Philip Morris Limited & Ors v Commissioner of Business Franchises & Anor; Coastace Pty Limited & Anor v State of New South Wales & Ors; Harper v Minister for Sea Fisheries

[1989] HCATrans 47

.

'

~ "

I~ :HE HIGH COURT OF ACSTRALIA	-.-~·-7
Office of che Registry

Melbourne No M87 of 1987

B e t w e e n -

PHILIP MORRIS LI!1ITE:J • STA:::::·,.;::::

TOBACCO SE~VICES L!~I-~J a:-:.d

G. P .M. CIGARETTE DISTR:3~:·J?.S

(AUS7RALIA) LIXITED

?~ai:1:~::.;

and

COMMISSIONER OF BUSINESS FRANCH:s::s

and THE STATE OF VICTORIA

Defendar-.c:s

Case stated

Registry No CS of 1987

B e t w e e n -

COASTACE PTY LL~ITED

First Plairicif:

ROGER WILLIAM PETERS

Second Plainci::

and

Philip Morris 211

STATE OF NEW SOUTH WALES

First Defendant

ANTHONY DANIEL CLYNE, CHIEF a:M11SS!CNER
FOR BUSINESS FRANCHISES LICENCES

(TOBACCO) OF NEW SOUTH WALES

Second Defendant

WAYNE DUESBURY

Third :le fend a:-.:

IAN P. SMITii

Fourth Je:e:;da:-:.:

Case stated

ClTl/1/PLC

~

~--- - . ., .

_:::.:e o: ::-.e :\.egist:ry

'.1e ~ :;ourne :ro :1:10 o: ~?88

B e t w e e n -

GEOFFREY ALAN EAR.PSR

?lai:-t::.::

and

~INISTE~ FOR SEA FISHERI~S.

DIRECTOR OF SEA F!SHERI~S -~;J

THE STATE OF TASM.ANIA

Defendancs

Demurrer

XASON CJ

BRENNAN J

DE.Ai."fE J

DAWSON J

TOOHEY J

GACDRON J

5fcHtGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 9 MARCH 1989, AT 10.15 AM

(Continued from 8/3/89)

Copyright in the High Court of Australia

ClTl/2/VH	212	9/3/39
Philip Morris

MASON CJ:  Yes, Mr Solicitor.

MR BERKELEY:  Your Honours, I am not persisting with our second argument. When the Court ruled yesterday

that it would not allow DENNIS to be reopened

I did think that it would be possible to put that

argument without asking for leave to reopen any oc

the earlier cases, but having thought about the

matter over the adjournment and in the light of the

way the argument developed yesterday I have come to

the conclusion it is not possible to do that. So,

in this case we shall rely only upon the first
argument with the consequence that if that succeeds

the answers in the case stated will be answered no.

If I could take the Court there to page 12.

If the plaintiff's argument succeeds, in my

submission - if 1 could go first to C - the proper

answer to the first question would be question (i),

section 10 is invalid except for the imposition of

the lump sum fee. Your Honours will remember that

imposes a lump sum fee and an ad valorem fee.

It is not suggested, and it could not be suggested

that the system of licensing itself is invalid.

What is suggested is that the ad valorem fee

exacted for the licence is invalid and that we

are entitled to require wholesalers to be licensed

and to keep records, and so on.	We are not
entitled to exact an ad valorem fee.	That
is the case that is put.

Then, in our submission, even on the

plaintiff's argument questions (ii) and (iii) of

part C ought to be answered no, but that will

depend upon whether these provisions, that is the

provisions of sectin 10, can apply severably

to the first plaintiff and the second and third

plaintiff, and I shall have to address some

argument as to that point because, as 1 understood

the plaintiff's argument, they are not severable.

(Continued on page 214)

ClTl/3/HS	213	9/3/89
Philip Morris

MR BERKELEY (contuing):  Now, in relation to the other two

questions if the plaintiff succeeded, it would be

proper to say unnecessary to answer because it is

really inappropriate to answer them. If one looks

at A, the question is:

Were the fees referred to in the Statement of

Claim insofar as they were paid by:-

(i)      the First Plaintiff .....

invalid as being exacted contrary to the

provisions of Section 90 .....

Unless the Act is invalid in respect of all the

plaintiffs, that question really cannot be answered

because what was applied for was one licence which

was a group wholesalers' licence and the fee was

calculated by reference to the activities of all the

plaintiffs and it would not be appropriate in the

absence of some examination of facts to answer that

question and, if question C is answered in the way

I have suggested, it would not be necessary to

answer it.

The same really applies to question B. It is

too wide; that is, it is only the fees that are

invalid, not the Act.

Now, in relation to the question of whether

these provisions - whether the fee, if it is a tax,

that is, if the Court holds it is a tax - whether

that could be held bad as regards the first

plaintiff and good as regards the other plaintiffs,

that question was considered by three of the Judges

in the majority in CHAMBERLAIN's case, 121 CLR 1. I

do not think that Sir Garfield Barwick dealt with it

but it was mentioned by Justices Menzies, Windeyer

and Owen who were the other three Judges in the

majority and Justice Menzies deals with it at

page 26, at the top of the page, right at the end

of His Honour's judgment. His Honour says: (Continued on page 215)

ClT2/l/SH	214	9/3/89
Philip Morris

~R BERKELEY (continuing):

It is true that many receipts taxed

by the sections in question are not receipts

of the price of new goods manufactured in

Australia. It follows that the sections

are not wholly ultra vires. The Parliament

of a State cannot, however, escape from s.90

of the CONSTITUTION by throwing its net

wide. A State tax of five per cent of the

sale price of all sales made within the State

would be good in relation to some sales and

bad in relation to others. The same is true

here. It is only to the extent to which

receipts of the price of new goods manufactured
in Australia are taxed, that I consider that

the sections in question are invalid.

I

And then, at page 29, the matter is dealt with by

Justice Windeyer, at the end of His Honour's

judgment, His Honour relying upon section 2A

of the West Australian ACTS INTERPRETATION ACT

and section 3 of the ACTS INTERPRETATION ACT for

the State of Victoria to come to the same conclusion.

At the bottom of page 29 and the bottom of page 31 the same conclusion seems to be arrived at by

Justice Owen.

In addition to that, since that time, the

State of Victoria has re-enacted its interpretation

legislation and I have had photocopied and I shall

hand to Your Honours the photocopy of the relevant

section, which is section 6, which is cast in

rather wider terms than the pre-existing provision

which I do not have in Court. Section 6(1), which

is on page 3, starts off in familiar enough words:

Every Act shall be construed as operating

to the full extent of, but so as not to exceed, the legislative power of the State of Victoria,

Act

to the intent that where a provision of an

and then these words, I think, are new:

or the application of any such provision

to any person, subject-matter or circumstance,

would, but for this section, have been

construed as being in excess of that power,

it shall nevertheless be a valid provision

to the extent to which it is not in excess

of that power and the remainder of the Act

and the application of that provision to

toehr persons, subject-matters or circumstances

shall not be affected.

ClT3/l/SDL	215	9/3/89
Philip Morris

In the circumstances of this case our submiss~on

is that on the proper construction of that section,

if the Court were of the view that the first plainti::

escaped the payment of the licence fee because

the situation of that plaintiff was distinguishable -

or the legislation was distinguishable - from that

considered in the earlier cases it would still

be open to the Court to hold that the Act applied

to wholesalers who were not producers and

section 6 of the INTERPRETATION OF LEGISLATION

ACT in those circumstances, in our submission,

would require the Act to be held as valid in so

far as it applies to those other persons and

circumstances.

GAUDRON J:  Mr Solicitor, would there not be a different

operation of the Act so far as the composition

of the group is concerned, on that view?

MR BERKELEY:	That is so, Your Honour.
GAUDRON J:	Is it your suggestion that the concluding part

of section 6 overrides the previous approach of

this Court to severability?

MR BERKELEY: 

Your Honour, there would not be different -

I was too ready to accept what Your Honour put to me.
The group would be different but the Act would

operate in the same way in respect to that same
group.

GAUDRON J: 

So that the first plaintiff would still be liable?

MR BERKELEY: If one looks at the future operation of the

Act after the decision of the Court, it would

apply - that is assuming the decision is against

us - to people in the position of the second and

third plaintiffs, they would be required to be

members of a group, and it would not apply to people

in the position of the first plaintiff. Or - I have

not thought it out properly - it might apply to

·all of them but the licence fee would have to

be calculated on the basis that you did not include

in that licence fee, the calculation, the previous

sales made by the first plaintiff. That is how the INTERPRETATION ACT would require the BUSINESS FRANCHISE ACT to be applied to the persons and

sales to which it could apply.

If the Court pleases.

(Continued on page 217)

ClT3/2/SDL	216	9/3/89
Philip Morris

MASON CJ:  Thank you, Mr Solicitor. Mr Solicitor for New

South Wales?

MR MASON:	I hand up the outline of our submissions.
MASON CJ:	Yes, Mr Solicitor?
MR MASON:	Your Honours, we have endeavoured in paragraph 1

to set out what we submit is the principle flowing

from the ruling in DENNIS HOTELS, DICKENSON and

SLEIGH. We would submit that the attempt by the

plaintiffs to argue, in effect, that the cases are

authority for no proposition or a proposition that can

be pared down by overlooking the discussion in the

case is not unlike the suggestion that DONOGHUE V

STEVENSON is a case confined to deliquescent snail~ an

authority for no wider proposition.

Your Honours, in GOSFORD 'MEATS, as we indicate in the citations in paragraph 1, each of Their Honours

who look backwards at the DENNIS HOTEL line seem to

accept that it was authority for a proposition similar

to that which we have endeavoured to summarize. Your Honours, in paragraph 3 of our submission we

merely flag the question which we came ready to argue
and to submit that for another day the correctness of the extension in PARTON'S case outside of the area of manufacturer or producer as being the relevant step

in production to the area of distribution or sale is

a matter that can be left for another occasion.

(Continued on page 218)

ClT4/l/JH	217	9/3/89
Philip Morris

MR :f.ASON (continuing):  Your Honours, in paragraph 4

we have drawn actention to passages in the three

cases which have held in express terms that the

legislation there under consideration was in

all relevanc respects "identical' or "indisci1tguishdbl~',

or'~ractically indistinguishabl~' - the various

terms that were used. From that we have sought

to draw certain conclusions which are adverse to the attempt by the plaintiffs to distinguish the present factual situation from the situations

covered by that line of authority. The first

is that the attempt to say that wholesale, as

distinct from retail, is a difference in itself

runs fou~ in our submission,with the fact that

in SLEIGH and EVDA the legislation would have

extended to the operation of a wholesaler activity.

We submit secondly that the presence or

absence of a purpose of maintaining standards

in an industry is not determinative. As we

understood the argument that was put against
us it was said that whilst the licence fee is

a tax it is only those taxes which have a purpose

of maintaining or associated with a licensing

regime that are connected with standards in an

industry rather than simply the collection of
tax which fall within the principle flowing

from DENNIS' case. In our submission, the

total absence of a motive other than collection

of tax is not determinative.

BRENNAN J: That may be putting the argument against you

too narrowly, may it not, Mr Solicitor?	May
it not be that the dichotomy is between

tax raising and regulatory licensing regimes?

MR MASON:  That was the dichotomy that was put against

us, but our submission is that it was not in

issue that each of the licence fees in the

cases satisfied the Court's definition of being

a tax. The question was whether it was a tax on

goods which had the necessary relationship with

the step in production or distribution on the one

hand, or a tax that was the price of commencing

a business and continuing a business. As we would

read the cases after DENNIS, the Court placed no

importance whatsoever upon the fact that the

licence to perform a business was inserted solely

for the purpose of enforcing the tax.

(Continued on page 219)

CITS/1/JM	218	9/3/89
Philip Morris

BRENNAN J:	But if the licensing system is no more than the means of collecting a tax which is imposed upon a
step in production, manufacture or distribution
then one needs to distinguish between the kind of
licensing systems that are simply designed to
raise the revenue and the kind of licensing systems
which will allow the licence to be characterized
appropriately as a franchise.
MR XASON:	Yes, I would accept that, that it is the start of

the proposition at which the DENNIS line diverges f~o~

its application, in our submission; that in that

line of cases that the tax is not seen to be on goods

and therefore one does not need to be concerned about

the fall back position that Your Honour posited in

the fuller proposition.

BRENNAN J: It just seems to me that one might well say that

in cases such as the PETROL case, the H. C. SLEIGH

case, that one could understand that there is a need

to have a licensing system for wholesale petrol
depots and therefore one might need to have a

licensing system for which the ~ ~d be exacted as

a franchise and not as a tax - not as a simple tax

but like an ordinary - - -

MR MASON:  Yes. If there may be a rational basis for it,

that did not on our reading of SLEIGH's case enter

into the Court's consideration of the matter and that

the case did not turn in any way upon the presence or

absence of that factor.

(Continued on page 220)

ClT6/l/BR	219	9/3/89
Philip Morris

DEANE J: Of course, the problem with SLEIGH is that

section 90 was not really explored, was it, 1n

argument in that case? The submission that

was put was apparently that KAILIS was

inconsistent with DICKENSON which the present

Chief Justice was unlikely to be enthusiastic
about, one would have thought~ since they were
delivered on the same dav and it really was

a section 92 case -

MR MASON:  With respect, that involves a little bit of

truncation of the detailed submissions and

reasoning in the Court and, in any event - - -

DEANE J: The point I was makrng is that apart from

Mr Justice Jacobs, the reasoning of the Court

was, "This is DENNIS HOTELS and DICKENSON and we' 11 apply them." In DICKENSON you find the reasoning was,'This is DENNIS HOTELS." In that context, if ~hen you go to DENNIS HOTELS you

find what Mr Justice Brennan has put to you

as being the clear basis of the decision, it

is a little bit artificial to say that while

DICKENSON just said it was applying DENNIS HOTELS

in some cases reluctantly and SLEIGH simply

said it was just applying DENNIS HOTELS, the

whole basis has changed.

MR MASON:  I was, in fair part, circumscribed by the very

ruling the Court gave yesterday, that we are

to take SLEIGH as being authority for some

proposition .

DEANE J:	But the authority must be that the decision of DENNIS HOTELS applies to this licence fee
calculated in these circumstances in this
particular industry.  When one looks to see
what DENNIS HOTELS is about there is a problem
with SLEIGH in that it is a little difficult to see why DENNIS HOTELS does apply but what the case is authority for is that DENNIS HOTELS
. ~oes apply.  (Continuing on page 221)

ClT7/l/ND	220	9/3/89
Philip Morris

MR MASON (continuing): Well, in our submission, we do not

need to go beyond that. Whilst one can, in

retrospect, say there may have been an extension

of the principle into a new application which,

when analysed, showed that the rule was being

stretched a little bit, the fact is that the

Court went that way and has affirmed that position.

