Pacific National (ACT) Limited v Chief Commissioner of State Revenue

[2008] HCATrans 185

[2008] HCATrans 185

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S612 of 2007

B e t w e e n -

PACIFIC NATIONAL (ACT) LIMITED

Applicant

and

CHIEF COMMISSIONER OF STATE REVENUE

Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 MAY 2008, AT 10.19 AM

Copyright in the High Court of Australia

MR S.J. GAGELER, SC:   May it please the Court, I appear with MR J.O. HMELNITSKY for the applicant.  (instructed by Clayton Utz)

MS R.L. SEIDEN:   May it please the Court, I appear for the respondent.  (instructed by Crown Solicitor’s Office (NSW))

GLEESON CJ:   Yes. Mr Gageler.

MR GAGELER:   Your Honours, this is a case where there is no complication as to the facts.  The complication has arisen in the process of reasoning in the Court of Appeal and it is a case where fairly abstract notions of property ‑ ‑ ‑

GUMMOW J:   Just remind us, what is the factual structure in which these disputes get to the Supreme Court these days?

MR GAGELER:   The procedural structure, your Honour?

GUMMOW J:   Yes.

MR GAGELER:   It is an appeal against an assessment which is under the Taxation Administration Act.

GUMMOW J:   In olden times there was something called a stated case which used to create endless problems.  That does not exist any more.

MR GAGELER:   No.  There was a summons in the original jurisdiction of the Supreme Court in accordance with the procedure provided by the Taxation Administration Act challenging an assessment under the Duties Act and it proceeded by way of agreed statement of facts, plus a few documents, your Honours.

GUMMOW J:   But is there now a dispute about what is conveyed by the agreed statement?

MR GAGELER:   No, I think not.  There was a qualification on one view and it was not a view that I was espousing.  On one view the agreed statement of facts could have foreclosed the issue in the case.  That was not the way we read it.  We simply read it as the land being owned by the SRA and that is as much as we wanted to get out of it and that is the qualification that was noted by his Honour at first instance at page 6.  So there is no complication as to the facts.

Your Honours, the statutory scheme with which the court was concerned is really quite clear.  The statutory scheme was one that gave ownership of the rail infrastructure to the Rail Access Corporation and gave a right to use rail infrastructure as one that was able to be conferred on a rail operator by agreement with Rail Access Corporation.  That is what it did on the one hand and, on the other hand, it said that the ownership of the railway land was vested in the SRA and the right to use the railway land was automatically conferred on a rail operator by statute.

GUMMOW J:   Does it come down to these words “by which” in 164A?

MR GAGELER:   In the judgment of Justice Ipp it came down to those words.  In the judgments of Justices Basten and Hodgson a much more complicated process of reasoning came in.  But, your Honour, to go immediately to the reasoning of Justice Ipp, the critical part of his judgment is at page 33, and your Honour is referring to the point he reached in paragraph 46.  Justice Ipp, in our submission, was the one judge of the Court of Appeal who proceeded on a correct understanding of the bifurcation created by the Transport Administration Act and he alone based his decision on a particular construction of the words “by which” in the Duties Act but he was the only one to do that.  His construction of the Duties Act, in our submission, is wrong, or at least highly contestable and the bit ‑ ‑ ‑

GLEESON CJ:   That also was the point on which Justice Gzell decided the case, was it not?

MR GAGELER:   He decided in our favour.  He decided it in our favour on that point because he said at the bottom of page 11, the last two lines, that what the section is looking to is the source of the legal right to use land.  I mean, the section, in terms, refers to an agreement such as a licence by which a person has a right to use land and, in our submission, what it is clearly enough doing is referring to a contractual right to use land, a right conferred by the agreement or a right that flows by contractual force from the agreement.  That is simply what it is doing.

That is the difference between Justice Ipp, on the one hand, and Justice Gzell on the other hand and that is the only difference and, in our submission, Justice Gzell got it right and at least ‑ ‑ ‑

GLEESON CJ:   The essence of Justice Ipp’s view is in line 59 and 60 and page 33, is it not?

MR GAGELER:   Yes, I think so.  Yes, that is it, leading to the bottom of page 33.  That is his view, but the views of the other members of the Court of Appeal are much more complex and really, in our submission, are quite wrong.  If your Honours go to the judgment of Justice Hodgson, he makes three points – we lose for three reasons.

GUMMOW J:   Just going  back to Justice Ipp for a minute, he seemed to focus on the outcome, as it were, and he is really saying, is the agreement something that is a necessary step in reaching the outcome, is he not?  He says “which results”.

MR GAGELER:   Yes.  He is reading the words “by which” in a causative sense.  He is looking for causation.

GLEESON CJ:   He is saying before you entered into this agreement you did not have the right to use the land.  After you went into the agreement you had a right to use the land.

