sellers licences also decreased. The 44th Annual Report of the Commission for the Year Ended June 1980 showed a steady decrease to a low point of 1,080 in 1978, with an increase of 2 in 1980, although this figure included 30 taverns. The number of people in Queensland per hotel or tavern had increased to 1,284 in 1960, and 2,033 in 1980. It is clear therefore that the decline in the number of licensed victuallers premises prior to the introduction of the cap continued long after it was introduced, and it was, when Whitehouse was decided of no more than theoretical significance (the number of hotel licenses declined from 1,165 to 1,116 between 1960 and 1965). It follows that the removal of this restriction was in substance of no significance.
Although potentially the absence of a provision like s.17 is an important difference with the 1992 Act, in the practical context in which the legislation is operated, this distinction has not been significant, in terms of the substantial operation of the legislation.
Another change which was effected by the 1935 amendment was that licence fees came to be charged only on purchases of alcoholic liquor. The Home Secretary’s speech indicated that this was to avoid a situation where licence fees could be increased by efforts made by the licensee to provide accommodation required by the public. To avoid this, the cost of food stuffs, furnishings, or other equipment was no longer to be taken into account when assessing the license fee: p.1106. The emphasis in the Home Secretary’s speech is on the importance of improving the accommodation provided by hotels in Queensland in order to attract more tourists. A number of the changes proposed by the Amendment Act were directed to producing an improvement in the standard of hotel accommodation. It is also apparent that the Government was conscious that there were too many licensed premises in some areas, but a need for additional premises in others. This was to be met by the Commission’s accepting the surrender of licences, or acquiring or resuming them, in unprofitable districts, with payment of compensation (based on the value of the licence in that district which was expected to be not very much) and then selling the licence by tender in the district where there was a need for a hotel or additional hotels. This shows that the Government was conscious of the fact that the licence conferred a benefit, at least in those areas which were not oversupplied with hotels, of being able to carry on a business in circumstances where the right to do so was restricted, and was anxious to appropriate to the public at least some of that benefit.
There had always been in the 1912 Act some scope for removing a licence to other premises, but the practical value of this was limited by the restriction that the licence could not be removed to a place more than two miles from the premises in respect of which the licence was originally granted: s.38(2). The possibility of the removal of an existing licence to new premises at a different place was removed by the 1935 Amendment Act, but a very restricted right to do so was given by an amendment in 1952, and by a further amendment in 1970, the conditions under which that right might be exercised became more liberal: Re: Imperial Hotel Mackay [1980] Qd.R. 195 at 197. In the same year the possibility was introduced of a licensed victualler’s licence being converted to a tavern licence. As a result, the licence had some value to the licensee which was independent of the value of particular premises in respect of which it was operated. However, the process of removal had always been subject to strict controls under the 1912 Act.
Overall, my impression of the 1992 Act is that it is similar to the 1912 Act in providing a regime of strict regulation of the sale of liquor, even though the detail of the process of regulation is different, and what is now allowed under the 1992 Act is different from what was allowed at different times under the 1912 Act. Each Act attempts to balance, in the public interest, a range of competing views and interests in connection with the sale of liquor, ranging from supporters of an absence of any restriction, to advocates of prohibition. Overall, I do not think that the 1992 Act can be characterised as significantly less regulatory than the 1912 Act; in substance, each provides a detailed and rigorous regulation of the trade in a manner consistent with community standards and expectations of the time. The contrary, indeed, was not argued on behalf of the plaintiff; the thrust of the plaintiff’s argument was that, as a result of the decision in Ha, the licences were an excise essentially for the reasons expressed by the dissenting judges in Dennis Hotels and Whitehouse, on the basis that that approach has been vindicated in the latest decision. That is not the way I read the decision in Ha.
In my opinion, the important considerations are the general regulatory nature of the 1992 Act, and that the licence fee is in a (relatively) small amount and is calculated ad valorem on liquor purchased during a previous period in a way which is, but for the change of percentage, essentially the same as under the 1912 Act, that the number of licences are limited and issued in accordance with a process which regulates them by reference to demonstrable public need, that it can be properly characterized as a fee for carrying on the regulated and restricted business, and the licence period and the assessment period are relatively long (one year as against one month in Ha), so that there is a greater capacity for this mechanism not to be an accurate forecast of the turnover during the licence period, and the fee is more readily identified as a general overhead of the business during that period, although one related to the size of the business. In my opinion, the overall position is that the 1992 legislation is, in substance and in respect of the relevant matters, effectively indistinguishable from the legislation upheld by the majority of the High Court in Whitehouse. It is therefore, on the authority of Dennis Hotels (as preserved by Ha), not invalid as a duty of excise pursuant to s.90 of the Constitution.
Consequence of this being the initial licence period
The next issue is whether it matters that the fees in issue were in respect of the initial period of operation of the licences. The assessment of such fees is dealt with the 1992 Act in s.203(2) and (3), which provide:
(2)
If premises are used for only part of a licence period, the fee payable on any of the following is to be assessed under subsection (1) and, subject to subsection (4), using an estimate made by the chief executive of what the relevant gross amount would have been if the licensee had been able to trade on the licensed premises during the entire assessment period, proportionally reduced for the period that has expired since the start of the licence period –
(a) grant of a licence; or (b)
provisional grant of a licence under s.123 (provisional grant of licence); or
(c) resumption of trading under a licence removed from another place.
