Permanent Trustee Australia Ltd v Commissioner of State Revenue
[2004] HCATrans 43
[2004] HCATrans 043
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Melbourne No M277 of 2003
B e t w e e n -
PERMANENT TRUSTEE AUSTRALIA LIMITED
Appellant
and
COMMISSIONER OF STATE REVENUE
Respondent
GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 4 MARCH 2004, AT 10.20 AM
Copyright in the High Court of Australia
MR J.W. DE WIJN, QC: If it please the Court, I appear with my learned friend, MR M.K. MOSHINSKY, for the appellant. (instructed by Allens Arthur Robinson)
MR P.J. HANKS, QC: Your Honours, I appear with my learned friend, MR C.J. HORAN, for the respondent. (instructed by State Revenue Office of Victoria)
MR D.M.J. BENNETT, QC, Solicitor‑General of the Commonwealth of Australia: If the Court pleases, I appear with my learned friend, MR G. WITYNSKI, for the Attorney‑General of the Commonwealth, intervening as of right. (instructed by Australian Government Solicitor)
I am intervening substantially in the interests of the respondent, but would seek to address after the respondent because of a major matter on which we take issue with the respondent concerning its application to reopen the decision in Rowell v Worthing. If the Attorney‑General for Western Australia makes submissions to the effect that the hotel is not a Commonwealth place, I would seek to have a reply to Western Australia in relation to that issue. If the Court pleases.
MR R.J. MEADOWS, QC, Solicitor‑General for the State of Western Australia: May it please the Court, I appear with my learned friend, MR R.M. MITCHELL, on behalf of the Attorney‑General for Western Australia intervening. (instructed by Crown Solicitor’s Office Western Australia)
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, for the Attorney‑General for New South Wales who intervenes. (instructed by Crown Solicitor for New South Wales)
MR C.J. KOURAKIS, QC, Solicitor‑General for the State of South Australia: If the Court pleases, I appear with my learned friend, MR R.D. DE PALMA, for the Attorney‑General for South Australia intervening. (instructed by Crown Solicitor’s Office (South Australia))
GLEESON CJ: Mr de Wijn.
MR DE WIJN: If I could take the Court first to the Mirror Taxes Act and draw the Court’s attention to one of the key provisions. It is to be found at tab 2 of our chronology in the book of materials.
KIRBY J: How are you going to handle the application to reopen? You are going to deal with that in reply?
MR DE WIJN: I thought I would deal with that in reply, if that is convenient.
GLEESON CJ: If that becomes necessary.
MR DE WIJN: Yes.
GLEESON CJ: Yes.
MR DE WIJN: I am in the Court’s hands, but I thought I would do it that way. Can I take your Honours first to the definitions section, section 3 of the Mirror Taxes Act. The definition of “applied law”:
means the provisions of a State taxing law that apply in relation to a Commonwealth place in accordance with this Act.
Over to the next page, the definition of “scheduled law”:
in relation to a State, means a law that is specified in Schedule 1 in relation to the State, but does not include any part of such a law that is prescribed by the regulations for the purposes of this definition.
Then “State taxing law” is defined:
in relation to a State, means the following, as in force from time to time:
(a) a scheduled law of the State –
that is the ones we find in Schedule 1 –
(b) a State law that imposes tax and is prescribed by the regulations for the purposes of this paragraph;
(c) any other State law of the State, to the extent that it is relevant to the operation of a law covered by paragraph (a) or (b).
Section 4 is a curious provision. It says:
This Act has effect only to the extent that it is an exercise of the legislative powers of the Parliament under the following provisions of the Constitution –
and relevantly paragraph 52(i) of the Constitution. The charging provision, I suppose it is best described as, or the key provision, is found in section 6.
GUMMOW J: Just looking at section 4 for a minute, there is no reliance on section 51.
MR DE WIJN: There is no reliance on section 51.
GUMMOW J: Or section 98.
MR DE WIJN: That does not mean, with respect, that it would not be a law that would be capable of being enacted.
GUMMOW J: Quite. Well, I am not sure about that.
MR DE WIJN: Well, that is another argument, but in terms the Act says it is only an exercise of legislative power under section 52(i) and the other provisions.
KIRBY J: Have you ever seen that before?
MR DE WIJN: I have, and it is a curious provision. One of the things that ‑ ‑ ‑
KIRBY J: It would seem that an Act passed by the Federal Parliament is either valid or invalid under the Constitution.
MR DE WIJN: Precisely, your Honour, and throughout ‑ ‑ ‑
McHUGH J: Was there not some similar drafting in Newcrest, the legislation we considered in Newcrest?
GUMMOW J: Yes.
MR DE WIJN: Maybe, but one would have thought that the legislation was either valid or invalid.
KIRBY J: Maybe it is equivalent to saying our only purpose is to enact a law within those powers and if you think that it is only valid under another power it is not our purpose to enact the law.
MR DE WIJN: Precisely, but it is not as if we would say Parliament can choose where it gets its authority from. Particular laws are either authorised or are not authorised. This might limit the effect of the legislation so that if, for example, it was found that the law was not authorised under section 52(i) but it could be authorised under section 51(ii), then the law does not apply as a matter of interpretation of the statute.
KIRBY J: Is this explained in the second reading speech of the Minister?
MR DE WIJN: It is not explained in terms, but what the second reading speech does say is, in effect, we do not have to worry about the restrictions in section 55 or 51(ii) or section 99 because we are enacting the law under 52(i). What I think is a curious concept is ‑ ‑ ‑
KIRBY J: That was in case the Senate was watching.
MR DE WIJN: In case the Senate was watching. What seems to be the curious concept is that Parliament can choose to enact a law under a particular provision of the Constitution. They might say it is only effective to the extent to which it is within that power, but I am not at all sure that Parliament can pick and choose ‑ ‑ ‑
GUMMOW J: That is what they have said.
MR DE WIJN: Yes, that it is only an exercise of legislative power to this extent.
GUMMOW J: So it is a pro tanto modification of 15A of the Interpretation Act probably.
MR DE WIJN: Perhaps. Section 6 starts with another definition, “excluded provisions”:
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.
GUMMOW J: That is a defined expression.
MR DE WIJN: It is. Perhaps that means, if one interprets Allders into that paragraph, those provisions – that is excluded provisions in relation to a State taxing Act means those provisions insofar as they apply with respect to places acquired by the Commonwealth for public purposes.
GUMMOW J: It is defined in section 3.
MR DE WIJN: Yes, it is.
GUMMOW J: It means it is “inapplicable by reason only of the operation”.
MR DE WIJN: Subsection (2) is effectively the charging provision:
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 –
and we emphasise the words “in the State” –
that is or was a Commonwealth place at that time.
Subsection (3) is again a curious provision. It says:
Subsection (2) does not extend to the provisions of a State taxing law in so far as it is not within the authority of the Parliament to make those provisions applicable in relation to a Commonwealth place.
It suggests that Parliament contemplated that some State provisions may not be able to be picked up and, as it happens, a similar provision was included in the Application of Laws Act 1970.Your Honours will find that at tab 4 in the bundle of materials.
It is almost the same word for word that is in section 4(5)(c). That is the subsection that says this section shall not:
(a) have effect so as to impose any tax;
(b) have effect so as to confer any judicial power; or
(c) extend to the provisions of any law of a State in so far as it is not within the authority of the Parliament to make those provisions applicable in or in relation to a Commonwealth place.
So the similar wording has been picked up. In subsection (4) the applied law has effect subject to any modifications and the modifications are provided for in section 8 and there are a number of ways in which modifications may be made. Regulations may prescribe modifications, or the treasurer of a State may, by notice in writing, prescribe modifications. Subsection (3) provides that “a notice under subsection (2) is a disallowable instrument”.
KIRBY J: Was there ever a report or a parliamentary paper that explained the purpose or principle behind this mirror legislation?
MR DE WIJN: Yes, there was. There was an explanatory memorandum.
KIRBY J: Nothing apart from the explanatory memorandum dealing with the clauses.
