Kodak (Australasia) Pty Limited v The commonwealth of Australia

[1991] HCATrans 99

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney Nos S2, S3 and S4 of 1991

B e t w e e n -

KODAK (AUSTRALASIA) PTY LIMITED

Applicant

and

THE COMMONWEALTH OF AUSTRALIA

THE COMMISSIONER OF TAXATION

Respondents

Applications for special leave

to appeal

BRENNAN J
DEANE J

TOOHEY J

Kodak 1 19/4/91

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 19 APRIL 1991, AT 10.01 AM

Copyright in the High Court of Australia

MR D.M.J. BENNETT, QC:  May it please the Court, I appear

for the applicant with my learned friend,

MR B.J. SULLIVAN. (instructed by Mallesons Stephen

Jaques)

MR T.M. JUCOVIC, QC:  May it please the Court, I appear with

my learned friend, MR A.H. SLATER, for respondent.

BRENNAN J: Yes, Mr Bennett.

MR BENNETT: If Your Honours please, I hand up a number of

copies of an outline of submissions and also some

volumes of the Sales Tax Assessment Act.

BRENNAN J:  Do we have some bound copies and some unbound

copies?

MR BENNETT:  I am sorry, Your Honours. I intended to give

Your Honours the three bound ones and the other two

for the Court officer. Your Honours need not, at this stage, read the appendix to the submissions.

BRENNAN J: Yes, Mr Bennett.

MR BENNETT:  Your Honours, we have set out on page 1 the two

questions which we submit are of importance. They

are related and they ultimately involve the same
question of law but there are two reasons why it is
important. The first is whether the amendments in

1986 have the effect of abrogating a definition of

"goods" in part and also abrogating some fairly

basic concepts of sales tax law which have

continued since the beginning of the legislation.

The second is to what extent the Cooper

Brookes decision permits the implication of new provisions or the exclusion of unamended existing provisions in order to satisfy a parliamentary

intention.

Your Honours, on pages 2 and 3 we have set out the background matters. The first part of it

explains the four.terms. They are fairly obvious

terms but it is as well to have them clearly in

mind. Unexposed film is purchased from a retailer

and at some point in the prior chain of sales,

sales tax is paid. There is no dispute about that.

It is exposed in a camera, it becomes exposed

film. A customer then delivers it to us where its

surface is subjected to a very simple chemical
process which was described in the evidence which
converts it into a negative. That was ultimately

held on its own, but for the amendment, not to

constitute manufacture.

Kodak 2 19/4/91

The negative is then used in a process under

which light is shone through it on to a sensitive

plastic which becomes a print and sales tax is paid

on the sale of the print on the basis that it is

goods manufactured by the applicant and sold by it.

What the Commissioner does here is to claim

sales tax at a third point in the chain. What he

says is that under section 17A of the No 1 Act

there is a deemed sale. What that section says is

if a person manufactures something out of goods

supplied by his customer and then returns it to the

customer for a price, there is a deemed sale, even

though it remains the goods of the customer the

whole way through the process.

What the Commissioner says is the customer

comes along with his exposed film; we manufacture

it into a negative and then return the negative and he says there is then a deemed sale of the negative

to the customer.

DEANE J:  What is the value of the goods for the purposes of

the deemed sale, their value or the value of the

treatment?

MR BENNETT:  It is the wholesale value, Your Honour, which

is worked out on the basis of the cost of

manufacture.

DEANE J:  So the cost of treatment.

MR BENNETT:  Yes. In 1986 the definition of "manufacture"

was added by the addition of paragraph (d) which I

have set out on page 3. It is:

the processing or treatment of exposed

photographic or cinematographic film to
produce a negative, transparency or film

strip.

The problem arises because of the definition

of "goods". Your Honours see at the bottom of

page 3 that definition - it is 92,141 of the volume
but Your Honours probably do not need to go to it -

excludes:

goods which have, either through a process of

retailing or otherwise, gone into use or

consumption in Australia.

That definition was added in 1935 to enshrine Ellis & Clark in which it said that secondhand goods were

outside the system and, indeed, there is a note in
the CLRs to that effect. It is quite apparent from

the wording of the amendment.

Kodak 19/4/91

In the present case, of course, the exposed

film has previously been purchased by retail by the

customer and it has gone into use in Australia.