DEANE J: Yes. Well, it may well be that, for the purposes

of the present case, it is in your interests to

highlight the features of the liquor industry and

the tobacco industry, putting to one side the petrol

industry. From the point of view of your future

aspirations, of course, you are making it quite

clear that you do not want to be shackled by

reference to the particular industries. So you

can go forth with a formula that allows you to

impose excise duties or taxes at any stage

provided you say, "We will calculate it by

reference to the month before".

MR MASON:  Well, I would submit one does not have to go

that far in the present case and that SLEIGH's

case being directed to be taken as authority may

be properly used as authority in its application

to the facts of that case and whatever one can

derive from it. I would also say, as we do at

the bottom of paragraph 4(b), that to the extent

that it is a factor to look at the particular

industry, well, we are concerned with tobacco

and that it is a part - and we do not say a major

part but it is a part of the licens-ing regime under

the 1987 Act, that a person who sells cigarettes to

children and is convicted of that will not qualify

for a licence. So we do not eschew entirely the

aspect of the matter which Your Honour has adverted
to in argument but we would, to the extent that we

are able to, wish not to be confined to it.

Our submission about the relevant period in

4(c) is that in the later formulation in the cases

a criterion, if it ever was a criterion, upon which	the proximity of the relevant period ceased to be
any attention was placed in DENNIS HOTELS and, in
our submission, the simple fact that it was passed
was on the reasoning of the majority in DENNIS HOTELS
enough to make the tax no longer a tax on goods.

(Continued on page 222)

ClT8/l/SH	221	9/3/89
Philip Morris

MR MASON (continuing):  lt is certainly in that form t7at

the proposition has subsequently been stated ~n
the cases and 1 will not read the passages in

paragraph (c). We would remind the Court that

the period we are presently concerned with has
not changed in the Victorian Act from ~~en it was

considered in EVDA and the period in the New Sout7

Wales Act under challenge here is identical Ln

terms of its gap back from the present.

Paragraph (d) addresses the argument that

my learned friend, Mr Charles, put in one of his

alternative submissions, namely that the capacity of the scheme to attach to a producer meant that the licence fee was an excise in any application,

and we would submit that ~he very results in the

three cases referred to in (d) negate that

proposition because the licences there under

consideration could have been, and were necessary
to have been taken out by a producer who engaged

in the particular form of selling that was

attracted by those provisions.

ln paragraph (e) we address the submission

that Mr Charles developed that somehow or other

it was of the essence of DENNIS that one was looking

at a valuable privilege that was attached to land

that had some capacity of being bought and sold.

Our submission is that, as the Chief Justice himself
said in DENNIS, that was an immaterial factor and,

in our submission, none of the later cases have

placed any materiality upon it, Mr Justice Gibbs

in DICKENSON expressly restating and accepting the

view of the former Chief Justice.

In paragraph (f) we then address the submission

that to the extent that the licence fee falls on a

producer such as Philip Morris, then it is an

excise qua that producer and the detailed analysis

of SLEIGH's case, to which we draw reference,

has already been made to the Court and I do not
wish to repeat it here.	Our submissions are
summarized in the written submission.	I would,

however, draw attention to a similar argument which

was put and rejected in BOLTON V MADSEN. lf I

could just briefly go to that case, 110 CLR 264

at page 272.

(Continued on page 223)

ClT9/l/HS	222	9/3/89
Philip Morris

MR ~SON (continuing): Just below the middle of page 272 in

the judgment of the Court reference was made to

BROw~S TRANSPORT PTY LTD V KROPP. Ahd then about

eight lines up from the bottom of the page:

It was sought to distinguish that

decision by pointing out that here Turner
was not merely the carrier of the wool

but that he was the producer of the wool

which the vehicle was carrying. But, if

attention is concentrated on the facts of

the particular case, it is still clear that

the fee in question was payable as a condition

of a right to carry on that part of his

business which consisted of carrying his

goods upon the road. The distinction which

was attempted therefore fails.

We therefore submit that there is no relevant distinguishing factor between the three Acts under

challenge in these proceedings and the Acts that were

discussed in the earlier cases and the principles

flowing from them.

BRENNAN J:  What do you make out of that passage in BOLTON V

MADSEN?

MR MASON:  We would use the expression "criterion of liability".

If the criterion of liability which describes the

imposition of the licence fee is directed at an

activity which is not a step in production then it

is not an excise even if it happens to fall upon a

producer and, we would submit, that it is similar

to the payroll tax which falls upon a producer. It

might be different if it was a payroll tax that was

confined in its operation to producers.

BRENNAN J:  I thought that was probably the way in which you

used it but you really have to see whether or not

there is a distinction between a business with two

aspects to it as in BOLTON V MADSEN and a business

which consists of production for the purposes of

-sale.

(Continued on page 224)

ClTl0/1/BR	223	9/3/89
Philip Morris

MR MASON:  Not, in our submission, in relation to the

validity of the tax upon the particular person.

The plaintiff in BOLTON was held liable to pay

the tax though he was a producer. The additional

status of producer did not create in him any

veil of exemption flowing from section 90.

BRENNAN J:  No, but the aspect of his business was that

of carrier.

MR MASON:  In respect of a tax which fell upon the business

in a way that did not represent in its terms an
excise, we would say that the tax here falls

upon the business of wholesaling. That falls in

a way which does not attract section 90,

DICKENSON, EVDA, et cetera and it does not

become an impost that is invalid under section 90

simply because it is applied against a person

who happens to be a producer.

DAWSON J:  I think what is being put against you is that

sale is a necessary part of production in the

sense that one does not produce just for

self-satisfaction, and you cannot separate them.

MR MASON:  Yes, I accept that factor and that a tax on

a first sale by a producer of goods which
necessarily would fall upon that activity would

be an excise. That we would see to be the

proposition for the COR case and the FAIRFAX case

would be authority. There the tax in terms fell

expressly upon the first sale by a producer of

goods in Australia and so it inevitably and

necessarily taxed exclusively, or almost

exclusively, persons who were producers in respect

of their gainful activities as producers. That

is not the case in relation to the tax here

because, as I will point out later, a producer

may sell and distribute the goods which have been
manufactured in such a way as not to fall liable

to pay a licence fee under the legislation in

-Victoria and the 1987 legislation in New South Wales.

(Continued on page 225)

CITll/1/JM	224	9/3/89
Philip Morris

MR MASON (continuing):  Presumably a person who runs a shee?

farm has to transport the wool away from the far~

to convert the product into money, the whole

purpose of the business, and yet that was said not
in itself to convert what was not an excise into an

excise in its application to that person.

In paragraph 5, Your Honours, we have

endeavoured to give three reasons in policy why the

Court should not feel uncomfortable, if I may be

permitted to put it that way, in finding there co be

a real principle in the DENNIS HOTEL, DICKENSON line,

and in giving that principle proper application. :his

is not a situation, in our submission, where one is

faced with an unpalatable, unworkable rule that has

to be confined to its narrowest possible definition.

The third of those propositions is one which is a

grateful adoption of something which Your Honour

Mr Justice Deane was putting to one of my learned friends yesterday.

In paragraph 6, we look at the authorities which

deal with a distributive application of a tax which

is held to be an excise because if the principle is,

as we submit, that a tax which is held to be an excise

is invalid in its application to a person against

whom i½ is an excise, but not otherwise, my learned

friend, the Solicitor-General from Victoria, has

taken Your Honours, just minutes ago, through

CHAMBERLAIN INDUSTRIES, the only additional reference -

and I will not read it - is that in the dissenting

judgment of Mr Justice Walsh at page 40 - my friend

has read the others - we would also draw attention

to the form of the order that the Court pronounced in

CHAMBERLAIN INDUSTRIES, which gave it an operation

that confined it in its application to the particular

taxpayer against whom the sales tax operated as an

excise. LOGAN DOWNS also is authority for that

proposition, in our submission._ .If I could take the

Court briefly to LOGAN DOWNS PTY LTD V QUEENSLAND,

(1976-77) 137 CLR.	The majority of the Court, being
the statutory majority under the JUDICIARY ACT, held that	the tax in question was a section 90 excise but held
that it was not such in relation to horses that were
used for mustering on the cattle stations.

(Continued on page 226)

ClT12/l/JH	225	9/3/89
Philip Morris

MR XA.SON (continuing):  The statutory term that invoked the

tax was simply "stock" and "stock" was defined to

mean cattle, horses, sheep and swine but not all

horses were stock horses in the sense that they

were horses used for production purposes. On the

facts of this case, the horses in question were

used for mustering and, therefore, the excise was

not held to be an excise qua those goods.

At page 70 in the judgment of Mr Justice Stephen,

His Honour, in the second paragraph, said:

The present exaction cannot be an excise

so far as it relates to the plaintiff's stock horses; they are in no sense themselves goods in the stream of production and distribution; since they do not appear to be usec for breeding

purposes it cannot be argued that ·.:..:.. tax them is

to tax, as articles of commerce, their progeny

in the course of production.

The last full paragraph on the next page:

This Court's decision in the CHAMBERLAIN

INDUSTRIES case also disposes of any suggestion

that because the tax imposed by the legislation will not in every instance be a duty of excise,

for example in the case of the plaintiff's stock

horses, that should lead to the conclusion that

it is not in any instance void as imposing a

duty of excise.

The order that is set out at the top of the very next

page which became the order of the Court, was a

declaration that section 7 of the Acts were:

To the like extent, beyond power -

I am sorry, just going from the very top of the

page:

These declare the assessments made on the

plaintiff, insofar as made in respect of

its cattle, sheep and swine, to be -

excises.

(Continued on page 227)

ClT13/l/SH	226	9/3/89
Philip Morris

MR :-1.ASON (continuing):  Your Honour the Chief Justice

addressed the same matter at 78 and 79, about

point 6, the paragraph commencing:

The fact that the statutory definition

of stock -

and the top of the next page, Your Honour stated

the order which was in identical terms to that

of Justice Stephen. The Chief Justice agreed

with Your Honour Mr Justice Mason.

We do accept, however, that, as we mentioned in paragraph 6, there may be cases where

the Act, in effect, or in practically every
case strikes at tax on goods and whatever other

integers there are in the definition of the

excise. And the mere fact that one could posit

isolated situations which did not fall upon

production would not take it out of the definition

of excise. But that is not, in our submission,

the operation of the present taxes which in

their whole primary thrust are directed at sale

and sale in the context which, consistent with

DENNIS HOTELS, does not involve a duty of excise.

We would also rely upon the New South Wales

provision in the INTERPRETATION ACT which is

in substantially identical terms to the extended

Victorian provision that has been handed up

this morning. We would submit in paragraph 7

that if we are wrong about this distributive

approach to duties of excise and that if the

dicta that were read by my learned friend,

Mr Charles, were treated as authoritative, though

not being the majority position in CHAMBERLAIN,
then that is not going to help the plaintiffs

in the COASTACE situation because they are not

producers, they are solely wholesalers. We give

the Court the reference to paragraphs 4, 7,

9 and 10 of the case stated.

We would, however, draw attention to one

matter that I do not think has been mentioned

yet about a distinction between the 1975 and

1987 New South Wales Acts. The 1987 New South

Wales Act and the Victorian Act are identical

in their operation in one respect in that a producer who sells to a licensed wholesaler

does not pay any tax. Under the 1975 legislation,

section 12(1), a producer who sells is liable

to pay tax.

I will have to take Your Honours to the

print of the Act to illustrate that. In the

1975 New South Wales Act, if Your Honours would

ClT14/l/ND	227	9/3/89
Philip Morris

turn up page 29 and in the 1987 New South Wales

Act, section 41. Looking firstly at page 29

of the 1975 Act, section 12:

The fees to be paid for licences shall be as follows:-

(a) for a wholesale tobacco merchant's licence -

a fee of $10 together with an amount of

30 per cent of the value of tobacco sold
by the applicant in the course of tobacco

wholesaling during the relevant period.

other than tobacco purchased on or after

1 January 1987

(i) from the holder of a wholesale tobacco

merchant's licence -

What that means is that if a producer sells

in this period, in New South Wales, then since

a producer, by definition, does not purchase

the tobacco from a holder of a wholesale tobacco

merchant's licence then the producer if he sells

it by wholesale is liable to the fee under

12(1)(a); if he sells by retail he is liatle

to the fee later in section 12.·

On the other hand, under the Victorian Act and under the 1987 New South Wales Act, one

sees a different pattern from 41(1)(a). For

a wholesaler's licence the fee is $10 together

with 30 per cent of the value of tobacco sold

by the applicant in the course of tobacco wholesaling

during the relevant period, other than tobacco

sold to the holder of a wholesaler's licence.

That means that if the producer sells to the

holder of a wholesaler's licence then the producer

does not pay any fee.

(Continuing on page 229)

C1T14/2/ND	228	9/3/89
Philip Morris

NR MASON (continuing):  One can very crudely categorize :~e

operation of the 1987 and the Victorian Act as bei~ 5	one which taxes the last wholesale and the 1975 as
taxing the first wholesale. I draw that matter to the Court's attention because I do not know that
my learned friend, Mr Jackson, illustrated the
distinction when he went from the 1975 to the 1987
Act. In my submission, it does not help because the plaintiffs in COASTACE are not producers and so under the principle which, we submit, flows
from CHAMBER.IAIN INDUSTRIES, the tax is not an excise
in its operation upon them in any event.
Your Honours, we have prepared a table which shows the sections of the various Acts considered
in DENNIS, DICKENSON, SLEIGH, EVDA, PHILIP MORRIS and COASTACE in a form which we hope will be helpful
to the Court.

MASON CJ:	Thank you.
MR MASON:	There is, I think, one correction or qualification

that should be made. The very last item is "last

wholesale only" which is the point I have just been

putting. We say yes in the SLEIGH situation. In

fact, it is even stronger there. It is the retail

rather than the last wholesale that is the step that,

in effect, triggers off the tax. Section 14 of the

PETROLEUM ACT that is there in consideration was

slightly more complicated than we have SlDJIIErized because

what in fact happened was that a producer who sold

to a wholesaler was not liable to pay any tax in

relation to goods if the wholesaler disposed of

those goods during the relevant period. Section 14,

I hope, makes the detail of that proposition a bit

clearer.

Your Honours, in our submission, if one looks

at the BUSINESS FRANCHISE (PETROLEUM) ACT 1974,

South Australia - the one considered in SLEIGH -

there is nothing on the operation or on the face

of that Act which shows any regulatory purpose or

intent at all. Your Honours, in our submission,

the questions raised in the case stated in the

COASTACE litigation should be answered: l, no;

2, no; 3, by the plaintiffs. If the Court pleases.

MASON CJ:  Thank you, Mr Solicitor. Mr Solicitor for

Western Australia, are you presenting your argument

now?

MR PARKER:  I believe it is my turn, if it please the Court.

I would pass up an outline of our submissions, if

it please.

MASON CJ:  Thank you.

