Port of Portland Pty Ltd v State of Victoria
[2010] HCATrans 220
[2010] HCATrans 220
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Melbourne No M62 of 2010
B e t w e e n -
PORT OF PORTLAND PTY LTD
Appellant
and
STATE OF VICTORIA
Respondent
FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J
BELL J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 26 AUGUST 2010, AT 10.18 AM
Copyright in the High Court of Australia
MR J.D. MERRALLS, QC: May it please the Court, I appear with my learned friend, MR S.T. PITT, for the appellant. (instructed by Mills Oakley Lawyers)
MR P.J. HANKS, QC: Your Honours, I appear with my learned friends, MS C.M. KENNY, SC and MR C.O.H. PARKINSON, for the respondent. (instructed by Victorian Government Solicitor)
MR R.J. MEADOWS, QC, Solicitor-General for the State of Western Australia: May it please the Court, I appear with my learned friend, MR A.J. SEFTON, on behalf of the Attorney-General for the State of Western Australia who does not wish to be heard on the notice of contention issue but would seek leave to intervene in relation to the other issues. There is a 78B notice but we do not think that it can fairly be said that a matter arises under the Constitution or involves its interpretation. (instructed by State Solicitor (WA))
FRENCH CJ: Is your summons opposed?
MR MEADOWS: Not that I am aware of.
MR MERRALLS: No, your Honour.
MR HANKS: No, your Honour.
FRENCH CJ: Yes, all right. You will have leave to intervene.
MR MEADOWS: May it please the Court.
FRENCH CJ: Yes, Mr Hanks.
MR HANKS: Thank you, your Honour. The State submissions on the notice of contention are to be presented by Ms Kenny, so I will vacate the lectern.
FRENCH CJ: Thank you.
MS KENNY: Your Honours, before I commence the submissions may I just correct one error in a footnote in the State submissions and that is footnote 113 on page 18 of the State submissions. You will see, your Honours, there that reference is made to the LTA. The reference, in fact, should be to VLA. Having said that, the notice of contention raises three discrete issues.
The first is the proper construction of clause 11.4(a) of the agreement and, in particular, the issue which arises is what was the nature of the promise? Was it to do something more than just amend legislation? The second issue which arises is whether the legislative amendments which were introduced by section 27 of the State Taxation (Omnibus Amendment) Act complied with the contractual promise in clause 11.4(a). The third issue is whether the amendments had immediate impact and benefit for the appellant’s land tax liability. The State, of course, contends that it did.
Now, your Honours, I had proposed to address the first of those two issues by taking your Honours through the relevant sections of the legislation that applies. It is the State’s contention, your Honour, that the Court of Appeal fell into error on this part of this case because of their incorrect construction of clause 11.4(a) of the agreement, and their imperfect understanding of the legislative framework.
Your Honours, I had proposed to take you through the relevant sections of the three pieces of legislation that apply. That is the Land Tax Act 1958, the Local Government Act 1989 and the Valuation of Land Act 1960. Your Honours, if this becomes tedious, I am sure your Honours will fast-forward me, but I thought this would be the most helpful and useful way to proceed. So having said that, your Honours, could I please take you to tab 3 which is the relevant reprint of the land tax legislation.
GUMMOW J: This is 26 May 1998. Is that the one?
MS KENNY: Yes, your Honour. If I could start, your Honours, by taking you to section 8 which appears on page 22. As your Honours will see that section says:
tax on land shall . . . . . . be assessed charged levied and collected by the Commissioner for each year on the total unimproved value of all land of which he is the owner at midnight on the thirty‑first day of December immediately preceding the year –
of taxation. So the key point to note, your Honour, is that taxation is on the unimproved value of land. From section 8, your Honours, we then go to section 3(2), which is on page 12 of the legislation and this contains the all important provision in reference to site value. Subsection (2) says:
(2)For the purposes of assessing the tax . . .
(a)the unimproved value of any land shall be an amount equal to the site value (as defined in the Valuation of Land Act 1960) of the land as at the relevant date adjusted in accordance with sub‑section (4) -
So the Land Tax Act immediately picks up unimproved value under the Valuation of Land Act. I did not propose to take you to the equalisation factors. That appears in subsections (3) and (4) on page 13, but suffice to say, your Honours, that when the Act – the equalisation factor on a yearly basis is multiplied by the site factor to make sure that values of land remain current for each year of taxation.
Then, your Honours, if I could take you to subsection (2A) which is immediately beneath section 2, that defines the relevant date which is important. It says:
(a)where the land is within the municipal district of a municipal council –
(i)subject to sub-paragraph (ii) the date as at which rateable properties within the municipal district were valued for the purposes of the last general –
The relevant date is the date of the last general valuation –
before 1 January in the year immediately preceding the year for or in which the land tax is being assessed -
and in subsection (ii) which relates to supplementary valuations made after the general valuation, the relevant date is the return date of that supplementary valuation. If I can then take your Honours to section 16, which again picks up the Valuation of Land Act, and that is on page 53 and that provides in subparagraph (a) that the Commissioner may use:
valuations made by a rating authority within the meaning of the Valuation of Land Act -
Now, the municipal council of the shire of Glenelg was a rating authority for the purposes of the Valuation of Land Act.