The Court of Appeal said, well, that is all right;

the new definition of manufacture must impliedly

override that problem. But the second issue, the

issue which is the important one, is that after its

manufacture into a negative, under the definition,

the negative is then used to make a print before
the negative goes back to the customer. Now, the
taxing point selected by 17A, by the deemed sale,
is the time of delivery to the customer; when the

customer gets back his negative and the print. At

that point, the negative has been used to make the

print. It has gone into use in Australia and is

therefore no longer goods.

If I can make that point a little more

strongly, it has not merely gone into use; it has
been put to what in 99 cases out of 100 would be
the only use it ever goes into, and the whole

purpose of its creation, namely the making of the

print. It is true that the customer can, if he

wishes, have more prints made from the negative

and, indeed, that is the reason the negative is

given to him. Common experience would tell us that

only a very small percentage of negatives would be reused in that way. But what is important is that

the definition of "goods" excludes goods that have gone into use in Australia and, on any view of it,

this negative, when it had light shone through it

to make the print, has gone into use in Australia.

That means that the deemed sale provision simply cannot be put together.

If Your Honours wish the references, the 17A

is on 92,222; "manufacture" is 92,142 and "goods" is 92,141. But the point is the amendment cannot

catch the present negatives under 17A because, as

Your Honours will see from 92,222, 17A makes the

taxing point delivery.	Your Honours see after (b)
on that page:
the manufacturer of the goods shall, for the
purposes of this Act, be deemed to have sold
the goods to the customer at the time when the goods were delivered to the customer -

yet at that time, under the definition of "goods"

they are just not goods, on any basis.

BRENNAN J: That is on the footing that the goods at the

time of the delivery to the customer have gone into

use by the manufacturer.

MR BENNETT:  Yes.

Kodak 4 19/4/91

BRENNAN J: Is there any case which says that?

MR BENNETT: There is very little authority that I am aware

of on any of these sections. I am not aware of a

case which discusses that issue at all.

BRENNAN J: If that argument be right, if goods are put to

any use by a manufacturer before sale, sales tax is

avoided.

MR BENNETT:	Your Honour, it might depend on the nature of the use but in this case, it is not merely putting
them to some casual use incidental to their
manufacture, this is the whole use they are created
for and it is over once they are delivered. It can
happen again, although it is unlikely in most
cases. But it is not merely a minor use in the course of it, it is the whole of the raison detre.

BRENNAN J: That may well be right. It is just my

understanding of the exemption there has always

been on the footing of the use by those to whom it

is supplied as purchasers.

MR BENNETT:  Your Honour, if it is supplied to the

manufacturer's own use, a whole lot of different

provisions come into play and some different

arguments apply but the manufacturer uses it to

make the print on behalf of the customer, and

indeed at the request of the customer, so in a

sense it is the customer's use. The manufacturer

is doing something with it, after he has made it,

for the customer.

If one can test it this way: suppose the

developer who makes the negative is a different
company from the processor who makes the film, the

print. Assume that you go to two separate people:

one to develop your unexposed film to your

negative; and then you get the negative back and go

to a second person and say, make a print from this
for me.	There would be no doubt there it has gone

into use in Australia.

BRENNAN J: But it has also been delivered to the second

person there.

MR BENNETT:  Yes, of course it would, but the point I make,

Your Honour, is that that shows that a use for the

purpose of making a print is something which would,

in the case of a negative, be use. Why should it

be different where the same manufacturer undertakes

that task on behalf of the customer. We submit,

just reading the words of the section, that it just

does not work.

Kodak 19/4/91

Now, that takes me to the bottom of page 5 and

may I just remind Your Honours at this point of the

exclusions appearing on page 92,142. At the same

time as (d) was added, (e) and (f) were added, (e)

dealing with reproduction of computer programmes,

(f) dealing with films and the use of video

cassettes to make fresh ones by putting new films

on them. In each of those additions to the

definition of "manufacture" parenthetical words

appear at the end, (including goods and commodities

of the kind referred to in paragraph (a) of the

definition of "goods"), that is the excluded
categories of (a):

goods which have, either through a process of

retailing or otherwise, gone into use or

consumption in Australia:

So with those two definitions, the legislature went out of its way to acknowledge that it was making a

change to the definition and that that had to be

specifically addressed. That was not addressed in

relation to (d) and we rely on the expressio unius

that flows from that.

Similarly, one can make the same point about

three other provisions. On page 93,304

Your Honours will see the (No 9) Assessment Act where the definition of "goods" in that Act

includes, section 2A:

goods or commodities which have gone into use

or consumption in Australia.

I will not take Your Honours to them but

Your Honours will see the same things in

_section 18(7) and 18A(9) with the (No 1) Act.