MR DE WIJN: No, I think there was only an explanatory memorandum ‑ ‑ ‑
KIRBY J: Where do we find that?
MR DE WIJN: At tab 11.
KIRBY J: Thank you. Do not take yourself off your path.
MR DE WIJN: I will take your Honours to it in due course. It was clear that it was a reaction to the decision in Allders. The explanatory memorandum makes that clear. The Mirror Taxes Act goes on to deal with a number of other miscellaneous provisions: jurisdictions of courts, procedures, certificates about ownership of land, et cetera.
KIRBY J: Does it imply that Allders came as a happy surprise to the federal Parliament?
MR DE WIJN: Yes, it does. It also implies that – yes, well I will not say any more - perhaps to the States, it was clear that the States have got together ‑ ‑ ‑
KIRBY J: It was not a happy surprise for them.
MR DE WIJN: No, it was not happy. Section 23 of the Mirror Taxes Act provides that the revenue collected under the Mirror Taxes Act must be credited to consolidated revenue and there is also, in section 23(4), an appropriation of the consolidated revenue, effectively to the States.
GLEESON CJ: Is this a law that could have originated in the Senate?
MR DE WIJN: We think not, because of the appropriation and because it imposes taxation – the main point. If I can turn now to the section 55 point, which is the first point we deal with in our outline, the point of principle raised by what I might describe as the section 55 point is as set out in paragraph 16 of our submissions, namely, whether a law which Parliament has exclusive power to make, pursuant to section 52(i) of the Constitution, which is also a law imposing taxation, is required to comply with section 55 of the Constitution. As a matter of construction ‑ ‑ ‑
KIRBY J: We had a case – it does not seem to be referred to in the submissions, or at least I have not seen it – in which there was discussion of the history of the Senate’s role and the purpose behind section 55. Do you remember what that case was? Was that the Queensland case involving State taxes? There was a case where this was discussed, since Allders, and I just could not find it referred to ‑ ‑ ‑
MR DE WIJN: Since Allders. Austin?
KIRBY J: No, it was not Austin.
MR DE WIJN: There was some discussion about section 55 in Austin.
KIRBY J: I will keep thinking about it if I can.
MR DE WIJN: We will follow it up, your Honour. We say that, as a matter of construction, there seems little doubt that section 52, which is said to be subject to this Constitution, is qualified by section 55, insofar as it is a law in respect of Commonwealth places which is also a law imposing a tax. It is clear, in our submission, that section 55 is not limited to laws authorised solely under section 51(ii), and we have referred in our written submissions to the Air Caledonie Case (1988) 165 CLR 462 and the Australian Tape Manufacturers Case (1993) 176 CLR 480. They were both cases where it was held that a particular levy – to use a neutral term – was a tax, and that although in the one case it was or could have been authorised under the immigration head of power and in the other under the customs head of power, it was still a tax and notwithstanding authorised under those sections had to comply with section 55.
GLEESON CJ: How do you deal with the scope of the expression “one subject of taxation” when you are dealing not with a general law imposing taxation, but with a law imposing taxation in respect of one specific or particular subject matter, such as Commonwealth places?
MR DE WIJN: With respect, the subject matter of tax is not the Commonwealth Places.
GLEESON CJ: The expression is “one subject of taxation”.
MR DE WIJN: Yes, and the cases indicate that one has to look at how taxes have been dealt with historically and what Parliament had in mind when it was looking at the issue and the subject of taxation, with respect, is not the Commonwealth place. The law is made in respect of places acquired by the Commonwealth for public purposes but the subject of taxation is either income tax or stamp duty or payroll tax, some of those well‑established subjects of taxation.
GLEESON CJ: I understand that in the context of a general tax.
MR DE WIJN: With respect, your Honour, this is the imposition of 24, or whatever the number is, general taxes but made to apply in a particular location. The subject of tax does not change, the area of operation does. One might give an example where one has income tax but there might be special provisions that apply in relation to mining properties, for example. In section 122A of the Income Tax Assessment Act there is, or certainly used to be, incentives, I suppose, additional depreciation, allowances for expenditure incurred in respect of mining operations on a mining property. So the subject of taxation remains, we would say, with respect, income tax, but it operates in a particular area.
KIRBY J: This is the second question, is it not?
MR DE WIJN: It is the second question.
KIRBY J: You have to first meet a suggestion that section 55 does not cover section 52.
MR DE WIJN: We do.
KIRBY J: Notwithstanding the words “subject to this Constitution”.
MR DE WIJN: Perhaps, dangerously, the Chief Justice moved me off my track, but I wanted to deal with the point ‑ ‑ ‑
GLEESON CJ: No, you courteously answered the question.
MR DE WIJN: The first point we do have to make good is that section 52 is subject to 55 and perhaps I will return to that and come back to your Honour the Chief Justice’s question. We would say that as your Honour Justice Kirby pointed out in Eastman 200 CLR 465 ‑ and I know your Honour was in dissent in Eastman, but not in this point – both sections 51 and 52 are concerned with the grant of legislative power and both are expressed to be “subject to the Constitution” and it would be strange, we would say, if “subject to the Constitution” meant something different in section 51 to what it means in section 52.
KIRBY J: Given that the purpose is to protect the role of the Senate in the enactment of legislation and given that that can be done both under section 51 and 52 and given the express language it seems to me very hard indeed to say that 52 is not governed by 55.
MR DE WIJN: With respect, your Honour, we would agree. The respondent relies, and we would say almost solely, on Buchanan. We would say Buchanan is, indeed, a very thin thread to rely on in this case. It was a case dealing with the territories power in section 122. Section 122 of the Constitution is not expressed to be subject to the Constitution.
GUMMOW J: Well, there are now territorial senators.
MR DE WIJN: Yes.
GUMMOW J: So 122 to that extent authorises, as I understand it, the creation of the position of territorial senators. So they get into the rest of the Constitution.
MR DE WIJN: They do and ‑ ‑ ‑
GUMMOW J: And Buchanan assumes the contrary, you see.
MR DE WIJN: And the point I was going to make, that as a matter of wording we are in a much stronger position ‑ and the words “subject to” obviously are of some significance. There has been perhaps a reading down of, I would not say the Buchanan principle but the principle that section 122 is unqualified whatsoever. Before going to that, I just want to take your Honours to a short passage in Svikart v Stewart 181 CLR 548 at 561 in the joint judgment of Chief Justice Mason and Justices Deane, Dawson and McHugh, the paragraph starting at about point 2 of the page, nearly point 3, the first full paragraph:
Section 52(i) provides for the exclusive power to make laws with respect to the seat of government as well as places acquired by the Commonwealth for public purposes . . . That power is not made subject to the Constitution as is the power to make laws with respect to the seat of government under s 52(i).
The words “subject to”, we say, are important and that passage that I have just read was picked up and cited with approval by your Honours the Chief Justice and Justices McHugh and Callinan in Eastman at 333 to 334.
Now, we say, your Honours, that the reasoning in Buchanan relied very much on considerations peculiar to the territories power in section 122, as it was considered in the early part of this century.
GUMMOW J: And to the Senate as a States’ house.
MR DE WIJN: And the Senate as a States’ house. It concerned the power to make tax laws for a territory. By contrast, we say the Mirror Taxes Act enacts a law imposing tax which applies only to the six States. Notwithstanding that we are dealing with Commonwealth places, it is clear, we would say, that they are still part of a State in the Commonwealth in a political sense. The Commissioner’s submission says the States do not have any interest in Commonwealth places. With respect, that is not the case and not made out and entirely contrary to what was said in Worthing at page 124. Justice Windeyer, at the bottom of 124, the very last line, said:
Such places are quite different from territories surrendered to and accepted by the Commonwealth under s. 111 of the Constitution or otherwise acquired, within the meaning of s. 122. The difference is the difference between political dominion and a proprietary interest . . . When the Commonwealth acquires land within a State it becomes in a sense a tenant in fee simple. But the theoretical anomaly disappears if the fee be regarded as in reality merely a description of the nature and quantum of a proprietary interest –
And then down to the very bottom of the page:
The acquisition by the Commonwealth of places in Australia as post offices, naval and military barracks . . . does not mean that they cease to be in a political sense parts of the State within the geographical boundaries of which they lie. They are not like territories surrendered by a State according to s. 122.