The next section, your Honour, that I refer you to is section 24A which appears on page 56 and perhaps I need not read this, but simply point out that the Land Tax Act, as we have said in our submissions, contains its own regime for considering objections to land tax and what this provisions says is that if the Commissioner has used a valuation under the Valuation of Land Act, then it must not entertain any objection relating to the unimproved value of land but rather that matter is to be dealt with by the Valuation of Land Act.
There is a final provision which I would like to take your Honours to and that is section 38 of the Land Tax Act which appears on page 63. Essentially, I need not read that to your Honours but simply summarise it to say that what that does is say this, that if an objection under the Valuation of Land Act is pending then you are still liable to pay land tax but if your valuation is somehow adjusted through that objection process then you will be entitled to a refund.
CRENNAN J: Is there any provision for refunds or adjustments in circumstances where an objection has not been taken under the objection process but some error in the valuation has been discovered after tax has been paid?
MS KENNY: If I understand your question correctly, your Honour, I think it would be under the section I just took you to.
CRENNAN J: What I am asking you about, and it may be there is no such provision, but in the absence of an objection being taken, say for the reason that a taxpayer has not appreciated there is a mistake in a valuation upon which the tax assessment has been made, and that comes to light, time for objection has gone, is there any provision for making any adjustment?
MS KENNY: No, there is not, your Honour. You have to do it within the timeframe of the statutory regime or you miss your opportunity, but, as I will take you to the relevant sections in a minute, your Honour, there is ample opportunity to make objection. If you do not do it, then you miss your opportunity. Your Honours, could I then take you to the legislation in tab 4 which is just a couple of provisions of the Local Government Act which will make the sections of the Valuation of Land Act a bit more intelligible. The first section I take your Honours to appears on page 212 of the Act. This is behind tab 4, your Honours. You will see that section 155 permits a council to declare a number of rates. Section 156 provides that:
(1)The owner of land is liable to pay the rates and . . .
(2)If the owner cannot be found or identified, the occupier of, or the mortgagee ‑ ‑ ‑
GUMMOW J: Sorry, are you reading 155?
MS KENNY: Sorry, I have passed over – 155 I simply summarised, your Honour, it just provides that ‑ ‑ ‑
GUMMOW J: Where are you now?
MS KENNY: I am now onto 157, which is really the most important provision. It is on page 213, and that provides that:
A Council may use the site value, net annual value or capital improved value system of valuation.
KIEFEL J: We just do not seem to have this section.
MS KENNY: It was a late addition to the materials, your Honours. It may not have found its way into your folders.
FRENCH CJ: This is a replacement tab 4, yes.
MS KENNY: Yes, that is correct, your Honour. It is page 213, your Honours, section 157.
FRENCH CJ: In this case, of course, we are talking about a site value basis.
MS KENNY: Yes. Site value, your Honours, is the only value that is relevant for land tax.
GUMMOW J: Is there a definition of “site value”?
MS KENNY: We will come to that in a minute, your Honour. That is under the Valuation of Land Act. The next section of the Local Government Act is over the page, section 158 and this provision ‑ ‑ ‑
KIEFEL J: Could I just interrupt you? I did not quite get you. The last section you referred to in the Land Tax Act, which was not at the end of my reprint, was that section 63?
MS KENNY: No, it was section 38, your Honour.
KIEFEL J: Section 38. Thank you very much.
MS KENNY: Over the page at section 158, it is mandatory for a council to declare annually the rate that the council intends to charge. That becomes relevant, your Honour, when we look at the Valuation of Land Act.
BELL J: I am sorry, can you tell me what tab you are behind at the moment.
MS KENNY: Tab 4, your Honour.
BELL J: It is 158 behind tab 4.
MS KENNY: On page 214. Tab 4 should now contain the replacement sections.
BELL J: For the Local Government Act.
MS KENNY: There was a replacement tab. Your Honour, we can provide a further copy if that would be of assistance.
BELL J: Thank you.
MS KENNY: Your Honour Justice Bell, it was page 214, which makes it mandatory to pay rates.
BELL J: Yes, thank you.
MS KENNY: Your Honours, while I am at this tab there are just two incidental matters I mention so that I do not have to take your Honours back to it. It is section 154, which is on page 212. All that does is say that Crown land is exempt from rates. That becomes relevant when you consider why Barton Place, which was the main port area, had previously been exempt from rates. While we are at the Local Government Act I also point out section 220Q on page 313. I simply point that out, your Honour, because we do rely upon an order‑in‑council that was made extending the boundaries of the Shire of Glenelg. That order was made ‑ ‑ ‑
FRENCH CJ: This to just to get you in under 13DF?
MS KENNY: Yes, that is correct. They are incidental matters which I mention on the way through. If we could now go to tab 5, your Honours, and if I could ask your Honours to go to page 23 of the legislation ‑ ‑ ‑
GUMMOW J: This is the 1995 reprint.
MS KENNY: It is. I should mention at this point, your Honour, that we have provided the 1995 version but also the later reprint because our factual scenario straddles both Acts. Up front I should say that the most important difference for our purposes is that the 1998 amendments introduced biennial valuations of land. Prior to that it was every six years. That is really the only significant difference in the legislation. If I can then take your Honours to page 23, section 13DC(1), which says:
In every valuation for the purposes of the Local Government Act 1989, each separate occupancy on rateable land must be computed at its net annual value, its capital improved value and, if required by a rating authority, its site value.