The words in parentheses at the end of

paragraph 8 of my submissions are not correct. They

should be deleted. I am sorry about that.

So, Your Honours, when the draftsman has

wished to amend the definition of "goods" by an

amendment he has had no difficulty in doing so but

he has not done so here. What he has done here is

simply amended the definition of "manufacture" and

if he intended to catch this type of processing, he

has failed, not only to observe that these are

goods which, by a process of retailing, went into

use when the original film was sold, the original

unexposed film was sold, but also that it is goods which have gone into use after the manufacture and

before delivery to the customer.	So for both
reasons, it simply does not work.	And if that is

what the amendment sought to do, it has failed.

Kodak 6 19/4/91

It still, of course, has a purpose. For

example, it can have a purpose in relation to a

developer who develops exposed films into negatives

and supplies them to his customer without a print.

In such a case the Act would bite. But it does not

bite in the type of case we are concerned with.

I have mentioned the subsidiary point in

relation to the prior retailing in paragraph 9 on

page 6. There is a line of cases, both in England

and in Australia, in which the courts have

attempted to draw a line between alteration of

existing goods - there is the retreaded tyres and

the purified saccharin, those two cases, and

manufacture of new goods like the reconditioned fur

coats in Jack Zinader. We successfully submitted

to the Court of Appeal, although we failed on this

issue before the trial judge, that the goods

remained the same goods for the purpose of the

legislation, notwithstanding the change from

exposed film into negative, because of the very

minor nature of the change.

I give an example in paragraph 10 of the point

we make about Cooper Brookes. I have put an

extreme example to make clear the way in which

Cooper Brookes does not work, we would submit.	One
assumes licensing legislation which says, first,

that no person shall drive an unlicensed vehicle on

a public highway, and there were then detailed

provisions for the licensing of vehicles and

vehicle is defined as "cars and trucks". One

assumes that Parliament decides it wants to licence

refrigerators and that this would be a convenient

form of legislation to adopt. So it simply says,

we will amend "vehicle" so it means "refrigerators"

and it puts in detailed provisions for licensing

refrigerators. But it forgets that the only

operative provision is that no person shall drive

an unlicensed vehicle on a public highway. There

is no way that Cooper Brookes can be used to cure

that.

finds a mistake in drafting, such as in that case, Cooper Brookes merely says that where one

a complicated subparagraph referring to a number of

paragraphs and including one which should not have

been included to make it work, the court can say

the true intention is apparent on the face of it,
we will leave it as if it did not refer to that

subsection.

That is rather like the cases where one reads

in or out a superfluous or omitted "not" or one

reads "inconsistent" as "consistent" because there has been a clear almost typographical error by the draftsman. But we would submit what the Court of

Appeal has done in this case is to take Cooper

Brookes to unprecedented lengths, because what it

Kodak 7 19/4/91

has done is to say, "Because the amendment by

adding paragraph (d) intended to catch the

development of film, the manufacture of exposed

film into a negative, it must have intended to do

that in the situation where the negative is

supplied with the print to the customer, because

that is what normally happens; therefore", the

Court of Appeal says, "we will, in effect, override the definition of "goods" and say that these goods, unlike any other goods of any kind, have the

capacity to remain goods, notwithstanding going

into use or consumption in Australia." That,

Your Honours, we would respectfully submit, is

going far beyond anything permitted by Cooper

Brookes.

It is a reliance on parliamentary intention, in this case said to be defined in the explanatory

memorandum, to resolve not an ambiguity but a

situation where there is no ambiguity at all but

merely a misfiring of legislative intent if the

intent was as broad as the memorandum suggests.	We
respectfully submit that that is an impermissible
process.

As we pointed out in paragraph 11, it is still

effective because it still applies to a developer

who develops exposed film into negatives, if one

assumes the first and minor point against us. But,

of course, if the Court of Appeal is correct, a
processor who sells the final prints but retains

the negatives would not be liable for sales tax on

their development since he would not have sold the

negatives. There would be no deemed sale of the

negatives. So if we simply kept the negatives,

this would not happen.

Now, the reasons why special leave should be

granted I have referred to at page 8.

Your Honours, the first is that the application involves the two questions of law which I have set

out. I mention the fact that if leave is granted,	it is probable that the respondent Commissioner
would seek to raise the argument on which he
succeeded before Mr Justice Mcinerney but failed in the Court of Appeal. That is the question whether the exposed film is the same goods as the negative into which it is converted. What we submitted in
relation to that, and what was accepted, was a
novel proposition which we submit is correct and a
question of some importance, and that is that if a
metamorphosis is something which was always part of
the planned life of the goods, then that
metamorphosis does not prevent the goods being the same goods before and after. Here, the development
of the exposed film into the negative was not
making a different thing, we said, be-cause, apart

Kodak 8 19/4/91

from the simplicity of the process, it was always

intended, it was the path for which this piece of

plastic was always intended to follow.