ClTlS/1/BR	229	9/3/89
Philip Morris

MR PARKER:  Could I indicate that the first submission is inc2~ce

to be confined to franchise fees calculated by refere~c,

to past sales.	The drafting is a little incautious -
a DENNIS HOTELS-type franchise fee.	If it please

Your Honours, the first paragraph seeks to identify

what, in our submission, is at the heart of the basis of the decisions in DENNIS HOTELS, DICKENSON'S ARCADE

and SLEIGH.

(Continued on page 231)

ClTl0/2/BR	230	9/3/89
Philip Morris

::1:R PARKER (continuing): Although, of course, the issue has

been approached differently by various Justices,

the lack of a sufficient connection with the goods

sold under the licence seems to be, in the end,

a fundamental consideration on any of the views

taken.

So it is, in our submission, that while a

tax on the retail sale of goods is, on the receive

view, a duty of excise, a licence fee to sell

goods by retail calculated not by reference to

the goods sold under the licence but by reference

to past sales, is not a duty of excise.

DEANE J: Mr Solicitor, is not the problem with that this,

that if one looks at the judgments of

Justice Kitto and Justice Taylor in DENNIS HOTELS,

the last paragraph of each makes it clear beyond
any argument to the contrary that the fact that
the calculation was by reference to previous sales
was not a decisive factor in their decision in

that each says that was not true of a temporary licence but, notwithstanding that, it was not an

excise duty.

MR PARKER:  Undoubtedly, anybody who attempts to find a

simple proposition or a single proposition for

the decision in DENNIS must find difficulty with

one judgment or other. What we have attempted

to do here is to put what, in our submission,

is a satisfactory and a sound rationalization

of the distinction that ought to be seen in this

matter.

DEANE J:	But that raises the main question, does it not, and that is this: whether - and I have articulated
it before but I am not quite sure what people
say about it - and that is whether, if the decisions in DENNIS and DICKENSON are to be accepted in
a context where DICKENSON said it was simply applying
DENNIS HOTELS, does one say, "Well, that leaves

· provided they observe this calculation by reference	the States to go forth into any line of product
to the previous month instead of the actual month", or does one say, "DENNIS recognized that there
were particular considerations to the liquor industry
which warranted categorization of the fee."
DICKENSON applied those to the tobacco industry
and, when one comes to it, SLEIGH applied it to the petroleum industry, but does one, as it were,
draw a line there?

MR PARKER: 

Our submission is not - and as Your Honour has

seen from the way the outline is shaped - we are,
in the end, saying "no" to what Your Honour has

been searching for.  May I perhaps best deal with

that by moving quickly through them and coming

to the point?

C1Tl6/1/SDL	231	9/3/89
Philip Morris

DEANE J: No, come to it in your own order.

MR PARKER:  It will be quick anyway because, in view of ~hat h2s

been said, there is no need to labour some of

the points.

We have pointed, in our respectful submission, to the fact that there seems no logical basis for

distinguishing wholesale sale from retail sale

in any of the matters that fall for consideration.

In our second submission we have pointed to the u~derlying truth that there is a distinction

between distribution and sale on the one hand

and the manufacture and production of goods on

the other. Of course, a manufacturer may well
be manufacturing with a view to sale although
that is not in any sense a universal proposition

but it is the usual commercial motivation.

(Continued on page 233)

ClT16/2/SDL	232	9/3/89
Philip Morris

MR PARKER (continuing):  The purpose ultimately of sale

will often require distribution, but as conceo:s

and as activities there is a noticeable

fundamental distinction between production and

manufacture, on the one hand, and distribution

and sale on the other, and the distinction, in
our submission, is relevant and material in

the present debate for reasons that His Honour

the Chief Justice spelt out in LOGAN DOWNS.

If 1 could take Your Honours to LOGAN DOWNS,

137 CLR 59, and the passage is at page 77.

There His Honour the Chief Justice said:

Quite apart from what has been decided

and what has been said in DICKENSON'S

ARCADE and KAlLIS it needs to be

emphasized that DENNIS HOTELS, BOLTON V

MADSEN and for that matter DICKENSON'S

ARCADE (to the extent to which it
related to the licensing fee) were cases
involving impositions levied at a time

when goods were in the course of sale or

distribution, after the process of

manufacture or production had been

completed. It has always been

recognized that before these impositions

can be characterized as an excise a

direct relationship between the tax and

the goods must be shown. Such a

relationship between the tax and the

goods must also exist, so it is said,

when the tax is levied at a time when

the goods or the commodity is in course

of production, but it may be said that in

such a case the relationship between

the tax and the goods and therefore the

relationship between the tax and "home

production or manufacture" is more easily

perceived.

That passage, of course, recognizes that at the

heart of excise is a tax on home production or

manufacture and recognizes that when one is

directly taxing that one may more readily perceive

that there is a duty of excise than when one is

looking at steps subsequent to that process.

The same sort of concept was the subject of

the passage of the comments of His Honour
the Chief Justice in the passage that has already

been read to the Court in SLEIGH at page 503. just remind you of the words:

There is in all this nothing to distinguish the licence fee from that

which was dealt with in DICKENSON'S

C1Tl7/l/HS	233	9/3/89
Philip Morris

ARCADE. Although some attempt was

made to suggest that the plaintiff

was engaged in manufacturing operations

in that it included one or more

additives in the petroleum products

which it obtained from refiners,

the prohibition is against carrying on
the business of selling petroleum products
without a licence, that is against

selling, not against manufacturing.

The case is, therefore, governed by

DICKENSON'S ARCADE.

I should mention that His Honour Sir Garficld Barw~k

agreed with the reasons of the present Chief Justic~

in that case with respect to section 90.

(Continued on page 235)

ClT17/2/HS	234	9/3/89
Philip Morris

:fR PARKER (continuing):  In this case the tax falls -

dealing with the Victorian position - because,

as we read the statute, the manufacturer is

selling. The impost is on selling. The use

of the word "manufacturer" there was a red

herring because the statute does not pay

any attention to manufacturing whatever.	The
impost is on selling.	The effect of section 10

of the Victorian Act is that a manufacturer may

sell the whole of his produce without incurring

any liability to pay the ad valorem duty if he

sells to a licensed wholesaler, and as is the case under the Act and as is confirmed by the

facts before Your Honours, only that part of

Philip Morris' produce that it chooses to sell

as a wholesaler to a retailer falls for duty

and has been assessed for duty under the scheme of the

legislation. So it is not the effect of the

Victorian Act that for the manufacturer to sell its produce it must incur liability for

the fee. In fact, conducting itself in an

ordinary manner of manufacturing, that is selling

to the wholesaler, there would be no liability

incurred.

SLEIGH's case, in our submission, is of considerable significance. Sleigh claimed before

this Court to be a producer because it introduced

distinctive additives to petroleum before it

marketed it. That may or may not have been a

valid claim. What is important is that it was

a basis upon which Sleigh presented its case to

the Court.

MASON CJ: Attention has been drawn to this feature of

SLEIGH by counsel before this. Is it necessary to reiterate this, Mr Solicitor?

MR PARKER:  I felt, sir, that I may have put it with a

slightly different emphasis, and it appears to

us - - -

MASON CJ: · If so, by all means put it.

MR PARKER:  I am grateful to Your Honour. It does appear

to us that SLEIGH is very significant, particularly
in view of one or two questions that have been

put by the Court this morning and it is at the

heart of my promise to deal with Justice Deane's

searching inquiry to me.

Sleigh did not hold a licence at all under

the South Australian Act. As Your Honours realize,

there are nine classes of licences under the Act.

The first six of them each specifically were to

authorize the business of selling petroleum

products manufactured by the holder of the licence.

CIT18/l/JM	235	9/3/89
Philip Morris

XA.SON CJ:  Yes. The Solicitor for New South Wales pointed

that out.

MR PARKER: Sleigh's claim for exemption by virtue of

section 90 raised, in our respectful submission,

very directly in the context of a statute that

emphasized and directly attached itself to

sale by a producer the question whether sale

by a producer of its produce was a material

distinction. It matters perhaps not in the

end whether Sleigh really was a producer. The

fact that it claimed to be was enough to clearly

and specifically raise that distinction before

the Court. As Your Honours realize, Your Honour

the Chief Justice, with Sir Garfield Barwick

agreeing, dealt specifically with the pror· ~tion

and dealt with it by dismissing the releva

of the circumstance that Sleigh might be

a producer. The fact that the other Justi_ ~ who

were in the minority did not see reason to ~eal

specifically with it, in our respectful submission,

can only mean that to them the circumstance that

the producer was selling his produce, and that

was the specific provision of the Act, was not
material to their consideration of the issue

and to the decision they reached that DICKENSON'S

ARCADE should be applied to the case.

(Continued on page 237)

CIT18/2/JM	236	9/3/89
Philip Morris

MR PARKER (continuing): In our submission, it must follow,

from any proper analysis of SLEIGH, that the point

raised by the first plaintiff in the Victorian case

is effectively decided against him.

Now, the question whether SLEIGH is merely an

application of DENNIS and DICKINSON and, perhaps,

an inadvertent application, as Justice Deane

postulated, is one that we would answer in this

way: it is,whether by conscious thought or

inadvertence, a direct application of DICKINSON

to sale by a producer of his own produce. If the

considerations of the traditional regulation of the

liquor industry in DENNIS and, to a lesser extent,

the tobacco industry in DICKINSON, if they might

have been thought material and, going back over the

cases and seeking again to rationalize to the stage

of incorporating the application of DICKENSON to

SLEIGH, they are matters that can be considered, but

the truth is that in SLEIGH those factors were not

seen to be material as we read the reasons by any

member of the Court and it is, of course, the case

that DICKINSON was applied out of any area where one

might suggest there is a traditional regulation in

any serious way of an industry into a completely

new and novel field for that type of control and, in our respectful submission, if one looks at the

South Australian Act, there is not any serious regulation of the industry attempted by the Act

at all.

The case was presented and argued on the basis of it being a revenue-raising statute. So that there

is a lot of significance, in our respectful submission,

from the point reached by this Court in applying to

SLEIGH the decisions of DENNIS and DICKINSON.

In our respectful submission, a rational and

clear distinction in principle can be seen between

DENNIS, DICKINSON and SLEIGH on the one hand and

GOSFORD and KAILIS on the other. KAILIS and GOSFORD

were both cases where the business franchise fee was

to engage in actual production and, in both cases, the measure of the fee was past actual oroduction.

In the DENNIS line of cases, the business franchise fee is not to engage in production but to

engage in an act subsequent to production, sale.

The dividing line centred in whether or not the franchise fee directs itself at production itself,

in our respectful submission, should be seen as clear,

founded in discernible and reasonable principle and
established and we would submit it is establshed when

one looks at SLEIGH and looks at GOSFORD.

ClT19/l/SH	237	9/3/89
Philip Morris

So, it is our submission, in answer particula~Ly

to Your Honour Justice Deane, that the DENNIS HOTELS'

line of cases should be seen as confined to franchise fees which do not fall on actual production or a step in actual production; that is, to cases where the

franchise fee falls on a step subsequent to production,

sale or distribution.

In the cases to which the DENNIS HOTELS' line of cases applies, because of the decision in SLEIGH, it

is our submission that it is irmnaterial that a

producer is called on to pay the fee. I would

respectfully adopt the submissions of my learned

friend, the Solicitor for New South Wales, with

respect to the COASTACE case. They are our

submission, if it please the Court.

MASON CJ:  Thank you, Mr Solicitor. Mr Solicitor for Tasmania.

MR BALE:  May it please the Court, I do not hand up an outline.

What I would have submitted has already been comprehensively put to the Court by my learned friends,

the several Solicitors-General for the States who have

preceded me and I would not take the Court's time to

retraverse that.

(Continued on page 239)

ClT19/2/SH	238	9/3/89
Philip Morris

MR BALE (continuing):  Perhaps, however, in light particula:::-~::

of the questions put by Your Honour Justice GaudroG

and Your Honour Justice Deane in relation to whethe:::-

or not there is a principle to be found in the tril.og-:
of cases that the Court has decided not to revisi~ -·

iIDd if there is a principle, what is it, I should say

particularly that I would, with the greatest respect,

adopt that which has just been submitted by my

learned friend the Solicitor-General for Western

Australia.

Whilst it would be tempting to say in this case,

and thereby keep out of hot water perhaps, that the

principle is simply that a fee for a licence to sell

liquor, tobacco or petroleum which is calculated by

reference to prior sales is not a duty of excise,

we would submit that the proper principle is

that a fee for a licence to sell goods which is

calculated by reference to prior sales is not an excise.

We would submit that the traditional areas, or the

traditional goods, to which excise was seen to

attach, liquor, tobacco and beer, might have been

sufficient to curtail the principle had we not ventured

into SLEIGH. But since the decision in SLEIGH related

to a product which was not one of those traditionally

regarded as being subject to a duty of excise it would

be our submission that the principle now should be

regarded as broadly attaching to goods. And it would

be ou.r submission that the judgment of His Honour the
present Chief Justice in SLEIGH in the passages to

which reference has already been made indicate that the

principle ought to be thus regarded.

DEANE J:  It is a strange result though, is it not, that if you

look at DENNIS HOTELS, six of the seven members of the

Court thought that the calculation by reference to

the prior period was not decisive? The three

dissentients said so, three of the majority plaintiffs

indicated that was so. Mr Justice Menzies took the

other view which is why his view changed according

to the different taxes and the result of the cases that,

in some cases reluctantly, applied DENNIS HOTELS, is

·that a completely contrary principle emerges.

MR BALE:  One cannot gainsay that, Your Honour, and I suppose

that is evolution and I would submit that SLEIGH is

indicative of the fact that the principle has

evolved and has developed to the extent that now should

propirly be regarded as applying, so long as those

cases stand, to all sales. I think that trend has been

seen as we developed through DICKENSON, in which the

principle was rather more expressly stated and

rather more unanimously stated into SLEIGH.	Those
are my submissions, may it please the Court.

MASON CJ:  Thank you, Mr Solicitor. Mr Solicitor for

South Australia?

ClT20/1/JH	239	9/3/89
Philip Morris

MR DOYLE:  If the Court pleases, Your Honour, I have an

outline which I brought to Court yesterday with

hope springing eternal but in the light of the

ruling yesterday morning it seems sadly irrelevant

now and so if I might be permitted, without the

replacement outline, to address a few brief

submissions to the Court?

MASON CJ:	You did manage to cover everything, I thought, in the outline yesterday at any event.
MR DOYLE:	Your Honours, after I was readmitted to the

brotherhood, I was accused of having done that.

Your Honours, in our respectful submission, it

really does come down to identifying the scope of

the principle established by the decisions in

DENNIS, DICKENSON and SLEIGH. In our respectful submission, where one gets . the· position where

majority reasoning cannot be identified and yet the

Court has said that the decisions are to stand, one should not then, in our respectful submission,

resort to the reasoning of individual judgments in

the manner which was done by, in my submission,

counsel for the plaintiffs.