At about point 4 of the page, his Honour says:
Territories surrendered to the Commonwealth by a State, and over which the Commonwealth exercises political dominion, can be properly called enclaves: places acquired and held by the Commonwealth as Commonwealth properties within a State to my mind cannot.
We would say it follows that the reasoning in Buchanan at page 327 to 330 would suggest that where the Commonwealth place remains part of the State in the political sense – suggest that it does – therefore Commonwealth taxing laws imposed in respect of such Commonwealth places should be subject to section 55, to ensure the protection that was intended to be afforded to the States and its residents.
The proposition that section 122 is not governed by other provisions of the Constitution is not something that can be accepted as absolute today. In Spratt v Hermes Chief Justice Barwick made the point at page 242 that section 122, although a broad power, was qualified, and the point was made again in Capital Duplicators 177 CLR 248 in the joint judgment ‑ and I just need to refer to the pages without reading from them ‑ at 272 in the joint judgment of Justices Brennan, Deane and Toohey their Honours say that:
the scope of section 122 may be qualified by other provisions in the Constitution –
and there is a reference to Spratt v Hermes in the passage of Chief Justice Barwick. At 276, at the bottom of the page, we have referred to these passages in our submissions, and 279, and in the judgment of Justice Gaudron at 288 and 287.
So we would say as a matter of statutory construction and as a matter of reading the Constitution as a whole, bearing in mind that Commonwealth places remain part of the States in the political sense Justice Windeyer described, it would be clear, we would say, that section 52 must be read subject to section 55 insofar as it imposes a tax law. The next question then is whether the Mirror Taxes Act fails to comply with the first and/or second paragraphs of the Mirror Taxes Act.
GUMMOW J: What is the consequence of non‑compliance with the first paragraph for your case?
MR DE WIJN: The non‑complying provisions go out ‑ ‑ ‑
GUMMOW J: Yes. What is the practical result for these assessments?
MR DE WIJN: The non‑complying provisions go out. One of the non‑complying provisions would be the objection provisions and they are the only place one finds objection provisions and one would then have an incontestable tax which would be invalid for that reason.
KIRBY J: You have to still overcome the second point which the Chief Justice was asking you about because it is one thing for 55 to govern 52. It is another to say that there is a breach of 55 in the way this Act is structured. There are two questions. One is whether, conceivably, the Constitution operates, and the second is, if it does operate has it been breached and there are strong arguments ‑ ‑ ‑
GUMMOW J: I am trying to get an answer to the first question.
MR DE WIJN: There are two paragraphs to section 55. The first is that:
Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.
That is the Dymond point, if I can put it that way.
GUMMOW J: And you say the net result would be an incontestable tax?
MR DE WIJN: What would happen is that the non‑imposing provisions, the penalty provisions and all of those other provisions, would go and with it would go the objection provisions, because the only place one finds the objection provisions is in the ancillary provisions, and one would be left with an incontestable tax.
GLEESON CJ: That is the step I am just a little puzzled about at the moment. Let us suppose you had a law imposing taxation and nothing in the legislation setting up a procedure for objection and review. Why does it follow that a taxpayer cannot by any means dispute an assessment?
MR DE WIJN: One would have to find some other means of ‑ ‑ ‑
GUMMOW J: Well, they would just refuse to pay the debt. You have an answer to an action in debt.
MR DE WIJN: That may be the answer.
GLEESON CJ: We looked at this, did we not, in a case in relation to customs duty?
GUMMOW J: Yes, we did.
GLEESON CJ: A few years ago.
MR DE WIJN: The consequence of infringing the first part of section 55 is that the extraneous provisions drop by the by. It means there are no machinery provisions. It does not get us anywhere unless one somehow invalidates what is left.
GUMMOW J: Well, it does not get you anywhere if this debt point ‑ ‑ ‑
MR DE WIJN: Well, it does.
GUMMOW J: Yes, Malika v Stretton is the case.
HAYNE J: 204 CLR 290.
MR DE WIJN: The second paragraph of section 55 is the one that gets us a lot further, and that is:
Laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with one subject of taxation only –
We would say that one only needs to look at the schedule to the Mirror Taxes Act to see the disparate subjects of taxation: payroll tax, stamp duty, debits duty. Three more disparate subjects of taxation.
KIRBY J: That depends on how you classify it and that gets back to the Chief Justice’s question. If you classify it as a taxation designed to deal with the peculiar problem of Commonwealth places, then it passes muster, does it not? I know that that is not how it has been in practice read in the past, at least in State tax legislation/
MR DE WIJN: That classification, we would say, is highly artificial. That classification seeks to classify the subject of taxation by reference to the location in which it operates. That is not the subject of taxation. With respect, that is the geographical area in which it applies. In my example of the mining ‑ ‑ ‑
KIRBY J: It is the subject matter of the taxation. Maybe that is the distinction you draw, that it is not the subject. The subject of taxation is that upon which the taxation falls.
MR DE WIJN: The income, or the payroll tax, or the instrument in the stamp duty context. That is the subject of taxation. Just to repeat the example I gave before about the mining provisions – and one can no doubt think of a lot of other provisions – the subject of taxation is still income tax, but they might operate differently on a mining property, or on a primary production property, or whatever. One would not say, with respect, that the subject of taxation is primary production property ‑ ‑ ‑
GUMMOW J: One can approach this at large, but one approaches it through Resch’s Case, does one not?
MR DE WIJN: Your Honour is correct and if ‑ ‑ ‑
GUMMOW J: Resch’s Case says that the courts take what the Americans would call a deferential position, where the legislature takes a view as to what a subject of taxation is because there ‑ ‑ ‑
MR DE WIJN: Can I deal with that very point, your Honour? At paragraph 43 of the respondent’s submissions, it is a convenient place to find the passage. If I could ask your Honours to turn to paragraph 43 of the respondent’s submissions. The respondent there sets out a passage of this Court from the Second Fringe Benefits Tax Case 163 CLR 329 at 344. Over the page, page 14 of the respondent’s submission, in the second full paragraph there extracted the Court says:
Although the court is bound to insist on compliance with the requirements of s 55 so that the section achieves its purpose of enabling the Senate to confine its consideration in each case to a taxing statute dealing with a single subject of taxation, in applying the test stated above, the Court will naturally give weight to Parliament’s understanding that its Tax Act deals with one subject of taxation only.
Now, if we turn to what Parliament’s understanding was – and I ask your Honours to turn to the book of materials, to tab 11, the explanatory memorandum, and I ask your Honours to turn to paragraph 1.15. Your Honours will see from paragraph 1.15 that Parliament’s understanding was that section 55 simply did not apply. So Parliament did not have any understanding that it was dealing with a discrete subject matter of tax. It had in mind that section 55 might be a problem, but thought it was not a problem because it simply did not apply to section 52. Reading from the explanatory statement:
The limitation on the Commonwealth’s taxing power, precluding its use so as to discriminate between States or parts of States, does not apply to the Bill. The Government is also advised that the constitutional limitations on laws imposing taxation, requiring laws imposing taxation to deal with no other matter, and requiring such laws to deal with one subject of taxation only (Constitution, section 55), do not apply to the Bill.
GLEESON CJ: What is it about the expression “subject of taxation” that produces the consequence that where you have legislation like this aimed at a special and particular problem and a unique legislative response to the problem, that it is not capable of being regarded as one “subject of taxation”. Where does that expression come from?
MR DE WIJN: I am not sure where the expression comes from. It certainly appeared to be parliamentary practice, I think overseas in England, before our Constitution for taxing Acts to deal only with one subject in the traditional sense, and that has certainly been the assumption of this Court right through the last century.