Thirdly, we simply point out there is a very

substantial continuing amount of sales tax. There

is, I think, between $3 million and $4 million a

year in relation to the applicant and just under

$20 million a year in relation to the industry at

present values. So there are very substantial

amounts of money involved.

There is, as is said in the affidavit, at least one other case pending involving the same

issues. I can tell Your Honours that is the Genex

case. It has been set down to be heard before the Full Federal Court during May.

Now, if Your Honours are against me on the

grant of special leave, we would ask that rather
than refuse special leave today, Your Honours stand
the application over generally for this reason: if
the Genex case in the Full Federal Court goes the
other way and there is no special leave application

by either party, there are two additional factors

in support of my application. The first would be

the conflicting decisions of the Court of Appeal

and the Federal Court and the second would be the

huge competitive disadvantage my client would be

at, having had a decision to the opposite effect

against it on virtually the same facts.

If there is a special leave application in that case by either party, obviously this case

should be heard with it or at least adjourned until

the result of it, so the same result could follow.

It is, of course, probable, if Your Honours grant

special leave, that that fixture would be vacated

and that case would simply await the result of this

one, although we do not know of course - we are not

in it, and it may well be the Full Federal Court

would proceed with it, in which case it might or

might not catch up in time. One would have thought

it might well be reluctant to proceed while an

appeal was pending on the same point.

But, Your Honours, we would submit it is not a

otherwise refused and I have not otherwise

reason why special leave should not be granted at

this stage, because of the likelihood that the

satisfied Your Honours, we would ask the

application be stood over generally.

TOOHEY J:  If the Full Federal Court were to reach the same

conclusion as the Court of Appeal, and special

Kodak 9 19/4/91

leave having already been granted by this Court,

what do you suggest might happen?

MR BENNETT:  Your Honours would then have the benefit of the

views of three additional judges in deciding the appeal. It may well be, and one would assume in

that case, that the taxpayer would seek leave to

appeal and either have the appeal heard with this

one or await the result of it.

TOOHEY J: Except the combined weight of the Court of Appeal

and the Federal Court might be a fairly compelling

reason for not granting special leave.

MR BENNETT:  Your Honour, with the qualification that the

Federal Court would no doubt be influenced by the fact that the Court of Appeal has decided the issue that way and therefore it may well say one of the

reasons for coming to its conclusion is comity

between those courts.

BRENNAN J:  Mr Bennett, in practical terms you spoke of the

comparative disadvantage competitively of one party

or the other, depending upon the way in which the

judgments in the two cases may go. In practical

terms, what is the present position? Is the sales

tax being paid and being passed on to customers?

MR BENNETT: It is not a simple answer. There have been

proceedings in which these matters have been dealt

with between the parties. My understanding is that

money is being paid into some fund - I think it may

be being paid with applications being made every

six months. Would Your Honour just pardon me a

moment, I will check that. I am told that it is

not being paid at the moment but an arrangement has

been reached as to what would happen, if we were to

fail, in relation to the money, so in that sense it

would be paid.

BRENNAN J:  Is the cost of it being transferred on to the

customers' accounts?

MR BENNETT:  Your Honour, that is not a simple question. If

this matter is ultimately determined in my client's

favour, there is an issue as to whether we are

entitled to refunds because, whether it is being

passed on or not depends upon an argument based on

apportionment. The price has varied independently

of the sales tax and there is an issue between the

parties as to the answer to Your Honour's question. In paragraph 5 on page 9 I refer to a

secondary submission which I have set out in the

appendix. I do not propose to take Your Honours to

it on this application unless Your Honours wish me

to. I simply point out there was a second argument

Kodak 10 19/4/91

we raised, based on an item in the first schedule.

It is an alternative argument in the sense that if

I succeed on the main argument, it is unnecessary;

it has failed below; it is a short point of

statutory construction which I have explained there

and it would not take the Court more than a few

minutes of argument on each side in the course of

the matter being argued for it to be resolved.

So if leave is granted we would, I simply

disclose to the Court, wish to raise it on the

appeal unless, of course, we were excluded from doing so by Your Honours in terms of the order.