(Continued on page 241)

ClT20/2/JH	240	9/3/89
Philip Morris

~R DOYLE (continuing):  And in our respectful submission,

a number of the questions posed by Your Honour

Justice Deane this morning, in effect, tend

to adopt that approach. And our respectful
submission is one, in effect, in this situation
has to look very much at the result of the cases

and without wanting to go into great detail we would submit the principle to be deduced from DENNIS, DICKENSON and SLEIGH can be stated

briefly along these lines, that DENNIS

established that a fee for a licence to sell,

calculated on sales in a past period, is not

directly related to goods and so not an excise,

or, alternatively, is not an impost on goods

in the course of distribution and so not an

excise.

SLEIGH established that that proposition

can be applied to a licence to sell held by

a producer, there might have been doubt about

that in view of the facts of DENNIS, and

DICKENSON, we respectfully submit, in effect,

applies the DENNIS principle simpliciter.

What GOSFORD shows, and other cases relating

to different types of licence, is that that

particular principle cannot be applied when

the licence and the fee relate to the taking

of a step in production, the fee itself being

referable to the taking of that step. And so

GOSFORD indicates that while that principle

has been applied to people who are producers,

in fact, it will not be applied when the licence
itself is to do an act or step of production

and when the fee relates to that step.

And we respectfully submit that is the principle

to be deduced from the line of the three cases

which the Court has said it will not reconsider

and GOSFORD indicates the limit to· that principle.

We therefore submit that the present cases,

PHILIP MORRIS and COASTACE,are indistinguishable

from SLEIGH and that, in particular, the shortening

of the period, the period in arrears if I can

describe it that way, is not important. The significant thing is that the licence fee is

not referable to the quantity or value of goods being handled pursuant to the licence or during the current licence period.

And, again, it can obviously be said, "Well,

that is an artificial line'', but, unfortunately,

when lines are drawn in this area, if we have

rightly identified the line, as that the fee

is not referable to quantity or value of goods

currently being handled, then that is the

signficant thing not how far back the handling

occurred.

C 1 T21 /1 /ND 241 9/3/89

Philip Morris

MR DOYLE (continuing):  We would also submit that the existence

of the regulatory scheme in liquor licensing cannot

be regarded as a significant fact in the light of

DICKENSON where, in our respectful submission, one

cannot say there was really a regulatory scheme in

relation to tobacco such as one found in relation

to liquor. And so we would respectfully submit

that DICKENSON indicates that that is not an aspect

of the principle to be deduced from DENNIS.

In our respectful submission, the case can be

approached that way and if it is then, in our

respectful submission, the answer is a relatively

simple and clear one. An alternative approach to the

case is to say, "Well, overall the approach of this

Court to the issue of excise is based on the economic

effect of a tax" and the Court has said that an excise

is a tax which is a burden on production either

immediately when it falls on a step in production

or indirectly when it falls on sale.

As I indicated in my submissions yesterday, it

obviously becomes fairly important then to identify

what is the relevant effect - and I will not go into

that - but, we submit, looking at the matter in that

context it can be said that what DENNIS establishes

is that whatever the relevant effect is, it does not

occur when the making of a sale itself attracts no

liability to pay a tax. So if one looks at it in

that context it can be said, if that is the situation,

the making of the sale itself attracts no liability
to tax, then the relevant effect does not occur
whatever the relevant effect may be.

The validity of that proposition, of course, could be debated endlessly but the Court has indicated

that it is not to be debated and so therefore, we

submit, that is another relatively simple approach

to the answer in this case. Moving on, Your Honours,

from the scope of the principle, could I make just

one or two other points. In our respectful submission,

the so-called distributive characterization approach

which emerged in CHAMBERLAIN's case is not permissible

here. In our respectful submission, in that case the

majority held that a tax on a receipt was a tax on the

receipt of the moneys acknowledged by the receipt

and the majority then went on to say that it became

a tax on the sale of goods when those moneys were the

proceeds of the sale of goods. So in turn it

followed that when that sale of goods was made by a

producer it had become a tax o~ the very sale.

(Continued on page -'243,

ClT22/l/BR	242	9/3/89
Philip Morris.

~R DOYLE (continuing):  In our respectful submission,

that is the principle embodied in CHAMBERLAIN.

Here, however, what we have is a licence fee

paid by a person who happens to be a producer

and when it falls on him it is still not falling

on a sale. It is still, because it is calculated
on the basis of sales in a past period, a fee

not referable to any particular sale, and so

we do not have the feature which was present in

CHAMBERLAIN that when the impact of the law on

the producer was examined in CHAMBERLAIN the
tax was found to fall on the very taking of the

step, the making of the sale.

When we look here at the impact of the tax, '~

one calls it that, on the producer we find that ~t
does not fall on the very sale; it falls on sales

in a past period and so does not have the necessary

relationship, and so we submit that the approach

in CHAMBERLAIN can not be used in this case.

Your Honours, we also submit that it would not

be appropriate in this case to say that it is

in substance a tax on production. The precise

meaning of those words "in substance" is a matter

of a little difficultly, but we submit that in

HEMATITE what was significant and what appears

to have lead to the conclusion that it was in

substance a tax on production was that the Act
singled out certain pipelines which were operated

by producers, and only by producers, and imposed

a huge impost on the right to operate those

pipelines.

It was seen to have the same effect as a tax

on production and there was good reason under the

circumstances to conclude that those pipelines

had been selected because they were used by

producers; in other words, to say that in substance

that was a tax on production. Likewise in COR -

because of the way in which the tax was expressed

it was a tax on a first sale after production -

it was seen to be - although not on production -

a tax which would be payable by producers and

only by producers and so, in our respectful
submission, there was again good reason to say

that that was in substance, using the modern term,

a tax on production or, as was said then "in

effect or in reality".

As we read the judgments the fact that the tax

was expressed in that particular form was a matter

of significance to the Chief Justice

Sir Adrian Knox and to Justices Isaacs and Powers.

It is not clear whether it was significant to

Justice Starke - in that respect his judgment is

a little ambiguous - and it was clearly not

significant to Justices Higgins and Rich.

ClT23/l/HS	243	9/3/89
Philip Morris

MR DOYLE (continuing):  But we respectfully submit that

if one goes to COR as, perhaps, the earliest

instance of the in-substance approach or to HE~1ATITE

as the latest, what one finds is the significant

thing is the singling out of transactions by

producers and, in our respectful submission, that

feature is completely absent here. There is no

indication in the statute at all that, in any

respect, producers are aimed at or selected out

from a wider group. So we would respectfully

submit that the in-substance approach should not

be adopted here by, as it were, adding together

a whole series of factors and saying, well, in

substance, that is the conclusion we reach here,

that it is an excise. We submit that the in-substance

approach depends upon what I have called a "singling

out".

Finally, we would respectfully submit that

no real issue of severance arises here. That

if there is in any respect an excise, it is only

when the tax happens to fall on a producer and,

in that situation, severance does not arise.

In HEMATITE, of course, the very section was declared

to be invalid because it could only apply to producers

and I did not think to check what was the actual

order made in COR. One would assume, again, the

order was that the section was invalid.

Where the tax can only fall on producers

and query where it will fall mainly on producers,

it then makes sense to declare it to be invalid.

But where it is an excise only because it happens

to fall on a particular producer, in our respectful

submission, severance does not really arise and

the only appropriate order is one which, in effect,

declares the inapplicability of the relevant tax

to that particular person.

May it please the Court.

MASON CJ:· Thank you, Mr Solicitor.	Mr Davies?
MR DAVIES:	May I hand up some outlines, Your Honours.
MASON CJ:	Thank you.

(Continued on page 245)

C 1T24/l /SDL 244 9/3/89

Philip Morris

XR DAVIES:  Your Honours, there are only a couple of

submissions I would like to add to what is in

our outline and what has been said before on

behalf of the Solicitors-General for the other

States. They are really in response, at least
partly, to questions that Your Honours

Justice Brennan and Justice Deane raised with

our learned friend the Solicitor-General for

New South Wales. They arise out of DENNIS. In

our respectful submission there are two

important steps in the reasoning in DENNIS.	The
first is that the fee charged was a tax and
therefore it would follow necessarily, not a
means of regulation. The second is that the

distinction which was made in DENNIS was between

a tax on the right to carry on the business and a tax upon goods sold in the course of carrying on that business.

The other point which I would like to make, which really arises out of the last paragraph of

each of the judgments of Justices Kitto and Taylor

in DENNIS to which Your Honour Justice Deane

referred, both Their Honours were applying

strictly the criterion of liability test and

that is, in our respectful submission, why they
reached the conclusion. It may necessarily

follow, in our respectful submission, that in the area of licences, as we have defined them in paragraph 1 of our outline, that the criterion

of liablity test was adopted by the Court, was

a necessary part of the reasoning in DENNIS

and therefore is a necessary part of the

acceptance of the decision in DENNIS.	They are
our submissions,rmy it please the Court.

MASON CJ:  Thank you, Mr Davies. Mr Charles?

MR CHARLES:  If the Court pleases, Your Honours, as we

followed the learned Solicitor-General for Victoria

last night, the submission was then made that

BOLTON V MADSEN was no longer good law; PARTON's

case was not a settled principle; CHAMBERLAIN's	case was no longer good law; the second limb of
DENNIS HOTELS was no longer good law, and I think he added that DENNIS HOTELS did not stand for
anything. Your Honours, I would not have laboured
that point, in the light of the fact that the
submissions were withdrawn this morning, had it
not been for the fact that we would say they have
now been precisely adopted and repeated by the
Solicitors-General both for New South Wales
and Western Australia and by Mr Davies on behalf
of Queensland.

CIT25/l/JM	245	9/3/89
Philip Morris

MR CHARLES (continuing): If I may invite the Court's

attention to the outline of argument for New

South Wales which has been submitted this

morning, the Court will see put before it the

submission that:

The ruling in that part of DENNIS HOTELS .....

may be formulated as follows:

Outside the "heartland of duties of excise"

(ie production of manufacture of goods)

a fee required for a licence to sell goods

which is calculated by reference to the

quantity of goods purchased or sold during

a past period is not an excise.

And Mr Davies, for Queensland, has just put to the Court that:

whatever else maybe a duty of excise, a

fee paid for a licence to sell goods,

calculated by reference to quantity or value

sold or purchased in a prior period, is

not an excise

Your Honours, of course, what that means is

that, if correct, then any licence scheme imposed

upon newsagents, general stores, butchers, hardwares,

greengrocers, Myers, David Jones, Woolworths,
which requires them to obtain a licence and
to pay fees for selling by retail in the community

will, of course, no longer be an excise so long

as it is made in relation to sales in a prior

period. But it is not, in any way, limited

to sales by retail. That expression of the

rule will cover just as adequately sales by

any wholesaler and also sales by any manufacturer

and, apparently, the only criterion necessary
to preserve a scheme of that kind from extinction

as an excise is simply that it must not be imposed

upon a manufacturer or producer as such.

In other words, so long as, quite simply, the scheme produces a wholesale licence fee

which is simply imposed upon all wholesalers,

even if the fact be that those wholesalers are

all producers, that scheme will survive by the

simple application of this test. Your Honours,

we, of course, cannot argue that DENNIS HOTELS

is wrong but the Solicitors-General for the

various States, in our submission, have been

seeking from this Court the most dramatic

enlargement of any principle that may be found

to stand in DENNIS HOTELS if, contrary to the

Solicitor-General for Victoria, there is such

a principle or matter for which it presently

stands.

ClT26/l/ND	246	9/3/89
Philip Morris

Your Honours, we would say, with great

respect to those who have argued the contrary, that if there had been a wholesale tax imposed

in this way put before the Judges in PARTON's

case, all of them, without exception, including
the minority, would have said, instantly, that

that was a sales tax and that that was an excise

in consequence no matter that it was fixed by

reference to past sales.

In our submission, to achieve the result

presently being put before this Court by the

various States, it is necessary for this Court

to overturn the PETROL case, the NEWSPAPER case,

PARTON, CHAMBERLAIN, DENNIS HOTELS itself, BOLTON

V MADSEN, GOSFORD MEATS and HEMATITE. And we

would say, with respect, section 90 of the

CONSTITUTION will cease to exist as an entity

in consequence.

Your Honours, it is simply not possible

to make a proposition of that kind stand in

the light of the decided cases. We would add

that, in our submission, it was quite expressly

rejected by the majorities, both in HEMATITE

and in GOSFORD MEATS. I do not wish to take

the Court at length to the passages, I have

done it in argument before, but could I simply,
by way of an example, remind the Court of what

was said in 155 CLR at page 385 by two members

of the majority in that case, Your Honour

the Chief Justice and Justice Deane, that,

starting at page 385, point 3:

Finally, a general proposition that a tax

cannot be a duty of exeise if it takes the

form of a licence fee that is quantified

by reference to goods produced, manufactured

or sold during some period prior to the

actual period of the licence is simply

inconsistent with the well established and

fundamental principle to which reference

has already been made, namely, that the

question whether a tax is a duty of excise

must be determined by reference to substance

rather than form. Although DENNIS HOTELS

has been allowed to stand as an authoritative

decision on its own fact, it would fly in

the face of both principle and authority
to accept it as establishing a general

proposition that can be applied to a tax

made payable, in the form of a licence fee,

by a manufacturer or producer of goods.

C1T26/2/ND	247	9/3/89
Philip Morris

MR CHARLES (continuing): Now, Your Honours, those who had

to deal with the question of a first sale by a

producer inunediately went to the conclusion that

it was necessary for the concept of an excise to have any value at all that the tax be capable of

being imposed and still be characterized as an

excise on the basis of sale as well as on production

and manufacture and every established formulation of

the test which has been accepted by this Court since

PETERSWALD V BARTLEY has accepted that the tax may be

imposed at any time,from the very first moment of

manufacture, up to the point of retail sale, leaving
aside the question of whether or not a consumption

tax might be such an excise but it has never been in

question, after PETERSWALD V BARTLEY, that such a sale

may be the subject of a tax imposed by way of excise

and, if that were not so, section 90 would not have

sensible content.

The test that is now being put before you by

the various States denies that proposition diametrically.

Now, Your Honours, it has been suggested in argument

that it might be said that liquor and tobacco are in

some separate category. We would accept, if I may

say so with respect, that so far as liquor is

concerned, at least in relation to sales in licensed

premises and, obviously, they will be by retail, it

may very well be said that there is a real significance

and importance attached to the way in which those sales

are made. There is, plainly, significance and value

given to the premises by the operation of licensing

of those premises. There is an importance in a

community interest in ensuring that sales of liquor

are made properly, safely and under controlled

circumstances.

Now, it is readily understandable that in a

situation of that kind the result in DENNIS HOTELS

would have been produced and, equally, that to assess

the value of premises by reference to past sales is an

understandable explanation of the reasoning of the

majority of the conclusion in that case.