HAYNE J: What, an assumption that this is a reflection of British parliamentary practice?
MR DE WIJN: No, an assumption that subject matter of tax meant a subject such as income tax or stamp duty or land tax. There is no other example that we have been able to find anywhere where the Commonwealth Parliament has sought, in one enactment, to pick up more than one traditional subject ‑ ‑ ‑
HAYNE J: This problem is a problem of first impression and to suggest, as you do, that the Court has previously assumed to the contrary is rather to draw a long bow, is it not Mr de Wijn? If this is a problem of first impression, it is a problem of first impression.
MR DE WIJN: With respect, your Honour, section 55 is a saving provision in the Constitution designed to protect the Senate and designed to have each “subject of taxation” considered separately.
KIRBY J: That is why I mentioned to you this has been discussed in a case recently, within the last two years, and the history and purpose of the provision of section 55 was discussed.
GUMMOW J: It was an issue in Austin.
KIRBY J: I recollect that it is explained in Quick and Garran.
GLEESON CJ: It is related to the problem of tacking, is it not?
MR DE WIJN: It is.
GLEESON CJ: How does a problem of tacking arise in relation to legislation of this particular kind? Do you mean the Senate might have thought, we are happy enough to have mirror tax legislation in relation to Commonwealth places in respect of stamp duty, but we are not too keen on mirror tax legislation in relation to land tax.
MR DE WIJN: Your Honour, I was perhaps too quick to say yes in response to the question of tacking. The tacking problem is the first paragraph of section 55, that is dealing only with imposition of taxation so to avoid having a law that deals with the imposition of taxation having something added on to it. The separate subject matter is a separate protection designed to ensure that one does not put together ‑ ‑ ‑
GLEESON CJ: You cannot present the Senate with a packaged deal.
MR DE WIJN: A packaged deal, exactly, a packaged deal of subjects of taxation.
GLEESON CJ: The House of Representatives cannot confront the Senate with a take it or leave it approach to a package of taxation measures. Why is Parliament not entitled to regard this particular law in this particular situation as a discrete taxing measure?
MR DE WIJN: It is a discrete response to a problem, but it is a problem, the Allders problem, that bears on a number of different taxes. So we have a problem perceived from the decision in Allders. It applies not just to one subject of tax, it applies to a number of subjects of tax, and it applies because particular subjects of tax apply in respect of a particular location. The location is the Commonwealth place. It is the relationship with the Commonwealth place that determines whether the States can or cannot impose the tax that has the required relationship. We would say it is entirely artificial to then sort of classify the subject of tax as the Commonwealth place.
It is the relationship with the Commonwealth place that gives rise to the inability of the State governments to legislate for those taxes, but that inability applies to a number of subjects of taxation. States do not impose income tax any more, but it could be income tax, it could be payroll tax.
GUMMOW J: It could not be land tax though.
MR DE WIJN: In fact, land tax has come in – it could not be land tax because the States cannot tax the Commonwealth.
GUMMOW J: Because of 114.
MR DE WIJN: Precisely, but land tax has, in fact, been included in the schedule by a regulation. It does not affect us because it happened after, but there may be provisions in the Land Tax Act where lessees, for example, might be deemed to be owners, so that there may be some overlap. But generally what your Honour Justice Gummow says is correct because the States could not tax the Commonwealth.
The relationship with the Commonwealth place is not the subject of taxation. It is the matter that determines whether the State has or has not exceeded its authority. The subject of taxation does not change and what the Parliament has done is, in fact, put together a package of disparate taxes and said, “Take it or leave it”. Now, as it happens, it was taken, but the subject matters of tax remain – we would say, with respect, stamp duty, stamp duty as they apply in the particular relationship; payroll tax, as it applies in a particular place – and we would say that is clearly the subject matter of taxation, not the relationship with the Commonwealth place. The relationship is not the subject matter.
HAYNE J: That is the subject of taxation is not acts, matters or things connected with the relevant locality?
MR DE WIJN: That is not the subject of tax. The subject of tax ‑ ‑ ‑
HAYNE J: Is the Stamps Act not relevantly a tax on the transaction?
MR DE WIJN: No, the Stamps Act that we are concerned with is a Stamps Act on instruments ‑ ‑ ‑
HAYNE J: I thought that was the dissenting view in Allders.
MR DE WIJN: The dissenting view in Allders was just because it is a duty on instruments does not mean there is not a sufficient relationship with the Commonwealth place.
HAYNE J: Because it is an act, matter or thing connected with the relevant locality, relevantly?
MR DE WIJN: Because it is in respect of the relevant locality, but the subject matter of the tax remains the instrument.
CALLINAN J: I would have thought that was clearly rejected in the joint judgement at page 676. That argument is really described there as a “slogan”. The first complete paragraph on page 676.
MR DE WIJN: The argument in Allders was an argument about relationship. Because stamp duty was a duty on instrument, it could not be in respect to a Commonwealth place. That does not change, with respect, what the subject of taxation is. Just because something is in respect to a Commonwealth place – take the income tax example again. Income tax might be payable on income derived from sources in Australia. The subject of the tax is the income. What determines whether it is payable is the source in Australia. One would not say the subject of income tax is Australia. Income tax might be payable by residents of Australia. So the relationship or the necessary test is residency, for example, but one would not say the subject of taxation is residence. The subject of taxation is the income. That is what is being taxed.
GLEESON CJ: It might depend on the context in which you ask the question might it not? The expression “subject matter of taxation” may have some flexibility about it.
MR DE WIJN: It may, your Honour, going back to the precise words of section 55 – “one subject of taxation”, not subject matter.
GLEESON CJ: Yes, well, first of all, that does not mean a person, does it? Although there is a section in which you could describe a person as a subject of taxation.
MR DE WIJN: We were not suggesting that it is a person, we were suggesting that it was the subject of taxation. The cases would say that it is to be determined by looking at what have traditionally been regarded as disparate and different subjects of taxation.
GLEESON CJ: That is what gives rise to my question. Whether or not, in a context such as the present, it is appropriate to be governed by what has traditionally been regarded in the context of general tax law as a subject of taxation. We are dealing with a very special and particular problem, you know.
MR DE WIJN: We are dealing with a special and particular problem, but the special and particular problem is a tax problem. One cannot get away from that. The Commonwealth ‑ ‑ ‑
GLEESON CJ: Going back to the relationship between the two Houses of the Federal Parliament, what is it about the relationship of the two Houses of the Federal Parliament and what has been done in the present case that gives rise to a problem?
MR DE WIJN: The problem is that ‑ ‑ ‑
GLEESON CJ: In particular, a problem of tacking, that is to say, presenting legislation on a take it or leave it basis in relation to a number of matters that the Senate might want to regard as different matters.
MR DE WIJN: One does not say there is not a problem because the legislation was passed. One looks at the protections that are put into the Constitution in respect of taxing laws. The Senate is entitled, and the States are entitled, to have put up one subject of taxation at a time. So that in a general sense if one was saying –leave aside the discrimination point and the preference point – but if one was saying, “I want to introduce a specific tax for Victoria”, one would have thought it would be clearly contrary to section 55 if Parliament said, “Well, you’re going to get a package and it’s going to include income tax, land tax and stamp duty”. That is just broadening the geographical area. One would have thought that was clearly contrary to section 55. The fact that this legislation deals with the relationship in a smaller geographic area does not change, we would say, the construction one gives to section 55.
KIRBY J: What is the history behind – in the English parliamentary practice and the struggles between Parliament and the Crown - over taxation. What was the history that preceded that, that is reflected in section 55? Was it that it is easier for Parliament to reject a particular taxing measure than it is to reject a whole swag of them and to interrupt the revenues of the Crown and that, therefore, it should be done bit by bit.
MR DE WIJN: Exactly, to avoid the “take it or leave it” package the Chief Justice mentioned. To avoid saying ‑ ‑ ‑
KIRBY J: But a robust Parliament could say, “Well, it’s too bad. We won’t have the lot”.
MR DE WIJN: A robust Parliament might.