But it is not a matter which would make the case

take much longer. The case overall would take, in

my respectful submission, less than a day on all

issues and it involves, we submit, very important
questions, both to the industry and in relation to

the interpretation of the Sales Tax Assessment Act,

as well as the more general issue about how far one

can take Cooper Brookes.

DEANE J:  Mr Bemnett, is there any aspect of double tax

here?

MR BENNETT:  No, Your Honour, what is being done to us is

more like a VAT. It is being sought to say the way

the two sales taxes that are there at the moment

operate, there is a little bit in the middle that

is not picked up in the value - that is really what

is in substance being said.

DEANE J:  What if you structured your costs so that you sold

the print for a price that included the processing

of the negative to produce the print, if you won on

this argument, would it be of advantage to you?

MR BENNETT:  Your Honour, the Commissioner would not

recognize that apportionment - - -

DEANE J:  No, I am saying you do not apportion at all, that

the price of your print reflects the cost of the

processing of the negative.

MR BENNETT:  It does at the moment, Your Honour; it always

has.

DEANE J: What that means then, am I right, that the

Commissioner treats the cost of processing the negative as the basis for sales tax on the negative

and deducts that cost in calculating the value of

the print for - - -

MR BENNETT: That is what happened prior to the 1986

amendments, yes, Your Honour, and what was said in

the explanatory memorandum was that that had given

rise to some avoidance activities in the

Kodak 11 19/4/91

apportionment by some taxpayers and this was to, in

effect, dispose of that problem.

DEANE J:  So on the Commissioner's approach the processing costs attract tax on the negative but they do not attract tax on the print?

MR BENNETT: That is so, Your Honour, and what attracts tax

on the print is the cost of shining the light

through to make the print, cutting it and the

materials for that. May it please the Court.

BRENNAN J: Yes, Mr Jucovic .

MR JUCOVIC:  Your Honours, may we hand up five copies of our

outline of submissions.	Your Honours probably only
need to attend to the first page and a half.	The
other pages deal with the question of aids to
manufacture.

BRENNAN J: Yes, Mr Jucovic.

MR JUCOVIC:	Your Honours, may I direct your attention to the relevant provisions which are found at the
application book pages 41 and 42. At page 41 at
line 10, the fourth schedule to the Sales Tax (Exemptions and Classifications) Act is set out,
and it provides that -

Negatives ..... manufactured from exposed

photographic or cinematographic film supplied

by the persons for whom the negatives ..... are

manufactured -

that -

are subject to tax. That appears from the provides

following, Your Honours, at line 25 on page 41, the

Sales tax is imposed ..... upon the sale value

of goods manufactured in Australia ..... and

sold by the taxpayer or treated by the

taxpayer as stock for sale by retail or
applied to the taxpayer's own use.

Section 4 provides for the rates. In respect of

goods covered by the fourth or fifth schedules to

the Sales Tax (Exemptions and Classifications) Act

it is 20 per cent. Section 6B of the Sales Tax

(Exemptions and Classifications) Act provides that:

The goods specified in a Schedule ..... are so

specified for the purposes of the Acts

imposing sales tax upon goods so specified.

The effect of those provisions is to treat

negatives as goods subject to sales tax.

Kodak 12 19/4/91

Section 17 of the Sales Tax Assessment Act imposes the obligation to pay the sales tax.

Your Honour, the goods are manufactured by

reason of the definition which is found at line 20

of page 41 and, in our respectful submission, it

would be absurd if the goods in Sales Tax Act (No 1) which incorporates in its provisions the whole

of the Sales Tax Assessment Act had a different

meaning to goods in section 17.

BRENNAN J:  Do you say that section 17 and not 17A is the relevant provision - - -

MR JUCOVIC: Section 17 is the relevant provision,

Your Honour. Section 2 of the Sales Tax Act (No 1)

which is not referred to at pages 41 and 42,

provides that:

The Sales Tax Assessment Act (No 1) shall be incorporated and read as one with this Act.

So, Your Honours, what Mr Bennett relies upon is

the definition of "goods" in section 3 of the

Assessment Act (No 1). Your Honours, section 3(1)

provides that - you will find it at page 92,131:

In this Act, unless the contrary intention appears -

words have the following meaning. Your Honour, the

definition of "goods" in section 3 therefore gives
way to a contrary intention, that contrary

intention being that only negatives, only

negatives, Your Honour, no other goods, are treated

as goods which are the subject of sales tax.