Then we come to the all‑important definition of the meaning of “site value”. That appears on page 6. Without reading it, I simply point out that the key ingredient of site value is that it is market value assuming improvements have not been made. Then, your Honours, if I could take you to page 3 of the legislation ‑ ‑ ‑
GUMMOW J: It is the last words of the definition of “site value”?
MS KENNY: Yes, your Honour.
FRENCH CJ: That term is used, I think, in the Local Government Act, but I presume there is an adopting definition of it somewhere in that Act?
MS KENNY: In the Local Government Act, yes, there may be, but it is really the Land Tax Act that is picking up the valuation of land and its definition, your Honour.
FRENCH CJ: Yes, all right.
MS KENNY: Your Honours, it is important to understand this particular section because it is the State’s contention that it was the loophole in this particular section that the parties addressed their mind to when then came down to draft clause 11.4(a) of the agreement. Before taking you to it, I should mention this, your Honour. Essentially, your Honours will recall – or perhaps it is convenient for me now to take you to it, to clause 11.4(a) where the State – perhaps we should go to that section. It is on page 145 of the appeal book. Clause 11.4(a), as your Honours will undoubtedly recall, states that:
The State has agreed with the Purchaser that it will effect an amendment to statutes governing the assessment and imposition of land tax to ensure that the unimproved site value used as the basis for assessment of land tax liability for the Real Property excludes the value of buildings, breakwaters, berths, wharfs, aprons, canals or associated works relating to a port.
What needs to be understood at this point, your Honours, is that under the legislation as it was then in force, each of those six categories of improvements would have been embedded in the site value or would have not been improvements because they would fall either within subsections (a) or (b) of the definition of “improvements”. I do not think it is clear on the materials when these improvements were made, when they made the berths or the breakwaters or the canals, but they were done while the property was in the possession of the Crown or the authority, in this case, and they would have been of a type that fell within (a) and (b) and it is to that particular section that the parties wish to address when they came to draft the terms of clause 11.4(a) of the agreement.
If I could just at this point, it might be helpful, your Honours, if I take you to the new definition as it appears after the amendments introduced by the Omnibus Amendment Act. If I could then take you, at this point, to tab 6 and to page 3 of tab 6. If I could just point out what the amendments did. Two lines above subsection (a) the amendment introduced the words “but, except as provided in subsection (2AA).
GUMMOW J: Sorry, where are you reading from?
MS KENNY: This is page 3, your Honour. Two lines above subparagraph (a) of the definition of “improvements”. The amendment introduced the words, “but, except as provided in subsection (2AA)”.
FRENCH CJ: So it comes as a carve out from the excluded categories?
MS KENNY: Yes, that is right. Then what it did is, if you go to page 8, is created a new (2AA) which said:
Works relating to a port, being buildings, breakwaters, berths, wharfs, aprons, canals or associated works are improvements within the meaning of this Act.
GUMMOW J: Both these changes were done by Act No 10 of 1996?
MS KENNY: That is correct, your Honour. Yes, that is the Omnibus Amendment Act. So then, your Honours, if I could then take you back to the previous Act and, in particular, now take you to page 39 and section 36, which deals with objections and reviews related to site value. I should point out, your Honours, that this objection regime is the same in the Acts which came into force in 1998. The numbering of the sections has changed, but substantially the same. It is in Part III of the new VLA Act.
Starting at section 36, your Honours will find that one of the first grounds of objection that you may make is that “the value assigned is too high or too low”. Then if I could take you to section 37 below, which imposes an obligation to send statutory notices, and I might summarise this section, your Honours, by saying this. What it requires or makes mandatory is that the rating authority, in this case the Shire of Glenelg, subparagraph (a) sends:
a notice of valuation which shall identify the land in respect of which the rate is or will be payable and show the several bases of value assessed in respect of that land and the date as at which the value of the land was assessed.
Subparagraph (b) must also:
not later than the time at which the notice of valuation is given, a notice that some other authority may use one of the bases of value shown for the purposes of a rate or tax levied by that authority.
Your Honours, as a practical matter, these statutory warnings were given by the annual valuation and rate notice. I just want to digress here just to show you what they look like. If I could ask your Honours to go to appeal book 116 and what we have there, your Honour, is an example of the valuation and rate notice for the year 1995 to 1996. Now, if I could draw your attention, your Honours, to the first black line which appears and you will see there, “Property Number”, that is a reference to Barton Place in this instance. You will see there that the rating year is specified as 1995 to 1996, the issue date is “02/04/97,” the valuation date is 1993 because it goes back to the level of values of the last general valuation, and then underneath that second line your Honours will see that there you have got the three values, “Site Value,” “Capital Improved Value” and “Net Annual Value”.
Now, on the back on these notices, your Honour, there would have been a statutory warning similar to the warning that we see on page 114 of the appeal book. Your Honours will see on 114 at around about 40:
APPEAL AGAINST VALUATION
If aggrieved you may lodge an objection with the Council in the manner set out in Part III Division 4 of the Valuation of Land Act 1960, within two (2) months of the giving of this notice. Any such objection must be in or to the effect of the prescribed form, copies of which are available from the Council Rate and Valuation Unit -
Now, it is fair to say, your Honours, that we do not have the back of these rate notices but there was no dispute about having received it or that that warning would have been there.