KIRBY J: It is steeped in constitutional history here, and I am sure it is all explained in Quick and Garran, no doubt elsewhere, but in order to understand what 55 is getting at, it is helpful to know what the history behind it is. It is an ancient parliamentary history.
MR DE WIJN: I appreciate that, your Honour.
KIRBY J: And we have looked at it in recent years.
MR DE WIJN: Your Honour, could I take your Honours to paragraph 17 of our written submissions, page 8. It starts at page 7. The first paragraph of section 55 of the Constitution as related to section 53 was intended to prevent the practice of tacking. The purpose of the second paragraph of section 55 was to ensure separate consideration by each House of particular kinds of taxation, so that each would be considered on its merit and not just as an element of the overall package, and that is from the Second Fringe Benefits Tax Case. That may have been the case that your Honour Justice Kirby was referring.
GUMMOW J: These are federal considerations.
KIRBY J: The case I was referring to was one in which I participated, and I did not participate in that one.
MR DE WIJN: No.
KIRBY J: We have debated this in recent years.
MR DE WIJN: Perhaps Luton v Lessels [2002] HCA 13.
GLEESON CJ: That is the case about the collection of money owing by defaulting child supporters.
MR DE WIJN: So we say that the parliamentary history and the cases make it plain that the second part of section 55 was to ensure separate consideration of particular kinds of taxation, so that you just do not get an overall package as in this case. The way in which to resolve the problem, or the way in which to do it properly is to ensure, as has been done for 100 years, that each traditional subject of taxation, each subject of taxation and, with respect, it is difficult to see how the relationship with the place can be the subject of taxation - the subject of taxation is the ‑ ‑ ‑
GLEESON CJ: It depends on the degree of particularity or generality, but if you look at the Income Tax Assessment Act somebody reading through that might be able to identify many subjects of taxation within the Income Tax Assessment Act.
GUMMOW J: That is what Resch was all about, was it not?
MR DE WIJN: Precisely.
GUMMOW J: …..did not work.
MR DE WIJN: For that reason this Court has said you do not analyse the subject of taxation in the way economists might. You look at it in an historical sense and you look at what Parliament intended. Now, what is plain from the explanatory memorandum is that Parliament did not consider that this was one subject of taxation. Parliament considered that it did not need to comply with section 55, so it did not have to worry about it. So if one is looking at what Parliament had in mind, Parliament said, I do not need to worry about it. It did not consider it was dealing with one subject of taxation. If any inference is open from the explanatory memorandum, it is the contrary inference. It thought it was dealing with more than one subject matter, but it thought it did not matter.
HAYNE J: That seems to have put a gloss on what is said in Resch.
GUMMOW J: Page 223, 66 CLR about point 4. Section 55:
is concerned with political relations, and must be taken as contemplating broad distinctions between possible subjects of taxation based on common understanding and general conceptions, rather than on any analytical or logical classification.
MR DE WIJN: Yes, and the broad ‑ ‑ ‑
GUMMOW J:
What is the subject of the tax may be gathered from a general consideration of the enactment . . . that it is for the legislature to choose its own subject and that its choice is fettered neither by existing nomenclature nor by categories that have been adopted for other purposes.
So your reference to tradition is not right, I think, if Resch stands. It is always treated as authoritative in this field.
MR DE WIJN: The subject of taxation is on no view, we would say, the Commonwealth place. The Commonwealth place – repeating the submissions – but the Commonwealth place is not the subject of taxation. The subject of taxation is, in the case of payroll tax the wages, or in the case of stamp duty the document or the transaction, but that is not the ‑ ‑ ‑
HAYNE J: I understand you say that the Commonwealth place is not the subject of tax. That does not inevitably lead to the consequence that the subject of the tax is not taxation in Commonwealth places. Now, it may be that that is not a single subject, but simply saying that the subject is not the Commonwealth place does not lead to the conclusion you assert?
MR DE WIJN: The expression “taxation in Commonwealth places” is merely a general description. One could simply say that all Commonwealth taxes are Commonwealth taxes. That does not make Commonwealth taxes the relevant subject of taxation. That is just a generic description of all of the taxes. The subject of taxation is not the general description. It is the particular tax that this Act or the particular taxes that this Act picks up.
HAYNE J: It seems to me at the moment that the essence of your point is captured in Clause 1.1 of the explanatory memorandum by the use of the plural form:
provides the framework for the imposition of taxes.
At the moment, that is the essence of the point that you make.
MR DE WIJN: With respect, that is a good summary of the point, but the “taxes” that the explanatory memorandum refer to are the taxes picked up in the schedule, which are disparate taxes. It is, we would say, artificial and it would defeat the purpose of section 55 if one were able to just broaden the definition to say it is any Commonwealth taxes, or any taxes.
Can I go now to the section 99 point. The Commissioner’s argument in relation to the section 99 point appears at paragraph 49 of the Commissioner’s submissions. The Commissioner says:
The reference in s 99 to laws of “revenue” (at least in so far as it covers taxation laws) should be similarly construed as limited to laws which are supported, or are capable of being supported, by the legislative power conferred by s 51(ii).
Now, we say the imposition of taxes such as stamp duty in respect of Commonwealth places – or, for that matter, more widely – is capable of being supported under section 51(ii), no question about that.
The second point we make is that the words in section 99 are plain and they apply to any – we emphasis the word – any law of revenue. Clearly, we would say, the Mirror Taxes Act is a law of revenue no matter what head it is authorised under. To the extent that the expression “revenue” in section 99 of the Constitution is broader than the expression “taxation”, it would indeed be a strange result if, to the extent that revenue was broader, section 52 would be subject to section 99, but not otherwise. That seems to be the consequence of the Commissioner’s argument.
GUMMOW J: What do you say about the proposition in paragraph 55.2 of the respondent’s submissions ?
MR DE WIJN: Can I come to deal with that in a moment?
GUMMOW J: Yes.
MR DE WIJN: The third point about section 99 being subject to section 52 is that we say that if section 99 were limited in its application to laws only authorised under sections 51, 52 or 53, it would be otiose, except to the extent perhaps that there was a difference between discrimination in 51(ii) and preference. The cases tend to suggest that certainly there is no significant difference.
Now, to answer your Honour Justice Gummow’s question, if we make good the point that section 52 is to be read subject to 99, the next point we have to make good is that there was a preference. Could I take your Honours to the schedule to our written submissions. What we have done there is assumed that the particular agreement to lease was executed in each of the six States of Australia, and, on the assumption that the take‑out amount was, in effect, a premium, as it has been assessed, we have calculated the different amounts of duty in each of the States.
Your Honours will see, in the second last column, the figures vary enormously from 762,000 in Victoria, 254,000 in New South Wales, to an excess of 2 million in the other States, the 2 million being caused by the other States assessing premiums at conveyance rates of duty. So one will see an enormous difference and preference being given, in this case, to New South Wales.
GLEESON CJ: I am not sure whether you told us about this earlier and I am not sure whether it appears from the statute, but do the taxes raised under this legislation go back to the State?
MR DE WIJN: They do. There is an appropriation in the Mirror Taxes Act in section 23 where the taxes go straight back to the State. The theory is the States bear the administrative burden of collecting when there is an administrative arrangement in place.
Now, the only criteria or discrimen that determines which of those amounts of duty is payable is where the Commonwealth place is located. That is the only factor that determines which amount of duty is payable. Section 6(2) of the Mirror Taxes Act makes that plain and, for example, in relation to New South Wales, section 164 of the Duties Act defines a lease as “a lease of land in New South Wales”. So the only thing that determines which of those amounts of duty is payable is the location of the property.
The respondent says this does not give a preference because it imposes a uniform rule. With respect, we say, that is not so. The Mirror Taxes Act imposes as one Act, one law of the Commonwealth, 24 different sets of provisions which operate so that significantly different tax outcomes arise solely because the Commonwealth place is located in one State or another. That is not the operation of a provision uniformly. The discrimen is the State and the cases make it clear that, if that is the case, then it is an unlawful preference.
