Paliflex Pty Ltd v Chief Commissioner of State Revenue

[2003] HCATrans 343

[2003] HCATrans 343

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S145 of 2003

B e t w e e n -

PALIFLEX PTY LTD

Appellant

and

CHIEF COMMISSIONER OF STATE REVENUE

Respondent

Office of the Registry
  Sydney  No S270 of 2003

B e t w e e n -

SOUTH SYDNEY CITY COUNCIL

Plaintiff

and

PALIFLEX PTY LTD

Defendant

ATTORNEY-GENERAL OF NEW SOUTH WALES

Intervener

GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 SEPTEMBER 2003, AT 10.21 AM

Copyright in the High Court of Australia

__________________

MR N.C. HUTLEY, SC:   If your Honours please, I appear with my learned friends, MR G.A. MOORE, MR N. PERRAM and MS K.M. RICHARDSON, in the appeal and in the matter removed we appear for the defendant.  (instructed by Brock Partners)

MR M.G. SEXTON, SC, Solicitor‑General for the State of New South Wales:   If the Court pleases, I appear with my learned friend, MR I. MESCHER, in the first matter for the respondent and for the Attorney-General for New South Wales who intervenes, and in the second matter for the Attorney‑General for New South Wales intervening.  (instructed by Crown Solicitor for New South Wales)

MR I. MESCHER:   If the Court pleases, I appear on behalf of the plaintiff in the second matter, the removal matter.  (instructed by Pike Pike & Fenwick)

MR D.M.J. BENNETT, QC, Solicitor‑General of the Commonwealth of Australia:If the Court pleases, I appear with my learned friends, MR G. WITYNSKI and MS N.L. SHARP, for the Attorney-General of the Commonwealth intervening in both matters.  Your Honours, we submit that the appellant should either be required to deal with the whole of the case, including the validity of the State legislation in chief, or all interveners to be permitted to address after the appellant’s reply.  (instructed by Australian Government Solicitor)

MR C.J. KOURAKIS, QC, Solicitor‑General for the State of South Australia:If the Court pleases, I appear with my learned friends, MS J.C. PRITCHARD and MR C. BLEBY, for the Attorneys‑General of Western Australia and South Australia intervening in both matters.  I support the submission just made of the learned Solicitor‑General for the Commonwealth. (instructed by Crown Solicitor’s Office (SA) and Crown Solicitor’s Office Western Australia)

MR P.J. HANKS, QC:   If the Court pleases, I appear with my learned friend, MR S.G.E. McLEISH, for the Attorney-General for Victoria intervening,  We support the submission made by the learned Solicitor for the Commonwealth.  (instructed by Victorian Government Solicitor)

GLEESON CJ:   Yes, the proposal of the Solicitor for the Commonwealth as to the order in which the matter should be dealt with, should be adopted.  Yes, Mr Hutley.

MR HUTLEY:   If the Court pleases. Your Honours, in the appeal, the notice of appeal appears at appeal book page 100, and, as will have been apparent from the submissions, the appellant does not press ground 5. We apply for leave to amend the grounds of appeal to raise issues arising out of sections 55, 51(ii) and 99 of the Constitution.

GLEESON CJ:   Is that opposed?

MR SEXTON:   No, it is not, your Honour. 

GLEESON CJ:   Yes, you have that leave.

MR HUTLEY:   Thank you, your Honour.  We have prepared a form of notice of appeal to reflect that.  Would it be convenient to hand it up now?

GLEESON CJ:   Yes.

MR HUTLEY:   As will appear from the written submissions of the various parties, the appeal and the notice of contention conceivably raise for reconsideration, at least, the decision of this Court in Stocks & Holdings ‑ if I can use the abbreviation which appears from the written submissions. To the extent that leave be necessary and to the extent that this Court has determined that section 51(ii) does not in any way impact upon an exercise of power under section 52(i), a leave would be necessary in relation to that. Would the Court propose to deal with those questions in advance of consideration of the appeal, or during the course of the appeal?

GLEESON CJ:   We will deal with them in the course of the argument.

MR HUTLEY: If the Court pleases. Your Honours, the orders that we propose to address the issues in both matters is as follows. The first issue we would address are the principles applicable to the extent of the exclusive power conferred upon the Commonwealth by section 52(i) of the Constitution and the corresponding denial of power to the States, which will involve consideration of the principles of characterisation to be applied in those questions.

The second issue is whether the Land Tax Act, which I will refer to as the “Rating Act”, and the Land Tax Management Act, which, because there are so many Managements Acts, I will refer to as “LTMA” – if they were to support the assessments as to land tax for the 1999 and 2000 years, would be laws with respect to Commonwealth places.

The third issue, which, of course, to a great extent will overlap with the second issue, is why the decision in Attorney‑General for NSW v Stocks & Holdings (1970) 124 CLR 262 is, in our submission, merely an application of the principles derived from the decision of this Court in Worthing v Rowell & Muston Pty Ltd (1970) 123 CLR 89.

KIRBY J:   Is that where you will be dealing with the Commonwealth’s primary contention that you just apply the State Act in an ambulatory way, the land tax legislation?

MR HUTLEY:   Yes, your Honour.  Our submission ‑ ‑ ‑

KIRBY J:   It seems to me that that, logically, is the first question that has to be dealt with. 

MR HUTLEY:   Your Honour ‑ ‑ ‑

KIRBY J:   You will be dealing with it there?

MR HUTLEY:   There.

KIRBY J:   You will get to it ‑ ‑ ‑

MR HUTLEY:   In issue two and issue three.  They overlap to an extent.

KIRBY J:   Everything overlaps.

MR HUTLEY:   Yes, your Honour. The fourth issue, your Honours, would be whether section 14(2) of the Commonwealth Places (Administration of Laws) Act 1970 (NSW), which I will refer to as the “State Administration of Laws Act”, could operate validly to subject the appellant to the assessments to land tax if the answer to the former issues is that the Land Tax Management Act and the Rating Act would be laws with respect to a Commonwealth place.  Issue five is whether the Local Government Act, if they were to support the rates and charges assessments the subject of the removed proceedings, would be laws with respect to Commonwealth places.

The sixth issue is whether section 13 of the Commonwealth Places (Mirror Taxes Administration) Act 1998 (NSW), which I will refer to as the “State Administration Act”, could operate to subject the appellant to assessments to land tax. Within that issue, there are a series of further issues, which I will identify with particularity when I arrive at that point, but, broadly, they are whether the Commonwealth Places (Mirror Taxes) Act 1998 (Cth), which I will refer to as the “Commonwealth Mirror Taxes Act”, could apply in the current circumstances, firstly; whether it is wholly or partly invalid by reason of section 55, section 51(ii) or section 99 of the Constitution; and, finally, whether on the true construction of section 13, it can apply in the circumstances.

GLEESON CJ:   Now, is all this on the assumption that the principal source of the inhibition on imposing land tax and rates on the Commonwealth is section 52(i)?

MR HUTLEY:   Yes.

GUMMOW J:   That is not right, is it?

MR HUTLEY:   On the Commonwealth, I am sorry? No, it is not premised on that at all, your Honour. Section 114, besides other principles which are discussed in the case of this Court remove that possibility. The question is whether, if on the true construction of the Land Tax Management Act it purports to apply to the purchaser from the Commonwealth, namely Paliflex, to impose land tax on the property after it ceases to be a Commonwealth place, would the law still be a law with respect to a Commonwealth place?  That is the issue which is raised. 

Of course, one accepts that neither of those Acts could apply to the Commonwealth, irrespective of whether one was dealing with a Commonwealth place, and we submit did not on their true construction purport to apply to the Commonwealth.  The question is whether ‑ ‑ ‑

GUMMOW J:   You rely on Essendon Corporation, do you, for that ‑ ‑ ‑

MR HUTLEY:   Your Honour, we submit that the Court of Appeal referred to section 21C and 10(1)(a) for reference to the Crown.  It was, in fact, common ground between the Solicitor-General and myself before the Court of Appeal and before the learned President that those sections were not referring to the Crown in right of the Commonwealth, but were referring to the Crown in right of the State of New South Wales and that was all.

We submit that the Act, on its true construction, simply would not apply to the Commonwealth, but the land tax jumped forward.  One of the aspects of the land tax scheme is it purports to impose taxation on persons as owners who are not, in fact, the owner, and, in fact, it has a broad application to persons who do not have that character.  So a property whilst owned, that is, the title to which was held by the Commonwealth, could, if a sufficient relation existed between that property and a third person, render that third person an owner for the purposes of the Land Tax Management Act.

KIRBY J:   That is a potential problem, but, as I understand it, you are the owner.

MR HUTLEY:   Your Honour, I raise that, because it is for that ‑ ‑ ‑

KIRBY J:   Let us get certain facts clear.  You have acquired the title.

MR HUTLEY:   Yes, your Honour, we have acquired the title.

KIRBY J:   You are a private sector organisation that has acquired the title that is seeking to avoid land tax.  That does not seem to be redolent with a lot of merit.  The Commonwealth has no current interest in the land.

MR HUTLEY:   Your Honour, the Commonwealth, in our respectful submission, had an interest in the land at the time it sold the land.

KIRBY J:   Yes, but just explain this to me.  If we accept the ambulatory view of the Act, all of these constitutional arguments go down the plughole.

MR HUTLEY:   No, your Honour, in our respectful submission, not.  To take, for example, the circumstances in Stocks & Holdings, where a law, on a construction which posited that the law would only apply to a property after it ceased to be a Commonwealth place, could still be a law with respect to a Commonwealth place ‑ ‑ ‑

KIRBY J:   Here, it is simply a question of whether the Land Tax Management Act, in its own terms, once you become a private sector owner of the land – as in any other case where you acquire land as a private sector organisation from anyone else – the land tax bites.

MR HUTLEY:   Your Honour, that is the contention against us and I appreciate that, but the question arises this way.  If Stocks & Holdings were right, it would have been a matter of simplicity itself to convert the very restraint which the Court there found and constituted a law with respect to the Commonwealth into an ambulatory law with exactly the same content.  The fact that a law is expressed in ambulatory terms, in our respectful submission, simply does not address the question ‑ ‑ ‑

KIRBY J:   “Ambulatory” is a rather unfortunate word, in a sense; it is just a question of whether the Act has application.  In some cases it does not and in some cases it does.

MR HUTLEY:   Quite.  Your Honour, that is, with respect, what we say.  We say the question is, whether you characterise it as ambulatory or not, whether a law which purports to impose land tax on a person who acquires land from the Commonwealth is a law with respect to a Commonwealth place.

GUMMOW J:   So am I right in thinking, Mr Hutley – I have to get this straight – you do not say the New South Wales 1956 legislation was struck by 52 of the Constitution or by 114?

MR HUTLEY:   Your Honour, on its true construction, it would be construed ‑ ‑ ‑

GUMMOW J:   That is a question.

MR HUTLEY:   ‑ ‑ ‑ yes, to fulfil the requirements of 114 and section 52(i).

GUMMOW J:   And that follows from the principles in Essendon Corporation 74 CLR 1.

MR HUTLEY:   Yes, your Honour, but the real question is what the extent of that reading down – if reading down be the way to describe it – is required by those principles.

GUMMOW J:   I am just trying to work out whether in any of its aspects and operations the 1956 legislation was invalid.

MR HUTLEY:   In our respectful submission, no.

GUMMOW J:   And it did not apply to any Commonwealth place, nor did it seek to tax Commonwealth property?

MR HUTLEY:   No, your Honour.

GUMMOW J:   So it is different from the Stocks & Holdings situation?

MR HUTLEY:   Your Honour, the Stocks & Holdings situation, in our respectful submission, assumed for the purposes of debate that the County of Cumberland scheme, as a matter of construction, only purported to apply to the property after the property ceased to be a Commonwealth place.

GUMMOW J:   This phrase, “a matter of construction”, it is just a nonsense.  The question is, what was the law? 

MR HUTLEY:   Quite.

GUMMOW J:   Of course, you work out what the law is by construing it, but the question is, what was the law?

MR HUTLEY:   Accepted, your Honour.  The way the Court approached it is, if the law meant that it applied as and from its ceasing to be a Commonwealth place, it was a law with respect to a Commonwealth place, and therefore the whole scheme was struck down.  What we submit is that the contention against us is that upon the place ceasing to be a Commonwealth place, the Land Tax Management Act applied to this property, and the contention ‑ ‑ ‑

GUMMOW J:   At the relevant 31 December.

MR HUTLEY:   At the relevant 31 December.  In our respectful submission, it really cannot matter whether the settlement of this transaction took place on 4 February of that year or 31 December.  The question is, if it attaches in the hands of Paliflex, to expose Paliflex to land tax, is it a law with respect to a Commonwealth place?  Because the Act, of course, was passed during the time the property was a Commonwealth place and what we submit is, if it is on its true construction, it would so operate, it is in principle indistinguishable from the consideration which led the Court to the conclusion in Stocks & Holdings.

GLEESON CJ:   We need to look at the taxing provision, do we not? That is in section 7 of the 1956 Act.

MR HUTLEY:   Yes, your Honour.

GLEESON CJ:   It provides that taxes “levied and paid upon the unimproved value of all lands” which satisfy two conditions – one is that they are owned by a taxpayer – and that does not include the Commonwealth – and the second is that they are “not exempt from taxation”. There is a whole list of exemptions covering a wide range of lands such as showgrounds, lands used for trotting clubs, lands used for charitable or religious institutions, and so forth. So section 7 says a tax is:

levied and paid upon the unimproved value of all lands –

if the land is “owned by taxpayers” and if the land is “not exempt”.  Now, while it was owned by the Commonwealth, it was not owned by a taxpayer.  Is that right?

MR HUTLEY:   Yes, your Honour.  It also was exempt from taxation under the Act because it was a Commonwealth place.+

GUMMOW J:   I do not understand that.

GLEESON CJ:   “Exempt” means, does it not, exempt pursuant to section 10?

MR HUTLEY:   No, your Honour.  This Court, in relation to the federal land tax regime of 1910, which had I think in section 11 exactly the same words, said that the highest form of exemption one can have is a constitutional exemption.

GLEESON CJ:   But you do not need to get to that, do you?  This land is not owned by a taxpayer while it was owned by the Commonwealth.

MR HUTLEY:   Can I take your Honours to the definition of “owner” so I can draw your Honours’ attention to – the mere fact that the owner was the Commonwealth does not mean that this Taxing Act only extends to the Commonwealth on its terms.  It can extend to persons who are deemed to be owners because they have a sufficient relation to a piece of property irrespective of the fact that the title is not vested in them.  Your Honours, we arranged for a bundle to be prepared.  I do not know if it is convenient to use that bundle.  It is behind tab B2 of that bundle.  If your Honours go to the definition of “owner”, which is in section 3, it says:

“Owner” in relation to land, includes every person who jointly or severally, whether at law or in equity ‑

and then it sets out what it is and then it says:

and includes every person who, by virtue of this Act, is deemed to be the owner.

GLEESON CJ:   And then there is also a definition of “taxpayer”.

MR HUTLEY:   I appreciate that, your Honour.  But one then moves on, if your Honours would bear with me.  If your Honours go up to, for example, sections 22 and 23, really through 32, your Honours will see a series of extensions of the meaning of “owner”.  For example, under section 32:

(1)  Where land is occupied, controlled, or used by a person who is not the owner and there is no lease or agreement for a lease for a definite term in respect of the occupancy, control or user of the land . . . shall be deemed . . . to be the owner ‑

GLEESON CJ:   That does not matter if the person is not a taxpayer.

MR HUTLEY:   Quite, your Honour, but the Commonwealth could own this land and for perfectly proper purposes enter into transactions with a person who is not the Commonwealth such as to give them the use of the land and that person would then become an owner for the purposes of the Land Tax Management Act.  Therefore, it is insufficient merely to, as it were, construe the Act as not applying to the Commonwealth to overcome a possible intersection with the exclusive ‑ ‑ ‑

GUMMOW J:   I know, but did any of these sections apply to this land?  We are talking about this Commonwealth place.

MR HUTLEY:   Your Honour, I appreciate that but in fact, no, they did not apply to this Commonwealth place, but because the Act, in our respectful submission, has the ambulatory manner it does, on its true construction all Commonwealth places are excluded from its operation.

McHUGH J: A good illustration of it is the rifle clubs. The Commonwealth gave licences to rifle clubs to use Commonwealth land, and on one view those licensed clubs would be taxable because they were the owners of the land under section 32 unless section 52(i) of the Constitution operated.

MR HUTLEY:   Precisely, your Honour. That is why on the true construction of the Act the words in section 7, “excluded from the operation of this Act”, operate to exclude “in Commonwealth places”.

HAYNE J: How does that work? I can understand you saying that that may lead to some effect on various, or all perhaps, of the deeming provisions, but how do you go from an effect on the deeming provisions to a consequence in respect of section 7?

MR HUTLEY:   Your Honour, I do not have to go to a consequence in respect of section 7. What I have to address, in our respectful submission, is this question, whether to tax the land in my client’s hands the purchaser from the Commonwealth would be a law with respect to the Commonwealth place. That is all I have to establish. Then if it is, section 7 excluded by “from the operation of this Act” would exclude this land from the operation of this Act.

GLEESON CJ:   Would it make any difference if we were concerned with the position of a purchaser from your client?

MR HUTLEY:   Your Honour, a different question of characterisation would then arise. It may. The way we put it is this, that section 52(i) gives to the Commonwealth exclusive power with respect to places purchased by it for public purposes. We say once property is purchased for public purposes, the exclusive power is acquired by the Commonwealth. It follows that while soever the Commonwealth owns the land, it is a Commonwealth place. We submit that any State law which has an operation which impacts sufficiently for there to be a nexus in the characterisation sense with the land will be a law with respect to a Commonwealth place.

GUMMOW J:   You have to say it may impact here.

MR HUTLEY:   Or may impact, yes.  I accept that, your Honour; may impact.  One of the interests of the Commonwealth in Commonwealth places is in what it has to sell.  If the Commonwealth has a place which is free from land tax, it has an asset, an attribute of which is at the moment of sale not exposed to land tax.

KIRBY J:   Your theory blesses it, at least during the first acquisition, with that immunity which seems a very – it might be what the Constitution requires, but it does not seem very sensible.

MR HUTLEY:   Your Honour, if the Constitution does not require that, the States can pass any legislation they want, conditioned to operate on property ceasing to be Commonwealth places – and if you call it ambulatory or you call it specific, it does not matter – which effectively can sterilise Commonwealth places in the hands of the Commonwealth. The example we give is an airport.