Before I leave this valuation and rate notice I thought it might be helpful to give your Honours an example of how these values carry forward into the land tax assessments, and so if I could take your Honours to appeal book page 301 because it is not quite self‑evident how it works. That is an amended 1997 land tax assessment notice and, in particular, your Honours, you will see that item No 3 on page 301 is Barton Place – that is the main port area – and then you will see that the next reference is “805010”. That actually picks up the reference in the valuation and rate notice. Then you have – moving across “Single Holding”, “Proportional Tax”, second‑last column is the “Site Value/Eq.Factor”. So from a practical point of view that is how the valuations merge together. Then, your Honours, if you go back to the legislation at page 40 and ‑ ‑ ‑
GUMMOW J: Which legislation?
MS KENNY: This is the Valuation of Land Act, your Honour, page 40 on tab 5, and subparagraph 37(b) which sets out the time. So when you get your rate and valuation notice you have a certain time to lodge an objection and that sets out the timeframe. Essentially if it is the first time you are notified, you have two months. That is subsection (i). Then for subsequent notices, you have to do it in certain months.
HEYDON J: Are you are talking about section 37(1)(b)?
MS KENNY: Yes, I am, your Honour. No, subsection (3)(b).
GUMMOW J: Subsection (3)(b), I think you are talking about.
MS KENNY: Yes, (3)(b) on page 40.
GUMMOW J: Not (1)(b), (3)(b).
MS KENNY: Yes, (3)(b).
FRENCH CJ: The warning referred to a rating authority which I think is also defined and includes the Commissioner under the Land Tax Act.
MS KENNY: Yes, that is right. I am sorry, your Honour, I might have agreed with you prematurely. The warning would have to be nothing greater than what the legislation specifies in (1)(b) on page 40. It does not have to refer to the Commissioner, but it must refer to the fact that some other – and that would take in the Commissioner.
FRENCH CJ: Yes. I just notice the paragraph uses the word “authority”. The defined term is “rating authority”, which is the term that was used in the warning that you took us to, and which includes by definition in this Act, the Commissioner.
MS KENNY: Yes.
GUMMOW J: Paragraph (f), the definition of “rating authority” is the Commissioner.
MS KENNY: Yes. Then if we could go from there, your Honour, to section 38A which is on the next page, on page 41, and I simply refer your Honours to section 38A because it is the only limitation which is contained within the Valuation of Land Act as to the objections that may be made. Summarised, that simply says that if you have lodged an objection, and it has been considered by the valuer, then you may not lodge a further objection for 12 months.
Now, then section 39 below that, and I should say here, your Honours, that I am taking you to this part of the legislation because an integral part of the way that we put our case is that there was an opportunity to object and it was not taken advantage of. It is the State’s submission that the Court of Appeal, in reaching the conclusion that we say is incorrect, overlooked these provisions and the opportunities for adjustment and increasing and decreasing the valuation.
Section 39, your Honours, simply says, if I could summarise it, that once you have lodged an objection, the valuer must meet with you and discuss the matter with you. That is 39(1). Then in subsection (2)(b) which is on page 42, the following page:
if he considers an adjustment in the valuation is justified –
i)he will recommend accordingly to the valuer-general -
and then in subsection (4):
The valuer-general may disallow the recommended adjustment in whole or in part . . . but otherwise shall confirm the recommended adjustment.
Then in subparagraph (5), it provides that:
the decision of the valuer-general shall be final and shall be given effect to by the rating authority and by every other rating authority using that valuation.
FRENCH CJ: This is all part of a statutory framework which, on your submission, means that the amendment that was actually made would answer the description of ensuring that, et cetera, within the meaning of 11.4(a).
MS KENNY: Yes. We are taking a two‑pronged approach in the sense that, your Honour, we say that the contractual promise was to enact amendments of a certain kind. Once those amendments were enacted, that discharged the obligation, but if it is necessary to establish that something more was promised, that in fact those amendments would have immediate impact on land tax liability, then it was capable of doing so.
FRENCH CJ: On that construction of ensure?
MS KENNY: Yes. So if I can then take your Honours to – and I might tell your Honours I am nearing the end of this legislation – to section ‑ ‑ ‑
FRENCH CJ: We are not flagging yet. It is all right.
MS KENNY: Page 44 and to section 42 and what that says is, essentially, you can appeal to the court if you are not satisfied with the valuer general’s disallowance of your objection and then:
the Court or Tribunal on an appeal shall review the assessment of valuation of the lands made by or for the rating authority (as the case may be) and may either confirm the valuation or increase or reduce the value assigned to the land or make such other amendment as it thinks fit.
A very wide power, your Honours. The Act does not say, of course, how the court or tribunal or what considerations they should take into account in exercising that wide power, but it is the State’s submission that that question is answered by – if it is not already implicit in subsection (1) that it can take into account things it considers necessary, then it is answered by reference to section 5A(1) of the Valuation of Land Act which imposes an overriding obligation on the value of the court or the tribunal to have regard to every matter or thing. If I can take your Honours to that section.
FRENCH CJ: Section 5A?
MS KENNY: Section 5A(1), your Honour, and that is on page 15 and it says as I described it before. It is an incredibly wide provision and we say that part of the things or matters that may be considered on any review of the valuation is the fact that the law has changed since the valuation was made on another occasion.