Can I take your Honours first to Cameron 32 CLR 68. This was the case where they had a different cost value for livestock depending on the State in which the livestock was situated. First, at page 71 at about point 6, Chief Justice Knox says:
It is manifest that the fair average value, as found by the table of stock in different States varies according to the State in which such stock are found; and that this is the only discrimen pointed out in the table.
Over to the next page, page 72 at about point 4, the Chief Justice says:
I respectfully agree with this definition, and add that when the localities selected to furnish the discrimen are States or parts of States the discrimination is expressly forbidden by sec 51(ii) –
and the later cases say that there is not a lot of difference between that sort of discrimination and preference. Justice Higgins at page 78 at about point 7 or 8 says:
Two pastoralists may in fact make £1,000 net profit – one in New South Wales, the other in Queensland; and yet under these Rules they may be treated as making unequal profit, and be liable to pay unequal income tax. The only reason for this result is that one is in Queensland, the other in New South Wales.
Finally, Justice Starke at page 79, about the middle of the page:
A law with respect to taxation applicable to all States and parts of States alike does not infringe the Constitution merely because it operates unequally . . . On the contrary, a law with respect to taxation which takes as its line of demarcation the boundaries of States or parts of States necessarily discriminates between them, and gives a preference to one State or part thereof over another State or part thereof.
MR GLEESON: Once again, the word “preference” is a word that takes its meaning from its context and its practical application, is it not?
MR DE WIJN: Yes, and the preference in this case is given to taxpayers in New South Wales over taxpayers in Victoria or Queensland. The preference is to the person entering into the lease so that if my client chose to enter into this very same agreement in New South Wales he would be advantaged.
HAYNE J: How is that said to be a preference to one State, or any partner of, over another State?
MR DE WIJN: It is the people in the State. That is what Cameron and James made clear. It is not the State as a State; it is the people in the State. What Cameron made clear was that one was talking about the taxpayers in the particular State and the different tax result that arises because you have a different cost base for the cattle, or whatever it is. It is not the State, per se; it is the people in the State. So the taxpayer, Permanent, had it gone to New South Wales and entered into this very agreement would have been advantaged or Permanent No 2 in New South Wales would have paid a lot less stamp duty or duty under the Mirror Taxes Act. This is Commonwealth legislation imposing a Commonwealth tax.
GLEESON CJ: On the basis of local rules.
MR DE WIJN: No, with respect, not on the basis of local rules, on the basis that the Commonwealth Act enacts, as a Commonwealth Act, its own legislation. This is a Commonwealth Act. It happens to pick up the words in the State Act, but it is a Commonwealth Act imposing tax at different rates and the only discrimen is where you happen to be, which State you happen to be in.
HAYNE J: Can you have a discrimination between States or parts of States which does not give preference to one State or any part thereof over another State or any part thereof?
MR DE WIJN: The cases suggest that there is not a lot of practical difference between discrimination in section 51(ii) and 99, although the wording is slightly different. I think the suggestion is that you cannot have discrimination without preference, but you might be able to have preference with discrimination. The other way around - you might be able to have preference without discrimination, but not the other way around. On no occasion have the courts identified any significant practical difference between discrimination and preference. For section 99 purposes the preference is clearly given, based on the location of the particular Commonwealth place. It is the sole factor it turns on and that is precisely what happened in James ‑ ‑ ‑
KIRBY J: Its purpose is to equalise people in different States in order to ensure that taxes of this kind are not avoided. Its object is not discrimination, but equality, and it is one respectful to the federal scheme because it permits the States to fix the tax and this is the vehicle by which it is imposed.
MR DE WIJN: With respect, your Honour, it does that in a way that is not permissible under the Constitution. We have a situation where the States are prohibited under section 52 from imposing stamp duty and the other duties if they have the necessary connection with a Commonwealth place.
KIRBY J: Your theory would require that the Commonwealth levy a uniform tax throughout the Commonwealth, get a pot of gold and give a reimbursement, or give a fund, under maybe section 96, to the States.
MR DE WIJN: If the Commonwealth wanted to introduce stamp duty, for example, in respect of Commonwealth places, it could do so quite easily. It could do so in compliance with section 55 and it could do so at a uniform rate that applied uniformly in respect of each Commonwealth place. Your Honour’s example ‑ ‑ ‑
GUMMOW J: Commonwealth places are in parts of States. People might be back here arguing section 99 from another viewpoint.
MR DE WIJN: With respect, your Honour, the relevant discrimen is the State. Although the Commonwealth place might happen to be in a State, and would happen to be in a State, the relevant discrimen for section 52 purposes is the acquisition of a property by the Commonwealth for public purposes. So one would not be discriminating if one imposed a particular rate of tax in respect of transactions in a Commonwealth place because the Commonwealth place is ambulatory. It is not selected as being a geographical region within a State or a State itself. It is the same as the mining example that I gave to your Honours earlier.
If the Commonwealth enacted a specific provision such as it has in section 122 allowing special concessions for mining properties, or expenditure incurred on mining properties, one would not say that the discrimen is part of the State. It is the mining property wherever it happens to be within the State. What Cameron and James make clear is that the discrimen needs to be identified as a State or identified as a geographical region within a State – say, the east half of Victoria or something like that. The Commonwealth place, although it happens to be in a State, does not take a geographical area within the State as the discrimen. So we say the Commonwealth could easily enact a level stamp duty to apply in all Commonwealth places, and that would not infringe section 92.
Your Honour Justice Kirby’s question about the equalisation I think can be dealt with by this response. Assume for a moment that each of the States imposed income tax and each of the States chose to do that at a different rate ‑ 10 per cent in Victoria, 20 per cent in New South Wales. It would not be permissible for the Commonwealth to say, “We would like to equalise all taxpayers in Australia. So what we are going to do is impose an income tax of 40 per cent in Victoria, to bring it up to 50 per cent, and 30 per cent in New South Wales”. That would clearly not be permissible. That is what, in effect, is happening.
The problem is caused, if it is a problem – and we say it is not a problem – because the authority to tax in relation to these places is given to the Commonwealth and the Commonwealth is required to exercise that power in a particular way, a non‑preferential way.
HAYNE J: Now, does this limb of your argument depend upon equating discrimination and preference?
MR DE WIJN: No, your Honour.
HAYNE J: I understood it to argue from 51(ii) to the content of 99. Is that right?
MR DE WIJN: We would say that the preference – if I can just go to James ‑ ‑ ‑
HAYNE J: I had in mind what Justice Dixon said in Elliott 54 CLR 657 at 682 to 683, particularly his Honour’s remark at 683:
I agree that it does not follow that every discrimination between States is a preference of one over the other. The expressions are not identical in meaning.
I have not yet, I fear, understood what your submission is about preference. I understand you to say there is discrimination, but what do you say is the preference of one State over another?
MR DE WIJN: The preference is the lower rate of duty or the lower rate of tax that is payable by New South Wales. That is the preference to those residents of New South Wales. That is a preference.
HAYNE J: I understand that, but then what are you doing about the words “preference of one [State] over the other”? Are you equating a preference to those who transact business in a State with a preference to the State, or preference of a State over another, rather?
MR DE WIJN: Yes, with respect. It is the people in the State ‑ ‑ ‑
GUMMOW J: What do you mean by “people in”?
MR DE WIJN: Well, the residents ‑ ‑ ‑
GUMMOW J: They do not have to be a resident.
MR DE WIJN: Well, they do not have to be residents, but it can be any relationship.
GUMMOW J: Exactly.
MR DE WIJN: But it is the doing of the business in building the hotel in New South Wales. Had Permanent built the hotel, had Permanent No 2 built an identical hotel in New South Wales, it could have got a clear preference of some hundreds of thousands of dollars.
CALLINAN J: Why does that not discriminate between the States themselves, in the sense that it imposes a tax, which enables one to get more stamp duty revenue than another?