In our submission, it is not nearly as easy to explain the exception, if it be one, in relation to

tobacco and certainly, Your Honours, we would submit
that historically it cannot be explained on the same

basis. The various historical examinations by this

Court, in our submission, have not shown that in

relation to tobacco any like considerations obtained

that would make the licensing of premises for the sale

of tobacco of particular consideration. Indeed,

tobacco is usually not sold in premises which are

strictly tobacconists' premises. Ordinarily, one

will find them being sold in a variety of different

establishments, including places where they might

ClT27/l/SH	248	9/3/89
Philip Morris

have been thought most dangerous, namely in a

petrol station.

Now, Your Honours, it is not possible to obtain any like understanding of the tobacco

exception and it may be, Your Honours, that it
can only be understood simply as an exception

which the Court has allowed to occur but, in any

event, the decision in DICKINSON'S ARCADE is

explicable as being in relation to retail sales

and not to sales at an earlier point.

Now, Your Honours, there has been several

attempts by those putting argument on behalf of
the States to suggest that EVDA NOMINEES involves

some imprimatur in relation to this legislation.

We would say, with respect, that that simply is

an impermissible attempt to use precedent in a way

far in extreme of any legitimate such use. What

happened in EVDA NOMINEES was that the matter was

put before the Court by counsel as one involving

legislation which, for practical purposes, was

indistinguishable. The Court said that it would

not allow argument to take place in relation to

DENNIS HOTELS and DICKINSON'S ARCADE and there the

matter started and finished.

We would say it is abundantly clear from

the report of the case and the report of argument
that no attempt was made to distinguish the

legislation. No attempt was made even to examine

the legislation and one finds, Your Honours, that

being clear above all, we would say, from the

fact - and I mean no disrespect to the Bench in

saying this - that all that happened after argument

was as it is reported on page 316, the Justices

left the Bench for a short time to consult and then

came and gave their oral judgment.

(Continued on page 250)

ClT27/2/SH	249	9/3/89
Philip Morris

MR CHARLES (continuing): Now, Your Honours, with the greatesc

of respect, to assert that a decision of that kind gives the imprimatur to this legislation, we would

say is simply nonsense. One turns next, Your Honours,

to see where H.C. SLEIGH takes the States. It has

been put that the effect of that case is to establish

that the DENNIS HOTELS case could apply to a producer -

I understood that submission to be made expressly by

the Solicitor-General for Western Australia - but

it is plainly being relied on by the States for a very

substantial widening of what was seen to be the low-

water msrk of the DENNIS HOTELS island.

Your Honours, I mentioned briefly to the Court when my learned friend, Mr Jackson, had finished

his argument in opening that I had somewhat understated

in my own argument the effect of the legislation in

SLEIGH and may I now go back to that legislation.	The
Court will recall it is the South Australian
Act No 95 of 1974 that was in question in that case. in relation to SLEIGH, that it was enough to make
that case authority that DENNIS HOTELS could apply
to producers that SLEIGH in the proceedings had claimed to be a producer, that that was enough to place the matter before the Court.

Your Honours, an assertion of that kind could

be no foundation whatever for any theory of precedent
that that case now gives weight to or entitles an
excise to be imposed on a producer. What the

legislation demonstrates by a careful examination is

that although licences may be imposed on manufacturers,

that fact was not critical at any stage in the Court's

judgments. What the licensing scheme demonstrates

upon examination is that although there are nine

classes of licence set out on pages 422 to 423, the

persons who really bear the fee are the retailers

because retailers must be licensed, as will be seen,

Your Honours, from class 9, near the bottom of page

is then not taxed on the sales made by that retailer.	423, and every other seller who sells to a retailer
That is the effect, Your Honours, of section 14.

In other words, all of the fees are borne by

those who make the sales to the public and the
manufacturer would only bear the licence fee in, one

would have thought, the extremely rare case,and

possibly the Court might well say non-existent

likelihood,that the manufacturer occasionally makes

retail sales to the public. Your Honours, this case

is entirely explicable if petrol is to be regarded
as another exception or another part of a DENNIS

HOTELS island. This case is explicable on the basis

that it relates to retail sales. It is certainly

not explicable on the basis that any attention was

given to the position of H.C. SLEIGH as manufacturer

ClT28/l/BR	250	9/3/89
Philip Morris

because as the facts make abundantly clear, unde~

the refinery exchange process that was used, the

plaintiff was not a manufacturer in South Australia

and the attempt made by the plaintiff to establish

himself in that category was expressly rejected
in so far as the matter was considered and, in

particular, in the judgment of Your Honour the

Chief Justice to which reference has been made.

(Continued on page 252)

ClT28/2/BR	251	9/3/89
Philip Morris

~R CHARLES (continuing):  Now, Your Honours, with

respect, SLEIGH takes the States nowhere in

relation to production, but what is clear,

Your Honours, is that if the State's submissions

are correct, then a licence fee imposed upon wholesalers can cover all producers at their

point of first sale simply so long as the Act

is made general in operation, refers to

wholesalers as such and does not, in terms, make

reference to their position as manufacturer or

producer.

Now, we say, Your Honours, that that is not

merely to drive a coach and four through the

CONSTITUTION.	It is a process of surgical
excision.	Your Honours, so far as the question

of the distributive operation of the Act is

concerned, we have submitted that if on its true

construction the Act imposes an excise upon

Philip Morris as a producer at its point of first sale, that it must follow that the same conclusion

applies in relation to the other two members,

wholesalers who are not producers within the

plaintiff's licence. Members of the Court have

had the licence drawn to their attention.

Your Honours, we say, firstly, that on the

authorities to which we have referred that

position is to be seen on the basis that if the
fee is found to be an excise, then the operation of

the CONSTITUTION is that the sections are bad.

That is our first contention. Our second

contention would be that the fact that the sales

tax, as we would characterize it in submission, is

imposed upon a sale by wholesale, is sufficiently

close on any of the tests from cases such as

PARTON, down through BOLTON V MADSEN on to the

present time to be properly characterized as an

excise.	Once the Court arrives at the conclusion
that the tax is imposed on goods and that it is

proper to see that relationship, notwithstanding

that it is calculated by reference to a past sale,

in our submission, it requires the overturning

of all the cases down from PARTON on through

BOLTON V MADSEN and accepted by this Court and

members of the minority, we would say, in HEMATITE

and in GOSFORD MEATS; it would be overturning

all those cases to say that a sales tax imposed

on sale by wholesale is not an excise,

Your Honours, both because the sale by wholesale

is close to and will necessarily impose burden

upon P:oduction, we say it is properly seen as

an excise.

The DENNIS HOTELS exception, in so far as

it is an exception, or island, if it is that, we

say can only be given sense in the context of

ClT29/l/HS	252
Philip Morris

the CONSTITUTION if it is limited to an imocsi:~c~

on sale by retail. If it is left as possibl:

applying to sale by wholesale, then immediately

all sales by wholesale, Your Honour, we would sav

may be protected from section 90 by being

generally expressed.

Now, Your Honours, it follows therefore, 1n

our respectful submission, that if the Court

determines that the imposition of the fee on
Philip Morris is bad, then all the plaintiffs
must succeed at least in the PHILIP MORRIS case

and the force of that submission, we would submit,

is underlined by the fact that they are three joi~t

holders of a group licence and we would say that

it would be an absurd conclusion if one of those

three licence holders could be protected by

section 90 and the other two not. That would

simply underscore - - -

GAUDRON J:	That depends, Mr Charles, does it not, on the group licencing provisions having a different
effect from that which one can see in the statute
as presently standing if PHILIP MORRIS were
excised from them?

(Continued on page 254)

ClT29/2/HS	253
Philip Morris
MR CHARLES:	As we follow it, Your Honour - Your Honour, I incorrectly answered Your Honour's question.
GAUDRON J:	Yes. It was on this issue I was pondering when

I asked the question yesterday.

MR CHARLES:  Yes, the situation, of course, is that if

someone is in business alone, that person must aoolv

for a single licence. If persons are part of a

group, then they must apply for a group wholesaler's

licence; that is the operation of section 7(1) (c) on

page 11 of the print. We would submit, Your Honours,

that it is properly put that the closeness of

connection between a producer and other wholesalers

is demonstrated by that very fact.

GAUDRON J:	Well, leave that issue aside for the moment. What concerns me is whether you could make sense of
section 7 at all if it were read to exclude theref~om
either a wholesaler who was a producer or to exclude
therefrom the calculation of the amount payable by reference to tobacco products sold by a wholesaler who is also a producer.
MR CHARLES:	Your Honour, if I may say so, the submission that

I was making immediately before Your Honour's question

was directed to a different issue.	I appreciate the
force of Your Honour's question.	The submission that
I was seeking to make was	the fact that there are

three persons in a group as wholesalers, one of whom

is a producer, simply supports the view that has been

taken through the cases, that any fee or tax imposed

upon any wholesaler, whether producer or not, must be

characterized as an excise in order to give section 90

meaningful content. That was the submission I was

attempting to make at that point, Your Honour.

Leaving that and assuming that I cannot make

that proposition good - - -

GAUDRON J:  I find it difficult to see how you could make it

·good by reference to the existence of a group.

MR CHARLES:	Well, Your Honour, simply this, that it indicates that in this case one has a producer, it is inherently
likely that producers may have other companies
related to them that simply engage in wholesale. The
sales have, we would say, much the same characterization,
they are likely to have the same impact on production,
in our submission. Both types of sale, we would submit,
will burden the price in the consumer's hands; the
person who buys ultimately a packet of cigarettes to smoke them will pay 30 per cent more because of the
imposition of this tax as a matter of necessity. Now,
it is our submission, Your Honour, that whether it is
a tax on a wholesaler as a producer or not produces
directly the same effect -

ClT30/l/JH	254	9/3/89
Philip Morris

GAUDRON J:  Well, it is the same whether it is a tax on t~e

retailer, if that submission is taken to its logical

end, and that is precisely what you cannot argu~.

MR CHARLES:  Well, Your Honour, outside the field of tobacco,

I can argue it.

GAUDRON J:	Yes.
MR CHARLES:	And outside the field of tobacco and liquor

decisions of this Court have found that proposition

entirely compelling. We would say, with respect, that

I am forced to accept it here in relation to retail

sales and only to retail sales of liquor and tobacco

and possibly petrol.

We would submit that to take the tax a step back and to impose it on a sale by wholesale is - and I

do not want to labou~ the point, I have said it. It is

inconsistent with PARTON and all the decisions in the

BOLTON V MASDEN formulation and so many cases that

we would submit and have submitted, Your Honours.

GAUDRON J:  Yes.

MR CHARLES:  For those reasons, Your Honours, in our submission,

the conclusion should be in relation to each of the

plaintiffs that the tax imposed is an excise and that

the sections are, to that extent, therefore invalid

and I should add that they cannot be saved, in our

submission, by the application of the INTERPRETATION

OF LEGISLATION ACT.

(Continued on page 256)

ClT30/2/JH	255	9/3/89
Philip Morris

GAUDRON J: Why not, I ask?

~R CHARLES:  On the ground, Your Honour, that a sales tax,

if it is - - -

GAUDRON J:  You characterize it one way which, in some respec~s.

may beg the answer -

~R CHARLES:  Your Honour, I am simply seeking the authority

of Judges - - -

GAUDRON J:	Let us assume that it is decided to be a saLes tax on the wholesaler/producer and whatever it
is on the others, it is not an excise. Let us
assume that position were reached.  Why would
not section 6 save it?
MR CHARLES:	We would say, Your Honour, that whatever it

does it cannot go so far as to draw a line through

a group licence and I do not want to make any

other submission on that point, Your Honour.

We would say that it is going to be very difficult indeed to say that the tax could be regarded as

a sales tax on a producer but imposed in precisely

the same terms against another non-producing

wholesaler - that it is not a sales tax on that

person.

GAUDRON J:	Which still is not necessarily the question.
MR CHARLES:	I accept, Your Honour - I can only answer with

a submission in our terms. We would go back to

the authority of Judges like Sir John Latham,

Your Honour, to seek the support for the submission
that a tax imposed in those terms and in that

way is a sales tax. Unless there are any questions,

Your Honours, those are our submissions.

MASON CJ:  Thank you, Mr Charles. Mr Jackson, before I

call upon you, I should offer the Solicitor-General

· for Victoria and the Solicitor-General for New

South Wales the opportunity, if they wish to avail

themselves of it, of responding to Mr Charles'

argument on section 14 of the BUSINESS FRANCHISES

(PETROLEUM) ACT of South Australia.

MR BERKELEY:	Your Honour, it might be an awkward way of doing it, but could I have the opportunity of
considering that while Mr Jackson is addressing
the Court?

MASON CJ; Yes. Mr Jackson, nobody wants to precede you

so we should hear from you now.

MR JACKSON:  Your Honours, may I deal with two matters by

way of reply in addition to those dealt with by

my learned friend, Mr Charles.

C 1T3 l /1 /SDL	256	9/3/89
Philip Morris

The first concerns the question whether one method of identifying the area in relation to

which the backdating cases remained authority

might not be to regard them as limited to what

Your Honour Justice Deane suggested might be regarded

as the traditional areas - I may not have the

exact word - of alcohol and tobacco.

Your Honours, we would urge, with respect,

that is not an appropriate discrimin and we would

do so for a number of reasons. Your Honours,

i t is true to say , of course , that as a ma t t er

of history, alcohol, in one form or another, has

been the subject of excise duties and has been

the item or the commodity which has most frequently
and almost continuously been the subject of that

in various jurisdictions.

Tobacco also has been, from time to time,

and tobacco, it is right to say, in its various

forms, including snuff, has been perhaps the second

:::ios t fas h ion ab 1 e genera 1 are a .

Your Honours, no doubt those items are easy

subjects for taxation because they are consumed

widely and they tend to be purchased by the ultimate

consumer in relatively small quantities, which

means that the amount to be paid by increases

in the excise duty is not noticed so much.	But
the range of items and commodities subject to
duties has always been treated as being much
wider and, in times of need, expands.

(Continued on page 258)

C1T31/2/SDL	257	9/3/89
Philip Morris

MR JACKSON (continuing):  I mention the latter aspect,

Your Honours - and I will come to some instances

of it in just a moment - but the fact that the

range of items potentially subject to excise

duties expands in times of need, be it

need brought about by war, or need brought about

by simply economic difficulties, provides a

reason why one treats the terms of section 90

as in aid of the Commonwealth's powers because

what it does do is to prevent there being any

economic competition with the States in terms

of duties in respect of particular commodities

and one should not, in our submission, try to

cut up the range of commodities into a number

of categories.

Your Honours, if I could go f~~3t to

instances in which the range of ite=3 subject

to excise duties has been treated as much wider.