KIRBY J:   How could a State Parliament pass a law which would then be directed to the status of a Commonwealth place?

MR HUTLEY:   Your Honour, it would be directed only to the status of the Commonwealth place after it ceased to be a Commonwealth place, and it could be expressed to be not about the place but of the control of the owner.

GUMMOW J:   Your point is that would affect its value in the hands of the Commonwealth whilst it was a Commonwealth place.

MR HUTLEY:   Quite.  It would change the character of, in effect, the asset that the Commonwealth can dispose of.  The example we give – take Kingsford Smith Airport or Tullamarine, could the State today pass a law which said that a year after the Commonwealth disposes of Tullamarine Airport, any person who is the owner will require a licence from the State to continue to use it as such and in default of the grant of such licence it will be used as a park. 

Now, that would be an ambulatory law and it could be expressed, with respect, to any airports.  The terminology does not matter.  Effectively, it would change the character of that which the Commonwealth had.  On conventional characterisations principles – and we have referred to the most recent statement by this Court of them in relation to section 51 – that would be a law with respect to the place.

Now, the jurisprudence in this Court has said that there is no logical distinction between laws aimed at a place and laws of general application.  That must be right, with respect, and that is the law.  The question thrown up by this appeal is, what happens if one has a law of general application – call it ambulatory or what you like – which of its nature changes the character of the title, that is, that which a person is buying from the Commonwealth in comparison to the position if the law did not exist.

If there had been no State land tax law, what the Commonwealth had to sell would be different to if there was this land tax law.  Now, that is, in our respectful submission, the issue which is raised by the appeal, and we say the test, as identified by this Court in Allders, of characterisation is no different to the characterisation test to be applied in respect of a Commonwealth law.  True it is the rights and obligations created by the Land Tax Management Act fall upon the incoming owner ‑ there is no doubt about that – but their nature is to change the incidence of title which a purchaser from the Commonwealth is receiving by virtue of acquiring the land.

McHUGH J:   Does your argument lead to the conclusion that no State law, whether it deals with local government matters, health, water, sewerage, can apply to the Commonwealth land so far as the first purchaser is concerned?

MR HUTLEY:   Not everyone, your Honour.  One would have to go through a process of characterisation and a determination of whether the court considered whether there was a sufficient nexus, but if it has the character of changing the nature of that which has been disposed of, in a real economic sense ‑ ‑ ‑

McHUGH J:   Well, take the Environmental Planning and Assessment Act in New South Wales.  You need consent for development.  Can that apply?

MR HUTLEY:   No.  That, we say, is essentially what was the position in Stocks & Holdings.

McHUGH J:   Stocks & Holdings.

MR HUTLEY:There, there happened to be the County of Cumberland plan, which identified the property, but the reason the majority considered it was a law with respect to a Commonwealth place was because it subjected that property to control as to development.  I mean, the mere identification of the property, in our respectful submission, cannot have been the ultimate criteria.  The question is, are you changing the character of that which the Commonwealth has to sell?  Because if ‑ ‑ ‑

GUMMOW J:   Those notions of character and nexus are bound up with a view of economic value, are they?

MR HUTLEY:   Not just economic value, your Honour.  For example, it can be tested this way ‑ ‑ ‑

GUMMOW J:   I suppose we have to say market value, really. 

MR HUTLEY:   Not just market value. It can be tested this way. The logical relation between the grant and the deprival of power has been established by this Court. The Court has also found that a convenient test is whether the Commonwealth could pass the self‑same or similar law, but that is just a convenient test; it is not the absolute test. The Commonwealth could not pass a land tax law with respect to this place conditioned to operate upon its ceasing to be a Commonwealth place. We accept that, under section 52(i). But the Commonwealth could pass a law, which would be a law with respect to the Commonwealth, which defined the attributes of ownership of the incoming purchaser from it at the time the assignment took place, and the attributes of ownership would include, in our respectful submission, that you are buying land which is not exposed to State tax upon your ownership of the land.

Now, it does not follow from that, for example, that the State could not pass a law, for example, conditioned to apply to a Commonwealth place as and from its ceasing to be a Commonwealth place, which prevented the smoking of marijuana on the place.

McHUGH J:   May not the difference be, excepting Stocks & Holdings for the moment, that it is only those laws which could really be said to, in effect, bring about a defect in the title of the Commonwealth, as opposed to laws that have some consequential effect on the owners of land?

MR HUTLEY:   Your Honour, the difficulty with that is that Stocks & Holdings would have been different.  If the restraint had not been expressed on the land, it would have been a restraint on any purchaser from the Commonwealth.

McHUGH J:   That may still amount to what in conveyancing parlance might be called a defect in title, just as if there was an easement running across the land which had not been disclosed.  Planning regulations affect title in that sense, but does a tax on the owner of a land affect the title to the land in the same way?

MR HUTLEY:   In the strict conveyancing sense, no, your Honour, I accept it does not change the title, but many restraints do not affect the title if expressed to be restraint upon the incoming purchaser.  They merely have that effect and in the same way ‑ ‑ ‑

McHUGH J: They have economic effects, and may not that be the difference that mere economic effects are not caught by section 52, but those laws which have an effect on the Commonwealth’s title are caught by section 52?

MR HUTLEY:   In one sense, your Honour, they cannot affect the Commonwealth’s title.  The Commonwealth’s title is ‑ ‑ ‑

McHUGH J:   No, I mean in the sense that a conveyancer would say this is a defect in title.  If you were putting requisitions and so on and you found this easement or this regulation and so on, it would be a defect in title which would enable you to rescind the contract, as opposed to a matter for compensation.

MR HUTLEY:   Your Honour, that would be a distinction, but on conventional principles of characterisation, in my respectful submission, it would not be a determinative distinction because one could with little ingenuity structure laws which could not be called defects, as it were, on title in your Honour’s sense of the term and achieve exactly the same economic consequence.  That is the problem.

HAYNE J:   Now, the economic consequence of which you speak is not an economic consequence on market value, is it?

MR HUTLEY:   Your Honour, in my respectful submission, the capacity to sell land which is not exposed to land tax makes the land a very different creature in a market sense to land which is exposed to land tax.

HAYNE J:   The value of which you speak is a value to the Commonwealth, not a value struck as between arms length parties in a Spencer Case.

MR HUTLEY:   I accept that, your Honour.

HAYNE J:   That is, you speak not of market value, you speak of value to the Commonwealth.

MR HUTLEY:   Because of its unique position, I accept that, your Honour.

HAYNE J:   Yes.  So anything that redounds against the economic interest of the Commonwealth is a candidate for consideration in this field, is it?

MR HUTLEY:   A candidate for consideration, your Honour.

KIRBY J:   This is a very generous interest of yours in the benefits of the Commonwealth but it is not one that the Commonwealth itself embraces.

MR HUTLEY:   No, your Honour.  Your Honour, as with many developments, at the moment one is in a position of ‑ ‑ ‑

KIRBY J:   Is it suggested it embraced that and secured that benefit for you, that it sold the land positing that you would then get not a blight but a blessing of indefinitely of immunity from land tax?

MR HUTLEY:   Your Honour has seen the evidence in this case.

HAYNE J:   You struck a good deal, Mr Hutley, you struck a good deal.

MR HUTLEY:   Your Honour has seen the evidence in this case and it was agreed facts, so there could be a number of reasons why that was done, but that is the position, your Honour.

CALLINAN J:   Mr Hutley, the only consequences are economic, are they not?  There are no defects in title, as Justice McHugh has put to you; it is just purely economics, is it not, value, money to the Commonwealth?

MR HUTLEY:   It changes, we would say, in a sense the incidence of ownership which the Commonwealth is in a position to, in effect, convey.

CALLINAN J:   No, surely, it is only value.  Take a parcel of land beside an airport which is found to be surplus to the airport requirements, but there is a question about how low planes can come in and that sort of thing.  The Commonwealth could sell that land and take an easement of air space, for example.  There are plenty of ways in which it could protect its interests other than its economic interests.  So it is only economics, is it not?

MR HUTLEY:   Your Honour, in one sense the dichotomy between economic and other interests is really perhaps a false one.  The capacity to use is really in a sense a question about economic interests ‑ ‑ ‑

CALLINAN J:   The Commonwealth can always protect its capacity to use either by not selling or by retaining some other proprietary right, for example, an easement or something of that kind.

MR HUTLEY: But the question is it is not what the Commonwealth protects. The value of Commonwealth land is a legitimate interest for the Commonwealth to protect under section 52(i).

CALLINAN J:   Well, that may or may not be right but, in fact, it is only economics, it is only value, is it not, that we are talking about?  If there is anything else, I would like you to tell me what it is.

MR HUTLEY:   Your Honour, before I make that concession could I take that on board for a little while because I would like to think about it.  Could I come back to your Honour in regard to that?

CALLINAN J:   Yes.

MR HUTLEY: But our principal submission is that the Commonwealth can, under section 52(i), protect those interests by laws. Any law which impacts upon the Commonwealth’s interest of that right which is conditioned to operate upon the Commonwealth ceasing to control it is a candidate, in your Honour Justice Hayne’s terminology, for consideration of whether it has a sufficient nexus with the property in the normal characterisation sense to be a law with respect to property.

McHUGH J:   What about a State income tax on property sales?  That would affect the purchaser, would it not?

MR HUTLEY:   Yes, your Honour.  An example here was that stamp duty was sought to be imposed upon the purchaser, upon my client, and a determination was made that that law imposing stamp duty on the purchaser was a law with respect to a Commonwealth place.

GLEESON CJ:   Now, suppose you have a local government Act that provides that swimming pools have to be fenced and suppose you have a residential dwelling owned by the Commonwealth that has a swimming pool on it.  You would say so long as that is owned by the Commonwealth as a Commonwealth place they do not have to fence the swimming pool.

MR HUTLEY:   Your Honour, the Application of Laws Act has removed that at the Commonwealth level, but set that aside, yes.

GLEESON CJ:   Then when the land is sold to a purchaser from the Commonwealth is it within the capacity of the State government to enact legislation to require that the swimming pool be fenced by the new owner?

MR HUTLEY:   Yes, your Honour.  The debate to date, your Honour – I have worked on the assumption that one is dealing with a State law which is made whilst the place is a Commonwealth place, or purportedly made.  After the place ceases to be a Commonwealth place, there is no debate relevant to your Honour’s question that the State of New South Wales could pass a law giving effect to pass a law which enacted that requirement.  There is no doubt ‑ ‑ ‑

GLEESON CJ:   They cannot pass a law that has effect in relation to that land while it is owned by the Commonwealth, even if the law says, “This does not apply to the Crown in right of the Commonwealth”.

MR HUTLEY:   If it is conditioned - and if the consequence is that it operates on any purchaser from the Commonwealth and it is a law – that would be a law with respect to the Commonwealth, no.  As the Court in the joint judgment in Allders observed, the problem with section 52(i) is it constantly calls for questions of characterisation. Therefore one can, as it were, posit examples really one way or the other, but it always comes back to a question of characterisation. There is no absolute rule, for example, as is contended by the respondents, is if you get something which you can characterise as ambulatory, that is the end of the inquiry. It cannot be a law with respect to a Commonwealth place or that it has to be targeted – the Court dismissed that in Worthing and Allders – or anything else.  As the Court observed, one simply has to sit down with each time the point arises and exercise a question of characterisation.

The point is made against one, when one comes to section 14(2) – to jump ahead a little – that this result leads to very unfortunate results. It is inconvenient. Now, with respect to Commonwealth places and the application of laws on Commonwealth places, an Application of Laws Act has been passed and that is not in issue here. There is a State Application of Laws Act, which has since been passed, and there is an issue about whether that can improve the position in comparison to the Tax Act.

If there was a desire by the States to achieve the application of all its laws to Commonwealth places upon their ceasing to be Commonwealth places, there is a simple device which could be undertaken to achieve that:  merely to create, as it were, a cognate Act, with the facility for the passing of regulations as and when places cease to be Commonwealth places, if that was a desired course to apply to Commonwealth places.  But the appeals to inconvenience, which your Honours will see throughout the written submissions, simply, really do not address the question.  In our respectful submission, the question is, and will always be, with respect to each law, whether, to operate in the way contended for, it would be a law with respect to a Commonwealth place.

GUMMOW J:   How would the Commonwealth have drafted a law in exercise of the power under 52 in a way that would remove your problems, and do it validly?

MR HUTLEY:   The Commonwealth has passed, your Honour, the Commonwealth Places (Application of Laws) ‑ ‑ ‑

GUMMOW J:   No, in a way that would help you?

MR HUTLEY:   In the way that would help me?

GUMMOW J:   Yes.  What do you say they could have done?

MR HUTLEY:   Yes.  Your Honour, in our respectful submission, the Commonwealth, by agreement ‑ ‑ ‑

GUMMOW J:   This is only if you work out what the Commonwealth can do, that you can work out what the State cannot do.

MR HUTLEY:   What the Commonwealth could do is pass a law as to the attributes of ownership received from it upon conveyance – just upon conveyance.  Could not promise beyond it, but it could say, “You are acquiring land which does not expose you at this moment, by reason of your ownership, to land tax.”

GLEESON CJ:   What about next year?

MR HUTLEY:   Is your Honour assuming the passage of a further Act?

GLEESON CJ:   No.  Land tax strikes year by year.  Could the Commonwealth enact a law saying that the purchaser will not be liable for land tax any year so long as the land remains in the hands of the purchaser?

MR HUTLEY:   Your Honour, it could not pass a law precluding the State from passing a law exposing the purchaser to land tax, if passed after the land ceased to be a Commonwealth place.

HAYNE J:   So what is the title you say it passes?  A title the Commonwealth passes is a title freed from tax and charges, freed from some taxes and charges?  What is the title you posit in this hypothetical law?

MR HUTLEY:   In our respectful submission ‑ ‑ ‑

GUMMOW J:   Free for how long?

MR HUTLEY:   Your Honour, what it can say is, “We are selling you a title, the ownership of which does not expose you to land tax, unless there be a further piece of legislation exposing you to land tax”.

McHUGH J: Leaving aside section 51(ii) of the Constitution, under section 52 could the Commonwealth enact legislation declaring that the purchaser of land owned by the Commonwealth shall not be subject to land tax while the land is in the possession of the purchaser?

MR HUTLEY:   If by that is meant that the States are precluded from exposing it, no, we would not contend that. 

McHUGH J:   Why not?

MR HUTLEY:   I am sorry, your Honour, I withdraw what I said.  There is an issue which this Court does not need to determine as to whether the Commonwealth can pass a law in respect of a Commonwealth place whilst it is a Commonwealth place expressed to operate for the time beyond it as a Commonwealth place, for example, to take ‑ ‑ ‑

McHUGH J:   It can do it retrospectively, as Kidman’s Case established long ago.

MR HUTLEY:   Your Honour, it can certainly do it retrospectively concerning a Commonwealth place covering the period when it is a Commonwealth place.  It may be a different issue – and this Court has not had to pass upon that question – as to whether, to take my airport example, the Commonwealth could pass in respect of Tullamarine Airport today, assuming it is still a Commonwealth place, a law saying that it shall remain for use as an airport for 20 years after it ceases to be a Commonwealth place, relying solely on 52(i).  There may be other powers.  That is an issue which has not been determined and I think the joint judgment in Allders referred to dicta in Stocks & Holdings which went to that point.

We have submitted that it could well be that the Commonwealth might have a power under 52(i) to make such a law if it could properly be characterised as a law with respect to the Commonwealth place.  There would be a characterisation question which would focus upon the sufficiency of the nexus in extending the law beyond the period in which the place is a Commonwealth place.

McHUGH J:   Could the Commonwealth pass a law under 52(i) saying that the purchaser of land from the Commonwealth shall not be assessable in terms of any tax or charge on the land for a period of five years after the purchase?  That must affect the economic value for the Commonwealth, must it not?

MR HUTLEY:   Subject to determination of that earlier question, if that is held to be of sufficient nexus, yes.  It is unnecessary to determine that question precisely in this case, in our respectful submission, because what the Commonwealth undoubtedly could do is pass a law telling you what ownership of the property you are buying from them would expose you to at the moment you acquire it.

McHUGH J: Yes, but it is helpful to know what the State can do by determining what the Commonwealth can or cannot do. After all, section 52 and section 90 are the clearest examples of interstate questions, notwithstanding what Lord Simonds said in Nelungaloo.

MR HUTLEY:   Your Honour, it is sufficient for our purposes if the law we posit would be a law with respect to the Commonwealth but if it be necessary, we would submit that the law that your Honour has posited could be a law with respect to a Commonwealth place.  If that be correct, then that would be because there was sufficient nexus in such a law with the place.  We would say it would follow inexorably that exposing a person who acquires the Commonwealth to land tax by reason of ownership of the property acquired from the Commonwealth must be a law with respect to the Commonwealth place.

HAYNE J:   Can I understand the proposition.  Does it come to this, because the Land Tax Management Act, if it applied to impose land tax on the first purchaser of a Commonwealth place from the Commonwealth, would or may diminish the price obtainable by the Commonwealth for its sale, the Land Tax Management Act is a law with respect to a Commonwealth place?

MR HUTLEY:   At least that, your Honour.  As I said to Justice Callinan, to make it purely economic is perhaps overstating it, because ‑ ‑ ‑

HAYNE J:   At the moment you have given us no other candidate other than economics.

MR HUTLEY:   Well, your Honour, what we say is it is really an incident of ownership.  A law which alters the incidence of ownership of the property acquired from the Commonwealth changes the character of that which the Commonwealth has to sell, namely a property which does not have such incidence of ownership burdens imposed upon one by reason of ownership.  Now, that may be measured, as your Honour says, in a practical sense economically, but it changes, we would say, the nature of that which one is selling in the way that is indicated.

CALLINAN J:   Well, I have to say, I do not follow that.  Not the last proposition, that it changes the nature of what the Commonwealth has to sell.  I can see that it may change the value, but why does it change the nature?  The property remains exactly the same.  All of its physical attributes are the same.

MR HUTLEY:   Of course, but incidence attendant on ownership, that is, exposure to land tax by reason of ownership.  An ownership which does not expose one to that is a different sort of ownership to one that does, in our respectful submission.  In other words, you are in a different position of owner if you have land which does not expose you to ‑ ‑ ‑

CALLINAN J:   But it does not alter the character of the land itself in any way.

GUMMOW J:   There is a charge, is there not, under section 47?

MR HUTLEY:   Your Honour, the charge comes ‑ ‑ ‑

GUMMOW J:   It presumably can be sold.