MR GAGELER:   Yes, that is what he is saying.  He is saying that there is a cause and effect.  But for the agreement you would not have a right to use the land, obviously correct, but the agreement does not give the right to use the land.  The party to the agreement, RAC, has no interest in the land and has no ability, by statute or otherwise, to confer any interest in the land or any right to use the land.  The right to use the land comes from the statute and the ownership of the land.  The right to exclude others, is vested in someone else, the SRA.  It is not the agreement that does it.  The agreement is the trigger by which the statute confers a right, as against someone else, as against the SRA.  That is the difference between those two judges but, your Honours, the reasoning of the other two members of the Court of Appeal ‑ ‑ ‑

GUMMOW J:   I am sorry to interrupt you again, but how much duty is involved in this?

MR GAGELER:   A few million dollars in this case and it has a flow‑on effect for other cases.  But if you look at Justice Hodgson, he says some things that are really quite a wrong.  If you look at the bottom of page 29 – this is the first of the three reasons why in his view we lose – he says in the last couple of lines:

in my opinion there are some classes of rail infrastructure facilities that have the character of land and are not deprived of that character by their treatment by the legislation.

He says things like “tunnels and service roads” have that character.  Your Honours, that is just wrong.  The statute treats all infrastructure the same regardless of how big it is or what it might be made of.  The statute gives, for example, the RAC the ability to move a tunnel, the ability to extend earthworks.  All of that is just treated as a piece with any other bit of infrastructure.  The second thing he says is at about the middle of page 30.  At about line 30 he says:

in my opinion a right to use rail infrastructure facilities in situ carries with it a right to use the space which they occupy –

Now, if he is there saying that the Rail Access Corporation has a right to use the space that is occupied by the infrastructure facilities, then he is right but that is a right that Rail Access Corporation itself has by a statute.  It does not thereby acquire any interest in the land.  Indeed, that is the whole point of the North Shore Gas Case.  The third thing he says, your Honours, is at page 31 about line 12 and then line 19.  He says:

It is commonplace that powers to grant rights to use land are given by statute . . . The fact that a power to grant such rights is given by statute does not mean that the rights are not conferred on or acquired by the other persons “by” instruments exercising the power.

If he is meaning by that that the Rail Access Corporation exercised under statute some power to grant a right to use land, that is just wrong.  That is not the power that Rail Access Corporation had.  It did not have any interest in the land and it had only a power to grant a right to use the infrastructure.  Justice Basten said very similar things to Justice Hodgson and, in our submission, they are similarly wrong.  At page 42 about line 40 he says:

There can be no doubt that RIC –

the same as RAC –

having ownership of rail infrastructure facilities, including tracks, and their supports, has a right of occupation of land not merely for the purpose of occupying the land by holding and maintaining the facilities, but also to the extent necessary to allow for their use by rolling stock.

Your Honours, RAC has a statutory right of occupation and it is wrong in any way to equate that with a right of property in the space occupied by the infrastructure facilities or in the space above or around the infrastructure facilities, again, the very error in the North Shore Gas Case that his Honour spent several pages analysing.  Then if you go to page 45 about line 30, what his Honour says in the second last line of that paragraph, “It is sufficient that the Respondent” – that is Pacific National – “has a contractual licence to use the overlying space”.  That is wrong.  Pacific National does not have a contractual licence to use the overlying space.  It has a right of contractual licence to use the infrastructure and it has a statutory right to use the overlying space.  Then you get to page 47 – this is another reason that his Honour put up – about line 12:

If there is doubt as to whether the access agreement can be described as conferring a right to use the rail tracks (and I do not think there is) it would be sufficient that the Respondent acquires the right to use the tracks by entering into the access agreement.

What he seems to be saying there is because the tracks are three‑dimensional and because therefore they occupy space that can be described as land, it is sufficient that Pacific National acquires a right to use the tracks by entering into the access agreement.  Again, your Honours, the infrastructure is not land and to say that there is a contractual conferral or contractual derivation of rights to use that land is simply a mischaracterisation, perhaps a misunderstanding of the statutory scheme.  Those are our submissions.

GLEESON CJ:   Thank you.  Yes, Ms Seiden.

MS SEIDEN:   Thank you, your Honours.  There are three submissions on behalf of the respondent.  The first is that the issues purported to be raised in the special leave question are solely concerned with the construction of a specific statutory provision now effectively repealed.  Secondly, the point of construction identified as the second special leave question was dealt with only incidentally below and, finally, with respect, there is insufficient doubt in the decision below and sufficient uniformity in the decision.

As to the first matters, your Honours, there is no non‑statutory issue here.  The issue is one of construction of very specific words and the argument sought to be pressed is one that is peculiar to those words, the words “by which”.  The argument below was unguided by any decisions on the phrase for the reason that it is not to any material extent used elsewhere.  The interpretation is very much a matter of impression or a question of interpreting the statute by ordinary English usage in the context of the particular statutory regime.

GUMMOW J:   There is a problem, in a sense, though.  The States – and New South Wales is certainly one of them, I think – are making all sorts of arrangements now with respect to infrastructure which one did not encounter 30 or 40 years ago.  There is then a question of how those particular statutory regimes which the States construct mesh in with the generalised provisions of the statutory revenue legislation.