HAYNE J: That elides at least two propositions, does it not? The proposition the law has changed, has no temporal element. The law has changed with effect from when is a critical element in that proposition, I would have thought.
MS KENNY: Yes, your Honour, and it is our contention that the law had immediate effect from when the amendments came into operation. When they did, you could then – when you got your first notice of valuation as the new owner of this land, all you had to do was lodge an objection. In the meantime, you might get a land tax assessment, but you proceed with your objection, have that dealt with. If during the course of that objection your valuation is adjusted, then your land tax assessment also may be adjusted.
HAYNE J: But relevantly, the only question is whether that assessment is made according to law, is it not? If the law were to require that it is to be assessed according to a value struck at a particular date, so be it, and if it is the law that it be struck according to a value as at a particular date according to certain criteria, so be it. I suspect that the proposition you advance elides or slides over the underlying proposition for I understand your proposition to be that, through the mechanism of 5A, the “court board tribunal valuer or person” may lawfully consider relevant to determination of value a change in the law which will affect future valuations but which in terms does not affect a past valuation, it being the past valuation which the Act requires to be the foundation for the assessment. But if that proposition is not right you need to challenge it.
MS KENNY: Land tax is assessed each year, your Honour. General levels of value are established at the general revaluation which has to occur at a certain time but the mechanism for objection allows a taxpayer to challenge a valuation when they receive notice of what that site value is. It is our contention that during the course of that challenge a change in the law is relevant, indeed must be considered as part of the overriding obligation under section 5A(1) which is imposed on a valuer, court or tribunal.
Another way of putting it, your Honour, is that it would be a less than sensible result if you could consider everything, when you challenge a valuation if you could consider everything other than a change in the law. For example, if I may, if half the property disappeared because Cyclone Tracy wiped it away and you then want to challenge the site value because it is now substantially less, you could use the fact that half the land is gone but if for the same reason the site value has been reduced because of the law you could not apply the law, that would be an unusual and, we would say, an unreasonable result because effectively what you are seeking to do each year is to assess the taxpayer on the unimproved site value of the land determined as at 31 December.
CRENNAN J: Do the opening words of 5A(1) have an impact in relation to 13DF(6)(b) which is to be found on page 30? I am directing your attention in particular to the last few lines of (6)(b), in other words a valuer making a:
supplementary valuation, having regard to every circumstance which affects the value of the land at the time of the making of the supplementary valuation, if it is a circumstance requiring the making of a supplementary valuation -
Now, the argument put against you in relation to that is that there is quite a narrow power in relation to a supplementary valuation which, as I understand the argument, is a confined power which would not permit a valuer making a supplementary valuation to have recourse to section 5A(1).
MS KENNY: I was going to come to that, your Honour. I am happy to address it now if you prefer. We obviously say that that interpretation is wrong and that what those last – that in fact what section 13DF(6) does – I will just find the particular section ‑ ‑ ‑
GUMMOW J: Page 30.
FRENCH CJ: This is operating off the premise that subsection (2) is non‑exhaustive, is it not, is it not?
MS KENNY: Yes, that is right. We say that the proper way of reading subsection (6) is that when you are looking at a supplementary valuation you have regard to, in paragraph (a), the general levels of value at the last general valuation. Then (b), you have to assess the value which it would have had at the last valuation, taking into account things which were relevant at the time of the supplementary valuation. That is the second thing you do. We would say that the third thing you do is that, if you have had regard to one of those – if you have made your valuation because of one of the subsections in (2), that you should have regard to that as well. That is the way we say that should be interpreted but if we are wrong about that, our answer in relation to the supplementary valuation is that we bring ourselves in any event within subsection (2)(n) on page 29.
BELL J: It is put against you that that was a position that you disavowed at trial
MS KENNY: That is not correct, your Honour. I know that is the submission that is made, but I need to correct that. What was put at trial, your Honour, by the appellants is that, for the purposes of subsection (n) the only order‑in‑council that would be relevant was an order‑in‑council made under the Valuation of Land Act for the purposes of subsection (n).
BELL J: That was extending the boundary seaward, was it?
MS KENNY: Yes, your Honour, but that order‑in‑council was made under the Local Government Act. Our point is that subsection (n) does not require an order‑in‑council to be made under the Valuation of Land Act. The fact that an order‑in‑council exists and in this case is made under the Local Government Act suffices for the purposes of subsection (n).
FRENCH CJ: You rely on (e) also, do you not, on the basis that there has been a change out of Crown ownership?
MS KENNY: Yes, we do.
KIEFEL J: Subsection (2)(e) has become rateable since the return. If you are right about that, then (n) is irrelevant.
MS KENNY: Maybe not, your Honour. We say it is irrelevant but it may not be irrelevant on the appellants’ argument because what they say in relation to (e) is that, even if you bring yourself within (e) and you have a supplementary valuation that is made under (e), the valuer cannot take into account change of the law. Even though he must value it at the date of the supplementary valuation, he cannot take it into account because of those concluding words in subsection (6).
On their argument, your Honour, if you valued the land at the date of the supplementary valuation because it had become rateable, the valuer may take into account that it has now become rateable but he cannot take into account the change in the law. That is their argument. We say that that is wrong and would lead to less than sensible results and that it is not the proper construction of subsection (6). But in any event, we say that we do bring ourselves within (n).