MR HUTLEY:   Quite.  If one, in effect, becomes exposed to land tax, section 47 exposes the land to a charge.

CALLINAN J:   But never while it is in the hands of the Commonwealth.

MR HUTLEY:   Your Honour, we accept completely – the case proceeds from the point that the Commonwealth is inviolate and any other person is inviolate whilst the land remains a section 52(i) place.

CALLINAN J:   Well, with all due respect, the charge is irrelevant to the character of the land at any time whilst the Commonwealth owns it.

MR HUTLEY:   We accept that, your Honour.

CALLINAN J:   It does not alter the character of the land in the Commonwealth’s hands.

MR HUTLEY:   But in the same way that Justice McHugh observed that if one has a restraint on user after you sell land, that, in effect, affects your title, even though your title at the moment beforehand is not affected by it at all.

CALLINAN J:   I thought you had agreed it did not affect title in the sense that a conveyancer would speak about its effects in title.

MR HUTLEY:   No, I accept it does not affect title in the conveyancing sense, your Honour, but, in our respectful submission, it alters in a real sense that which you are selling.

CALLINAN J:   You have not demonstrated to me that that is so, I have to tell you, and you have not demonstrated yet that there are any consequences other than economic ones.

MR HUTLEY:   For the Commonwealth, there is not.

CALLINAN J:   You accept that?

MR HUTLEY:   For the Commonwealth, the only effect upon the Commonwealth is economic, in the same way as a defect in title upon the Commonwealth, which is conditioned to operate after it disposes it, is only an effect on the Commonwealth which is economic.  The question is, what is the consequence of the operation ‑ ‑ ‑

CALLINAN J:   No, if there is a defect on title, it may have practical effect upon the owner at any time before the owner sells it.  For example, if a building next door butts onto the subject land, it may be only to such a small degree that it is compensable, but it actually affects the use that the Commonwealth or the owner or occupier of the land can put it to.  So it does affect the owner.  A defect in title does have a practical effect upon ownership by the Commonwealth.

MR HUTLEY:   Your Honour, the defect in title that, as I understood in my discussion with Justice McHugh, was a defect of the nature of a restraint on user, post the Commonwealth disposing of it. It could not be pre‑Commonwealth disposing of it because that would infringe section 52(i). Therefore whilst the Commonwealth has it, and for the purposes of user, the Commonwealth is utterly unaffected by it. It becomes, to use his Honour’s reference, a defect in title, because it affects your capacity to sell it, because of how it is going it impact on the person who is purchasing it. It does not affect the Commonwealth, because the Commonwealth is as free from land tax as it is from a restraint on user.

KIRBY J:   I might be wrong about this, but it does seem to me that there is a relatively simple way to solve the problem that you present in a complex way.  The simple way is simply to characterise the State law as popping up at a time when it can apply, and not applying when it cannot, if the State law is apt in its language for that purpose.  But it is said that an obstacle to the simple way is the Stocks & Holdings holding and approach of this Court, which I see was criticised in the court below – at least, it was said that it required this sophisticated analysis.

Now, it is some years since I read Stocks & Holdings, and at some relatively early stage I would be grateful if you would take us to that, because if that is the key that unlocks the door to your argument, it seems to me we should have it very clearly in mind and either decide whether it is correct doctrine or whether it is apt for it to be reconsidered, because it does seem to impose a rather complicated way of dealing with what ought to be a relatively simple issue in a federation – when the Commonwealth is there, you cannot deal with it, but when it slips out the State Act just applies to you as a private party, as it would to any other citizen, corporate or natural.

MR HUTLEY:   Your Honour, I will come to Stocks & Holdings very shortly.  Our primary submission is that it is not Stocks & Holdings that drives this result, it is the decision of this Court in Worthing and the decision of this Court in Allders, which has said that every case is a question of characterisation of the State law involved and the normal characterisation analysis, which involves an analysis of effects.

KIRBY J:   At the moment, that seems to be fatal to your argument, because this is just a statute of general application.  At one stage, characterised, it did not apply to the Commonwealth, and the other stage, when the Commonwealth ridded itself of the property, it did apply to you.  If that is the answer, then that is it.

MR HUTLEY:   No.  In our respectful submission, one has to ask the question:  what is its effects on the Commonwealth?

GUMMOW J:   In other words, as I understand it, what you are saying is an interest of the Commonwealth is in turning this land to account to maximum receipt of revenue under section 81 of the Constitution.

MR HUTLEY:   Yes.

GUMMOW J:   And it can protect that receipt of maximum purchase price by a law you have been explaining to us.

MR HUTLEY:   Yes, and any law ‑ ‑ ‑

HAYNE J:   Let us follow that out a bit.  The key to it seems to be that if State law does apply, the attributes of ownership in the hands of the purchaser differ from the attributes of ownership that the Commonwealth enjoyed when it was a Commonwealth place.  Is that right?

MR HUTLEY:   I do not think that - the Commonwealth was never exposed.

HAYNE J:   Just so.  And is not the point which underpins much of your contention pointing to the fact that if State law applies to the subsequent owner, what the subsequent owner has differs from what the Commonwealth had and, therefore, the Commonwealth cannot turn to maximum account what it had?

MR HUTLEY:   Yes, it alters that which the Commonwealth had and could turn to account.  If that is agreeing with your Honour’s proposition, I have agreed with your Honour’s proposition.

KIRBY J:   Something which, I repeat, the Commonwealth is not seeking to do.

MR HUTLEY:   Your Honour, we live at the moment in an age of perhaps what might be described as co‑operative federalism.

KIRBY J:   I hope we always live in ‑ ‑ ‑

McHUGH J:   I said it was the political slogan.

MR HUTLEY:   And times can change.  Your Honour, there were times in the history of this country where disputes between the Commonwealth and the States were accepted.

GUMMOW J:   Anyway, citizens have a right in the observance of the constitutional compact.  It is not just a club between Commonwealth and States ‑ ‑ ‑

McHUGH J:   Mr Hutley, you say Worthing drives a decision in this case.  Take Worthing itself.  There it was held that the scaffolding and building regulations could not apply to Richmond Aerodrome because it was a Commonwealth place.  But supposing the Commonwealth sold Richmond Aerodrome to a private person.  Would not the building regulations immediately apply to that land?

MR HUTLEY:   The building regulations so far as they dealt with safety, they may well because the Court may well not characterise that as a law with respect to - for it to operate in the hands of the purchaser to be a law with respect to a Commonwealth place.  That would be an inquiry which one would have to undertake, as the cases say, about the impugned law at the time the inquiry was made.  We do not contend, as appears from our submissions, that this answers every law.  We do not, for obvious reasons.  But what we say is that Worthing does entail necessarily that laws could have that character.  The question is, as we see it and we submit, that the normal principles of characterisation simply have to be applied.  It really is not to the point to speak in terms of ambulatory or anything of that variety; it is to look at what is happening concerning the asset which the Commonwealth has and proposes to sell.

GUMMOW J:   We need to know fairly specifically, I think, Mr Hutley, what you say would be the relevant text of this Commonwealth law that could have been passed under 52 in respect of this Commonwealth place.  Do not do it now in the light of ‑ ‑ ‑

MR HUTLEY:   Your Honour, I did not draft it in terms.  The substance of it appears in our written submissions.

GUMMOW J:   Otherwise I cannot proceed with the case really, nor understand that, because I do not understand what the submission is as to the ambit of the relevant Commonwealth power under 52 with respect to this Commonwealth place.  I cannot work out what the States cannot do.

MR HUTLEY:   Certainly, your Honour.

GUMMOW J:   Do not answer that by pointing at what the States cannot do to start off with.

MR HUTLEY:   Your Honour, in – and I cannot remember the paragraph of our written submissions ‑ our written submissions in reply we have set out the substance of what we say the law would be.  I do apologise, your Honour, I have just temporarily forgotten the paragraph – yes, paragraph 18.  That was dealing with an example of a restriction on user, but what we ‑ ‑ ‑

HAYNE J:   Can we have an understanding of what you say about tax:  what tax, how long this exemption is and how it is conditioned.

MR HUTLEY:   A drafting exercise is taking place now it has been discussed, your Honour.  To go back to the order ‑ ‑ ‑

KIRBY J:   You listed the grand seven plan.  It was a grand plan of seven points and I do not think we have even got to the first.

MR HUTLEY:   Your Honours spiked that.  Your Honour, I was dealing with the principles which apply to characterisation.  We have in our written submissions set out the recent statement of this Court in Re Maritime Union of Australia; Ex parte CSL Pacific Shipping Inc [2003] HCA 43. The passage is at [35] as to the principles which would apply in relation to characterisation.

Now, we submit that once a property is acquired pursuant to section 52(i), it remains a Commonwealth place until disposed of by the Commonwealth. It does not cease to be a Commonwealth place, for example, because the Commonwealth leases it to citizens for business purposes. It may well be that that is part of the Commonwealth’s object in preserving its assets. The section draws attention to the moment of acquisition, not to any period of time thereafter. Thus, the exclusive power remains while soever it remains in the ownership of the Commonwealth.

If that analysis is correct, the exclusive character of the power is concerned not only with governance of the place whilst a place, but equally with the capacity of the Commonwealth to dispose of the place and its interests in that disposition.

Now, as we have submitted, the decision in Stocks & Holdings is authority for the proposition that a law passed by a State which was conditioned to operate in respect of a place as and from the place ceasing to be a place could be a law with respect to the Commonwealth place.  Could I take your Honours to Stocks & Holdings.

Your Honours, the case concerned the County of Cumberland Scheme and the operation of that scheme upon the rifle range at Maroubra which at the time of introduction of the County of Cumberland Scheme was  a Commonwealth place.  The County of Cumberland Scheme took the form of identifying various blocks of land within it and exposing those blocks of land to restraints or other conditions concerning the development of the land.  The land was subsequently sold and through a process which it is not necessary to go into the question arose as to whether the County of Cumberland Scheme could apply to the property.

Consequent upon the decision in Worthing, there was no doubt that the scheme could not operate upon the property whilst it was a Commonwealth place.  An argument was advanced that the scheme ought be construed such that the operation of the scheme upon the rifle range took effect only as and from the range ceasing to be a Commonwealth place.  The Court, by majority, held that, even assuming that the scheme could be so construed, the County of Cumberland Scheme would still be a law with respect to a Commonwealth place and infringe and be beyond State legislative power.

GUMMOW J:   We have to look at the questions, have we not?

MR HUTLEY:   Yes, your Honour.

GUMMOW J:   There was an application for an injunction by the Attorney-General under the Local Government Act power I suppose on the relation of a competitor, I guess – the Maroubra Junction Hotel?

MR HUTLEY:   Yes, your Honour.  The suit actually ‑ ‑ ‑

GUMMOW J:   The answers are at 292.

MR HUTLEY:   Yes, your Honour.

KIRBY J:   Does it not depend on the way the State statute or law is worded?  Does it not depend on if the County of Cumberland Scheme said something like, “All land which at the coming into force of this is private land shall be subject to”, as distinct from, “This scheme applies to land within the State in certain descriptions”, with an exception somewhere in it for Commonwealth places?  Would not the construction of the State Act as to whether it is apt to pop up and apply in its generality when the Commonwealth has moved out be important for the determination of its application thereafter?

MR HUTLEY:   Your Honour, it would be no doubt a factor in the analysis but, as we have submitted, it would not be determinative, because the inquiry would always be whether the operation of the statute upon the place in question could be characterised as a law with respect to that Commonwealth place.  In our respectful submission, drafting ‑ ‑ ‑

GUMMOW J:   One of the oddities of Stocks & Holdings is that the Commonwealth was refused leave to intervene.

HAYNE J:   They were robust days.

GUMMOW J:   It is the top of page 266.

HAYNE J:   It is only about Commonwealth places, Mr Hutley.

MR HUTLEY:   I was about to say it is sort of tempting.  That was the way in which the question arose.  The Chief Justice dealt with the question at page 266 of the report and he says in the second last paragraph:

I have had the advantage of reading the reasons for judgment prepared by my brother Walsh and, as I am in agreement with his conclusions in all matters which are necessary to be decided for the disposal of this appeal and in general agreement with his reasons therefore, I propose merely to state for myself the conclusions to which I have come, saying that I agree in the reasons which my brother Walsh gives for like conclusions. 

In my opinion, the legislative authority vested by the Constitution in the Commonwealth with respect to places acquired by it for public purposes will support all laws of the Commonwealth with respect to a place or places so acquired so long as but only so long as the place remains in the ownership or possession of the Commonwealth.

Then his Honour goes on for the next full paragraph, and says:

The function of the expression “acquired for public purposes” in s 52(i) is to describe the places in respect of which the legislative authority of the Commonwealth becomes available. But the legislative authority is, in my opinion, quite clearly intended only to be available so long as the place is a place of the Commonwealth. Thus, in my opinion, the submission of the defendant that although the Commonwealth had ceased to own the land on which there was formerly a rifle range the State still had no power to make any law with respect to it but that the land remains within the area of Commonwealth exclusive legislative power must be rejected.

Then, to the point of immediate relevance, if your Honours jump the next paragraph, he says:

It was submitted that because of the general rule of construction which would seek to confine a statutory provision within the legislative competence of the legislature which made it, and because of particular statutory provisions . . . the scheme should be construed as if it contained a provision that its terms should not apply to land being a place or forming part of a place acquired by the Commonwealth for public purposes so long as the Commonwealth should own or possess such place but that it should apply so soon as the Commonwealth ceased to own or to possess the place.  In my opinion, there are two answers to this submission.  The first is that it would not be, in my opinion, an exercise of construction to import such a provision into the scheme.  It would, in my opinion, amount to an attempt to legislate.

But secondly and more importantly such a provision, in my opinion, would itself offend s 52(i) for the reasons expressed by my brother Walsh.

KIRBY J:   Just pausing there, that first problem does not arise in this case, does it, because of the point raised by the Chief Justice at the outset, that there is in this Act a definition of “taxpayer” which does not pick up the Commonwealth.  When it disappears, then the Act, on its face, applies.

MR HUTLEY:   To whoever becomes the owner and then the question becomes, is it a property which is excluded by the operation of the Constitution in the way in which we submitted? But what your Honour says is correct on the particular construction of the particular Act concerned. That, I think, is all that need be referred to in his Honour the Chief Justice’s - Justice McTeirnan, whose judgment commences at page 268, did not really address this particular question, because his Honour came to the conclusion that the land simply was not land to which the County of Cumberland scheme did apply by reason of the decision in Worthing.  So he did not specifically in terms deal with the possible construction of its springing into life, as it were, after the place ceased to be a Commonwealth place.

Justice Menzies dissented and the reasoning which led his Honour to that conclusion appears particularly at page 275 at about point 7.  It is said:

When therefore, the scheme was adopted it did not apply to the Long Bay Rifle Range for two reasons – (1) that the scheme was not intended to control the Commonwealth in the exercise of constitutional functions, and (2) that it was not intended that the scheme should apply to lands of the Commonwealth situated within the County of Cumberland.

Once the Commonwealth disposed of the land comprised in the Long Bay Rifle Range the first reason would no longer afford any ground for denying the application of the scheme to the land which the Commonwealth had ceased to use. To the literalist, however, it is more difficult to conclude that land, having been acquired by the Commonwealth for public purposes, ceased to be land within that description once the Commonwealth had disposed of the land and it had been acquired . . . However, having regard to the purpose of s 52 of the Constitution, it seems right to me to construe that section as authorizing Commonwealth legislation with respect to places being the property of the Commonwealth which have been acquired by the Commonwealth for public purposes . . . On the other hand, it would seem to me an unreasonable construction of s 52 to deny the application of State laws in respect of places merely because, at an earlier day, they had been acquired by the Commonwealth for public purposes. The word “acquired” in s 52(i) does not, I think, require such an unreasonable consequence and I read the phrase “acquired by the Commonwealth” as carrying within itself the notion of being the property of the Commonwealth. Once land falls outside that description it is no longer one of the places with respect to which the Commonwealth has power to make laws under s 52 and it is a place in respect of which the State Parliament may make laws. Any other conclusion –

and he goes on.

GUMMOW J:   There is a slip in that, a temporal slip.  Once land falls outside that description it is no longer one of the places with which the Commonwealth has power.  That is not the question.  The question is:  did the Commonwealth have power whilst it was a Commonwealth place to say what would happen upon a first disposition by the Commonwealth?

MR HUTLEY:   Yes.

GUMMOW J:   Does Justice Menzies address that?

MR HUTLEY:   Can I take your Honour to 277?  His Honour says at about point 8:

Furthermore, I do not think that s 52 would prevent a State from enacting a valid law specifying property, including places acquired by the Commonwealth, but having no operation with respect to such places until they cease to be the property of the Commonwealth. The reason for this is that I think, for reasons already stated, that a Commonwealth law, expressed to operate with respect to a place acquired by the Commonwealth not only while it is the property of the Commonwealth but after it has ceased to be so, would not be a valid law.

GUMMOW J:   What are the reasons already stated?

MR HUTLEY:   As I understand it, it is the reasons on 276.

GUMMOW J:   They are not a complete statement.

MR HUTLEY:   No.

GLEESON CJ:   What Justice Menzies had in mind, for example, would be that the Commonwealth could not establish a former Commonwealth Places Commission which had exclusive power to regulate the use of former Commonwealth places forever.

MR HUTLEY:   No, your Honour.  That is, we would submit, undoubtedly correct.  But his Honour then goes on to say, in the balance of this passage, because the Commonwealth could not pass the self‑same legislation concerning the use of the rifle range after ‑ ‑ ‑

GUMMOW J:   Passed when, one has to ask ‑ ‑ ‑

MR HUTLEY:   Passed during the time that it was a Commonwealth place.  Your Honour, I apologise.  His Honour said that because the Commonwealth, whilst the rifle range was a Commonwealth place, could not pass an Act ‑ ‑ ‑

GUMMOW J:   I do not think he ever said that, did he?

MR HUTLEY:   He goes on and says:

The reason for this is that I think, for reasons already stated, that a Commonwealth law, expressed to operate with respect to a place acquired by the Commonwealth not only while it is the property of the Commonwealth but after it has ceased to be so, would not be a valid law.

GUMMOW J:   Yes, I know that, but that is for reasons already stated.  What do the reasons already state about the Commonwealth incapacity to legislate whilst it owns this land as to what happens on its first disposition by the Commonwealth?  Where do we find that on 276?  It seems to me we do not.