(3) If, in any licensed period –
(a) a return is not lodged under s.205 in respect of licence; or (b)
a return lodged in respect of a licence is incomplete or insufficient to enable the relevant gross amount paid or payable for liquor to be determined; or
(c)
a return covering the whole of the assessment period cannot be lodged in respect of a licence
the chef executive, subject to subsection (4), is to assess the fee payable in respect of the licence in such amount as the chief executive considers reasonable, by reference to the whole of the assessment period.
Subsection (4) simply provides that a minimum fee prescribed by regulation is to apply in those situations where, by the assessment process otherwise provided in the section, no or a lesser fee would be payable.
In circumstances where a licence is granted and licensed premises have not traded at that site during the financial year prior to the financial year during which the licence is granted, a return covering that assessment period cannot be lodged, and it is necessary for a fee to be determined under the new sections by reference to the entire assessment period, proportionately reduced for the period that has expired since the start of the licence period; that is, that part of the financial year during which the licence is granted which has already expired. In this case, each licence was granted during the 1996-97 financial year, and a return covering the whole of the assessment period (the 1995-96 financial year), could not be lodged in respect of the licence. It follows that the chief executive had to make an estimate of what relevant gross amount would have been under subsection (1) if the licensee had been able to trade on the licensed premises during the entire 1995-96 financial year, in such amount that the chief executive considered reasonable, and then reduce that amount proportionately for the period that had expired since the start of the licence period.
Depending on the nature of the place where a licence is granted, this may or may not have anything very much to do with the level of turnover the licensee might expect during the balance of the financial year after the licence is granted. For example, if a licence is granted at a place which was undeveloped, inaccessible or essentially unpopulated during the financial year prior to the financial year during which the licence is granted, the estimate would have to be very low, possibly below the minimum specified in the regulations. No doubt the position would be different if the licence was granted in a place which had, for more than two years, had a substantial need for licensed premises. There is some capacity for reassessment under s.212(2)(c) if the assessment was based on an incorrect assumption about the nature, scale or duration of the business to be conducted under the authority of the licence, but not if there is just some difference between the estimated purchases during the assessment period and the actual purchases during the licence period. This simply allows for the correction of a mistake in the process of assessment.
The formula used in s.203(2) is essentially consistent with the mechanism established by s.203 as a whole. Perhaps more importantly, the process is essentially the same as the mechanism to be applied under s.18(5) of the 1912 Act in similar circumstances, which required the Commission to assess as the licence fee “such sums as it thinks reasonable” in such circumstances. Plainly such a fee is not a tax on goods sold during the assessment period. It is not in terms an estimate of the goods sold during the licence period, and, because of the considerations referred to earlier, may well be not at all a good indicator of that turnover. It is, in my opinion, less identifiable as an estimate of the turnover during the licence period than a fee calculated in accordance with subsection (1), or in accordance with the provision considered in Dennis Hotels. In my opinion, it is more readily identified, and properly characterised, as a fee for the right to carry on the business during the licence period. In my opinion, it is not a duty of excise and it is not rendered invalid by s.90 of the Constitution.
In these circumstances it is unnecessary for me to say anything about the question of whether, had the relevant provisions of the 1992 Act been invalid, then the amounts claimed would have been recoverable.
During argument I misunderstood the way in which these fees were imposed, and initially thought that the fees related to the 1997-98 licence fee. This was as a result of my misreading of the letter from the defendant dated 28 August 1997 to the second plaintiffs which appears at p.5 of Exhibit 1. Once I came to realise that the fee sought in that letter actually related to the period from the time when the premises opened until 30 June 1997, the timing of the letter suggested that the fee had been based on the actual turnover of the premises during that period. Ultimately there was some difference between the parties as to how the fee had come to be determined, and the plaintiffs sought to raise the issue that the fees, refund of which was sought by the action, had not been imposed in accordance with the mechanism laid down in s.203(2) anyway. I ruled that that point was not open to them on the existing pleadings, and an application to amend was adjourned pending the determination of the issues which had been argued as to the constitutional validity of the relevant provisions of the 1992 Act. Had I concluded that those provisions were invalid anyway, this other issue would have become irrelevant.
It was submitted on behalf of the defendant that the question of constitutional validity was properly decided on the basis of the terms of the statute, and I accept that, although it is their substantial operation, not their form, that matters. If the plaintiffs can show that the defendant did not assess these fees in accordance with the statute, they may be recoverable on the basis that there was no valid assessment and therefore no entitlement to demand payment of these fees. In view of my conclusion, the matter will have to be listed to determine whether the plaintiffs may, in these proceedings, claim a refund of the fees on this basis. However, if they decide not to pursue this issue, or an application to amend is unsuccessful, the action should be dismissed.
| Reference has been made to Reprint 5 of the 1992 Act |
| Removed by Liquor Act Amendment Act 1970, which also substituted a less restrictive s.75. |
| Even in 1912 disapproval of singing in hotels was not universal. In Loughren v. McLeod [1914] St.R. Qd 116 at 119-20 Chubb J said: “As a German writer says ‘Music washes away from the soul the dust of everyday life’. What harm could a number of industrial fellow-workers assembled, as in this case, in an inn after the day’s toil, do by indulging in a little innocent merriment in the shape of a few harmless songs?” |
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