So to be clear about it, Justice Bell, the only thing that was conceded, if indeed the word “conceded” is correct, is that the appellants put that you needed an order‑in‑council under the Valuation of Land Act, and they had evidence that were not such order‑in‑council, and we said, well, we accept that evidence, we are not going to challenge it, but we have out order‑in‑counsel, it is made under the Valuation of Land Act and it is relevant for the purposes of subsection (n).
BELL J: That is the way that matter was put?
MS KENNY: Yes. It was an exhibit at trial, and your Honours have that in the material, and also your Honours ‑ ‑ ‑
CRENNAN J: Where is that in our material?
MS KENNY: It should be in a tab called “Government Gazette – Order in Council” exhibit 2. I am assuming that your Honours’ material is the same as – so, your Honour Justice Crennan, if you have that material, that, we say, is the relevant order‑in‑council ‑ ‑ ‑
CRENNAN J: Under the Local Government Act?
MS KENNY: Under the Local Government Act. We say that there is no need for a nexus because the keywords in (n) is that you have site value relating to the land which is the subject of an order‑in‑council, has been altered because of an Act, that Act being the State (Omnibus Amendment) Act.
Your Honours, there is just one final section that I need to take your Honours to and that is section 48 of the Valuation of Land Act. I might just summarise that by saying that I have already taken you to the section that says that when you get your rate and valuation notice you can challenge the site value, but this section now is addressing the situation where you have not received your rate and valuation notice for some reason and if you have not received your rate and valuation notice or no notice of value, this allows you, affords you an opportunity to lodge an objection from when you get your notice of assessment of tax. So it is a statutory scheme which is, as far anything can be perfect, quite perfect in its operation and conferred very broad powers on a court to adjust any valuation.
HAYNE J: Which section are we referring to, Ms Kenny? I am lost.
MS KENNY: I am sorry, your Honour Justice Hayne. It is section 48 on page 49 of tab 5.
KIEFEL J: What did you say was the effect of it?
MS KENNY: The effect is this, your Honour, that if, for example, you have not received your annual rate and valuation notice which tells you what the site value is, it might have gone to your tenant or something like that – so the first notice that you get of the site value is your land tax assessment, then this section allows you to lodge an objection then ‑ ‑ ‑
KIEFEL J: Yes, I see its relevance to the case now.
MS KENNY: ‑ ‑ ‑ on any of the grounds set out in section 36 and so the regime then runs its course again. Your Honours, just before I close with my submissions there is something that I wanted to say about the point in relation to the supplementary valuation, and if I could ask your Honours to go back to that section which is on page 26?
It may be convenient to deal with the point now while we are looking at the legislation. It is this, your Honours, that – we say that subsection (1) is a general power to make – this is on page 26 at tab 5, your Honours – we say that subsection (1) is a general power to make supplementary valuations for the purpose of the Local Government Act, and I took you before to that section of the Act which says that there may be many reasons that a municipal council might want to declare all sorts of rates. So we say it is a general power and that subsection (2) are not words of limitation but they are words of expansion and clarification.
HAYNE J: How does that submission sit then with subsections (4) and (5) which seem to treat the list in (2) as a universe:
(4)If a supplementary valuation has been made in any of the circumstances referred to in sub‑section (2) other than paragraph (o) –
one result –
(5)If a supplementary valuation has been made in any of the circumstances referred to in sub‑section (2)(o) –
a different result.
GUMMOW J: Subsection (6) paragraph (b) as well.
MS KENNY: Well, your Honour, all those sections are doing is picking up the fact that if you choose for some reason to make a supplementary valuation for these reasons then this result will follow, but that does not detract from the point that we are advancing that subsection (1) is a general power and it would have no work to do if subsection (2) covered the field.
FRENCH CJ: What is the constraint on the circumstances or range of circumstances in which a supplementary valuation may be made? I suppose you would say it is for the purposes of the Local Government Act.
MS KENNY: Precisely, your Honour, and there may be purposes that are beyond contemplation at the moment but become necessary for the purposes of the Local Government Act which are not picked up in subsection (2), that is why you have that general power.
BELL J: Does the general power tell you who it is who may carry out the supplementary valuation and then provisions made in subsection (2) for the circumstances in which a supplementary valuation may be made?
MS KENNY: No, it does not, your Honour. I think all the valuations must be carried out by a valuer.
BELL J: Yes, the matter I am raising with you is subsection (1) makes clear that a person referred to in section 13DA may carry out a supplementary valuation for the purposes of the Local Government Act, and then one gets in subsection (2) the circumstances in which a supplementary valuation may be carried out. That is another way of viewing it.
MS KENNY: I see, yes. It is certainly correct in interpretation, that obviously the person who is authorised by section 13DA is the one that must carry out any valuations, your Honour, whether it be under (1) or ‑ ‑ ‑
GUMMOW J: All these provisions are in Division 3A, are they not? The heading appears at page 23.
MS KENNY: Yes.
GUMMOW J: It is all within the Local Government Act.
MS KENNY: Yes, which is the reason why I took you to those provisions earlier, your Honour, because they do show ‑ ‑ ‑
GUMMOW J: Why is not subsection (1) of section 13DF telling you who, namely, these officials under DA, and subsection (2) is saying on what occasion they may do this? So DF tells you who and when, in other words.
HAYNE J: Subsections (4) and (5) tell you what happens and, on your construction, you have an undifferentiated general class of when with no specification of consequences.