MR HUTLEY:   One does not.  All I am saying is that that is the reasoning, as we see it, that his Honour supported for the conclusion that his Honour came to on 277.  In our respectful submission, it does not follow at all ‑ ‑ ‑

HAYNE J:   Just before you go on, and whilst we have this notion of first disposition in mind, for it affects the drafting that is being done beside you.

MR HUTLEY:   Thank you, your Honour.

HAYNE J:   Just to return a moment to economic consequences, and I simply leave it so that you may deal with it at a later and more convenient point.  You speak of the Commonwealth exploiting its property to maximum advantage.  You have to have two parties to that transaction, and the activity of the purchaser is surely affected by what the purchaser could itself realise on subsequent on‑sale.  Therefore, it may be that you have to have permanent tax exemption for this land if you are to find a purchaser who will pay you this enhanced value.  I simply leave that little bomb ticking for you, Mr Hutley.

MR HUTLEY:   No, your Honour, I am perfectly happy.  It is not a bomb.  It merely points out what our ultimate submission is, that if one is going to pass this sort of law one has to do it after it ceases to be a Commonwealth place because - what your Honour says merely informs the question of characterisation which we have addressed.

KIRBY J:   So you would not do it on the sale of every individual Commonwealth place. You would have a State form a Commonwealth Places Act of some kind. But that itself would run into a possible problem of being a State Parliament dealing with a law that would be characterised a matter of Commonwealth concern.

MR HUTLEY:   Your Honour, if the States try to do that whilst the place is a place they will run into difficulty.  But that is not to say you could not do it by regulation, in respect of specific places as and when they cease to be Commonwealth places.

KIRBY J:   All of this is unnecessary if you adhere to the “springing uses” theory.  They just spring up.  They are there when you need them.  The statutes apply.  It is a very seductively simple theory, apparently appropriate to a federal system.

GUMMOW J:   Now, what did Justice Windeyer say?

MR HUTLEY:   Your Honour, at 279 at about point 8 his Honour starts:

By virtue of s. 52 of the Constitution the Commonwealth Parliament has exclusive power to make laws with respect to places acquired by the Commonwealth for public purposes. Whatever view be taken of the scope and effect of s. 52, this much is clear: first, that any law of a State made after the acquisition of a place by the Commonwealth has no force or effect in so far as it is a law with respect to that place ‑ ‑ ‑

KIRBY J:   That is the problem that I was just mentioning.  The State has no business providing by its laws for former Commonwealth places.

MR HUTLEY:   Yes, your Honour.

KIRBY J:   So that presents an obstacle to your theory it seems.  But anyway, move on.  What is the second?

MR HUTLEY:   Your Honour, can I return to his Honour’s ‑ ‑ ‑

KIRBY J:   Yes.

MR HUTLEY:   It says:

secondly, that a law, whether in general or specific terms, which restricts and controls the use to which a place can be put is a law with respect to that place.  Therefore the Planning Scheme Ordinance could not have any lawful operation in respect of any place that had been acquired by the Commonwealth for public purposes before 27^th June 1951, and which was at that date still held by the Commonwealth ‑

and then his Honour goes on to consider the pro tanto invalidity.  About point 5 he says:

Rather it seems to me that the scheme, including the map, is to be read with an implication that it dos not encroach upon matters that are within the exclusive power of the Commonwealth.

KIRBY J:   Now, is that not a point of distinction here, that the very definition of the Cumberland planning scheme’s application was land as defined, which was available at 27 June 1951 and, therefore, to bring it within it you had to have some new law that brought land, which at that time was not within the scheme, into the scheme, whereas here you do not have that problem because of the definition of the Land Tax Management Act.  It simply applies from time to time in its terms.  It did not apply then in its terms.  It does apply now in its terms.

MR HUTLEY:   Your Honour, that is the ambulatory specific distinction.

KIRBY J:   But is that not an answer in terms of the principle of Stocks & Holdings?  You do not have to overrule it, you simply say, “Well, whatever its ambit it is distinguishable from this case because the legislation was quite differently expressed”.

MR HUTLEY:   Your Honour, I accept that the legislation was differently expressed.  What our submission is is that the characterisation of something as ambulatory or specific is not to the point.  It may be a relevant matter in consideration but it does not in effect obviate the task of characterisation called for under the…..but I accept that there is that distinction in fact, your Honour.

GLEESON CJ:   What do you say about the last two sentences on the first paragraph on page 280, the sentences beginning with the words “In the preparation of”?  The decision in part turns upon the fact, does it not, that this scheme had to apply to the land owned by the Commonwealth if it was to work as a scheme.  In other words, you could not just say, “While the land was owned by the Commonwealth, the scheme had nothing to do with it”.

MR HUTLEY:   That was the construction issue which lay at – and, in one way, the case could have been disposed on that construction issue, but each of the members of the Court go on to say, “But even if it could be so construed, it would still be a law with respect to a Commonwealth place”.

KIRBY J:   So all of that is dicta, then; it is not part of the holding of the case.  The holding of the case related to the construction.

MR HUTLEY:   Some of the Justices have said ‑ ‑ ‑

KIRBY J:   I am looking at it as a matter of principle.  If the case is disposed of on the construction point, that is the point of law for which the case stands.

MR HUTLEY:   It was dealt with, really, on both points, your Honour.

GUMMOW J:   Well, there were a number of questions.  That is the problem.

MR HUTLEY:   Exactly.  It was dealt with on a number of bases and no one central to the reasoning process which led to success on behalf of the Stocks & Holdings was that if it was construed consistent with constitutional principles, as contended, to apply only upon its ceasing to be a Commonwealth place, it would still infringe the constitutional prohibition.

HAYNE J:   Do you challenge Justice Windeyer’s reasoning at page 281, from about point 4, commencing with the paragraph “A person who becomes a tenant in fee simple”, over to the next page, 282, for the bulk of it?  It is a large question, but it seems to me that that encapsulates much of his Honour’s reasoning in the case and, on one view of things, may present an explanation of the particular answers that were given in Stocks & Holdings, recognising that Justice Windeyer would have given a different answer to question (3) from the answer the majority gave.

MR HUTLEY:   Yes, your Honour.  Justice Windeyer at 281 seems to draw a distinction between laws of general application and laws of specific operation.

McHUGH J:   He dissented in Worthing, did he not, on that basis?

MR HUTLEY:   Justice Windeyer had, in Worthing and in Phillips, expressed disquiet with the principles which the majority in both those cases concluded, namely, as to the, as it were, exclusive nature of the power conferred by section 52(i). His, in effect, separation out of laws of general application is, in our respectful submission, obiter in the case, and, in our respectful submission, is contrary to the general principles which have been established in this Court about section 52(i), that there is no logical distinction between targeted laws and laws of general application.

HAYNE J:   What I had particularly in mind was his Honour’s statement at 281 at about point 8, the sentence commencing:

It is whether or not a particular State law, the Ordinance, which had previously no force with respect to the subject land –

do you have that sentence?

MR HUTLEY:   Yes, your Honour.

HAYNE J:   Whether that can be understood as in any respect proffering an explanation for the answers given in Stocks & Holdings.

MR HUTLEY:   Your Honour, I may be being obtuse, but the thrust ‑ ‑ ‑

HAYNE J:   Namely, that it was a question there of whether the ordinance on its proper construction did not apply to this particular land could somehow spring into effect.

MR HUTLEY:   Precisely, yes, your Honour.

HAYNE J:   What analogy, if any, do you draw between that reasoning and this case?

MR HUTLEY:   The analogy we draw is that at the heart of that reasoning is a question of characterisation and that can be the only question at the heart of the reasoning.  The fact that such a law can be characterised as a law with respect to a Commonwealth place cannot, in our respectful submission, logically lead to a distinction by reason of the fact that it is only a specific and focused law having regard to the jurisprudence in this Court.

What we say about Stocks & Holdings at the end of the day is merely a particular application of the principle in Worthing.  If one goes through the judgments, it is apparent that all the Justices considered that, in essence, it was an application of the principles in Worthing.  True it is as a matter of the structure of the legislation involved, it is different – we do not run away from that, that is obvious – but, in essence, that is not a point of fundamental distinction between the case in Stocks & Holdings and the case with which we are concerned.

McHUGH J:   It is to this extent, is it not, that first the Court said that the planning scheme was not intended to apply to land owned by the Commonwealth when the Commonwealth disposed of that land, but then the Court said in effect that if State legislation is capable of a construction, that it would apply to land when the Commonwealth disposed of it, then it would be invalid because the State law when enacted would be a law with respect to a Commonwealth place.  That is the problem you have to overcome in this case, is it not, that on one view this legislation was never intended to apply to the Commonwealth and it just simply operates afterwards?  It is not a law with respect to Commonwealth places as such.  It just simply springs up, to use Justice Kirby’s expression.

MR HUTLEY:   But on the construction which was being addressed in Stocks & Holdings, that was the same position because it was in effect a law with respect to a place after it ceased to be a place.  The Land Tax Management Act is a law in one sense with respect to all land in New South Wales which from time to time meets certain characteristics.

McHUGH J:   Yes, but that is the important point, that it is a general law, whereas the argument of construction by the Solicitor-General in Stocks & Holdings was that you construe a planning scheme as saying, “This planning scheme does not apply to Commonwealth land while the Commonwealth has it but it does apply to land that the Commonwealth disposes of”.  The argument against the Solicitor-General was that that would be an invalid law.  If it did have that construction, it would be invalid because it was a law with respect to a Commonwealth place by definition.  By implication it referred to Commonwealth place, but this does not refer to a Commonwealth place; it is just a general law.

MR HUTLEY:   But, your Honour, in our respectful submission, that is a distinction not of substance.

McHUGH J:   Why not?  Is this not the point, that Mr Snelling was, in effect, saying that you read this Act as saying that this legislation does not apply to the rifle range owned by the Commonwealth, but shall apply to the rifle range if and when the Commonwealth disposes of it?  The constitutional objection to that is that that is still a law with respect to a Commonwealth place, because, at the moment it is enacted, the Commonwealth has it.

MR HUTLEY:   But, your Honour, a law is not a law with respect to a matter merely because it says it does not deal with the matter.  That merely defines the scope of the law.  Let it be assumed the law said that this Act applies to all places other than to the extent that it is with respect to a Commonwealth place.  It would not be a law with respect to Commonwealth places by reason of that; it would merely have defined the scope of the operation of the law by exclusion.  It says, this is a law about everything else but that.

Now, that was the construction which was in a sense being advanced.  They were seeking to say, this is a law about the rifle range to the extent that it is not a Commonwealth place.  The Court did not say that it is a law with respect to a Commonwealth place because it mentioned the rifle range, because one can, in effect, mention a prohibited topic without being a law with respect to it.  What made it a law with respect to a prohibited topic is because it sought to operate in relation to the prohibited topic from its ceasing to be the prohibited topic, and that was sufficient to make it a law with respect to the prohibited topic.

GLEESON CJ:   But how would you relate that to the Land Tax Management Act?  You have said, from one point of view, it is a law with respect to all land in New South Wales which has certain characteristics.

MR HUTLEY:   Yes.

GLEESON CJ:   Well, the most relevant characteristic is that it is owned by a taxpayer.

MR HUTLEY:   Undoubtedly, that it is one, your Honour, and relevant.

GLEESON CJ:   Yes.  How do you relate that characterisation of the law to the law in Stocks & Holdings?

MR HUTLEY:   Because if it is a law with respect to all property in New South Wales which is owned by taxpayers from time to time – and that is what it is – that is a law with respect to the Commonwealth place.  It is a law with respect to the Commonwealth place as much as it is a law with respect to any other place. 

In other words, one of the problems with any other characterisation is that one has to say that the Land Tax Act is not a law with respect to any property, because all property can either be in or be out from time to time, depending upon circumstances.  The Commonwealth could buy any piece of land.  Any piece of land could be bought by the Crown, or a church, or the other excluded categories.  One of the ironies of saying that it is not a law with respect to Commonwealth places is, really, one has to say that it is not a law with respect to property at all, in New South Wales.  Its ambulatory nature, in fact, means that it is a law with respect to all property.

I have taken your Honours to the passages at 281 over to 282 with Mr Justice Windeyer.  The next judgment is that of Mr Justice Walsh.  His Honour took up his consideration of the matter at the bottom of page 284, relevantly.  It says:

The defendant’s argument does not depend upon interpreting s 52(i) as having the effect that every place which has been acquired by the Commonwealth for public purposes remains forever a place to which that provision applies. It is nevertheless proper to consider whether it requires that interpretation. In my opinion it should not be interpreted in that way. I agree with the reasons given by Justice Menzies for holding that a construction should be adopted by which section 52(i) did not continue to apply to the subject land after it had been transferred by the Commonwealth.

That is directed to the point that the power to legislate exclusively ceases upon disposition of the place.  His Honour then goes on to consider the question of construction and towards the bottom of the page 285 he says:

In my opinion a law that, except with the consent of a specified authority, land shall not be used for any purpose and no buildings shall be erected on it for any purpose is, in so far as it applies in a place acquired by the Commonwealth for public purposes, a law with respect to the place.  No other conclusion could be consistent with the reasons of any of the members of the Court who constituted the majority in Worthing’s Case.  If upon their proper construction, the 1951 Act and the Ordinance applied to the rifle range land, I think that those enactments must be held to have been to that extent beyond power and invalid.  Unless they should be construed as less extensive in meaning than their general terms would indicate, they cannot be held to be wholly valid.

He then deals with the submission on behalf of the Solicitor‑General.

The submission is not simply that the provisions should be construed as not binding the Commonwealth.  It is that they should be construed as not intended “to bind the land” so long as it is owned by the Commonwealth.  It seems inevitable that the submission must be put in that way –

and then he goes on to deal with reading down.  He says:

I think it is essential also, that the submission for the informant should include a submission that nevertheless the enactment did deal with the subject land and did make a law concerning it, namely, a law that if the land should cease at some future time to be owned by the Commonwealth, then the restrictions stated in the Ordinance to be imposed upon –

et cetera.  His Honour then goes on to describe it.  The passages in which the ‑ ‑ ‑

McHUGH J:   No, there is a critical sentence which explains the whole rationale of the argument:

It is only upon that view of the matter that it would be correct to say that the land was “within the scheme” and that its restrictive provisions bound the owner of the land after it was transferred by the Commonwealth.

Then his Honour goes on to say that, on that view, it is still a law with respect to a Commonwealth place because it refers to a Commonwealth place and it says what is to happen after the Commonwealth disposed of it, and that is what the State cannot do.  But that is not this case.

MR HUTLEY:   Your Honour, I have put my submission. We say that is exactly what an ambulatory law, in essence, does. If this is excluded land because the Constitution has excluded it, and one assumes it has only excluded it for the period that it is a Commonwealth place, the land has said that any purchaser from the Commonwealth constitutes an owner within the meaning of the Act would be liable to land tax.

McHUGH J:   I will just leave it at this.  The difference seems to me to be that in Stocks & Holdings the argument for the Solicitor‑General was that, by necessary implication, the scheme was directly applying to this land and referring to this land.  As a matter of construction, in this case, the land never become subject to the Act until after it is disposed of.

GUMMOW J:   The difference is that, in the present case, there was also 114 of the Constitution, not present in Stocks & Holdings.

MR HUTLEY:   I accept the difference, your Honour.

GUMMOW J:   As to construction of the legislation.

MR HUTLEY:   Quite.  But, for the reasons I have given, one has to do more than merely, as it were, exclude “taxpayer”.  One has to, as it were, exclude the property also, because otherwise the law would expose persons who are not the Commonwealth to taxation with respect to the land.  Your Honour, if that be a distinction of principle, then one really becomes engaged in drafting exercises about whether laws are with respect to the Commonwealth places or not.

McHUGH J:   Well, it may be, but that happens all the time in constitutional law.

KIRBY J:   You are drawing lines all the time.

MR HUTLEY:   Quite, but what one is concerned with here, at the end of the day, is laws made about, and which impact upon, the exclusive area of control of the Commonwealth.  If it can be avoided ‑ ‑ ‑

GUMMOW J:   There is a difficulty with these judgments, a difficulty with all of them.  The phrase “with respect to” is used to mask what is really going on as to what are the real criteria which are being applied to work out what is the Commonwealth’s measure of exclusive competence and why it has it.

MR HUTLEY:   Yes, your Honour, and we say that, in effect of any law which is ‑ ‑ ‑

GUMMOW J:   And such a fundamental matter in the constitutional structure should not be left, one would think, to drafting and logic ‑ ‑ ‑

MR HUTLEY:   Exactly, your Honour.

GUMMOW J:   Witness the history of section 90.

MR HUTLEY:   And we say this Court ‑ ‑ ‑

GUMMOW J:   The other exclusive power which also got trapped in this logic chopping.

MR HUTLEY:   The Court’s principles of characterisation, which not only look to rights and obligations, but effects, in this field are particularly important; that one, in effect, does not make, in our respectful submission, form distinctions, because then it becomes merely a drafting exercise, but one looks instead to whether the law can be properly characterised, having regard to those criterion of having that effect.  I think I have made my submissions in that regard.

GUMMOW J:   What do you say about the passage in – were you going to the passage in Justice Walsh’s judgment at ‑ ‑ ‑

MR HUTLEY:   Page 288, your Honour?  I have taken your Honours ‑ ‑ ‑

GUMMOW J:   At 289?

MR HUTLEY:   Page 288 and 289, yes, your Honour.  I was going to take your Honours first to 288.  It said:

If the only constitutional impediment had been the principle ‑

down to the end of that paragraph, if I could draw your Honours’ attention to that.  Then his Honour goes on on 289.  He says:

In reaching the foregoing conclusions as to the extent to which the Ordinance must be read down to save it from entrenchment on the exclusive power of the Commonwealth Parliament, I have not found it necessary to decide that no law of a State, enacted whilst a place acquired by the Commonwealth for public purposes is still owned by the Commonwealth, is capable of having a valid operation with respect to that place after it ceases to belong to the Commonwealth.  I confine my opinion on this subject to the law with which we are concerned.

GUMMOW J:   Now, the mask drops a bit.  In the next sentence, the curtain goes up. 

MR HUTLEY:   Yes:

I am of opinion that it is not competent for the State Parliament to declare in advance the uses which may be made of the land by any person who may succeed the Commonwealth as owner of it.  Such a law would limit the extent and the value of the rights which could be enjoyed by a new owner to whom the Commonwealth transfers the land.

It then goes on.  That, I think, concludes the analysis.  In our respectful submission, there really is no difference in substance between exposure to tax and uses, because, from the point of view of the Commonwealth, that is really just talking about the value of the land to the Commonwealth, because ex hypothesi it is in no way entrenching upon the Commonwealth’s capacity to use it.