MS SEIDEN:   Yes, thank you, your Honour.  With respect, this lease duty has been abolished and that regime of abolishment is effective in all the States.  I think the ACT is the only one that is still online and that will cease on 1 January 2009 and, in any event, the particular words that this issue are concerned with are the words “by which” which only appear I think in one other statute – I think Tasmania – by way of an exemption to the lease duty and therefore, it is submitted, with respect, that notwithstanding the change in regimes, this issue will not assist in a broader context.

As to the second point, your Honours, the main issue before the primary judge and the Court of Appeal was the meaning of the expressions “land” and “use” and whether the North Shore Gas Cases were determinative of the issue.  This is further demonstration that the argument now pressed is a very narrow point of construction and also explains the reason that the Court of Appeal, in the case of Justice Hodgson and Justice Basten, spent some time dealing with the North Shore Gas Cases and in fact, rather than demonstrating an error in reasoning, their Honours explained why those North Shore Gas Cases were not determinative and were beside the point. 

If I could take your Honours to paragraph 25 of Justice Hodgson’s decision at page 29 of the application book.  His Honour states that the question is not whether the Access Agreement conferred an interest in land, which was the issue in the second of the North Shore Gas Cases, “but whether a right to use land was so conferred or acquired”.  They are the words of the statute presently under consideration, the “right to use land”.  Justice Basten also at paragraph 72 which is at page 42 of the application book notes that:

The reason why these questions –

and they are the questions that arose under the North Shore Gas Cases –

may be avoided is that the liability to pay duty on the agreement does not depend on the lessee having any estate or interest in the land, but arises if the agreement confers or gives rise to a “right to use land”.

Then his Honour says that in the two North Shore Gas Cases there is nothing against ‑ ‑ ‑

GLEESON CJ:   That expression “gives rise to”, it means something different from “confers” does it?

MS SEIDEN:   The statutory language is “acquires” or “confers”, not “gives rise to”.  I do not suggest that his Honour was meaning to give that a different meaning but that the statutory language is the word “acquired” or “conferred on”.  Finally, your Honours, the Court of Appeal was unanimous on the views in relation to the point which is sought to be agitated as a special leave point and that is whether or not the access agreement was an instrument by which a right to use land was conferred or acquired.  In this case, acquired. 

Each of the judges of the Court of Appeal agreed that the access agreement was an agreement by which the applicant acquired rights to use land.  This can be found at paragraphs 25 and 33 of Justice Hodgson’s decision, at paragraph 47 of Justice Ipp where his Honour says:

But, it cannot be gainsaid that the legal effect of the Rail Access Agreement was that the respondent, thereby, acquired a right to use land.

And, finally, Justice Basten at paragraph 82 that:

the Duties Act expressly encompasses not only an agreement by which a right to use land is conferred on a person, but also an agreement by which a person acquires such a right.

GLEESON CJ:   The competing points of view seem to be that of Justice Gzell who said the revenue statute only applies where the agreement is the legal source of the right to use the land and the Court of Appeal seemed to have said you look at it as an issue of causation and ask whether, in circumstances where you would not have a right to use the land but for the agreement, the consequence is the right to use the land is conferred by the agreement.

MS SEIDEN:   Yes.  I think, also, your Honour, Justice Basten perhaps was of the view that notwithstanding the statutory rights that the access agreement nonetheless fell into that first category that Justice Gzell had required that it was the source of the right.

GLEESON CJ:   A possible point of view is that the second argument amounts to post hoc ergo propter hoc.

MS SEIDEN:   The second argument being the causation argument.  Your Honour, the applicant is in effect contending that the words “by which” require more than a loose or causal connection and that, in a sense, requires the statute to be written down or read down because otherwise they are requiring that the agreement needs to be the sole source of the right which the respondent contends otherwise. 

In the respondent’s respectful submission, there is no justification for reading down of the section and perhaps this answers your Honour’s point that to do so it ignores the words “conferred on or acquired by” which appear in section 164A of the Duties Act which implies that there may be more than one source of a right to use land in any case and in such a case either may, subject to the instrument to duty.  The expression itself “by which” connotes a causal link and the preposition “by” invokes such a causal connection.

GLEESON CJ:   We find that at work in the Trade Practices Act.

MS SEIDEN:   Thank you, your Honour.  Those are the respondent’s submissions.

GLEESON CJ:   Thank you, Ms Seiden.  Yes, Mr Gageler.

MR GAGELER:   Your Honours, “by which” is one issue in case and it is an issue that is easily resolved and, in our submission, we are on the right side of the argument, even if we are not, it is an argument that could be dealt with rather shortly.  The other issues in the case are wider ranging.  They go to the nature and source of the rights of a lessee of infrastructure, the ownership of which is divorced by statute from the ownership of land.  They are issues that are squarely raised and that would need to be addressed in this Court because we would need to show not only that Justice Ipp was wrong, but that Justices Basten and Hodgson were wrong in the process of reasoning that they adopted.  If the Court pleases.

GLEESON CJ:   In this matter there will be a grant of special leave to appeal.

AT 10.43 AM THE MATTER WAS CONCLUDED