MS KENNY: Whether our point is right or wrong – we say it is right, of course, but we still bring ourselves within those two circumstances which are described in (e) and (n). Paragraph (e), there is no doubt that the land ‑ ‑ ‑
FRENCH CJ: That is just confessing and avoiding what has been put to you.
HAYNE J: But absolution will not follow, Ms Kenny.
MS KENNY: I do not think I can say anything further on that point, your Honour. While I am addressing the supplementary valuation, I would like just to pick up a point which is in reply to what my learned friends say in relation to a technical argument they advance about form and procedure. What my learned friends said at trial, which was not dealt by the learned trial judge, was that the supplementary valuation was unlawful and invalid because it failed to comply with section 13DH. Section 13DH, which appears on page 31, sets out a number of procedural requirements. It says “a valuer must return valuations”, the valuer “must make a statutory declaration” and that statutory declaration must be entered into the minutes of the council.
My learned friends relied at trial on the point to say that this really was not a supplementary valuation. We do not know what it was. We paid tax pursuant to it but it really was not a supplementary valuation. The trial judge did not deal with that technical point, but in our submission in finding that, in upholding the supplementary valuation, he dismissed those arguments and, in my submission, correctly because the only requirements to be fulfilled in relation to a supplementary valuation are those to be found in subsection 13DF(8) which is on page 30. We say that is a self-contained provision which is specific to supplementary valuations. The other ones relate to general. If we are wrong about that, your Honour ‑ ‑ ‑
HAYNE J: What is “the return” spoken of in (8)? Where do I find the statutory identification of “the return”?
MS KENNY: There is no statutory definition, your Honour.
KIEFEL J: But it is contained in 13DH(1) and (2). That is the return of the valuation that you have referred to.
MS KENNY: Yes.
HAYNE J: Thank you.
MS KENNY: Sorry, your Honour, I thought you meant the definition of the “return”. The return is basically the day on which the supplementary valuation is made. I think that deals, in relation to the supplementary valuation, with the two points – the one relating to the order‑in‑council and the one relating to procedural requirements. I also should just point out, your Honour, that if there has been some technical or procedural requirement that has not been complied with, there may be some assistance by way of section 53 of the Interpretation of Legislation Act 1984 (Vic). Your Honours would have a copy of that. It was handed up this morning.
KIEFEL J: I am sorry, what was that again? What was the name of the Act?
MS KENNY: It is the Interpretation of Legislation Act 1984 and:
Where a form is prescribed by an Act or subordinate instrument for any purpose, any form in or to the like effect of the prescribed form shall, unless the contrary intention appears, be sufficient in law.
You may get assistance from that, your Honour. Our primary point is that what we have to do is contained within 13DH(8).
FRENCH CJ: Where is the supplementary valuation?
MS KENNY: The supplementary valuation, your Honour, is at ‑ ‑ ‑
FRENCH CJ: It was dismissed as a notation on a rate card, I think, in the pleadings.
MS KENNY: There is a notation with it but there is also quite an extensive valuation. At page 88, your Honour. No, it is not page 88. It is page 252, I am told. You will see, your Honours, that it is quite an extensive document and that of course is made to Glenelg Shire Council but then notice of that supplementary valuation ‑ ‑ ‑
FRENCH CJ: That is at 114, is it not?
MS KENNY: No, not that one, your Honour. That is a further supplementary valuation. Notice of that was given on – pardon me for a moment. I will just find it. It is on page 258, your Honour, of the appeal book. That is a letter to the appellant and your Honours will find just below 40 in the margin that the letter says:
Five rate notices are enclosed. Two rate notices relate to Cape Grant Quarry . . . Three rate notices relate to the remainder of the Port area –
Your Honours, may I give you the references to those rate notices as they appear in the appeal book. The two rate notices referred to are at appeal book pages 260 and 256, and the three rate notices are at appeal book 116 through to 118. Of course, our point is, your Honours, that the supplementary valuation when it was made was notified. There was then an opportunity to object to it if my learned friend’s clients thought that it did not sufficiently have regard to the amended legislation. It is interesting to note, your Honours, that when the appellants eventually did lodge an objection in the year 2000, as we have said in our submissions, they were lodging an objection to the same site value that they had been notified of on 3 April 1997. The valuation did not change at all.
Having said that, your Honours, I simply close in making – your Honours understand that the significance of the supplementary valuation is that it related to the area on which most of the port improvements were; that is in relation to Barton Place. In relation to the tenanted areas, I should point out that, of course, there no was no supplementary valuation. The last time it had been valued was on 30 June 1993. It is not clear that any of those properties actually contained port improvements of the six categories you find in clause 11.4(a). They were mostly contained within the Port area.
There was a dispute at trial, in fact, as to the meaning of “port improvements” and, in fact, the appellants claimed that port improvements also included reclaimed and filled land. I need not go into any of that, your Honours, except to point out two things; that it is not clear that any of that tenanted property which was valued on 30 June 1993 included port improvements and, secondly, I am not sure whether your Honours are aware of this, but I think I am correct in saying that all of the land tax in relation to the tenanted areas was paid by the tenants.
BELL J: I thought that Justice Mandie, at appeal book 419, paragraph 78, found that the amendments did not meet the requirements of clause 11.4(a) because the tenanted properties continued to be assessed for land tax on the basis of the unimproved value, including the value of port improvements. This is at about point 40.