BRENNAN J:	What about transparencies?
MR JUCOVIC:	I am sorry, negatives, transparencies and film

strips. This case only involves, Your Honour, what

is in item 2 of the fourth schedule to the Sales

Tax (Exemptions and Classifications) Act. It does

not involve any general principle relating to goods

at all, but only what was meant by that item in the

context of the sales tax legislation.

Your Honour, may I hand to Your Honours

extracts from Cooper Brookes.

BRENNAN J:	Mr Jucovic, why is it that 17A does not apply?
MR JUCOVIC:	Your Honour, 17A does apply to deem the goods

to be sold, but the goods have a different

definition.	They do not have the definition in
section 3.	Goods are defined for this relevant

purpose, Your Honour, in item 2 of the fourth

Kodak 13 19/4/91

schedule to the Sales Tax (Exemptions and
Classifications) Act. That Act and the Sales Tax

Act treats negatives and transparencies which have

been manufactured for customers as goods, in our

submission, for the purposes of the Assessment Act.

TOOHEY J: Is section 17A - and I appreciate it is a deeming

provision - but does it deem a sale or does it

presuppose a sale and deem when the sale is to have

taken place?

MR JUCOVIC:  In our submission it just simply says when the

sale takes place. It deems a set of circumstances

to be a sale and it tells you when it takes place.

TOOHEY J: Well, that is not quite the answer you gave a

little while ago, I thought. In other words, do

you have to find your sale outside 17A and then go

to 17A to identify the time of sale, or do you go
to 17A in order to identify whether there has been

a sale or not?

MR JUCOVIC:  You go to 17A to identify whether there is a

sale or not, but it says that a certain set of

circumstances are a sale, and then tells you when

that sale occurs. That is our submission,

Your Honours. But we say for the purposes of the

sales tax on negatives, the definition of goods in

section 3 of the Assessment Act has given way to a

contrary intention which is expressed in the

legislation which is set out at pages 41 and 42,

because the legislature has treated negatives as

the subject-matter of sales tax. So they are goods

for the purposes of the Assessment Act.

Your Honour, the only passage that I wanted to

direct attention to in Cooper Brookes is found at page 321 in the judgment of the Chief Justice and

Justice Wilson, in the third paragraph where Their

Honours say:

In this case the choice with which the

court is confronted is between a literal and

comprehensive application of s.80C(3) and the

acceptance of an implication which would
restrict its application in the manner already

discussed. In one sense the function of

s.80C(3) is similar to that of a statutory

definition. As such it is subject to any

contrary intention, though this qualification

is not expressed in s.80C(3).

So Your Honour, this is a clearer case, in our

respectful submission. The definitions in

section 3 are subject to a contrary intention

appearing in the Act.

Kodak 14 19/4/91

This is simply a case of the correct

application of rules of construction as laid down

by the High Court in Cooper Brookes, and it is a

clearer case than Cooper Brookes and, in our

respectful submission, once one discerns from the

provisions at pages 41 and 42 a clear intention to
treat negatives as goods and to tax them, then no
difficulty or doubt arises sufficient to warrant

the grant of special leave in this case.

BRENNAN J:  What do you say to the argument that those

provisions can be given full force and effect if

they are restricted in their application to the

manufacture of negatives from which no print is

intended?

MR JUCOVIC: That is not what the words say, Your Honour.

Negatives ..... from exposed ..... film supplied

by the persons for whom the negatives ..... are

manufactured.

That is what was intended. The amendments,

Your Honour, in 1986 showed, in our submission, a

clear intention that goods for the purposes of

negatives were to have this meaning, and it would

not give effect to the intention expressed in those

provisions to so restrict it.

BRENNAN J: If one considers the case of transparencies,

there would be nothing to be done beyond the
application of some chemical process to the exposed

film. Is that correct?

MR JUCOVIC:	I think that is correct, Your Honour.
BRENNAN J:	So there there would be no question of applying

what is produced by chemically treating the exposed

film to any further process?

MR JUCOVIC: That is correct, Your Honour.

BRENNAN J: Well then, in either case it would be a case,

would it not, for the application of section 17A?

MR JUCOVIC: That is correct, Your Honour.

BRENNAN J:  And if the goods referred to in 17A are new

goods, that is, not the goods from which the

manufactured goods were manufactured, then the

assumption that 17A makes is that they are new

goods when they are delivered.

MR JUCOVIC: Section 17A does not make that distinction,

Your Honour. It simply talks of goods and it is a

question of whether the definition of "goods" in

Kodak 15 19/4/91

section 3 has been subject to a contrary intention

for this particular purpose.

BRENNAN J:  But one would not say that any goods which fall

within 17A remain goods after first sale.