May I give Your Honours, first of all, a reference

to the discussion of the topic in MATTHEWS V

CHICORY MARKETING BOARD, 60 CLR at pages 291 and

following? Your Honours, I do not intend to

go to the passages but in the pages following that

Sir Owen Dixon deals with the history of the

duties. There is a sunnnary to be found conveniently

in the 11th edition of the Encyclopaedia Britannica

at pages 58 and following. May I hand those to

Your Honours, together with a copy of an
American case to which I will refer in just a moment?

Your Honours, I intend to refer first to the passage from the Encyclopaedia Britannica.

Your Honours will see the entry under "excise"

commences in the bottom left column of page 58 and

there is a general discussion of it which follows.

Then Your Honours, in the right column on that

same page, the history of the branch of the

revenue is discussed. Then, Your Honours, towards

the end of that paragraph, will see a reference

to the 18th and the beginning of the 19th century and

t:halafter that the words commencing:

The wars with Bonaparte strained the government resources to the uttermost and

excise duties were multiplied and increased

in every practicable form. Bricks, cancles,

calico, prints, glass, hides and skins,

leather, paper, salt, soap and other

commodities of home manufacture and

consumption were placed, wit!:. -::::1.eir respective

industries, under excise sur:~:::..llance and fine.

When the duties could no longer be increased in number they were raised in rate -

and so it goes on.

Your Honours, I would simply refer to two matters

in relation to that. One is that at various times

CIT32/1/JM	258
Philip Morris

a wide range of items was treated 3s je~ng the

subject of excise duties. The second is that

Your Honours will note that one of the occasions for the imposition of duties over a wider range of

things was in time of economic need. Your Honours,

if one was seeking to find any genus, then one

way of classifying it would be perhaps to say

that it applied to items which were luxuries by

the standards of the day, or inessentials perhaps,

and some inkling along those lines is to be found

at the bottom of the left column on page 129.

But, of course, the items are not necessarily

those which are regarded as luxuries, and, of course,

it could change from time to time. One might say,

for example, that mineral water produced in

Australia was at .the present time a luxury; perhaps

one might not but 1t is a matter for the legislature.

(Continued on page 260)

CIT32/2/JM	259
Philip Morris
MR JACKSON (continuing):	Your Honours, the second reference

to which I would make - perhaps, I should say one

other thing. Your Honours will see the various items that are the subject of excise duties, as referred to

in the paragraph in the right column, discussed in the 1825 Act in the United Kingdom which lists the duties as described as "duties of excise".

Your Honours, may I have copies of that delivered

to Your Honours in the next day. It is an Act

which was contained in one of the documents which
was to be handed up had the matter gone further by

one of the States and I do not have copies available

to hand to Your Honours separately at the moment.

MASON CJ:	Yes.
MR JACKSON:	Your Honours, one may also see in the decision of the Supreme Court of the United States in PATTON
V BRADY, (1901) 184 US 608,which is the other
document handed to Your Honours, a discussion by
the Supreme Court of the terms of a tobacco tax which was imposed and the relevant part of the decision, Your Honours, cormnences at the page
numbered in the side, 615 and it is the page which
has the number of the page in the bottom right
corner of 717.

Now, Your Honours will see about 15 lines from

the bottom of the right column, Their Honours say:

We pass, therefore, to co;-ider the merits of the case, and here the fir= ~uestion is, What

is the nature of the tax? Ob-.· ·..isly it was

intended by Congress as an excise.

They then discussed the legislation setting out the

terms of the statute irmnediately adjacent to the

side notation 616:

It was provided that "upon tobacco and snuff

manufactured and sold, or removed for

consumption or use, there shall be levied

and collected the following taxes" -

and the rates were set out. Then, Your Honours,

if one goes from there to the left column on the next

page, in the last paragraph in the left column,

Their Honours say:

Ever since the early part of the Civil War

there has been a body of legislation, gathered

in the statues under the title Internal Revenue,

by which, upon goods intended for consumption,

excises have been imposed in different forms

ClT33/1/SH	260	9/3/89
Philip Morris

at some time imtermediate the beginning of

manufacture or production and the act of

consumption. Among the articles thus

subjected to those excises have been liquors

and tobacco, appropriately selected therefor

on the ground that they are not a part of

the essential food supply of the nation, but

are among its comforts and luxuries.

Then, if Your Honours were to read the remainder of

that paragraph to about 12 lines in the next paragraph

in the right colunm, what is apparent, in our

submission, is two things:  one is that, while

such items as liquor and tobacco are items which

may well be the subject of excise duties, that is

so, not because of their inherent nature but because

they represent one of a number of types of goods on

which excise duties might conveniently be applied.

The second thing is that what that, together with

the reference to the Napoleonic Wars in the earlier
reference I gave Your Honours,demonstrates is that

the time when duties of excise are likely to be

increased, both in terms of rate and also in terms

of the ambit of the items is one of need, be it
economic.

Now, Your Honours, I have taken a little time over that but the simple point I was seeking to make

about it was that it is not correct, if I may say so

with respect, in our submission, to say that the two

items of alcohol and tobacco fall into a class by

themselves and, of course, the decision in H.C.SLEIGH

would militate against the adoption of that submission.

We .. would also add, Your Honours, something that

I suspect I said before and that is that section 90

is a provision which is designed to ensure that the Commonwealth, when imposing duties of excise is not subject to economic competition by State taxes.

Your Honours, perhaps I should not have said "designed

to ensure". It is a provision which does ensure, in (Continued on page 262)

our submission.

ClT33/2/SH	261	9/3/89
Philip Morris

~R JACKSON (continuing):  The second matter with which

I wish to deal, Your Honours, is this, and it arises from the reference by our learned friends on behalf of New South Wales in paragraph 1

of their outline of submissions. Your Honours

will recall that what was set out there was

a statement of what was submitted as the correct

test and one of the reference relied upon to

support it was the observation of Chief Justice Gibbs

in GOSFORD MEATS at page 378. May I take

Your Honours to that for just one moment.

Your Honours will see, about a third of

the way down the page, His Honour refers to

the foor cases and then says:

The reasons for reaching this conclusion,

put shortly, are that no particular act

done in the course of the business gives
rise to any liability to pay the tax; liability

arises only on the grant of a licence, so

that if no licence is granted or renewed

no tax is payable; in other words the
tax is not imposed on the sale or purchase
of the goods, but is exacted for the licence

to engage in the business.

Your Honours, it may be perhaps just a matter

of words but the enactments under consideration

in all those cases - and by that I mean DENNIS

HOTELS, DICKENSON'S ARCADE and H.C. SLEIGH -

do not appear so far as we are able to judge

from their terms to have contained provisions

which were the equivalent of section 28A of
the 1975 Act in question here and its equivalent,

being section 47(1) in the 1987 Act, section 28A

providing that:

Where a person was required by this Act

to hold a licence in respect of any period,

but did not do so, the person shall play

to the Chief Commissioner an amount equal
to the fee which would have been payable
for the licence -

plus, of course, the double penalty.

Your Honours, those are our submissions.

MASON CJ:  Thank you, Mr Jackson. Yes, Mr Solicitor.

MR BERKELEY:  Your Honour, the way my learned friend,

Mr Charles, sought to make use of section 14

was to say that the question of whether Sleigh

was a producer or not did not _come in issue

in that case and, as I understood the argument,

it did not· come in. issue because if you looked

C 1T34/1 /ND 262 9/3/89

Philip Morris

at section 14, no licence fee would ever become

payable by Sleigh because: it was a manufacturer

and it was entitled to a rebate.~ By and large
it is a very complicated formula. It was

entitled to a rebate on account of the petroleum

that it sold to other licence holders.

It is rather complicated but if I could paraphrase the effect of the section as I understand

it: a holder of a class 5 licence which is the

licence SleiEh should have obtained, pays duty

on all petroleum sold by him in the relevant

period, less the -non-accountable amount, and that is defined as the amount sold to another

licence holder at any time and which, at the

end of the relevant period, is in stock by the

purchaser or which, during the period, has been

resold by the purchaser, diminished by the amount

of stock held by the purchaser at the beginning

of the period.

The general effect of that is that, by and

larg~, you will get a rebate. The person who

sells down the chain to another licence holder

will get a rebate of everything that he sells

to the other licence holder although, looking

at it briefly, it may not necessarily coincide

with licence periods - it might not dovetail

exactly, but in the long run that is the effect

of it.

But, in our submission, all that has got

nothing to do with the point that my learned

friend was making. The fact is that in SLEIGH's

case, Sleigh conceded that it was obliged to

get a class 5 licence, it was that matter that

was in issue before the Court. A class 5 licence

is one which is appropriate to a person who

sells goods which he himself manufactures and

also goods which he himself does not manufacture
and which are intended to be sold to persons

who are licensees and persons who are not licensees

and the Court just cannot assume that a petroleum

company does not engage in retail sales. (Continuing on page 264)

C1T34/2/ND	263	9/3/89
Philip Morris

MR BERKELEY (continuing):  One could take judicial

notice, in our submission, of petrol stations

all over Australia which, in the name of

petroleum companies - and we have Acts of

parliament controlling the activities of petroleum

companies in relation to their own service stations where they sell their own petrol. So one just does

not get anywhere with my learned friend's
submission because, firstly, you cannot make
the assumption a fact on which it is based, and

in SLEIGH's case Sleigh did not sell licences,

and, secondly, the whole purpose of the action was

to say that the fee was either an excise or

contrary to section 92.	That was the whole purpose
of the action.

For the purpose of deciding that point the Court had to assume and the parties had to assume

that there was a fee payable by Sleigh and it did

not matter whether it recouped it in part, or not,

and it was a fee that Sleigh would be out of

pocket and out of pocket to the extent of a tax

which is properly characterized as an excise.

MASON CJ:  Thank you, Mr Solicitor. Mr Solicitor for

New South Wales, do you wish to address us on

this point?

MR MASON:  As we read section 14(1) of the 1974 South

Australian Act, the producer/wholesaler is liable

for duty in relation to whatever is caught up by

the last four lines of that section and as

Mr Justice Gibbs explained,those last four lines

at page 490 of the report in 136 CLR, about the

middle of the page, he said this:

Any petroleum product which had been

sold by one licensee to another,

whether or not during the relevant

period -

and then in the brackets he explained those words,

as we see it -

(other than any of such product held

for resale by the latter licensee at

the end of the next preceding relevant

period) and which was either resold

..... was non-accountable.

So whilst it is not terribly easy to work out

what it is, the fact is that there was a liability

in certain circumstances for a certain portion of

the petrol that was sold by the producer to

another person.

MASON CJ:  Thank you. Mr Charles, we will proceed

with HARPER's case.

ClT35/l/HS	264	9/3/89
Philip Morris

MR CHARLES:  I hope that members of the Court will have a bock

of legislation and other documents.

MASON CJ: Yes.

MR CHARLES:  I suppose one could describe it as yellow in colour,

Your Honours.

MASON CJ: Pale yellow.

MR CHARLES: Pale yellow, indeed. And also, but not in that

document, Your Honours should have either or both of

the statement of claim and a case stated. It may

only be that Your Honours have the statement of claio.

McHUGH J: I have a demurrer book and Statement of Agreed

Constitutional Facts.

MR CHARLES:	Yes, Your Honour.
McHUGH J:	But is there a case stated?

MR CHARLES:  No, Your Honour, I think not. Your Honours, this

is a case about abalone and abalone according to

the Australian Encyclopaedia are "large marine

gasteropods (genus Haliotis)belonging to the phylum

Mollusca." The item in the encyclopaedia continues

that the animal lives - I have copies, Your Honours,

in case - - -

MASON CJ: At the moment, Mr Charles, I seem to be without the

statement of constitutional facts.

MR CHARLES:  Your Honour, I hope,will find that at the rear of the pale yellow booklet that Your Honour has.

MASON CJ: What, under tab 9?

MR CHARLES:  Tab 9, Your Honour, yes.

MASON CJ: Yes, I see, thank you.

MR CHARLES:  Your Honours, may I hand up copies of the item

from the Australian Encyclopaedia?

MASON CJ: Yes.

ClT36/l/BR	l65	9/3/89
Philip Morris

MR CHARLES:  If I may take the Court briefly to this before

going to the statement of agreed facts? The reason

for this, Your Honours, is that we are not quite
sure what this case is about. We came to the Cour:

expecting to argue DENNIS HOTELS and the imposition

of an excise. We have learnt at the Court that

DENNIS HOTELS is not an issue in this case, that it

is not to be relied on, and the issues, therefore,

are not entirely clear to us but in case there was

to be some submission that these animals, or fish, are

fixtures, it may be helpful to look at the precise

nature of the animal itself and we start, Your Honours,

therefore, with the encylopaedia. It is said that:

The animal lives in a simple curved spiral shell with a row of holes around the edge that allows water to pass over the gills.

The body is little more than a large

muscular foot with a pair of eyes on stalks

at one end and sensory tentacles around

the margin -

Your Honours will see in the right-hand column, in

the last paragraph that -

Young abalone of this size -

that is, 40 millimetres -

are vulnerable to predators such as fish and
crabs, and they live by day concealed in

narrow crevices or under boulders. At night

when many predators are inactive, they come

out to graze on seaweed growing on the rock.

As they grow larger they occupy increasingly

larger crevices and by the time they are

sexually mature, at about three years of age

and about 100 millimetres long, they may

live out in the open.

Now, Your Honours, going to the statement of agreed

·facts, the ~greed facts include that:

Abalone, generally known as shellfish, do

not swim. They attach themselves by

suction to rock surfaces on the sea bed.

Any movement of abalone is minimal and

occurs across rock surface only.

(Continued on page 267)

ClT37/l/JH	266	9/3/89
Philip Morris

~R CHARLES (continuing): Your Honours, there may be soQe

shades of meaning in the word "minimal". Our

instructions, for what they are worth, are that

movement during the day is minimal but at night there may be movement of up to 40 metres. I do

not know if that has any relevance to the matters
before the Court.

2.      Abalone marketed in Tasmania are taken

from within Australian territorial waters.

3. All abalone caught in Tasmania are taken by divers diving to the sea bed at a maximum

depth of 140 feet, from where they are

individually prised free from rocks by means

of a knife or other similar instrument.

4.      Abalone produces two distinct marketable

products, namely:

(i) Abalone meat shucked from the shell;

and

(ii) Abalone shell which is not processed

in Tasmania but is sold to overseas markets
for processing (to become "mother of pearl").

5.      A large percentage of all abalone taken

by persons licensed under Tasmanian law to

take abalone is taken from Tasmanian coastal

waters. The remainder is taken from adjacent

Australian waters.

6.      A large percentage of all abalone taken

by persons licensed under Tasmanian law to

take abalone in Tasmanian waters is brought

into Tasmania for processing.

7.      A total of one hundred and twenty-five

(125) persons all of whom are resident in

Tasmania held licences to take abalone issued

under Tasmanian Law in the year 1988.

8. There has been and is a demand for the

issue of Tasmanian abalone licences.