MR DE WIJN: I think your Honour might be right. Can I take your Honours back to Cameron at page 79? Although the earlier passages I read dealt with discrimination, Justice Starke goes on and deals with preference. At point five he says:
A law with respect to taxation applicable to all States and parts of States alike does not infringe the Constitution . . . On the contrary, a law with respect to taxation which takes its line of demarcation the boundaries of States or parts of States necessarily discriminates between them, and gives a preference to one State or part thereof over another.
And the passage that your Honour Justice Hayne referred to in Elliott, it is perhaps necessary to read on, at the bottom of page 683:
To give preference to one State over another State discrimination or differentiation is necessary. Without discrimination between States or parts of respective States, it is difficult to see how one could be given preference to the other. But I agree that it does not follow that every discrimination between States is a preference of one over the other. The expressions are not identical in meaning. More nearly, if not exactly, the same meaning, is the expression “discrimination against”.
We do not take it that his Honour Justice Dixon is saying that there is a major difference between the expressions. We rely on there being a clear preference and the figures bare that out.
GUMMOW J: One purpose of this law is, as Justice Callinan has been pointing out to you, to provide appropriations in favour of the States under section 23. You, naturally enough, are obsessed with the position of the taxpayer, but the statute is all about disbursement of moneys under section 23. Now, does that have any bearing on the application of 99?
MR DE WIJN: It certainly gives, from that point of view ‑ ‑ ‑
GUMMOW J: The relevant law, 99, can be section 23 of this Mirror Taxes Act, can it not?
MR DE WIJN: Yes. It certainly gives a preference to one State over another.
HAYNE J: In what sense?
MR DE WIJN: More money.
HAYNE J: The mere fact of monetary difference?
in a State as opposed to a stamp duty tax, and given that rational connection, there is no difficulty, in my submission, in this case in saying that this law deals with one subject of taxation.
GUMMOW J: You referred to one passage in the Tasmanian Dam. Justice Deane, also, at page 251, deals with a submission that Morgan should not be followed. But do not take the time up with it now.
MR KOURAKIS: If your Honour pleases, I will not take the Court’s time looking at that now, but if I could have leave, perhaps, to make a written submission on it, if it is appropriate?
GLEESON CJ: Yes.
MR KOURAKIS: If the Court pleases.
GLEESON CJ: Yes, Mr de Wijn.
MR DE WIJN: If the Court pleases. If I could deal with your Honour the Chief Justice’s last question first. We would say that if the Commonwealth enacted a stamp duty, for example, that applied to all activities in Commonwealth places at an equal rate, that clearly would not offend section 99, because the discrimen would not be chosen by reference to a State – unlike the present scheme – and it would not be chosen by reference to a part of the State. The preference would not be a preference which would offend section 99.
GLEESON CJ: Why would it not discriminate between those parts of the State that were Commonwealth places and those parts of the State that were not?
MR DE WIJN: There are two answers to that. First, it would not offend section 99 because the choice of the place is not based on it being a geographical part of a State or being a State. The discrimen is an ambulatory discrimen, that is places acquired by the Commonwealth for public purposes. That is different to saying the eastern half of Victoria or the western half of Victoria or the whole of Victoria.
GLEESON CJ: But suppose the Commonwealth enacted a law that said, “We’re going to impose stamp duty on all transactions relating to estates in land, leases of land in airports, Commonwealth airports, at a rate that happens to be double the rate of stamp duty applied by the State of New South Wales to similar transactions or instruments everywhere else”.
MR DE WIJN: And provided that applied equally to all Commonwealth places throughout Australia, that would not be giving a preference to one State or any part of a State. That arises from the way the High Court has approached this issue in Cameron and James. If I can take your Honours back to Cameron 32 CLR 68 at 72, the decision of Chief Justice Knox, in the sentence immediately prior to the sentence I read to the Court earlier at the top of page 72, his Honour the Chief Justice refers to Barger’s Case and says:
In that case my brother Isaacs said: “Discrimination between localities in the widest sense means that, because one man or his property is in one locality, then, regardless of any other circumstance, he or it is to be treated differently from the man or similar property in another locality.”
That has been picked up and approved by Chief Justice Latham in Elliott. That case, Cameron, was in fact ‑ ‑ ‑
GUMMOW J: Not by Sir Owen Dixon.
MR DE WIJN: Not by Sir Owen Dixon, but in fact Cameron was a case which involved section 51(ii) and section 99; your Honours will see that in the decision of Justice Starke at page 79.
GLEESON CJ: So, if, to reverse my example, the rate of stamp duty imposed by the Commonwealth in respect of airports was half the rate of stamp duty that operated in the rest of New South Wales, or in relation to the rest of New South Wales, that would not involve a preference to one part of New South Wales over other parts of New South Wales.
MR DE WIJN: It would not – it may, but the discrimen would not be a particular geographic region of New South Wales. The discrimen would be properties acquired for a certain purpose. An example I gave earlier this morning, mining properties, the same discrimination could be said to apply in relation to a mining property. The reason that the incentives that the Tax Act provides to mining properties and primary production properties do not offend section 99 is because the discrimen is not a State or a part of a State and, with respect, that example in relation to mining properties answers, with respect, you Honour’s question in respect of airports, because it is simply another discrimination. Section 99 does not talk about discrimination between one part of a State and another part of a State. It talks about discrimination between one State and another State ‑ ‑ ‑
GLEESON CJ: Preference.
MR DE WIJN: ‑ ‑ ‑ preference, sorry – preference between one State and another State, or preference between one part of one State over a part of another State.
The consequences of our submissions in respect of section 99 are not horrendous at all, we say. We say they are normal consequences of reading section 99 in the context of the Constitution and saying what was intended by section 99 is that, insofar as Commonwealth legislation is concerned, the Commonwealth could not choose to discriminate solely based on the location of a particular property or the location of a particular person. If one were to legislate in respect of activities in Commonwealth places, the discrimen would not be a particular part of Victoria or a particular part of Western Australia. The discrimen would be, as with a mining property, a property with a particular characteristic, independent of this location.
GLEESON CJ: That is an interesting and, I think, valid point that you make, that section 99 does not prevent giving preference as between parts of a State.
MR DE WIJN: I am indebted to my learned junior, who has referred me to the decision of Chief Justice Latham in Elliott (1936) 54 CLR 657 at 667, where the Chief Justice says:
It may be noted that the discrimination which is forbidden by sec. 51 (II) includes discrimination between parts of the same State. In sec. 99 the geographical element in the prohibition is expressed by the prohibition of giving preference “to one State or any part thereof over another State or any part thereof.” There is nothing in sec. 99 which in terms prevents the giving of preference to one part of a State over another part of the same State ‑ ‑ ‑
GLEESON CJ: Yes, which makes it very difficult to regard section 99 as in support of a general principle of equality.
MR DE WIJN: It requires a general principle of equality where it forbids the choice of States or parts of States as the discrimen ‑ ‑ ‑
GLEESON CJ: It is equality between States.
MR DE WIJN: Yes, and when one looks at Cameron and James, Cameron in particular, it was the location of the cattle in the particular State which was the discrimen. The cattle had to be in a particular State, they had to be in a particular location, but because the different cost rates applied to cattle in different States, it was held that that discriminated or gave a preference to one State over another and to the taxpayers or to the particular activity in the State. Cameron’s Case, with respect, is on all fours with our case. The criteria here is the location of the real estate, or the location of the leased property, in a particular State. That is the only criteria which gives rise to the preference.
GUMMOW J: Now, section 102 talks about preference or discrimination. Why is it assumed that “preference” in 99 is just another way of talking about “discrimination” in 51(ii)?
MR DE WIJN: I do not think I said that they were identical. I said the cases so far had not identified a significant difference. We are content to say preference means preference and if one looks at the schedule, there is a clear preference to a taxpayer or an organisation that enters into this lease in New South Wales as opposed to Victoria or any other of the other States.
GLEESON CJ: Equally, a clear preference to the State of Victoria as against the State of New South Wales.
MR DE WIJN: What the Court looked at in Cameron was the taxpayer.