GLEESON CJ:   Why would he limit what he said in the concluding sentence in that paragraph on page 289?

MR HUTLEY:   Page 289, yes, your Honour.

GLEESON CJ:   Why would he limit it to “the use to which the land may be put by a transferee from the Commonwealth”?  Why would it not include “the use to which the land may be put by a transferee from a transferee from the Commonwealth”?  Why would you not say “a law concerning the use to which the land may be put by any future owner of the land”?

MR HUTLEY:   Your Honour, because a potentially different question of characterisation might be involved.  Let it be assumed that one passed a law that said 50 years after acquisition, disposure by the State, some restraint on user, or after 10 purchases or the like, that may have a different characterisation question involved.  His Honour I think was concentrating upon the immediate, which was also pertinent to the particular case in question where one was dealing with the transferee I think from the Commonwealth.  I cannot give an answer beyond that, your Honour.

GUMMOW J:   He tried to find out what section 52 is really about. Is there any assistance from the Minnesota Case to which both Justices Menzies and Windeyer refer?

MR HUTLEY:   The difficulty with the United States authorities is that they come from a not completely different but substantially different constitutional background where the provision from which the words “exclusive power” are derived was a provision which involved transfers of sovereignty by portions of the States of the United States to the United States for the purposes of forts and the like, and the circumstance that in the right of eminent domain was developed in the United States through constitutional implication.  That, American authorities had determined, brought with it no concept of exclusivity or immunity of the United States from the exercise of powers in respect of those places.  So, the United States authorities, as is apparent from the Chief Justice’s analysis in Worthing, are of limited assistance in ultimately determining the ambit of section 52(i).

GUMMOW J:   Look at page 277 of Stocks & Holdings where there is a long extract set out.  At about point 4 the Court says:

it would seem that the sovereignty of the United States would end with the reason for its existence and the disposition of the property.  We shall treat this case as though the Government’s unrestricted transfer of property to non‑federal hands is a relinquishment of the exclusive legislative power.

Why cannot you translate those ideas to 52?

MR HUTLEY:   You can, your Honour.

GUMMOW J:   In other words, it really is a provision that does not intrude citizens’ interests. It really is drawing a line between Commonwealth and State interests. The Commonwealth interest when it ceases to be a Commonwealth place, full stop. You have to draw a line and that is the line. If the consequence of that is the Commonwealth does not get as much when it gives up its Commonwealth place, so be it, but it has handed it out of its exclusive domain and that is the end of it. That is where the Constitution draws the line.

MR HUTLEY:   Your Honour, what we would submit, with respect to that, is the following. Section 52(i) concentrates on the moment of acquisition and it gives an exclusive power at all times up to assuming the moment of disposition.

GUMMOW J:   It does not actually use the word “disposition”.

MR HUTLEY:   It does not, your Honour, but if it does not give it to then, one has to choose a cut‑off point as to when the moment of exclusive power ceases.  There appears to be no point which is able to be chosen other than the moment of disposition, unless one says that once a Commonwealth place, it is for all time, which the jurisprudence of this Court is to the contrary.  Thus, you have the point of time, that is, between the moment of acquisition to the moment of disposition.  The exclusivity exists within that.  We say that with matters conditioned to operate ‑ ‑ ‑

GUMMOW J:   The word “acquired” in 52(i), in what grammatical sense is that used?

MR HUTLEY:   When soever to be.

GUMMOW J:   No.  Whilst in a condition of having been.

MR HUTLEY:   The drafting concentrates on the moment of acquisition. What flows thereafter is left to implication and ‑ ‑ ‑

GUMMOW J:   Do you ask of this place, is it a place acquired – do you ask now, does it have this standing, this status, of something that is acquired by the Commonwealth?

MR HUTLEY:   Yes, quite, for a public purpose.

GUMMOW J:   Yes.  That public purpose is spent with the disposition.

MR HUTLEY:   Yes – well, your Honour ‑ ‑ ‑

GUMMOW J:   Which is another factor in the US decisions, too.

MR HUTLEY:   But the disposition itself can be part of its public purpose.  It is part of the public purpose of the Commonwealth not only to acquire things for public purposes and then use them for the interests of the Commonwealth, and that interest can include and will include and must include the act of disposition.

GUMMOW J:   Turning it to money to raise revenue.

MR HUTLEY:   Yes, exactly, and therefore that which impacts upon the interests of the Commonwealth in its asset – in the way in which we would endeavour to describe, subject to drafting a piece of legislation, which I will come back to – is what we say is the exclusive ambit of control.  What one is talking about here is the capacity of a State, prior to the place ceasing to be a Commonwealth place, exercising legislative power which may trench upon that interest, because, at the end of the day, the Land Tax Management Act, the power to pass it, our exposure to the obligations, depended upon a State power to pass it whilst it was a Commonwealth place. 

GLEESON CJ:   But it has to be more than an exercise of power which will entrench upon the financial interest of the Commonwealth. The State, for example, might exercise legislative power in respect of a neighbouring property, which has a major impact upon the price for which the Commonwealth can sell its property, but that has nothing to do with section 52(i).

MR HUTLEY:   No, because it does not alter, in the way which we have endeavoured to submit, that which the Commonwealth has to sell at the moment of the disposition.  Of course, the power does not, as it were, assure to the Commonwealth that everything that happens in the State which might impact upon the Commonwealth place is outside the purview of a State power, because ‑ ‑ ‑

GLEESON CJ:   Exactly.  The Commonwealth might approve of people building a road to the Commonwealth place.

MR HUTLEY:   Yes.

GUMMOW J:   Now, is not the reasoning of the United States cases even more strongly against you, in a way, because these Commonwealth places remain within the States?  They are not made over to the Commonwealth by surrender under section 111.

MR HUTLEY:   No, your Honour.  So there has to be, in effect, a ‑ ‑ ‑

GUMMOW J:   So the State’s sovereignty interest, to put it that way, persists throughout.

MR HUTLEY:   They are within the State for constitutional purposes.

GUMMOW J:   If you live there, you are a resident of the State for purposes of diversity jurisdiction.

MR HUTLEY:   Yes, you are a person, you are part of the people of the State of New South Wales, relevantly.  That is undoubted.  But the United States position changes, because one has, in effect, a re‑accession of territory to ‑ ‑ ‑

GUMMOW J:   I know, but you are not even in that situation.

MR HUTLEY:   No, I appreciate that, your Honour, but the ‑ ‑ ‑

GUMMOW J:   All I am putting to you is that the State interest in the section 52 situation is stronger in the sense that we are not talking about division of sovereignty, to use that rather difficult term.

MR HUTLEY:   Quite, but that is not to say that the State, whilst a State in the United States – sorry, the property was within the United States sovereignty the States can make laws which have the impact upon the property of the variety ‑ ‑ ‑

GUMMOW J:   Well, that is the question.

McHUGH J:   Mr Hutley, have you had a look at the inscribed stock Act case, Commonwealth v Queensland in 1920, where it was held that the Commonwealth legislation which gave an immunity from State taxation on interest from Commonwealth bonds inscribed stock was valid, which is the sort of immunity that you are suggesting is within the 52 power, are you not?

MR HUTLEY:   Yes.

McHUGH J:   In that case the Commonwealth legislation said that investors were immune from income tax and it was held that the State income tax legislation could not apply to the interest they earned ‑ ‑ ‑

MR HUTLEY:   There were those shipping cases which deal with ‑ ‑ ‑

McHUGH J:   O’Reilly, I suppose.

MR HUTLEY:   Yes, O’Reilly, which passed a law that, in effect, a Commonwealth instrumentality or an instrumentality could be immune from taxes.

McHUGH J:   It might be worth having a look at that ‑ ‑ ‑

MR HUTLEY:   I have looked at O’Reilly.  I had not looked at the other one, your Honour.  We will take a note and have a look at it.

GUMMOW J:   But O’Reilly works through 109.

McHUGH J:   Yes, and so is the inscribed stock case.  They are both 109 cases.

MR HUTLEY:   I accept that but, in effect, they point out that one, in effect, can make laws within a power concerning the exposure of a person, whether it be a Commonwealth instrumentality or, for that matter, someone else ‑ ‑ ‑

McHUGH J:   By taxing the investor you impede the Commonwealth’s ability to raise money, that is the sort of argument.

MR HUTLEY:   Can I return to the Minnesota Case, your Honour.  I think things are being indicated to me which I should tell your Honour, but I will return to that in due course.  Can I move on.

GLEESON CJ:   Well, if you can keep it going until a quarter to one, you are going to have an opportunity to settle this draft ‑ ‑ ‑

MR HUTLEY:   How close am I?

KIRBY J:   But if you lose this preliminary point, as it might be described, of call it the springing application or the ambulatory application and distinguish the Stocks & Holdings Case on the basis that has been discussed, then we do not really get to all the other points, do we?

MR HUTLEY:   Your Honour, if I cannot persuade the Court that this is a law with respect to a Commonwealth place, then I lose it every step of the way.  I accept that.

KIRBY J:   You are dead in the water.  Might it not be sensible to deal with that matter before going into the mirror image legislation and all of its delights.

MR HUTLEY:   Of course, I am in the hands of the Court, but one of the difficulties is that it is somewhat difficult to deal with it unless the matter was, as it were, determined.

GLEESON CJ:   Just to be precise, when you say “this is a law with respect to a Commonwealth place”, you mean section 7 of the Land Tax Management Act 1956 in its application to your client after acquisition of the land from the Commonwealth?

MR HUTLEY:   Yes.  As most of these cases turn out, issues of construction and constitutional operation really become almost mirrors ‑ ‑ ‑

GLEESON CJ:   Yes.  You go ahead with your argument.

MR HUTLEY:   Can I take your Honours to the Land Tax Management Act and the Rating Act.  Your Honours, in the bundle we have extracted the Act as enacted in 1956 and a reprint as at 29 June 1999.  Your Honours, that reprint for all material purposes ‑ ‑ ‑

KIRBY J:   That is the document behind B2, is it?

MR HUTLEY:   B2 is the 1956 Act, yes, your Honour.  The reprint which was in the form subject to a few minor amendments which I will tell your Honours about, your Honours will find behind B8.

KIRBY J:   B8 is the one that applies at the relevant time, is that correct?

MR HUTLEY:   Yes, your Honour.  It is actually midway between the two assessment dates, being 31 December 1998 and 31 December 1999.  There were a few minor amendments both before and after.  Those have been checked and they are irrelevant, though I shall just give your Honours for the record the statutes which effected the amendments.

KIRBY J:   Just explain this to me, the document behind B8 says “As in force at 29 June 1999”.

MR HUTLEY:   Yes, the two relevant dates, your Honour, the assessment dates, were 31 December 1998 and 31 December 1999.

GLEESON CJ:   We should be working from Reprint No 11?

MR HUTLEY:   Yes, your Honour.  Can I just tell your Honour that the reprint reflects amendments by Acts Nos 11, 138 and 170 of 1998, from 31 December 1998.  They are irrelevant in all respects to any question which your Honours would be concerned with.  They are minor amendments.

GUMMOW J:   That is 11, 138 and 170, is it?

MR HUTLEY:   138 and 170, your Honour.

GUMMOW J:   Of 1998?

MR HUTLEY:   Of 1998.

GUMMOW J:   Included, but irrelevant?

MR HUTLEY:   Yes.  After 29 June 1999, there were amendments by Acts Nos 31 and 52 of 1999 prior to 31 December 1999.  They also are completely irrelevant.  So for all purposes your Honours can work off that reprint being applicable in the two assessment dates.

The Act, of course, was essentially taken from the structure of the Commonwealth legislation which had been passed in 1910, and your Honours will find that legislation behind tab A1.

GLEESON CJ:   It is really a combination of sections 7, 8 and 9 that is relevant to the character of the tax, is it not?

MR HUTLEY:   Yes, your Honour.

KIRBY J:   What was the federal power that supported the Act of 1910 of the Commonwealth?

MR HUTLEY: Section 51(ii), your Honour. Structurally, the Acts have remained essentially the same between 1956 and the relevant dates; however, your Honours will note that from the reprint, section 4, most of the administration provisions associated with land tax have been centralised in the Taxation Administration Act 1996, although enforcement, valuation and the like procedures called for under the Land Tax Act have remained within that Act.  Otherwise, the structure has remained essentially the same, that is, that the Rating Act imposes the tax and the Administration Act makes laws relating to the imposition of the tax, but not imposing the tax, and associated provisions which now no longer involve the administration, but involve enforcement, valuation and the like, as they did.

KIRBY J:   That structure is for constitutional reasons?

MR HUTLEY:   It is not constitutional reasons within the State.  It is historical reasons because the States essentially adopted the form of the federal land tax scheme, which of course for constitutional reasons divided the equivalent Rating Act from the Assessment Act, and they were in effect carried over in substance in identical form.

KIRBY J:   But maybe within the States there is a constitutional “Convention” ‑ ‑ ‑

MR HUTLEY:   No, your Honour.  No they do not have a ‑ ‑ ‑

KIRBY J:    ‑ ‑ ‑relating to the role of the Upper Houses.

MR HUTLEY:   No.  Your Honour will see with respect to such things as stamp duties legislation, traditionally the administration and the taxing have been done in the same legislation.  So the structure of these two pieces of legislation are essentially historical from the New South Wales point of view.

GLEESON CJ:   Now, according to section 8:

Land tax shall be charged on land as owned at midnight on the thirty‑first day of December ‑ ‑ ‑

MR HUTLEY:   Yes, your Honour.

GLEESON CJ:   What is the meaning of that expression “land as owned at midnight on the thirty-first day of December”?

MR HUTLEY:   That means in respect of a taxpayer, he or she pays tax for the subsequent year in respect of that land which he or she owns as at 31 December on the year immediately preceding that year.

GLEESON CJ:   But you have to identify the ownership in which the land is held at midnight on 31 December to work out whether the land is subject to tax.

MR HUTLEY:   Quite.  Yes, your Honour.  If your Honour goes back to the definition of “owner” – and “owned” is given a corresponding meaning to owner – one has to find, as at midnight on 31 December some person who is in a relation to the land which satisfies one of the characteristics which constitute ownership.  That, of course, can be a multiplicity of persons in respect of the same piece of property.

KIRBY J:   Yes, but it is a dual notion.  It is owned by taxpayers, and that is a composite idea, and the Commonwealth cannot be a taxpayer.

MR HUTLEY:   Yes, I accept that, your Honour.

KIRBY J:   So the composite idea cannot, could not, never did, never could, apply to the Commonwealth.

MR HUTLEY:   I accept that, your Honour. It did not apply to the Commonwealth. Whether they had attempted to or not does not really matter, but they did not, because section 114 would have rendered any attempt futile. To turn to section 7 and 8, it says:

(1)  Land tax at such rates as may be fixed by any Act is to be levied and paid on the land value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act).

(2)  The land value –

and then it determines the land value.  Then it says:

Date of ownership for purposes of land tax

Land tax shall be charged on land as owned at midnight on the thirty‑first day of December immediately preceding the year for which the land tax is levied.

Then it says “Taxable value”, et cetera.  Now, the consequences of an owner being so taxed is as was observed – includes that the land will be charged pursuant to section 47 of the Act ‑ ‑ ‑

KIRBY J:   Does not that scheme indicate that it is really quite different from the Cumberland Scheme?  It is a decision that has to be made at rests every year, facing the reality that land ownership changes in the course of the year, and therefore you posit the question as at the given date as to the ownership of the land by a taxpayer at that time. 

MR HUTLEY:   Your Honour, that is how the structure works, yes.  One has to approach the question ‑ ‑ ‑

KIRBY J:   Your client is a taxpayer, and therefore, as at a given rest, when you ask the question, “Is it owned by a taxpayer as at the given date?”, the answer in the Commonwealth’s case is no; the answer in your client’s case is yes.  So that is quite different to the legislative scheme in the Cumberland County Scheme, is it not?

MR HUTLEY:   Your Honour, in form ‑ ‑ ‑

KIRBY J:   No, not in form, in substance of the operation of the relevant law.

MR HUTLEY:   It operates differently, yes, your Honour, but, in our respectful submission, the mere fact that one chooses to take an ambulatory form does not change the essential question which is before the Court, because it is not that the States have either trammelled or they have not trammelled upon ‑ ‑ ‑

KIRBY J:   Your theory is that the land always bears along a bridal train, “This land was once owned by the Commonwealth”.

MR HUTLEY:   Your Honour, this was a law with respect to all land in New South Wales.  It is stated to be a law with respect to all land in New South Wales and if it is not with respect to all land in New South Wales, it is with respect to no land in New South Wales.

GLEESON CJ:   Mr Hutley, is your argument that these provisions are a law with respect of Commonwealth places in their application to land that was previously owned by the Commonwealth, or is it your argument that this is a law with respect to Commonwealth places in its application to land that was last owned by the Commonwealth?

MR HUTLEY:   The former.

GLEESON CJ:   So, if the land had been transferred half a dozen times between the time it was owned by the Commonwealth and the time it was owned by the taxpayer in question, this would still be a law with respect to a Commonwealth place?

MR HUTLEY:   It could be, yes, your Honour, but if that be not correct, the second proposition is undoubtedly correct.

GLEESON CJ:   How would you go about deciding which one of them is correct?

MR HUTLEY:   Your Honour, the question arises this way.  There has been an assessment of my client, the first purchaser from the Commonwealth.  There have not been any interim purchasers.  The question is:  is a law which was passed and has the effect of imposing tax upon a purchaser from the Commonwealth a law with respect to the Commonwealth?  Should a debate ever arise as to subsequent properties, it is conceivable that there would be a different characterisation question, but the first question, we submit, is clear.

GLEESON CJ:   Is that a convenient time, Mr Hutley?

MR HUTLEY:   Yes, your Honour.

GLEESON CJ:   We will adjourn until 2.15.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.17 PM:

GLEESON CJ:   Yes, Mr Hutley.  We have the draft.

MR HUTLEY:   Thank you, your Honour.  Can I allow your Honours a moment, before Justice Hayne asks me a question?

HAYNE J:   “Then” is the weasel word, is not it, Mr Hutley?

MR HUTLEY:   At the moment, precisely, your Honour.

GLEESON CJ:   Does “expose” mean “subjected to”?