Your Honours, the plaintiff, Mr Harper, is a person

who dives for abalone and he makes his living

from doing so. As such, by the legislation in

Tasmania, he is required annually to obtain a licence and a substantial fee is made payable

for that licence. Your Honours, the statement

of claim - may I direct the Court's attention

to that - sets out, in paragraphs 3 and 4, what

are the activities in the plaintiff's business.

Your Honours will see that:

he dives for and takes abalone in Tasmanian fishing waters;
(b) sells and supplies the abalone to processors who

carry on in Tasmania the business of processing.

C1T38/l/SDL	267	9/3/89
Philip Morris

MR CHARLES (continuing):  Then, Your Honour, we refer to

section 9(l)(h) of the FISHERIES ACT which

authorizes the making of regulations. Your Honours,

that Act is to be found in the legislation book at

tab 1. The Court will see set out section 9 of

the Act which we understand to be the source of

the regulation-making power and, in particular,

Your Honours, on page 2, section 9(l)(h) is

what we understand to be the relevant subsection.

Then, Your Honours, may I draw attention to

the fact that the Act, as a whole, is set out at
tab 4 of the volume in case the Court wishes to

see the whole of the Act in context.	The statement
of claim continues, Your Honours, that:

At all material times during 1987 .....

Regulation 17A of the Regulations provided

as follows:

(1) Subject to regulation 17AA, no person

shall take any abalone in State fishing waters
unless he is the holder of -

(a) a subsisting cormnercial abalone licence sold and issued for that purpose under this

regulation; or

(b)	a subsisting non-cormnercial diving licence.
(lA)	The price at which a cormnercial abalone

licence may be sold _is a price calculated at

$360 for each tonne of abalone that the

holder of the licence is authorized to take
while the licence is in force.

The relevant provision, Your Honours, appears in tab 2 at page 10 of the legislation book.

(Continued on page 269)

ClT39/l/SH	268	9/3/89
Philip Morris

MR CHARLES (continuing):  Your Honours, I should

emphasize that that provision applied only for

1987 and the Court will see that there is

reference made to the position of fact in 1987

in paragraphs 7, 8, 9 and 10 of the statement
of claim. Your Honours will see that under the
licence in paragraph 9 at the bottom of page 3

of the statement of claim the 1987 licence

authorized the plaintiff to take 28 units
and what is a trifle confusing is that the units

are not of one tonne each. For some reason thev are .950 tonnes so that the total the plaintiff.

is authorized to take is 26.6 tonnes.

MASON CJ:  Mr Charles, that might be a convenient time

to adjourn, and we will resume at 2. 15.

AT 12.47 LUNCHEON ADJOURNMENT

ClT40/l/HS	269	9/3/89
Philip Morris

UPON RESUMING AT 2. 15 PM:

MASON CJ:	Yes, Mr Charles.
MR CHARLES:	Your Honours, I would ask that the Court turn to

the statement of claim. We were at paragraph 7 to lO

and I was drawing attention to the fact that for the

1987 year the plaintiff carried on business pursuant

to a licence. Paragraph 7 of the statement of claio

indicates that for that preceding 10 year period

the plaintiff had carried on business, dived for

abalone and taken abalone from Tasmanian waters in

pursuance of licences issued annually to him by the

defendants.

Your Honours will see that there is reference

made in paragraph 9 to the 1987 licence. It:

authorized the Plaintiff to take in

1987 in Tasmanian fishing waters, other

than the waters of the Furneaux Group, no

more abalone than the quantity indicated

in the Licence, namely 28 units of 0.950

tonnes each (a total of 26.6 tonnes).

The difficulty, Your Honours, is that the regulations

refer consistently to tonnages. The licences - and

I will hand the Court an example of a licence shortly

refer to units. The only explanation we can give by

way of surmise is that the use of unit rather than

tonnage makes it easier to vary ~~e quantity that can

be taken and possibly the fee by which it is done

but we are not privy to the reasons why those

differing expressions were used. But the Court will

see that Mr Harper's 1987 licence entitled him to take

26.6 tonnes.

Your Honours, in paragraph 10 the plaintiff, to

obtain that licence:	was required by regulation 17A and the
Defendants to pay, a prescribed price or fee of S9576.00, being $360.00 for each of the 26.6 tonnes of abalone that the 1987 Licence authorized the Plaintiff to take.

(Continued on page 271)

ClT41/l/BR	270	9/3/89
Philip Morris
MR CHARLES (continuing):	In paragraph 11	that price

paid by the plaintiff to obtain the 1987 licence

was calculated by the defendants by multiplying

the number of units which the plaintiff was

authorized to take under the 1987 licence,

namely 28, by a price of $342, and an

administrative process, which members of the

Court will see, was in the next year elevated

into the regulations as later paragraphs of the

statement of claim will show.

McHUGH J:  Excuse me just a moment, Mr Charles. That

figure of $360 in paragraph 10 of the statement

of claim, is that your calculation, or is that a

calculation done by a public official?

MR CHARLES:  That, Your Honour, is in the regulations.

If Your Honour would be good enough to look back

to paragraph 6, Your Honour will see that figure

is in but the administrative.means by which it

was calculated is set out in paragraph 12

immediately following. What some officer of

the defendants did was to use the formula
set out in paragraph 12 where Pis the amount,

ending up at $342, AV is:

the average annual value of the total

quantity of abalone taken in Tasmanian

fishing waters by the holders of
commercial abalone licences during
the 36 month period ended on 30th June

in the year preceding

and where:

"N" represents the total quantity of

abalone measured in units that the holders
of all commercial abalone licences may

take -

and multiplying the resulting figure by .05.

Your Honours, in paragraph 13 it is alleged that

by requiring the plaintiff to purchase that

licence for $9576:

calculated in the manner aforesaid,

the Defendants have imposed and levied

a licence fee upon the Plaintiff.

Then, Your Honours, the system changed in relation

to the 1988 year in the way set out in paragraph 14

of the statement of claim and Your Honours will see

that what had been L.e administrative calculation

then became the amended regulation 17A.

Your Honours, that is set out in the document book

that Your Honours have at tab 3.

ClT42/l/HS	271	9/3/89
Philip Morris

MR CHARLES (continuing):  That is an excerpt,

Your Honours, from the Sea Fisheries Regulations

of 1962 as at l January 1988. The amending
regulation is referred to in paragraph 14 of

the statement of claim, Your Honours. It then

sets it out. And members of the Court will

see the formula set out in subregulation (lA)

near the bottom of page 5. The fee itself,

Your Honours, was payable by two instalments

as appears from subregulation (lC) on page 6.

May I now hand up to the Court copies of the

1988 licence.

MASON CJ:  Yes.

MR CHARLES: If I said 1987, Your Honours, I was wrong.

I hope I said 1988. Members of the Court will

see that the amount paid is $9039.94 in

relation to 28 units at $645.71 per unit and

$20 for the diving licence and $170 for the

fisherman's licence.

(Continuing on page 273)

ClT43/l/ND	272	9/3/89
Philip Morris

MR CHARLES (continuing):  It is alleged at paragraph 15,

near the top of	page 7, that the defendants issued
that licence to	the plaintiff in respect of the
1988 year:

The Current Licence is held by the

Plaintiff at the date hereof and

authorizes him to take in 1988 in

Tasmanian fishing waters, other than

the waters of the Furneaux Group, no

more abalone than the quantity

indicated in the licence, namely 28

units -

again, Your Honours, this time the tonnage per unit
differs -· as 'the Court will see, it is now O. 855 tonnes

per unit, reducing, therefore, the total overall

quantity to 23.94 tonnes and to obtain that licence,

in paragraph 17:

the Plaintiff was required by Regulation 17A

and the Defendants to pay, a prescribed fee -

which had now become, as the Court will see, for

a full year, $18,079.88 and that calculates, and the

calculation here is ours -

$755.22 for each of the 23.94 tonnes of

abalone -

which we then call -

"the said price per tonne) that the

Licence authorizes the Plaintiff to take

during the term of the Licence.

The said price payable by the Plaintiff to obtain the Current Licence was calculated

by the first and second Defendants by

multiplying the number of units which the

Plaintiff was authorized to take under the

Current Licence, namely 28 units, by a

The price per tonne ..... was calculated by

the first and second Defendants in

accordance with the following formula -

price per unit of $645.91.

which is then set out and which was taken from the

regulations. We again allege in paragraph 20,

Your Honours, that:

By requiring the Plaintiff to pay a
fee ..... the Defendants have imposed and

levied a licence fee upon the Plaintiff.

ClT44/l/JH	273	9/3/89
Philip Morris

We say in paragraph 21 that they are payable in

instalments and that the payment which was first ~ade

of $9576.00 for the 1987 licence:

was made involuntarily and in fear that,

unless made, the Defendants would
refuse to issue a commercial abalone

licence to him and would thereby prevent

him from carrying on his business and

earning his livelihood.

And, again, the first instalment of the 1988 licence

fee in paragraph 23 under similar circumstances

and we then allege, Your Honours, that they are in

those circumstances duties of excise and beyond the power of the Tasmanian Parliament to impose.

Now, may I take the Court back briefly to our sl..llTIJla.ry

of argument which was handed to the Court at the	·
outset on Tuesday morning and there are two
comparatively small passages that encapsulate our
argument in HARPER'S case?

(Continued on page Z-7 5 )

ClT44/2/JH	274	9/3/89
Philip Morris

MR CHARLES (continuing):  We deal with the Sea Fisheries

Regulations, Your Honours, near the bottom of

page 3, and the features of the regulations to

which we would draw attention at page 4 that

the regulations prohibit any person from taking

any abalone in State fishing waters unless he

is the holder of a subsEting commercial abalone

licence.

Secondly, Your Honours, that under the

regulations as they stood in 1987, the price
payable for that licence was calculated at
$360 for each tonne of abalone that the holder
of the licence was authorized to take while the

licence was in force, 11:gulation 17A(l), which

Your Honours have in tab 2 at page 10. Next,

Your Honours, in 1988 the regulations provided

that the prescribed fee for the issue of a

commercial abalone licence should be an amount

for each tonne of abalone that the holder of a

licence was authorized to take pursuant to the

licence calculated in accordance with a

particular formula, and the formula was based

upon the gross value of abalone taken in State

fishing waters by the holders of commercial

abalone licences during the 12 months ending

30 June of the year preceding the licensing year,
again regulation 17A(l), as amended. That is

tab 3 at page 14.

We therefore submit that at all times

the licence fee was calculated by reference

to a specified dollar amount for each tonne of

abalone that the holder of the licence was

authorized to take pursuant to the licence.

Shortly, Your Honours, we would submit that the

licence fee in those circumstances may properly be described as a tax, a compulsory exaction of

money by a public authority for public purposes

enforceable by law and not a payment for services

rendered, taking the words used by Sir Harry Gibbs

in both HEMATITE and GOSFORD MEATS. (Continued on page 276)

CIT45/l/JM	275	9/3/89
Philip Morris

MR CHARLES (continuing):  Your Honours, the remainder of

the argument which we addressed to the Court in

this case commences at the bottom of page 10

of our summary. We say that the relationship

to the goods and to their quantity is established

in the circumstances of the licence fee calculation

that we have just put to the Court and we assume

from the statement that DENNIS HOTELS is not relied

on, that the point is not being made against

us here; that that calculation, by reference

to a previous period, in some way makes it
impossible to say that the fee or, as we would
respectfully put it, the tax, is not payable on

goods.

Your Honours, at the bottom of page 10 we

submit that the taking and gathering of abalone

for commercial sale is an act of production and

that abalone so produced constitute goods. We

would submit that some relevant assistance - the

submssion is hardly surprising, Your Honours,

but we would submit that relevant assistance may

be gained from KAILIS's case - the case which

the Court will recall relates to processing of

fish. The reference, Your Honours - I do not

propose to take the Court to it - 130 CLR, at

page 265. The fish in the relevant legislation

was defined as including crustacea or other marine

life and the fish were treated as goods in the

course of production, for example, in the judgment

of Sir Harry Gibbs at page 258.

In that case we would say the Court clearly

regarded the processing of fish as a process of production or manufacture. For example, in the

judgment of Sir Harry Gibbs at pages 258 to 259;

of Sir Ninian Stephen at page 260, and Your Honour

the Chief Justice at pages 265 to 266.

(Continued on page 277)

C1T46/2/SDL	276	9/3/89
Philip Morris

MR CHARLES (continuing):  We would submit that the taking

of abalone is the first step in that process of

manufacture or production.

Now, the licence fee in KAILIS, Your Honours,

was calculated on the value of fish caught or

purchased by the processor and in just the same way

we would put it the catching of the fish or their

purchase by the processor would relevantly be an

integral part of the business of manufacture or

production.

Now, having regard to the way the States have

used authorities in the course of these proceedings,

we would submit that if we are entitled to use

authorities in the same way, KAILIS concludes the

matter decisively in our favour at this point.

However, Your Honours, we would submit in terms of

the argument made on page 11 of our summary of

argument that the licence fee levied by the re8ulation

has, at all times, been calculated by reference to

a specified dollar amount for each tonne of abalone

that the holder of the licence is authorized to take

pursuant to the licence. In 1987, the specified

amount referred to in the regulations was a fixed

dollar sum whereas in 1988 it was to be calculated

by reference to the value of abalone taken in State

fishing waters in a prior twelve month period and

the difference between the two being that in 1987

that fixed sum was calulated administratively and

in 1988 that process was in the regulations as such.

We would submit that the licence fee imposed

by the regulations is exacted in respect of the
production of abalone. In both years, Your Honours,
the amount of the fee was related directly to the
quantity and value of abalone that the licence

holder was authorized to take pursuant to the licence.

As such, in our respectful submission, the licence fee

is a duty of excise. It is a compulsory exaction

imposed upon or in respect of the production of

abalone, levied in a substantial amount,

calculated by reference to the quantity and value

of abalone that the licence holder is authorized
to take. It is a tax which, we would submit, in the
normal course of events will be added to the price

of goods and ultimately paid by the consumer.

(Continued on page 278)

ClT47/l/SH	277	9/3/89
Philip Morris

MR CHARLES (continuing): We respectfully submit, for the

reasons that we have argued in relation to PHILIP

MORRIS,that the regulations do not escape the reach
of section 90 because they take the form of a licence
fee, nor are they beyond the reach of section 90 by

reason of the fact that the amount of the licence

fee prescribed by the 1988 regulations is to be

calculated by reference to the value of abalone taken

by commercial licence holders in a prior 12 month
period, and that is a simply a convenient means, we

would submit, of fixing the fee.

Your Honours, DENNIS HOTELS having been removed

as apparently a factor in the defence -we do not
know what the defence is -in our submission, in the

circumstances, we put the fee enacted plainly

a tax and an excise duty and - - -

BRENNAN J:  Does it make any difference that in 1987 a licence

was both sold and issued?