GLEESON CJ: Yes, but which way does the preference go here?
MR DE WIJN: We say that the preference goes to the people that do business in New South Wales or one of the lower taxing jurisdictions.
GLEESON CJ: Why are you ignoring the position of the State?
HAYNE J: When 99 is directed to preference of one State over another?
MR DE WIJN: There is, if need be, additional preference there.
GLEESON CJ: But it goes in the opposite direction.
MR DE WIJN: It may go in the opposite way, but that does not mean there is not a preference. The fact that there may be a multitude of preferences just makes it more offensive.
HAYNE J: But what it may do is suggest that 99 is not to be read in isolation from its context. Section 99, 101, 102 – this whole part of the Constitution needs to be taken as a piece.
MR DE WIJN: Your Honour, no one is suggesting that 99 should be read out of context, but it is a section expressly dealing with any laws of revenue, which on any view would incorporate tax laws, and it does require them to be non‑preferential in the relevant sense. I will only be a few moments longer.
If I could move to the first part of section 55 and just draw the Court’s attention to Quick and Garran at page 675. During the Melbourne drafting session leading up the Constitution there was, in fact, an amendment proposed to section 55 to have inserted after the words “deal only with the imposition of taxation” the words “and collection” and that was rejected. That may assist in some way as to what was meant.
We would say that the majority view in Dymond is to be preferred. It has been accepted in a number of cases since Dymond, and we have referred to them in our outline. If one were to accept the minority view, it would simply lead to a different type of line‑drawing exercise. It is clear that the line has to be drawn somewhere, and all that would happen – at the moment the line is quite clear, if one accepts the majority view and accepts the practice. If one accepts the minority view, one gets to a different sort of line‑drawing exercise. In the context of this case, that difficulty is made apparent if we look at the Mirror Taxes Act at section 9 – tab 2 of our materials. Your Honours will see that there is a provision there to make arrangements for the exercise of administrative functions.
Now, one would not suggest, for example, that if a State revenue authority entered into some arrangement with someone to collect the taxes, that that would be a law dealing with the imposition of taxation. We would say that wherever one draws the line, an arrangement under section 9 would be on the wrong side of the line and invalid, and the consequence of that being invalid is that the Mirror Taxes Act itself could never come into operation because section 6(6) says:
This section does not have effect in relation to a State unless an arrangement is in operation –
So the administrative arrangement is a precondition. I think I might have misled the Court – section 9 provides for an arrangement between the Governor‑General of the Commonwealth and the Governor of a State, but they are arrangements in respect of administrative arrangements. That section that permits those arrangements would clearly, we would say, on whichever view – minority view or majority view – be not a law dealing with the imposition of taxation. It is dealing with administrative arrangements of staff and things like that. Once that goes, then section 6(6) means that the Mirror Taxes Act simply does not apply, because it is a precondition that such an arrangement be entered into.
KIRBY J: Could I just understand the overall theory of your case. As I understand it, you have three-pronged attack on this. The first is the section 55 attack, the second is the section 99 attack, and the third is the suggestion of delegation.
MR DE WIJN: Yes, your Honour.
KIRBY J: The application of section 55 is adjunct to the first attack, is it not? It is merely a part of the section 55 attack.
MR DE WIJN: It is, but there are two elements to the section 55 attack ‑ ‑ ‑
KIRBY J: I realise that, but they are all directed at attacking the legislation on the basis of section 55.
MR DE WIJN: Yes. There is the first paragraph attack, and then there is the second paragraph attack which is a subject ‑ ‑ ‑
KIRBY J: I take the force of your submissions, but the net result of what has been done, is a sensible inter‑Commonwealth arrangement that preserves the autonomy and independence of the States in the levying of taxes. The outcome is not, in a sense, one that discriminates against the States, if that is the policy behind section 99, but one which preserves the States’ entitlement to have different taxes and, by federal law, preserves their entitlement to do so and their differentiation as between each other.
MR DE WIJN: It is meant to overcome the decision in Allders and put the States back in the position they are in ‑ ‑ ‑
KIRBY J: That is true.
MR DE WIJN: ‑ ‑ ‑ but it does that by relying on the Commonwealth to enact Commonwealth legislation, and the legislation which, by its very nature, must be taxing legislation and ‑ ‑ ‑
KIRBY J: Well, it could not be done by State legislation because these are Commonwealth places.
MR DE WIJN: Exactly. That is why there is the problem, so the Commonwealth has to enact legislation, albeit ‑ ‑ ‑
KIRBY J: And you say when it does, it just has to comply with section 99 whether it likes it or not ‑ ‑ ‑
MR DE WIJN: It just has to comply because the whole essence of the Constitution is that in respect of taxing laws, revenue laws and laws of trade, they are to be non‑discriminatory and there are special provisions in section 55.
GUMMOW J: Now, that we are clear about what answers you want from us on the stated case. Assume one agreed with you on that part of your section 55 argument which talks about subjects other than imposition of taxation. Looking at page 8 of the application book, it would be question 2(a)(i) that would get a tick, would it?
MR DE WIJN: It would be ineffective if we won on the first paragraph of section 55, the Commonwealth Places (Mirror Taxes) Act would be ineffective to permit the assessment that was issued in this case.
GUMMOW J: Does that carry over into question 3? Question 3(b) would get a tick as well, would it?
MR DE WIJN: Yes, I think that it is correct.
GUMMOW J: It is these words “invalid or ineffective” that may have some further ‑ ‑ ‑
MR DE WIJN: The reason for that drafting was because there may be an argument that, by operation of section 6(3) of the Mirror Taxes Act, it is simply ineffective, because section 6(3) on one view is a let‑out for the Commonwealth because it only applies to a certain extent.
GUMMOW J: Yes, the Act would be valid but ineffective.
MR DE WIJN: Yes, valid but ineffective. That is the reason that alternative drafting was chosen.
GUMMOW J: Thank you.
MR DE WIJN: So if we were to succeed on the first paragraph of 55, the Act is ineffective or invalid to permit the assessment, the same in respect of (a)(ii), and the same answer in respect of (b). My learned friend, Mr Bennett, said, well, it does not matter if the modification is struck down. With respect, that is simply not correct. The modification is essential, because it is the thing that provides that the duty is payable to the Commonwealth, not to the State.
HAYNE J: He says, no effect of modification, the duty is paid to the State, there is no need to have the cross‑payments mode.
MR DE WIJN: No, with respect, his argument, as I understood it, was not that. His argument was that the modification provisions were not needed because section 23 of the Mirror Taxes Act provided for an appropriation. The appropriation provisions in section 23 of the Mirror Taxes Act only apply when the money gets into the control of the Commonwealth, and the
Commonwealth cannot impose taxes to be paid to the Crown in the right of the State.
GUMMOW J: That would be in the face of section 81 of the Constitution.
KIRBY J: I saw Mr Hanks looking rather upset during this. If there are going to be different submissions in relation to the answering of the questions, now that we have the problem in mind, I think that should be the subject of supplementary written submissions.
MR DE WIJN: I am happy to do it that way.
KIRBY J: I would think that ought to be done.
MR DE WIJN: I am perfectly happy to do it that way.
KIRBY J: In a sense, if you win on the 55 point, we do not have to answer the 99 point, is that not correct? Or is that something you would want to address in dealing with the questions?
MR DE WIJN: That is correct, but we want to ‑ ‑ ‑
KIRBY J: The questions.
MR DE WIJN: We want to avoid being here again, I suppose, but your Honour is perfectly correct in, as a matter of strict logic, if we win on section 55, your Honours do not have to answer the remaining questions. It may be that the section 55 problem can be got around, depending on how they do it. If they do it the way we suggest, by having an equal tax, well presumably we will not be back. If they do it by having an unequal tax but just a separate assessing Act and a separate taxing Act, we still have the section 99 problem. If the Court pleases.
GLEESON CJ: We will reserve our decision in this matter and we will adjourn until 10.00 am tomorrow.
AT 4.27 PM THE MATTER WAS ADJOURNED
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