MR HUTLEY:   Or “exposed to” because of one’s ownership.  It does not include “subjected to”.  For example, if this sale could have taken place on 30 December, or could have occurred on 31 December, one is exposed, by reason of one’s ownership, to tax on 30 December and on 1 January as much as one is on 31 December.  Today, anyone who owns a piece of property in certain parts of Sydney is exposed to land tax by reason of his or her ownership.  True, it is, there would be an assessment only at a particular date, but the exposure of the legislation exists because of their ownership.

GLEESON CJ:   Yes.

MR HUTLEY:   Returning to the Act, I had taken your Honours earlier to those sections which impact upon the position of persons who could have a relation to the land sufficient to be an owner. It is for that reason that it is insufficient, having regard to the constitutional inhibition created by 52(i), to merely construe it as not exposing the Commonwealth to taxation. One has to, in effect, not expose the land to taxation in respect of anyone’s ownership during the period of constitutional immunity conferred by section 52(i). That has the consequence that the land at all materials times during the Commonwealth ownership would be a land excluded from the operation by force of the Constitution from the potential operation of the section of the Land Tax Management Act.

That would be land which would be exempt from taxation under the Act, not by an express exemption from taxation, but by a constitutional exemption from taxation under the legislation.  If the characterisation that we advance be correct, then the assessments to which we were subjected were assessments which must fall.

The second point of reliance in relation to the Land Tax legislation is placed by the respondent on section 14(2) of the State Administration of Laws Act, and could I take your Honours to that.

GLEESON CJ:   Is that in this folder?

MR HUTLEY:   Yes, your Honour.  Your Honour will find it at B4.

KIRBY J:   Which tab is it?

MR HUTLEY:   B4, your Honour.  Your Honours, this was legislation passed consequent on Worthing, to seek to apply to States all legislation as and from a place ceasing to be a Commonwealth place. If I could take your Honours shortly to the central section, section 14(2), with which we are concerned, which provides:

Subject to subsection (3), when a place ceases or has ceased to be a Commonwealth place at a particular time the laws of the State in force at that particular time apply or shall be deemed to have applied in or in relation to that place as if those laws had come into operation at that particular time and every Act, whether passed before or after the commencement of this Act, and every instrument made or having effect under any such Act, shall be read and construed as if it provided expressly that it was intended to so apply or to have so applied.

Now, this was an Act passed, obviously, during the period that this place was a Commonwealth place.  The effect that it is said to give to the Act is, as it were, a virtual re‑enactment as and from the place ceasing to be a Commonwealth place.

Now, to the extent that reliance need be placed upon that to support the Land Tax Management Act and the Rating Act, it suffers of necessity from the same difficulty that those two Acts would suffer from, because to that extent it is a law with respect to Commonwealth places.  It would seek to apply to those Commonwealth places laws which ex hypothosi are themselves laws with respect to Commonwealth places.  It, in our respectful submission, can simply rise no higher than the laws which it would seek to apply.  So, by parity of reasoning, it itself must relevantly be a law with respect to a Commonwealth place.

GUMMOW J:   So it is invalid?

MR HUTLEY:   Yes, to the extent that it seeks to apply the Land Tax Management Act to this place.  Otherwise, to take the Stocks & Holdings example, if this Act is valid, it would appear to have had the effect of applying the Cumberland scheme to the rifle range as and from the place ceasing to be a Commonwealth place, if it had been enacted prior to the decision, and therefore would have done exactly that which the Court held could not be done.

One turns then to the removed proceedings and these are concerned with the imposition of rates and charges in relation to the place, either by virtue of the Local Government Act itself or, alternatively, reliance is placed on section 14(2) of the Application of Laws Act. As appears from our written submissions, the analysis is precisely the same as applies to land tax, the reliance being placed by the respondents on the ambulatory nature of rating provisions which one accepts they have common characteristic, namely, a rate is struck annually in respect of property identified within a locality and as at the date which appears from the legislation the rate is raised. There is really no material distinction between rates and land taxes for any purpose. Unless the Court would be assisted by a detailed going through the legislation, it is set out in the written submissions. It appears adequately in those.

McHUGH J:   Mr Hutley, I might have missed something, but what do you say about the Commonwealth Places (Application of Laws) Act 1970?

MR HUTLEY:   That only operates whilst the place is a Commonwealth place and it does not apply to statutes which impose taxes.  When one comes to the mirror taxes legislation – I can take your Honour to the section.  At the time of the design of the Commonwealth application of laws provisions ‑ your Honours will find that behind A2.  This was part of the scheme which was developed to take up the suggestion that fell from all the Judges in Worthing that the problems associated with the decision could be overcome by the Commonwealth enacting an Application of Laws Act, as it were, to Commonwealth places.  The central provision here is section 4(1).  It provides:

The provisions of the laws of a State –

and laws of a State, your Honours, are defined in section 3 –

as in force at a time (whether before or after the commencement of this Act) apply, or shall be deemed to have applied, in accordance with their tenor, at that time in and in relation to each place in that State that is or was a Commonwealth place at that time.

(2)  This section does not –

and this is relevant to a later submission –

(a)  extend to the provisions of a law of a State to the extent that, if that law applied, or had applied, in or in relation to a Commonwealth place, it would be, or have been, invalid or inoperative in its application in or in relation to that Commonwealth place –

If your Honours go to subsection (5), it says:

this section does not:

(a)  have effect to impose any tax ‑ ‑ ‑

McHUGH J:   What subsection is it?

MR HUTLEY:   Section 4(5), I am sorry, your Honour. Your Honours will find behind tab A6 the second reading speech in relation to that Bill. On 3141 of the Hansard in the House of Representatives, in the first column in the second reading speech of Mr Enderby, that exclusion took place because of a concern that to impose, as it were – apply – State taxing laws as federal laws, or enact them as federal laws, might infringe section 55 of the Constitution. Thus, no Commonwealth places had applied to them taxes under the federal Application of Laws Act. The State Application of Laws Act, section 14(2), to which I took your Honours a moment ago, does not have an exclusion in respect of State taxing laws; it seeks to apply all laws.

GUMMOW J:   What does Mr Enderby have to do with all of this?

GLEESON CJ:   He is the opposition, is he not?

GUMMOW J:   The Attorney‑General was Mr Hughes, as appears at 3143.

MR HUTLEY:   I apologise, your Honour.

GLEESON CJ:   Mr Enderby was moving an amendment.

MR HUTLEY:   I am sorry, your Honour – Mr Hughes.  The important point is that all taxing laws were excluded.

GUMMOW J:   Where does it say that?

MR HUTLEY:   At 3141, your Honour, first column, at about point 2.  If those propositions be correct, reliance is placed by the respondent upon the mirror tax scheme, being the Commonwealth Places (Mirror Taxes Administration) Act 1998 (NSW) and section 13(2) thereof.

GLEESON CJ:   Where do we find that?

MR HUTLEY:   Your Honours will find that at tab B7.  That was an Act which was assented to on 2 November 1998, that is, after the place ceased to be a Commonwealth place, and therefore, so far as it concerned my client’s property, was not a law with respect to a Commonwealth place. 

That law is part of a scheme which was enacted consequent upon this Court’s decision in Allders International.  The State taxing law, the mirror tax law, takes as its point of departure the circumstance that the Commonwealth Mirror Tax Act, which I will come to in a moment, your Honours, has applied in the sense stated in that Act what are called “excluded provisions” of a State taxing law to the relevant property.  Can I take your Honours to the Act shortly and your Honours will find that behind A3.

GUMMOW J:   That is the Commonwealth Act?

MR HUTLEY:   The Commonwealth Act. Section 6(2) is the principal provision. It provides that:

Subject to this Act, the excluded provisions of a State taxing law, as in force at any time before or after the commencement of this Act, apply, or are taken to have applied, according to their tenor, at that time, in relation to each place in the State that is or was a Commonwealth place at that time.

GUMMOW J:   You have to go back then to excluded provisions.

MR HUTLEY:   And, your Honour, I will have to go back again in a moment. If your Honours go back to section 6(1), it says:

excluded provisions, in relation to a State taxing law, means provisions of that law to the extent that they are excluded by paragraph 52(i) of the Constitution.

If your Honours then go back to section 3, your Honours will find a definition of “excluded by paragraph 52(i) of the Constitution”.

GUMMOW J:   Not by 114.

MR HUTLEY:   No:

excluded . . . means inapplicable by reason only of the operation of section 52 of the Constitution in relation to Commonwealth places.

GLEESON CJ:   Or not by 114 and not by Essendon?

MR HUTLEY:   Quite, by nothing other than section 52(i) – and the word used is “inapplicable”. Certain sections of course of an Act may be invalid because they purport to apply to a Commonwealth place and those will be inapplicable sections undoubtedly, but the structure of the Act does not just pick up those provisions. It has to pick up, as it were, the structure of the legislation to make it operate as a taxing Act such as administration provisions and the like because those provisions would become inapplicable by reason of the operation of 52(i) because the taxing provision would be inapplicable.

So, the word “inapplicable” is intended to, as it were, result in the federal imposition of tax and application of all provisions of a State law which do not operate in respect of a place because of, and because of only, section 52(i) of the Constitution. The importance of that is, to jump forward, if one goes to the State mirror taxes law ‑ ‑ ‑

GUMMOW J:   Well, wait a minute.  There is a definition, then, of State taxing law, is there not? 

MR HUTLEY:   I am going to come to that, your Honour. It is important, therefore, to have provisions which are inapplicable by reason of section 52(i). It is only in that circumstance that you do have such. They are applied by the Commonwealth under the Act to become Commonwealth taxing laws. The precondition to the operation of the relevant section of the State Mirror Taxes legislation will be satisfied, and that is in section 13(1) of the State Mirror Taxes legislation.

In that circumstance, if there are any provisions which are applied by the federal law, the State law re‑enacts notionally the entire law as a State Act, upon the place ceasing to be a Commonwealth place.  So that is the ultimate fallback of the respondent, if all the other steps are unsuccessful, namely, one, there were provisions of the Land Tax Management Act and the Rating Act which were inapplicable by reason only of section 52(i); those are taken to have applied to this property; the place ceased to be a Commonwealth place; and therefore section 13(2) of the State Act is engaged and notionally re‑enacts the entirety of the State taxing laws ‑ which I will come to in a moment, your Honour – as on the place ceasing to be a Commonwealth place. Turning then to ‑ ‑ ‑

McHUGH J: Just before you leave it, could I just ask you, your argument depends, of course, on section 52, and you do not seek to rely on 51(xxxix) in its relation to 52, do you?

MR HUTLEY:   No.

McHUGH J:   If you did – and it has always intrigued me – if the 51(xxxix) law which operates by reason of its relationship to 52 – it would only create a 109 problem ‑ ‑ ‑

MR HUTLEY:   That would appear to be the case, yes, your Honour, but the jurisprudence in this Court concerning 52(i) is that the approach to the construction is similar to any other power.

McHUGH J:   I was wondering whether or not, to make good your argument about value, and so on, you might have to rely on 51(xxxix), although I do not think you do.  I think your point is good or bad depending on 52 ‑ ‑ ‑

MR HUTLEY:   Yes, your Honour.

McHUGH J:    ‑ ‑ ‑ and 51(xxxix) does not assist you, because it talks about the execution ‑ ‑ ‑

MR HUTLEY:   Yes, your Honour, and there would be the issue as to whether it is a 109 problem.  Can I explain to your Honours how State taxing law – State taxing law is defined in section 3 to be a scheduled law of the State, and your Honours will find at page 17 the scheduled laws ‑ ‑ ‑

GUMMOW J:   No land tax. 

MR HUTLEY:   No, your Honour.  I am about to come to that.  It can be a scheduled law of the State and there are lists of scheduled laws which identify various types of tax, financial institutions and the like.  Then a State law that imposes tax and is prescribed by the regulations for the purposes of this paragraph, section 25 is the regulation‑making power.  Your Honours will find behind tab A4 the Commonwealth Places (Mirror Taxes) Regulations 2000, and your Honours will find in regulation 4, on page 2, an edition of the Land Tax Act 1956 and the Land Tax Management Act (NSW).

GUMMOW J:   What is the relevant Commonwealth law that falls foul of 55 of the Constitution?

MR HUTLEY:   The mirror taxes legislation.

GUMMOW J:   Do they now? What is the law that imposes the tax? What is the Commonwealth law that imposes the tax in terms of the Land Tax Act?

MR HUTLEY:   It is, in my respectful submission, the Commonwealth Places (Mirror Taxes) Act.  It applies the law.

GUMMOW J:   But it does not apply the Land Tax Act.

MR HUTLEY:   The regulation brings it out ‑ ‑ ‑

GUMMOW J:   That is what I want you to focus on.

MR HUTLEY:   I am sorry, your Honour.  I do apologise, your Honour.  Once it is regulated, it becomes a State taxing law, that is definition of State taxing law (b).

GUMMOW J: Section 55 of the Constitution says the “laws imposing taxation”. You say there is a law purporting to impose taxation which does not comply with section 55.

MR HUTLEY:   Yes.

GUMMOW J:   What is that law?

MR HUTLEY:   It is the law constituted by the Commonwealth Places (Mirror Taxes) Act relevantly, in its immediate operation, once it comes into force – and I will come to that in a moment – together with the regulation, which makes this a State taxing ‑ ‑ ‑

GUMMOW J:   It is an exercise of power under section 25, is it?  An exercise of the regulation‑making power.  Before 2000 there was no such law in any way, shape or form.

MR HUTLEY:   Yes, your Honour.  Can I explain to your Honour how the structure works, and I think I will answer your Honour’s question.  The regulation was made in 2000.

GUMMOW J:   I understand that.

MR HUTLEY: That did not of itself impose a tax in New South Wales until there had been an arrangement between New South Wales and the Commonwealth. That is the arrangement which is effected pursuant to section 9 of the Mirror Taxes Act. That arrangement your Honours will find behind tab A5 – it is also in the appeal book – which was an arrangement of 20 February 2002.

HAYNE J:   What is it an arrangement for in 9(1) terms?

MR HUTLEY:   The arrangement arranges between the States for the States to accede to the scheme to allow, in effect, their instrumentalities to be used as part of the taxing process effected pursuant to the mirror taxes scheme.  Your Honours, to jump forward.  Taxes collected under this Act are to be paid into consolidated revenue.  That appears from section 23 of the legislation.

GLEESON CJ:   What exactly is it in this legislation that makes the Commonwealth a taxpayer, within the meaning of ‑ ‑ ‑

MR HUTLEY:   A taxpayer?

GLEESON CJ:   Yes.

MR HUTLEY:   We do not suggest that the Commonwealth is made a taxpayer.  It does not seek to make the Commonwealth a taxpayer; it seeks to apply the legislation to third persons.  The problem is perceived to arise out of the decision in Allders. So what the structure of the legislation is is that if there be a State taxing law which has a provision which is inapplicable by reason of section 52 only, and there is an arrangement between the States, and the law is either scheduled or the subject of a regulation, or is a law associated with a law imposing taxation within the definition of sub‑clause (c) of the definition of “State taxing law”, they are applied by section 6(2) as federal Commonwealth laws, in relation to those places.

So the tax obligation that arises thereafter – the obligation to pay money – arises because of the enactment of the relevant provisions of the State Acts as Federal Acts, which exposes persons who fall within the purview of those provisions, on their terms, to a tax obligation to the Commonwealth.

GLEESON CJ:   So this would cover the people referred to in sections 22 to 32 of the Land Tax Management Act?

MR HUTLEY:   Subject to an argument which arises as to what is meant by “inapplicable by reason only of” section 52(i).

GUMMOW J:   And this arrangement is an agreement between the two executive governments, which, as it were, conscripts the State Public Service.

MR HUTLEY:   Yes, and provision is made – I will come to the State Mirror Taxes law – for the governor of the State to accede to such an arrangement.  So, in effect, it operates to make, pro tanto, the State taxing regime federal taxes.  The arrangement operates on the basis that the moneys will be paid to the federal government into consolidated revenue, and, with certain exceptions, associated with over‑payments and the like, that money will then be remitted to the States.  So, in other words, the object is ‑ ‑ ‑

GUMMOW J:   That is 23(2).

MR HUTLEY:   Yes, your Honour.  The object is, consequent on Allders, on a State by State basis to subject Commonwealth places to taxes imposed by the Commonwealth in the same terms and to the same extent that would have applied in the States had the places not been Commonwealth places, excepting, of course, any suggestion of imposition on the Commonwealth itself or any other entity which is exempted from taxation, and any other provision of the Constitution or section 109, under any federal legislation.

That, in effect, is the structure which the legislation takes. Your Honours, the object of the legislation can be seen from an explanatory memorandum which was circulated within the House of Representatives as an adjunct to the second reading speech. Your Honours will find that behind tab A9. If I could just direct your Honours’ attention to the background because I should explain one other aspect of it once your Honours are seized of the background. If your Honours go back to the Act having read that and look at section 7 and compare it with the – section 7 provides:

(1)  An applied law does not have effect in relation to an amount that would (apart from this subsection) have become due for payment before 6 October 1997 under an applied law.

As appears from the explanatory memorandum, the 6 October date is the date upon which the Federal Government announced an intention to bring in place this scheme and also put in place a windfall taxes scheme to subject any claims by taxpayers against the States for the recovery of moneys paid which, due to the decision in Allders, were not constitutionally valid under the provisions to a windfall profit tax of 100 per cent on any judgment recovered by such taxpayers in respect of moneys paid to the States.

Now, that legislation – I will just give your Honours a reference to the name – it is on the list – is particularly the Commonwealth Places Windfall Tax Act 1998 and the Commonwealth Places Windfall Tax (Collection) Act 1988. Section 6 of the Commonwealth Places Windfall Tax (Collection) Act makes the condition of liability to the windfall profits a judgment against the State – that is section 6, your Honours – which relies upon a determination that the relevant State Act was invalid.

GLEESON CJ:   Because of section 52(i)?

MR HUTLEY:   Yes, but, your Honours, from the explanatory memorandum, it appears that the scheme was drafted with a consideration of invalidity in mind consequent upon the decision in Allders.  The section itself, which I took your Honours to defining “excluded provisions”, does not use the word “invalidity”.  It uses the term “inapplicable by reason only of”.

The Commonwealth has advanced an argument that if the true construction of the Land Tax Management Act and the Rating Act is that it is not invalid but it simply does not apply to Commonwealth places for the reasons we have advanced, then the Mirror Taxes Act simply is not engaged because all it is concerned with is invalidity of State tax laws, not inapplicability because of section 52 of the Constitution.