MR CHARLES: We would say, Your Honour, not. If it is thought

that the expression "sold" gives some notion of

voluntariness to the payment, we would rely on what

Sir John Latham said in the HOMEBUSH FLOUR case. The

fact is that you are not entitled to take abalone from

the water without a licence. To carry on your

livelihood you must have one. It is not a voluntary

payment. The idea that the licence fee is sold,

Your Honours, in those circumstances could not, we

would say, give any voluntary nature to the making of

the payment.

There is a passage at the outset of

Sir John Latham's judgment in the HOMEBUSH FLOUR case

where His Honour referred to the fact that in that

situation the person complying with the legislation,

my recollection is, had to make a contract with the

State and then buy the produce back and His Honour is

very scathing in referring to that as - the passage,

Your Honours, is in 56 CLR 400 and Sir John Latham

said at page 400 point 5:

it is further argued that, when the miller

agrees to repurchase his flour (or is deemed
to to agree), and accordingly becomes bound

to pay the difference between the two prices,

it is by virtue of his agreement that the

liability arises, and it is said, a sum paid

under an agreement cannot be regarded as a

tax. This argument has at least the merit
of an ancient and hoary lineage. "Voluntary

loans" and "gracious offerings" and "forced

benevolences" are not unknown in our history.

When such transactions amount to the exaction

of money by a government in obedience to

what is really a compulsive demand, the money

paid is paid as a tax.

ClT48/l/BR 278 9/3/89

Philip Morris
GAUDRON J: Mr Charles, could I ask this: would a royalty

imposed in the same circumstances be a duty of

excise?

MR CHARLES:  Your Honour, so far as cases like STANTON's case

are concerned, it is plain that in those circumstances
and, for example, in relation to the oil won by the

producers out in Bass Strait, we certainly would not

contend that the royalty paid there amounts to a duty

of excise. We would submit that in no circumstances

can the present payment be regarded as a royalty.

We do not know if this is the argument that is going

to be raised against us, Your Honour, but if it should
be, the reasons would at the least include that from
the time of Magna Charta as a matter of common law

it has not been possible for the Crown to insist upon

an ability to exclude persons from fishing in tidal

waters which these waters plainly were.

We would say it is quite plain that on no view

could the abalone be regarded as owned by the

Crown. It follows from Magna Charta and a large

number of cases that have been decided on the base

of it that the entitlement to fish in tidal waters

is a long-established public right - - -

DAWSON J:  But this not the Crown's, it is a statute.

MR CHA.l:{LES:  That is as a mtter of corrm:m law, Your Honour. I

do not know what the nature of the argument against

us will be but if it is said that any of the coastal

waters legislation bears on this, what that

legislation establishes, if it is valid, Your Honour,

and - - -

DAWSON J:  No, I had in mind the particular Act under which

the regulations were made.

MR CHA.l:{LES:  Your Honour, as to that a number of questions

may arise. There is no statement at all in the

legislation that we can find that the fish, the

sharks, anything else that can be found in coastal
waters belong to the State.	We would say that there

remains the existing cormnon law right to fish in

tidal waters. We would say that any attempt to take

away that right would have to be a matter of clear

legislative statement and we would say next, that

the very nature of a royalty involves the making of

a contract and in this case there has been no attempt,

we would say, to make a commercial contract for the

taking of abalone.

ClT48/2/BR	279	9/3/89
Philip Morris

MR CHARLES (continuing): There has been the insistence

by the State upon a licence being taken before

someone is allowed to carry on his occupation.

Whatever might be the position, if a different

approach were taken by, for example, the making

of a contract requiring a royalty to be paid,
as to which different considerations would

apply, it would be our submission that no attempt

has been made here to frame the licensing

arrangement as a royalty. And a number of steps

would need to be taken before - - -

DAWSON J: "Royalty", perhaps, is a technical term·, but

why not a price extracted for the exploitation

of the resources of the State?

MR CHARLES:	We would say, firstly, Your Honour, that considerations of that kind do not seem·to have
had any significance in cases like MATTHEWS.
Before they can be regarded as resources of the State, one would first have to find that
there was legislative power which had been
exercised to take within the State the ownership of the articles in question.

DAWSON J:  I do not know about that. Why is it not a

resource no matter by whom they are owned?

I mean, it is a source of value, it is a valuable

asset; the fact that - - -

MR CHARLES:	Your Honour, again, I am trying to anticipate.
DAWSON J:	Perhaps we ought to hear what the other side

has to say.

MR CHARLES:  There are a variety of different arguments,

I can assure Your Honour, that may be made,

depending upon which horn of whichever dilemma

we find ourselves on later. And I would rather

not forewarn the other parties if some of the

arguments we have succeeded in working up

might be relied upon.

MASON CJ: If does seem to be a defect in procedure if

a constitutional case comes on here and the

arguments to be put by the respective parties

are not known to their opponents.

MR CHARLES:  Your Honours, with great respect, I entirely

accept that.

MASON CJ:  Yes, I am not blaming the parties but I am

indicating that we ought in future adopt a

procedure which ensures that that situation

does not obtain.

C1T49/1/ND	280	9/3/89
Philip Morris

MR CHARLES:  Your Honour, we have been racking our brains

for some time trying to see on precisely what

basis the arguments against us may be put,

including some potential arguments about the

invalidity of the coastal waters legislation,

having regard to absence of constitutional power

which, if the legislation is put against us

will be one of our responses either later this

afternoon or tomorrow but - - -

MASON CJ:  At the moment you are exuding confidence.

MR CHARLES: Total confidence, Your Honour, yes. At the

outset, Your Honours, unless there is anything

further I can say, those are our submissions

in opening.

MASON CJ:	Do you have any supporters, by the way?
MR CHARLES:	I fear, Your Honour, we are alone.

MASON CJ:  Yes, thank you. Yes, Mr Solicitor for Tasmania.

MR BALE:	May it please the Court, if I might hand up
our outline and it might be convenient if, at
the same time, I were to hand up a bundle of a small number of documents to which reference
will be made:during the submissions and it might be convenient if the Court would have them at
once.
MASON CJ:	Does the abalone move for up to 40 metres at

night?

(Continuing on page 282)

ClT49/2/ND	281	9/3/89
Philip Morris

MR BALE:  That is not an admitted fact, it 1s not one er

the constitutional facts and it is certainlv not

accepted by us, Your Honour. Any movement

that it does have, as the constitutional facts

indicate - and it is not said that it is totallv

immobile - is on the rock surface upon which it.

attaches. It cannot leave the rock surface.

I think my learned friend wishes to make a point,

before I open my submissions.

MASON CJ:	Yes.
MR CHARLES:	If the Court will permit me just to intervene

very shortly I do so in order that the Court may

be warned of something before my friend starts.

This is the first indication we have had by paragraph 5 on the first page of my friend's submissions that those pieces of legislation will

be relied on. Now, Your Honours, we will want to

say, if they are relied on against us, that that

legislation is beyond power and I simply mention

that fact because this is the first time we have

had any indication that that is relied on against

us. I recognize, Your Honours, that is going to

require the giving of a notice and we shall

certainly give that notice as soon as we are able
to sit down and draw it but, if I may say so, it

emphasizes the point Your Honour the Chief Justice

made to me about the somewhat unsatisfactory nature

of this procedure.

MASON CJ:	What sort of notice are you going to give?
MR CHARLES:	A section 78(1)(b) notice, Your Honour.
MASON CJ:	What, presumably to all the parties that are

here at the bar table?

MR CHARLES:  Indeed, Your Honour, but I am hearing rumbles,

if I may so describe them, on either side of me,

· about not having been given it.

MASON CJ:	That hardly sounds a particularly valid complaint but,~anyhow, you are going to produce notices?
MR CHARLES:	Well, if it is regarded as necessary,

Your Honour, we will do so, and I took it from

the rumbles I heard that it would be.

MASON CJ:	Yes, Mr Solicitor.
MR BALE:	I think I can certainly say, from the ?Oint of view of the defendants and I unrlerstancl also from the Cornmor,,,,ealtl-i,
that this legislation is sufficiently recently before all of us and this Court that we certainly
would not take any point in relation to notices.

ClTSO/1/HS	282	9/3/89
Philip Morris

Obviously I do not speak and am not able to speak for the Solicitors-General of the several

States.

MASON CJ:	But as a matter of formality notices should be given so that the Court can comply with the
statutory injunction.

MR BALE:  Yes. We would accept receipt of them at

. . ,

whatever time 1t was convenient for my learned

friend to deliver them,without any need to

interrupt the argument at this point, Your Honour.

MASON CJ:  Yes. What I have in mind is that the statute

says that we shall not proceed "unless and until"
so that we need to know that the notices will be

given and given promptly.

MR CHARLES: 

Your Honour, I would hope that, subject to

being able to find a typist, we will be able to
give the notice tonight.

MASON CJ: 

Yes, Mr Solicitor.

MR GRIFFITH: 

If I may intervene, if the Court pleases,

we are not concerned about formalities as to notice,

but we understand my learned friend seeks to

attack the COASTAL WATERS(STATE TITLE)ACT.

That to us is something new. It would involve

relying on the external affairs power and we would

not say we are prepared today to argue that issue.

I must say, Your Honour, we thought this issue,

as summarized in the outline, was blindingly obvious

as the issue in the case and we have prepared

accordingly, but if my learned friend seeks to

challenge the validity of that Act, well

we probably need an opportunity to work up

argument on that.

MASON CJ:  In other words, you are applying for an

adjournment?

MR GRIFPITH:  Not at this stage, Your Honour. If my

learned friend wishes to proceed and give his

argument we might be able to work up the argument

overnight. We do not want the case to go off

unnecessarily but, Your Honour, perhaps it should

be - - -

MASON CJ:  We should first establish, I think, that the fact

that notices have not been given up to the present

point is not a matter of objection to any of the

parties here.

MR GRIFFITH:  The Northern Territory is not here, Your Honour.

ClTS0/1 /HS	283	9/3/89
Philip Morris

MASON CJ:  The Northern Territory does not come

within section 78B, does it?

MR GRIFFITH:  Thank you, Your Honour, I was just trying

to remember that. I hear rumblings from my

left that it does, Your Honour.

MASON CJ:	Has there been an amendment?
MR GRIFFITH:	There is section 78AA, Your Honour which

defines "State" to include the Northern Territory.

MASON CJ: That does create a problem for us.

MR GRIFFITH: Perhaps, Your Honour, that could be remedied

by a telephone call, or something and instructions

could be given.

MASON CJ:  No doubt it will come as something of a shock

to those in Darwin to receive this telephone call.

MR GRIFFITH:  Yes, Your Honour~ We are all reasonable people,

Your I-R5nour, and if it is thought that there is enough people to
argue it - Your Honour, perhaps we can proceed so far and hold
over until torrorrow the issue of the (STATE TITLES)· ACT.

The (STATE POWERS) ACT - - -

DEANE J:	Only if it is matters severable under section 78B(2)(c).
MR GRIFFITH:	Could we proceed?
DEANE J:	We could only proceed to ·~ear evidence and argument
concerning matters severable from any matter".
Well, it does not seem to be severable.
MR GRIFFITH:	Your Honour, I suppose it is really a

matter of acquiescence, that if the parties
are content to say the other issues can be argued

and the rest sorted out tomorrow, it is really a

m~tter of the spirit of the provision.

DEANE J: Except when the Act directs an unqualified order,

it would be rather strange if this Court

disregarded it.

MR GRIFFITH: 

Of course, Your Honour, but it is in the

context that it is assumed all parties are not
before the Court.

DEANE J: Unless, of course, you want to suggest that

the direction to this Court is unconstitutional,

which I would have thought it is?

MR GRIFFITH:  I do not wish to submit that, Your Honour.

We wish to be helpful, Your Honour. We have got

half a day available to us and we could probably

proceed so far.	Perhaps we could hold the
argument -

CITSl/1/JM	284
Philip Morris
DEANE J:	I withdraw the "which I would have thought it is".
MR GRIFFITH:	I did not take Your Honour up.
DEANE J:	I did not want to appear too glib.
MR GRIFFITH:	There are other provisions of the JUDICARY ACT

where one might make similar argument, Your Honour

and perhaps will one day when the Court is evenly

divided. But, Your Honour, it really is a matter for the Court to decide whether there is anything useful to be done in the next hour and 20 minutes.

We do not wish to be obstructive.

If the Court pleases, one other issue

which arises is that the validity of the

COASTAL WATERS (STATE POWERS) ACT was argued a

fortnight ago and it would be a question of whether

it was appropriate to reargue that again, or

merely await the decision of the Court.

MASON CJ:  No doubt Mr Charles will be able to have a look

at the transcript of argument and decide whether

he wants to do any more than put the submissions

that were put in that case.

MR GRIFFITH:  Your Honour, it might serve some function

if we were to produce argument overnight, as it

were, indicating why Mr Charles thinks the 78B
notice is necessary; he could shortly summarize

his argument as to why he thought the issue of

validity arose. Then we could address our response

directly to the way he is putting it.

(Continued on page 286)

CITSl/2/JM	285
Philip Morris
~N CJ:	At the moment, Mr Solicitor, it appears to the
Court that we have no alternative but to adjourn
until tomorrow morning. In the meantime, the
necessary steps can be taken on the part of Mr Charles to give the statutory notices and
cormnunication can be had with the Northern Territory and we would need to be informed tomorrow morning
that the Northern Territory has been given at least
oral notice and I should have thought it is possible
to give them written notice with modern electronic
means available today and, if possible, somebody
from the Northern Territory or on behalf of the
Northern Territory ought to indicate to the Court
what the position of the Territory is.
MR GRIFFITH:	Yes, that all would seem possible, Your Honour.
MASON CJ:	Now, that is the course the Court proposes to take;

that is, adjourn until 10 o'clock tomorrow morning

unless counsel at the bar table wish to advocate

some other course.

MR GRIFFITH:  Your Honour, my learned friend, the Solicitor

for Tasmania has a live abalone here. I do not know

whether it will survive until tomorrow. Perhaps the

Court could have a look at it.

MASON CJ: Well, he can have another one a:irfreighted up.

Yes, Mr Charles.

MR CHARLES:  Your Honours, I am very sorry this has happened.

I should say that when we came here we thought that

we had three cases which, together, raised the issue

of DENNIS HOTELS but at different times and we did

not, at the outset, think that anything in this

particular case involved anything other than

DENNIS HOTELS. We first learned, on Tuesday

afternoon, from my learned friend, Mr Bale, that

Tasmania would not be relying on HARPER.	Now, the
only other thing I would like to say, Your Honours,

is that the Court should not assume that we have not

attempted to find out what the argument was going to

be for the defendants.

MASON CJ:  No. We would make no such assumption, Mr Charles.

Very well, the Court will now adjourn until 10 o'clock tomorrow morning.

AT 2.59 PM THE MATTER WAS ADJOURNED

UNTIL FRIDAY, 10 MARCH 1989

ClT52/l/SH	286	9/3/89
Philip Morris