MR JUCOVIC: That is correct, Your Honour.

BRENNAN J: That must be because those goods fall within

section 3.

MR JUCOVIC: After their first sale, Your Honour. That is

correct, Your Honour.

BRENNAN J:  Does it not come down to the question of whether

the use before first sale by the manufacturer is a

use within section 3?

MR JUCOVIC:  Your Honour, it depends on what use.

Section 17 deals with the uses that can be put:

Goods ..... manufactured ..... and sold by the

taxpayer and ..... sold ..... or treated as stock for sale or applied to the taxpayer's own use.

Your Honour has put to me, I think, a situation

where they have already been sold. You have passed

the taxing point, so there is no need to apply

section 17A if I correctly understand what

Your Honour is putting to me.

BRENNAN J: What I was putting really is this: that 17A is

a special provision which deals with goods

manufactured that fall within its terms, and that

the point of taxation in relation to such goods as

that specified in 17A, if the goods which fall

within 17A are not thereby excluded from the

definition of "goods" in section 3, the question

must simply be, in order to answer paragraph (a) of

section 3, whether or not goods which are taxed at

the point of sale by 17A have gone into use prior

to that point.

MR JUCOVIC:  Yes, I accept that is the question,

Your Honour. Our answer to it is really that one

has to read all these provisions as a whole and one

finds from those provisions a contrary intention as

to the use to which "goods" is to be applied in

relation to negatives and transparencies.

Your Honour, those are our submissions on the

1986 amendments. I direct Your Honour's attention

to Aids to Manufacture. Mr Bennett puts it as a

subsidiary point, and we are content to leave it

that way although if Your Honours were to grant

special leave, you might consider confining the

Kodak 16 19/4/91

grant of special leave to the important question,

that is, the effect of the 1986 amendments.

BRENNAN J: Perhaps you should deal at this stage with the

suggestion of standing the matter over until the

Federal Court matter has been disposed of.

MR JUCOVIC:  Your Honour, we have no instructions. It seems

to us that the position is this: that if the

Federal Court finds for the Commissioner there is

no need for this Court to deal with the matter.	If
the Federal Court comes to a different conclusion, no doubt there would be an application for special leave by the Commissioner at that stage.
Mr Bennett's client is not paying the tax. There are some special arrangements. And if the Federal

Court finds against the Commissioner and this Court

grants special leave which it would probably have

to do if there were conflicting decisions, the

matter will be decided in this Court and

Mr Bennett's client is not in a competitive

disadvantage.

DEANE J: But if we were inclined to refuse leave, would it

not be preferable to stand the matter over rather

than refuse leave in a context where the Federal finality of views involved in a refusal of leave

than would, in fact, be justified?

MR JUCOVIC: If Your Honours were inclined to refuse leave,

Your Honours, in Your Honours' reasons, could state

to the Federal Court that this does not affect

anything they would have to do. It is only a

matter of what step Your Honours take in relation

to this.

DEANE J:  But we would be reluctant after an examination of

the kind we can have in a leave application to express views as to prospects of success which

might fetter the Federal Court in the formulation

of its views after a hearing of the complete

argument.

MR JUCOVIC:	Your Honours, our answer to that is that the Federal Court should not regard itself in any way
fettered by what this Court does on a special leave application because of the very factors which
Your Honour points to, and would look at the matter afresh giving due weight, in our submission, to the decision of the Court of Appeal, not to the
decision to refuse special leave.

Those are our submissions, Your Honour.

BRENNAN J: Yes, Mr Bennett.

Kodak 17 19/4/91

MR BENNETT:  If Your Honours please. Your Honour, the

reference to item 2 does not take my friend any

further. If Your Honours see page 41, it involves

exactly the same question as is involved in the

amendment of the definition of "manufacture"

because item 2 is quite capable of applying both to

the transparencies where, of course, there is no

print as such, and to cases where the negatives are

supplied to the customer without any print. So we

would submit it does not take my friend's argument

any further. It is capable of working. The

question is: does it have the limited application?

In relation to section 17A, what my friend

really has to do is construe the word "goods" in

section 17A zeugmatically. He is not merely saying

that the definition does not apply to 17A or one

reads the definition down; he is saying "goods" in

section 17A, where it is talking about negatives,

excludes the definition of "goods", but where it is talking about other things adopts the definition of

"goods". He is taking the same word and using it

in two different ways.