Your Honours, that is one argument as to the construction of the section and it is a construction which is favourable to my client because, if right, the mirror taxes legislation will never be engaged.  Therefore, the State Mirror Taxes Act cannot be engaged because it takes its point of departure an application by the federal Act.  However, it does cause some strange results, namely, people seeking to oppose tax reliant on the mirror taxes scheme will be feverishly arguing that on the true construction of the State Act it does not apply in excess of constitutional powers, where one will find the States feverishly arguing that they did intend to exceed their constitutional powers.  That is one of the oddities of an argument that limits inapplicable by reason only of 52(i) to a requirement of invalidity.  As we understand it, the State opposes that construction.

If the Mirror Taxes Act is engaged when it can be said of the State taxing law it is inapplicable because section 52(i) operates in the circumstances not to expose this property to taxation and that is consistent with the construction of the legislation, if that is the true construction of the Mirror Taxes Act, then it would appear to be engaged with respect to this property because there was under section 6(2) a retrospective application of the entirety of excluded provisions of the Land Tax Management Act and consequently the Rating Act to this property.

If that be correct – and it is possible that the Commonwealth Mirror Taxes Act could be engaged – the next issue which arises is whether the Commonwealth Mirror Taxes Act infringes one or more of the provisions of the Constitution to which reference has been made, namely, sections 55, 51(ii) or 99.

GUMMOW J:   There is a big debate – I do not know about a big debate, but there has been discussion from time to time as to whether taxation can be imposed by regulation in the Commonwealth sphere in the light of 55.  In other words, it is not enough ‑ ‑ ‑

MR HUTLEY:   Your Honours, the regulation merely identifies the Act ‑ ‑ ‑

GUMMOW J:   You cannot give the Executive power to impose taxes.  It has to be imposed by the Parliament under statute.

MR HUTLEY:   Your Honour, our submission attacks firstly the Mirror Taxes Act at an antecedent point, namely, that the Act schedules a series of taxing provisions from various States which of their character both impose tax and make provisions in relation to the administration of tax, the Stamp Duties Act and the like.

GUMMOW J:   Those State Acts are drawn in jurisdictions which do not themselves constrain their legislative system by a section 55 analogue, is that right?

MR HUTLEY:   No, quite.

GUMMOW J:   They might have a section 53 analogue in their State Constitution, namely, these things have to originate in the Lower House ‑ ‑ ‑

MR HUTLEY:   Quite.  The best example, if your Honours go to the schedule at 17, there is a Stamp Duties Act (NSW) and the Stamps Act (Vic) and the Stamp Act (Qld), et cetera. They are Acts which both impose and regulate the administration in relation to tax and the others have the same aspects. I do not think really there is any dispute about that fact. The argument is that section 55 does not apply to an Act imposing tax enacted under section 52(i).

GUMMOW J:   In other words, the words “subject to the Constitution” in 52 do not include for some reason 55?

MR HUTLEY:   That is the argument and reliance is placed upon the decision of this Court in Buchanan v The Commonwealth (1913) 16 CLR 315.

GUMMOW J:   That is a 122 case.

MR HUTLEY:   Quite.  Your Honour, there are though some dicta ‑ ‑ ‑

GUMMOW J:   Just think about the text for a minute.  Section 122 is not expressed to be subject to anything in Chapter II, is it?

MR HUTLEY:   Chapter V, Part V.

GUMMOW J:   Yes, sorry.

MR HUTLEY:   Chapter I, Part V. Your Honour, our submissions are relatively simple. Section 52 says it is subject to the Constitution, 55 is obviously part of that, 55 is in the same part as 52. Commonwealth places are not excised from the State; they are within the State and they are within the State as identified in covering clause 6. Residents of such places would be people of the State for the purposes of section 7 and section 24 of the Constitution and there is no analogy in any way in relation to Commonwealth places to the position of the Territories, which was considered in Buchanan.

We say it follows that the constitutional interest which informed 55, and, for that matter, 53 and 54, is as much applicable to laws imposing taxation in respect of Commonwealth places as applies to any other law enacted under section 51(ii). Otherwise, it would appear, if that is right, section 53 would not seem to apply to laws imposing taxation in respect of Commonwealth places, and therefore they could be either originated or amended in the Senate, et cetera.

Now, if that be right, there can be – and I do not think there is any dispute that the Mirror Taxes Act operates to impose taxation.  We say that the Mirror Taxes Act, to the extent that it deals with subject matter other than the imposition of taxation, and, setting aside the regulation issue for the moment, your Honour, the regulation which brought the Rating Act and the Land Tax Management Act within the meaning of State taxing law dealt with the imposition of tax, insofar as it brought the Rating Act within the meaning of the State taxing law, but the Land Tax Management Act is not a law imposing taxation.  It is a law with respect to the imposition of taxation in the manner discussed in the Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 343 to 345 in the joint judgment.

One might argue, although it is not necessary for present purposes, that it was unnecessary to make a regulation with respect to the Land Tax Management Act, because it is not a law imposing taxation within the meaning of paragraph (b) of the State taxing law, but would become an applied law by virtue of (c). But setting that aside, if section 55 applies, the Land Tax Management Act could not be dealt with in the same legislation, with the consequence that it has no effect, and therefore relevantly could not be engaged by the Mirror Taxes legislation, and therefore one could not engage the State Mirror Taxes legislation and the assessments must be invalid.

HAYNE J:   What Parliament was told about this aspect of the matter appears conveniently in the explanatory memorandum under tab A9 at paragraphs 1.14 and 1.15, where the view is expressed that because the Act is made under powers, among others, and, as far as I see, presently relevantly, 52(i) and not under 51(ii):

the task of mirroring the effect of State taxing laws –

is said to be “made easier”, and, over the page, that 55 is, so it is said, not engaged. 

MR HUTLEY:   Quite, and that led to the ‑ ‑ ‑

GUMMOW J:   We might see the advice referred to on page 7. 

HAYNE J:   Or at least hear its effect. 

MR HUTLEY:   Probably somebody here can tell you.  Your Honours, those paragraphs of the explanatory memorandum also raise another problem.  Recently, this Court, in Austin v The Commonwealth [2003] 77 ALJR 491 at 531 to 532, and paragraphs [187] to [192] in the judgment of Justices Gaudron, Gummow and Hayne, set out the principles which are applicable to the second limb of section 55, namely, whether the obligation that: “Laws imposing taxation shall only deal with” one subject of taxation only.

Your Honours’ statement was expressly agreed in by the Chief Justice at page 493 and Justice Kirby at page 545.  As appears from that statement of principle, this topic of one subject of taxation looks to the subject, as it were, chosen by Parliament.  Here, we have a situation where Parliament has, in effect, said, “We don’t have to choose, because it’s irrelevant”, so Parliament simply has expressly not turned its mind to that issue.  Therefore it becomes necessary to seek to deal with this issue unassisted by any attitude of Parliament to choosing a subject of taxation.

GUMMOW J:   Now, is there any reference in the explanatory memorandum to that aspect of this scheme which involves the Executive exercising a power to impose taxes, by virtue of the legislative provision?

MR HUTLEY:   Your Honour, by way of analysis, no.  There is a reference to the definition of State taxing law, but nothing ‑ ‑ ‑

GUMMOW J:   It is not picked up in dealing with that?

MR HUTLEY:   No.

GUMMOW J:   It is as if Mr Pym had never lived.  His ghost probably does not walk in the chambers of the Treasury Department. 

MR HUTLEY:   One starts, your Honour, with the name of the legislation.  The use of the plural “taxes” is, in our respectful submission, a fairly good indication that one is not dealing with one subject matter of taxation.  One is, in fact, imposing, if and when arrangements are entered into, a bundle of taxes with the express contemplation that other taxes may be added from time to time to the definition of State taxing laws and thereby impose a federal tax in those terms. 

Now, in our respectful submission, it is just incapable of describing what has occurred as one subject matter of taxation.  The schedule deals with debits taxes, which are debits made to accounts kept with financial institutions; financial institutions duties, which taxes financial institutions; payroll taxes; stamp duties and the like and the regulation with which we are concerned has added yet another subject of taxation.

If those submissions be correct, the entire mirror taxes legislation is invalid, because when there is a multiplicity of subject matters, the jurisprudence in this Court is that the entire legislation falls.

GUMMOW J:   Now, why has not this problem arisen in the United States?  In his paper, Sir Zelman Cowan – you know that paper?  It is referred to by Justice Kitto in Worthing.

KIRBY J:   It is noted in Allders too.

MR HUTLEY:   Yes.

GUMMOW J:   Yes.  Sir Zelman refers at 178 to Congress giving taxing authority to States within federal enclaves.  How was that done?

MR HUTLEY:   Your Honour, I will be quite frank, I have not tracked it down.  We will look at it overnight.

GUMMOW J:   They have an equivalent of 53, do they not?

MR HUTLEY:   Your Honour, I will just check through.

GUMMOW J:   And do they have an equivalent of 55?  If they do not, one can see ‑ ‑ ‑

MR HUTLEY:   How they could get through.

GUMMOW J:   ‑ ‑ ‑ it might be easier for them.

MR HUTLEY:   If the mirror taxes scheme has survived thus far, the next issue which arises is whether section 52 is subject to section 99 of the Constitution, namely that:

The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof.

Further, although in the light of the decision of this Court in Allders, perhaps more difficultly, the proviso to section 51(ii) of the Constitution:

laws . . .  with respect to:

. . . 

taxation; but so as not to discriminate between States or parts of States;

In our respectful submission, a general law of taxation with respect to all Commonwealth places could not infringe the proviso to 51(ii) or section 99 because a law with respect to Commonwealth places is not a law with respect to localities selected by reference to their being parts of a State or States. Thus, the application of the proviso to 51(ii) or 99 would not prevent section 52(i) having a substantive taxation power. However, if the discrimen of taxation within Commonwealth places is chosen by reference to State citers such that on asking, as it were, “What tax am I subject to?”, the first question is, “What State are you in?”, we say that that is a tax which infringes section 99 of the Constitution and, to the extent that that is still available to us in the light of Allders, a tax which discriminates between States or parts of States – between States, we say.

We submit that the decision in Allders was rightly decided and the argument there advanced was, as expressed in the joint judgment, without merit.  That was because, we submit, it sought to re‑enliven the construction of 51(ii) which was rejected in Cameron v Federal Commissioner of Taxation.  That is, discrimination between States or parts of States occurs when one taxes by reference to localities in the Commonwealth.

There was and could be nothing wrong with the Federal Parliament passing a stamp duties law with respect to all Commonwealth places because no discrimen of taxation would be chosen by reference to States or parts of States; it would be merely defined “those to whom were exposed to taxation”, not in any offensive fashion.

However, our submission would result in the conclusion that the Commonwealth cannot divide up Commonwealth places by State or part of State as the basis or the criterion for exposure to tax. If that be correct, the mirror taxes scheme at the federal level infringes section 99 and section 51(ii) because that is precisely what it seeks to do. It imposes different schemes of taxation in each State for Commonwealth places. It chooses the taxes by reference to that which maintains in the State outside Commonwealth places but that does not change the fact that this discrimen of federal tax as federal tax is by reference to State citers.

The principle applicable in this Court in relation to choice between States and parts of States derives from the statement of Mr Justice Isaacs in Barger’s Case (1908) 6 CLR, the relevant passage at page 70.  That has been applied in relation to 51(ii) by the Court in Cameron v Federal Commissioner of Taxation (1923) 32 CLR 68, in the judgments of the Chief Justice at page 72, Mr Justice Isaacs at page 76, Mr Justice Higgins at pages 78 and 79, and Mr Justice Rich at page 79. It was applied by the Privy Council in W.R. Moran v Federal Commissioner of Taxation (1940) 63 CLR 338.

There is, in our submission – it has been held that section 99 applies to laws imposing taxation, and that is Morgan v Commonwealth and the references in our submission. In our respectful submission, there is no basis for reading out of application to section 52 expressed to be subject to the Commonwealth, section 99, and there is no need to read out the requirement in 51(ii) because its application does not in any way sterilise the capacity of the Commonwealth to impose uniform taxes throughout Commonwealth places.

Your Honours, we have in the footnotes to our submissions set out the comparable sections across the land tax scheme of the various States to show the differences in the preferences and the changes from State to State.  We have circulated to our learned friends a schedule which seeks to set that out in a tabular form and which might be of assistance to the Court.  If I could hand up to the Court that schedule.  I will not go to it at any length or at all unless some contest arises in relation to it.

Whilst it is true that the words “trade, commerce” in relation to section 99 have been read down to laws enacted pursuant to section 51(i), no such limitation has been read in in relation to the word “revenue”. Having regard to the use of that term throughout the part in which 99 falls, being Chapter IV, it would be impossible to limit the word “revenue” to taxes collected under section 51(ii) because its intent was to go beyond tax to any receipts by way of revenue of the Commonwealth and prevent preference in relation to such receipts on a State by State basis.

The preference in this case goes beyond merely the preference by different rates in different States. The provision in section 9 with respect to arrangements contemplates a circumstance where there will be a tax regime in one State of the varieties dealt with in the mirror taxes scheme but not in others. That in fact is what maintained from 20 December 2000 till dates in 2002. As appears from our written submission, on 20 December 2000 there was gazetted arrangement under section 9 in relation to Victoria but no other States acceded by arrangement until 2002.

Thus, from 2000 to 2002, the question “What tax should I pay?” would have been “Nothing, unless you are in Victoria”. That, in our respectful submission, also necessarily involves preference. Those are our submissions in relation to section 99.

GLEESON CJ:   Thank you.

MR HUTLEY:   There is one short issue as to construction about section 13. It is adequately set out in our written submissions and it is unnecessary to go into that.

GLEESON CJ:   Thank you, Mr Hutley.  Yes, Mr Solicitor.

MR SEXTON:   If the Court pleases, my learned friend had six chapters; I have seven, your Honours, if I could just outline those before I commence.  Our first proposition that I will come to is that, in our submission, the legislation in both cases, the relevant State legislation, is valid because, on its construction, it does not ‑ to use the words of Justice Mason at first instance ‑ engage Commonwealth places. 

Your Honours, we then have three propositions that may call into question the decision in Stocks & Holdings, so at that point I will say something by way of an application to challenge that decision.  It is not clear, perhaps, whether it is strictly required – that is, a challenge on our part – but it seemed to us unsafe to proceed with our argument without seeking that leave.

The three propositions, then, that we want to follow on, the first is that the legislation in both cases, the State legislation, has an operation, as in one case tax legislation, and in the other case rating legislation, that does not depend on any reference to the previous period of Commonwealth ownership.  We say, therefore, the legislation simply operates of its own force in relation to the periods for which land tax and rates are claimed.

The next proposition, your Honours, that we make is that, in the alternative to all of these, the relevant State legislation springs back of its own accord when the property in question was disposed of by the Commonwealth.

The final proposition of that kind, and also in the alternative, is that section 14(2) of the State Administration of Laws Act, to which my learned friend has taken your Honours, has the effect, if necessary, of reapplying the law of applying the relevant State legislation in each case.

There is two further matters that are left on the list.  One is the mirror taxes scheme.  Your Honours, it is only by a rather convoluted route that we would rely on the mirror taxes legislation.  We would say that your Honours do not have to take that route.  For that reason I do not intend to deal with it in considerable detail but I will come to it because I will have to set out the situation in which we say it is open to be relied upon.  Finally, your Honours, we will say something again briefly about the situation in the United States and in Canada on the same subject.

Your Honours, if I can go back to the first of those matters, which is the State legislation itself and its own terms.  If I could take your Honours to the Land Tax Management Act which is at tab B8 of the volume that is provided by my learned friend. Your Honours, as the Chief Justice has noted, the criteria for taxation set out in section 7, 8 and 9 of the Act, particularly when combined with the definition of “taxpayer” which is in section 3, being defined as “any person chargeable with land tax”. The actual rate of tax is of course set out in the Rating Act itself, a separate piece of legislation.

Your Honours, we would say that those provisions on their face indicate why the legislation did not engage Commonwealth places and impose land tax on them during the period of ownership ‑ ‑ ‑

GUMMOW J:   “Engage” is a rather slippery term, is it not?  The question is whether it was a law with respect to it.

MR SEXTON: Yes, it is. That is right, your Honour. But that is our submission, that it is not a law with respect to Commonwealth places because the legislation on its face indicates no intention to impose a tax on the Commonwealth while the owner of land in New South Wales. Your Honours, it is also relevant, in our submission, to look at section 2 of the Land Tax Management Act, which says that:

This Act shall be read and construed subject to the Commonwealth of Australia Constitution Act, and so as not to exceed the legislative power of the State ‑

Then it goes on to talk about questions of severance. In our submission, your Honours, because of section 114 of the Constitution in this particular case that section also would prevent the legislation being legislation with respect to Commonwealth places.

GUMMOW J:   I think Mr Hutley agrees that this State statute never purported to tax the Commonwealth while the land was in Commonwealth hands and was a Commonwealth place.

MR SEXTON:   He does, your Honour.

GUMMOW J:   Nevertheless, he says it is still with respect to it.

MR SEXTON:   That is right, yes. That is the dispute between us, your Honour, but we have a number of alternative bases for saying that the legislation can validly apply after the period of Commonwealth ownership, but we say the first of those is the simple terms of the legislation itself, when combined, of course, in the case of section 2, with section 114 of the Constitution.

GLEESON CJ:   What do you say about Mr Hutley’s references to sections 22 to 32 of the Act and its potential operation in relation to people who have a lesser interest than that of an owner in fee simple in Commonwealth land?

MR SEXTON:   Well, your Honour, there may be a question, depending if there was an attempt to apply those provisions to a situation where, for example, the Commonwealth had an interest in a property, whether those sections could be legislation with respect to those Commonwealth places. But, in a sense, if that were otherwise the conclusion, we would say that section 2 would prevent that occurring.

Your Honours, we make a similar argument in relation to the Local Government Act.  Some of the provisions are set out at tab B5.  Your Honours, the relevant provisions that impose rates, or, if I could summarise them, are perhaps section 498, which refers to the ad valorem amount.  Section 535 says that:

A rate or charge is made by resolution of the council.

Part 5 of the legislation generally, which is headed, “Levying of rates and charges”.  Section 562 which refers to the “payment of rates and annual charges”.  Your Honours, there is a general provision in the Act which, in this case, is section 4.  It says:

This Act binds the Crown in right of New South Wales and, in so far as the legislative power of Parliament permits, the Crown in all its other capacities, except to the extent to which this Act otherwise provides.

Again, there is a reference to the legislative power of the Parliament. Section 114, in our submission, would simply prevent the Parliament of New South Wales from imposing rates on a property owned by the Commonwealth.

I should say, your Honours, that section 31 of the Interpretation Act, which is at B1 in the collection of legislation, is to similar effect, as the two provisions that I have quoted, although the provisions in each Act are slightly different.  Section 31(1) of the Interpretation Act says that:

An Act or instrument shall be construed as operating to the full extent of, but so as not to exceed, the legislative power of Parliament –

being the Parliament of New South Wales.

GUMMOW J:   Does the Local Government Act become a scheduled Act for the mirror places legislation?

MR SEXTON:   No, your Honour.

GUMMOW J:   It has not, has it?

MR SEXTON:   No.  Your Honours, before I come to the next three propositions, can I come to ‑ ‑ ‑

HAYNE J:   Do you rest only on the proposition that the legislation did not tax or rate the Commonwealth?

MR SEXTON:   Yes.  Your Honour, we say they are not a law with respect to a Commonwealth place, because there was no intention of, or effect of, imposing land tax or rates on the property during the period of Commonwealth ownership.

HAYNE J:   I thought there was one or several other arguments advanced against you.

MR SEXTON:   There are, your Honour.  There are other arguments, but, on that question of the terms of the legislation, what is put against us is that nevertheless the legislation constitutes a law with respect to a Commonwealth place.

GLEESON CJ:   One of the arguments put against you, as I understand it, is that insofar as the legislation provides or has the effect that the land will be liable to land tax when it ceases to be owned by the Commonwealth, it is a law with respect to a Commonwealth place.

MR SEXTON:   Your Honours, in our submission, the argument which my learned friend makes about economic consequences is really something of a mirage, in the sense that it would be possible for the State in question to enact legislation the day after the place had been disposed by the Commonwealth.  In those circumstances, as a practicality, it is unrealistic to suggest that somebody will take the property with the expectation that it would, for example, be free of land tax, or free of rates.  So that putting aside the fact that there is a co‑operative scheme that is designed to avoid that very result, but, in any event, in our submission, there is simply an air of unreality about the proposition that there is an economic advantage to the Commonwealth in being able to dispose of a property, as it were, free of land tax, or free of rates, for the first or any subsequent purchasers.

GLEESON CJ:   The argument also seems to involve the proposition that it is a law with respect to a Commonwealth place, because it is a law that imposes a tax by reason of the fact that it is no longer a Commonwealth place.

MR SEXTON:   Well, your Honour, it is only necessary to state that argument, in our submission, to see the problem about it, that that cannot be a law with respect to a Commonwealth place.

GUMMOW J:   You have to disagree with the reasoning of Justice Walsh in Stocks & Holdings, do you?

MR SEXTON:   I think that is right, your Honour, that whether it is necessary for this case to say that Stocks &Holdings should be overruled, there may be some doubt about that proposition because it depends really on how the decision in Stocks & Holdings is analysed, but there is no doubt that in terms of some of the dicta, if dicta it be, in that decision, that the example that your Honour gives – and that particular passage above all – we would have to contest that.  Although, your Honour, Justice Walsh said in that passage ‑ ‑ ‑

GUMMOW J:   The passage is at 289.

MR SEXTON:   Yes.  Justice Walsh said in that passage that it did not follow that he was speaking about every piece of State legislation that was made during the period of Commonwealth ownership.  He then went on to speak, as your Honour noted before, about questions of restrictions on use.  Now, your Honours, there may be different questions in relation to State legislation during the period of Commonwealth ownership that had an impact on future use of the property.  That is not this case, of course.

CALLINAN J:   Mr Solicitor, could I ask you a question about Justice Walsh’s reasons for judgment at page 285, the last sentence on that page:

Unless they –

which is a reference to the Act and Ordinance –

should be construed as less extensive in meaning than their general terms would indicate, they cannot be held to be wholly valid.

Now, is it not the fact that section 7 of the LTMA dictates a construction less extensive in meaning than, for example, “all land” and the less extensive meaning is all land owned by a taxpayer, and the Commonwealth is not a taxpayer. So that it seemed to me that it was at least arguable that this case is directly within the express qualifications stated by Justice Walsh anyway.

MR SEXTON:   Your Honour, certainly we would make the submission that it is possible to decide the present case in our favour without contradicting the decision in Stocks & Holdings whatever some of it ‑ ‑ ‑

CALLINAN J:   The Chief Justice agreed that Justice Walsh – and I think Justice McTiernan’s reasoning is to a very similar effect.

MR SEXTON:   Yes, your Honour.

CALLINAN J:   So if you can bring yourself within that qualification, I would have thought that could be the end of the matter.

MR SEXTON:   Your Honours, could I say two further things about the economic or financial question that was raised in argument with my learned friend. The first is, of course, that my learned friend does not indicate where this would stop; whether somehow the first purchaser is able to take advantage of this situation, or whether the advantage continues with subsequent purchasers. It might be asked, in terms of section 52(i) perhaps, why the Commonwealth would want to pass on this kind of advantage.

In our submission, it is unrealistic, because of the fact that the State could itself, as soon as the period of ownership finishes, pass almost whatever legislation it seeks to do, unless my friend is also – as he perhaps is ‑ positing some restriction.  There would have to be a restriction, as well, on that power of the State Parliament ‑ otherwise power of the State Parliament – because, otherwise, the financial advantage could be negated almost straight away.

GUMMOW J:   What do you say about the draft Commonwealth law that was handed up after lunch?

MR SEXTON:   We say that it would not be a law within Commonwealth power, your Honour.  It says “shall not”:

A person who acquires a Commonwealth place from the Commonwealth shall not, at the time of acquisition – 

seemingly, perhaps, at the time of the transfer or registration – 

be then exposed – 

as your Honour notes, it depends, to some extent, on the meaning of the word “then” – 

by any enactment of the State to any tax referable to that person’s ownership – 

Again, it is not ‑ ‑ ‑

GLEESON CJ:   If it was a regulation instead of a statute, it would be void for uncertainty.

MR SEXTON:   I was not going to say that unkindly, your Honour.  It does have that problem about those two phrases, but, perhaps more importantly, there is the problem of how far in time it would continue from the changeover of ownership.  But, in our submission, it simply would not be a law within the powers of the Commonwealth.

GUMMOW J:   Why not?

MR SEXTON:   Your Honour Justice Gummow raised the question, in my learned friend’s argument, as to when the cut‑off point occurs in relation to State and Commonwealth powers, and whether the change of ownership would be that point.  We would say that it is, that there would be all manner of difficulties, we would say, apart from questions of principle involved, in continuing the Commonwealth’s power beyond that point.

HAYNE J:   The argument against you at least includes the proposition that so long as the Commonwealth can turn their property to better account, more value by that first sale, in a sense that demonstrates it to be within 52(i) power and that is reason enough to conclude that it is a law with respect to a Commonwealth place.  If you impede the capacity – that is the Commonwealth could positively pass a law providing for the enhancement in that way and the mirror is the State cannot impede it.

MR SEXTON:   That is the argument, your Honour.  It does need to include the proposition that the State could not, as it were, by its own legislation, negate that.

HAYNE J:   What is the answer to the argument?  I understand that is the argument.  What is the answer to it?

MR SEXTON:   Well, your Honour, the answer to it depends in one sense as to whether it can be characterised as a law with respect to a Commonwealth place.

GUMMOW J:   I know.  We are trying to find out what is masked by this word “characterised”.

MR SEXTON:   The second answer, your Honour, is really a question of principle as to when the Commonwealth power expires in relation to a Commonwealth place and the State jurisdiction resumes.  Now, we say that the obvious and rational point for that is when there is a change in ownership.  If one adopts any other principle, then it will be very difficult in application.  At some point there is a reduction to that kind of question in this case.

CALLINAN J:   Mr Solicitor, the value argument is not very convincing either, because assume the Commonwealth has acquired the land.  It can only acquire it for public purpose or for a government purpose, if I can put it that way.  On its acquisition it is settled law that the person from whom it is acquired, if it is compulsorily acquired for example, cannot get any value based upon the use or the incidence of the use to which it is put by the Commonwealth as resuming authority.  So why should the Commonwealth, when it sells that land, get the benefit of an incidence, that is its land tax free status, which is something for which it had not paid anyway?

MR SEXTON: We agree, your Honour. As I mentioned, it is a question of policy. It is hard to, for example, see why in a federation it would be part of the intention of the Constitution that the Commonwealth could pass on, after its ownership of a property, that particular land to a citizen of the State who would then be immune, at least for some time, from land tax, rates and similar matters. There does not seem to be any rationality in that as a ‑ ‑ ‑

CALLINAN J:   It is likely to be getting something for which it never paid anyway, a land tax free status.

MR SEXTON:   Yes.  Your Honours, can I say in a sense on the same subject, that my learned friend I thought perhaps conceded ‑ ‑ ‑

GUMMOW J:   To follow up what Justice Callinan was putting to you, may not be – and this may assist you, I do not know – that this phrase “acquired by the Commonwealth for public purposes” indicates really what you are characterising.  In other words, the cessation of that state of being “acquired . . . for public purposes”, so that there will no longer be land of that nature – it will not be dedicated to public purposes – is not an interest of the Commonwealth which the exclusive power supports.  In other words, if the Commonwealth ceases to need it for public purposes, 52 is spent.  The step by which it brings about that spent state is not something that attracts an exclusive power, at least not with respect to land acquired for public purposes.

McHUGH J:   What do you say as to whether the adjectival phrase “acquired . . . for public purposes” has a temporal connotation?  Does it describe a place that was acquired, or is there something continuing about it?

MR SEXTON:   We say it refers to the period during which it is ‑ ‑ ‑

GLEESON CJ:   And to its status.

MR SEXTON:   During that period?

GLEESON CJ:   Yes.

MR SEXTON:   Yes.

KIRBY J:   Otherwise it becomes a blight or a benefit, depending on your point of view, forever potentially, which would be an absurd construction.

MR SEXTON:   Your Honours, still on that subject, my learned friend, I think, conceded that, for example, scaffolding regulations, which was the law in Worthing, would in fact be applicable to a former Commonwealth place.  In our submission, the same principle would apply.  It would probably be attractive perhaps to someone to use the place for building operations without having to comply with all those kinds of regulations, and one could always posit that kind of value or financial advantage in relation to particular land in different circumstances.  So that it does not seem to us that it is easy for him to pick and choose between various kinds of legislation in that respect.

McHUGH J:   I know the jurisprudence supports the use of notion of characterisation but it does seem to me a most unfortunate expression.  After all, despite Sir Garfield Barwick’s flirtations with it in respect to section 51, it has been driven out of the 51 jurisprudence and now seems to have got in the back door with 52.  After all, the expression is “with respect to” a place.  Why does not one apply the 51 terminology, namely, “with respect to” requires a relevance or connection with the subject matter that is referred to.

MR SEXTON:   I will come, your Honour, for example, to Allders and some of the statements that were made along those lines in Allders because we would adopt those in terms of saying in this case that the legislation is not a law with respect to a Commonwealth place on any of those tests. We would say the same about section 14(2) of the State Administration Act. I will come to those in due course, your Honours.

Can I come to Stocks & Holdings and say briefly why we make the application that we do.  It is arguable – and there were several references to it in the course of my learned friend’s submissions by your Honours.  It is arguable – and Justice Callinan has made another one that Stocks & Holdings can be relatively narrowly confined because of the nature of the planning scheme and its specific reference to the land in question that was at that time owned by the Commonwealth.

GLEESON CJ:   And because it was a law about land use, which is easy to describe as a law with respect to a place.

MR SEXTON:   Yes, that is so, your Honour.  So that it may be that for our purposes we do not ultimately need to challenge Stocks & Holdings directly, but I will come to the question of some of the statements that were made in a moment.

I speak really of the majority constituted by Chief Justice Barwick, Justice Windeyer and Justice Walsh.  Justice McTiernan did not directly address this issue, although we would agree with Justice Callinan that his comments could be taken as supporting our propositions, and Justice Menzies of course directly dissented on this question and took the view that a general State law would spring back into operation.

I should say, your Honours, that of course section 14(2) of the State Administration Act and its equivalents in the other States was not before the Court in Stocks & Holdings.  The decision was handed down on 21 December 1970 and in New South Wales that legislation came into operation on 24 December 1970, three days later.  Hence Justice Menzies’ proposition that the general laws sprang back of their own accord.

In our submission, there is some inconsistency between the views of the majority, whether the statements be obiter or not.  We say that they would be because they are broader than the decision seemed to require.  I will not take your Honours to those passages in detail because my learned friend read from most of them, but just to say this, that Justice Walsh certainly suggested that anticipatory State legislation would not be valid and that a reading down exercise by way of a constitutional limitation or the Interpretation Act would not prevent the law contravening section 52(i) unless it could be construed as having no application at all to the land in question. But even Justice Walsh stated in that passage that Justice Gummow referred to on page 289 that he did not find it:

necessary to decide that no law of a State, enacted whilst a place . . . is still owned by the Commonwealth, is capable of having a valid operation with respect to that place after it ceases to belong to the Commonwealth.

He noted that he confined his opinion to the law with which the case was concerned.

Justice Walsh referred specifically at page 289 to laws that would limit:

the use to which the land in question might be put by a transferee from the Commonwealth –

as contravening section 52(i), which is, of course, not this case.

Chief Justice Barwick also appeared to reject the concept of anticipatory State legislation, at 267, although he stated that he was in general agreement with the reasons of Justice Walsh.  Justice Windeyer, to the same effect, although he seemed to suggest that some general State laws applied of their own force, as soon as the land was transferred by the Commonwealth.  At 281, Justice Windeyer said:

For example, a person who becomes the owner of land that was once part of a Commonwealth rifle range cannot say that he is at liberty to disregard State laws relating to the discharging of firearms.

So that would not, in our submission, seem consistent with a general proposition about State laws enacted during a period of Commonwealth ownership.

All that is to really say to your Honours that, in our submission, there is some inconsistency between the majority judgments.  There were two other judges on the Court, one of whom took a strongly different view, one of whom did not address the issue directly, and that this is not a case - Stocks & Holdings, which was the culmination of a series of decisions, Worthing and Phillips can stand without challenge, in our submission, whatever view be taken of Stocks & Holdings.

And finally on this question, Stocks & Holdings is a decision that we say would result in considerable inconvenience if one takes the broader view of what it stands for because it would have the result that any current owner of land would be immune from State law, so long as he or she can show that during any period from 1901 on, the land was a Commonwealth place.

KIRBY J:   Mr Hutley does not go that far.

MR SEXTON:   I will come to that, your Honour – and that the relevant State law ‑ ‑ ‑

KIRBY J:   He tries to draw the line a little bit closer to himself.

MR SEXTON:    ‑ ‑ ‑ and that the relevant State law was one enacted subsequent to the land ceasing to be a Commonwealth place.  There would then be, in our submission, a very onerous obligation on State Parliaments to enact the entire body of State laws afresh, every time a place in the States ceased to be a Commonwealth place.

Now, several members of the Court in Worthing assumed, of course, that these problems could be readily solved by legislation, and we, of course, would agree with that.  Mr Hutley says that you could do this by a regulation‑making exercise, but the regulations must have a source of power in legislation and, on his argument, the problem is that that legislation itself will be a law with respect to Commonwealth places.  So there is, in our view, considerable inconvenience that would result from an application of Stocks & Holdings in its broadest terms.

GLEESON CJ:   If it became necessary to do so, would you support the reasoning of Justice Menzies on the bottom of page 277 and the top of 278?

MR SEXTON:   Is that, your Honour, as to the laws springing back?

GLEESON CJ:   He refers to the United States case; it has already been discussed.  He then says that:

a Commonwealth law, expressed to operate with respect to a place acquired by the Commonwealth not only while it is the property of the Commonwealth but after it has ceased to be so, would not be a valid law. 

He goes on to say:

a State law imposing rates or land tax and passed before or during the time a place fell into the description of a place acquired by the Commonwealth, could apply, without further legislation, to the place which had ceased to be a place acquired by the Commonwealth.

MR SEXTON:   We do support that, your Honour.  As your Honour appreciates, there are a number of ways in which we reach that result.  One is the terms of the legislation itself, the State legislation itself.  Another is simply the notion of the State legislation springing back at the time of disposal, and in a sense ‑ ‑ ‑

KIRBY J:   That is not really very different from the first, is it?  It is the same thing.  You have to first construe your statute and see, is it like the County of Cumberland scheme, which is attaching to a land at a particular time, or is it something which involves things done at rests, where you are having to make a decision at a time after the Commonwealth had anything to do with the land or owned the land.

MR SEXTON:   Your Honour, there is a degree of overlap between those propositions that we put. The specific one that the Chief Justice refers to in the judgment of Justice Menzies – Justice Menzies there envisaged that it could be done perhaps either within the legislation itself – for example, the land tax legislation, which we say, in effect, is done here – or we would say the remarks of Justice Menzies there would also support section 14(2) of the State Administration of Laws Act, as a more general attempt to cause the State laws to come into operation at the point when the property passes to the new owner.

GLEESON CJ:   If you look at section 10 of the Land Tax Management Act there are all manner of owners of land who are exempt from land tax, so that for example, while the land is owned by the Labour Council of New South Wales it is not liable to land tax.  Presumably, the Labour Council of New South Wales might buy some land and then later sell it, so this concept of the Act sometimes having an operation in relation to certain land depending on who owns it and other times not having an operation in relation to the same land, is really basic to the structure of the Act.

MR SEXTON:   And it is also true of the State Crown that it is exempt.

KIRBY J:   It is of great importance practically because of the unburdening of public land and public ownership and therefore the likelihood that a lot of things that once were owned by the Commonwealth will very quickly be owned by someone else.

GLEESON CJ:   Exactly.  Now that all our post offices are run by newsagents the suburbs must be dotted with former post offices that are in private ownership.

KIRBY J:   Well, they are being turned in Edgecliff into luxury home units.

MR SEXTON:   I think there is something, your Honour, in the Australian Postal Commission legislation that provides for the payment of land tax in relation to those properties.  I am not sure, but I think ‑ ‑ ‑

GLEESON CJ:   But the same applies to rating legislation, does it not?  Once again, there are provisions in the Local Government Act that exempt from rates all sorts of owners of land.

MR SEXTON:   Yes, your Honour.  That is the structure of both pieces of legislation.  Your Honour, I was about to go on to a separate point.

GLEESON CJ:   Is that a convenient time?

MR SEXTON:   Yes, your Honour.

GLEESON CJ:   We will adjourn until 10.00 am tomorrow.

AT 4.15 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 11 SEPTEMBER 2003