When a definition section says, "Unless the contrary intention appears", it means unless in

some section there is a reason why the definition

does not apply to that section. It does not mean

unless there is some reason why in a particular

case, in a particular application of a section, one

should exclude the definition, and one cannot read

the words in that way.

In relation to Cooper Brookes might I just

remind Your Honours of the passage in the pages my
friend has handed to you at page 305, the first

line on the page in the judgment of the

Chief Justice. His Honour puts the countervailing

consideration and says:

However, if the language of a statutory

provision is clear and unambiguous, and is

consistent and harmonious with the other

provisions of the enactment, and can be

intelligibly applied to the subject matter

with which it deals, it must be given its
ordinary and grammatical meaning, even if it

leads to a result that may seem inconvenient
or unjust.

That is this case. Cooper Brookes was a case where it could not be intelligibly applied. This is a

case where it can be.

My friend says this is a stronger case than

Cooper Brookes. We would submit that the reverse

is the case, first, because it requires a much

Kodak 18 19/4/91

larger redefinition. One really has to say: in the

case of negatives one does not treat them as going

into use when they are used by the manufacturer for

making a film. One really has to imply all that to
make it work. It involves the zeugmatic

construction I have referred to, and in any event,

in this case there is a practical field of

operation for the amendments as there was not in

Cooper Brookes.

Your Honour Mr Justice Brennan referred to the question as to whether "use" for the purposes of

section 17A was constituted by the manufacturer

using it at the request of the customer as is done
here. That is, of course, and Your Honour asked me

the same question, an aspect of the decision in

this case, and we would respectfully submit that it

is also an important aspect. It is an undecided

question.

Finally, in relation to - - -

BRENNAN J:  Do I take it that the declaration that was

sought in these proceedings is a declaration with

respect to photographic negatives from which prints

were manufactured?

MR BENNETT: Yes, Your Honour, I think that is so.

BRENNAN J:  I am looking at pages 1 and 2.

MR BENNETT: Yes, that was intended to refer to photographic

negatives which had been used by shining light

through them to make prints.

BRENNAN J:	To make prints for customers?
MR BENNETT:	Yes, Your Honour. Finally, my friend made one

submission about the Federal Court case. He said

if special leave is refused here and the taxpayer

wins in the Federal Court and the Commissioner

seeks leave, comes to this Court, obtains leave

because of conflicting decisions, this Court will

then decide the matter and that is the end of it.

That has, with respect, one qualification, and that

is my client would then be at risk of having an

issue estoppel against it, unlike all the rest of the photographic industry which could rely on the

new case. So we would then, we respectfully

submit, be seriously prejudiced. But I do stress

that our preferred position is that special leave

be granted on the basis that that case will
probably then either not proceed in May, or if it

does, be able to catch up before the appeal is

heard.

May it please the Court.

Kodak	19	19/4/91
MR JUCOVIC:	May I just say something?	I have received the

instructions that the Commonwealth would not take a

point about a res judicata so far as Kodak is

concerned if this case ever came to the High Court

on an application by the Commissioner for special

leave to appeal.

BRENNAN J:  The problem would not arise of res judicata in

the High Court. It would arise at first instance.

MR JUCIVOC: Sorry, if ultimately this matter is determined

by the High Court adversely to the Commissioner on

an appeal in the other matter - - -

BRENNAN J:  The Court will consider its decision in this

matter and hopes to give its decision at 2.15 pm

this afternoon.

MR BENNETT:  Your Honour, may I just by leave say one thing

in answer to my friend's last remark. The problem

with the Commissioner's concession is that it does

not solve our problem in relation to past tax. It

certainly was not clear from the form of my
friend's concession that it is intended to operate

in relation to past tax to which we might be

entitled to recovery. And in any event, if the

matter is to go to this Court from the Federal

Court, we would respectfully submit that the two

cases should be heard together so we also have the

ability to be heard. May it please the Court.

AT 11.03 AM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

UPON RESUMING AT 2.20 PM: 

BRENNAN J: In this matter, in all the circumstances and, in

particular, the pending proceedings in the Federal

Court raising the same or a similar question, we think the appropriate order is that the matter be stood over generally with leave to either party to restore the matter to the list on giving 14 days notice to the Registry and to the other party.

There will be an order accordingly.

MR BENNETT:  Would Your Honour reserve the costs - - -

Kodak 20 19/4/91

BRENNAN J: Yes.	Do you have any objection?
MR JUCOVIC:	No, Your Honour.

BRENNAN J: Costs will be reserved.

AT 2.21 PM THE MATTER WAS ADJOURNED SINE DIE

Kodak 21 19/4/91