MS KENNY: Yes. His Honour does say that, but my point is, your Honour, despite his Honour saying that, the question of what were the port improvements and on what land were they found was a matter that really went to valuation and damages evidence and that was really a matter that was left undecided. There is no doubt, of course, that most of the port improvements fell within the main area because that is where you had the berth, the aprons, the canals, the wharves, the buildings. The real area of dispute was in relation to the meaning of “associated works” and whether “associated works” meant associated works to the port or whether it is associated to the six categories which preceded it.
KIEFEL J: Where does that leave us in relation to the tenanted land for the purposes of this appeal?
MS KENNY: For the purposes of this appeal, your Honour, it is our submission that your Honours need not go into that question – digress into whether there were or not port improvements because the fundamental point we make in relation to this issue is that ‑ ‑ ‑
KIEFEL J: There was a review process available.
MS KENNY: Yes, that is right. When it all could have been determined at that – if when they got those rate and valuation notices in relation to land which had been assessed in 1993 or valued in 1993, they could have objected, they could have had this matter determined then and, indeed, the court had a much broader power to adjust the valuation than the Supreme Court did in hearing this case. That is the only point to make of it.
KIEFEL J: You are coming back to deal with the arguments about Barton Place, though, are you, and the limits, if any, on the supplementary valuation? I know that they have been touched upon in discussions with the Court, but I take it you are coming back to deal with that argument in full.
MS KENNY: Briefly, your Honour. I did not want to enlarge very much on what we said in our submissions, but effectively the significance of Barton Place is that the legislation came into effect on 25 June 1996, the supplementary valuation was made on 7 March 1997 after that. We say that of course it was the law that you would then have to exclude those improvements from site value; in fact the evidence of the ‑ ‑ ‑
KIEFEL J: Just on that point, you have been asked about the timing really of the supplementary valuation. Mr McDonald’s supplementary valuation was given a retrospective date of 30 June 1993, but do you say that the valuation was in fact, as I think the statute requires, a valuation from the date it was undertaken, looking forward, because that was the only way to fulfil the statutory requirement?
MS KENNY: Yes, that is correct, your Honour. It is one of the idiosyncrasies of this Act that it refers to general levels of value and of course ‑ ‑ ‑
KIEFEL J: I was concerned more with the idea of the date, but you would say that the date he ascribed to it is simply to link it to the original valuation which has been the subject of report and record?
MS KENNY: Yes, and because that was the date of the last general valuation which was made in 1993, then you are valuing it at the date of the supplementary valuation, having regard to circumstances which then apply in relation to that land when you are undertaking the valuation.
KIEFEL J: I am sorry, what was the date of coming into force of the legislation?
MS KENNY: 25 June 1996.
GUMMOW J: This is of Act 10 of 1996; the Omnibus Amendment Act?
MS KENNY: Yes, the State Taxation – I was not going to take you to that, your Honour. It is actually in the appellant’s legislative materials, but I did take you to the definition which embraced those amendments.
GUMMOW J: Yes.
KIEFEL J: Could I then ask you about how you meet the argument about the application of 13DF(6)(b)? Assuming that the circumstance for the supplementary valuation is found in 13DF(e), that is, the land has now become rateable, the requirement that under 13DF(6) that the valuer have regard to every circumstance – I am paraphrasing – if it is a circumstance requiring the making of a supplementary valuation. If the relevant circumstance is then that the land has become rateable, how do you say subsection (6) operates?
MS KENNY: As I said before, your Honour – I am sorry, I will just find the section. If it falls within subparagraph (e) then on the narrow construction that my learned friends put forward, you would not be able to take into account the change in the law, because the only relevant factor would be the fact that it had become rateable.
KIEFEL J: Yes, but how do you meet that?
MS KENNY: We meet that, your Honour, in two ways. First of all, there is the overriding obligation of section 5A(1) which requires you to have regard to “every matter or thing”. In our submission, a change in the law is a relevant matter or thing. The other way that we meet it, your Honour, is to say that in fact what paragraph (6) imposes, what it allows you to do is – the supplementary valuation goes back to general levels of value as of 30 June 1993. That is subparagraph (a). Then you take into account in the first part of (b) any matter which is relevant at the time that you make the supplementary valuation, which is the first part of (b). Then you take into account also the matter that has triggered the supplementary valuation, in this case rating.
FRENCH CJ: Are you assuming in making that response that (6) sets out the only matters you can have regard to, as distinct from mandating what you must have regard to?
MS KENNY: Subsection (6) says that you must have regard to those matters, so it is a mandate to take them into account, your Honour. But there is still the overriding obligation under section 5A(1).
KIEFEL J: It is not must only take into account?
MS KENNY: Yes.
KIEFEL J: The other matter, perhaps ‑ ‑ ‑
MS KENNY: Might I say, your Honour, that it would be less than sensible if in making the supplementary valuation, when the law has changed the only matter that you could take into account would be that it has become rateable, because the fact that it has become rateable does not really raise a valuation issue on its own, whereas of course a change in the law which actually affects the site value is a relevant matter.
KIEFEL J: Is both the circumstance and the fact to be taken into account in one?
MS KENNY: Yes.
KIEFEL J: But as you say, perhaps that means that the circumstance that it has become rateable since the return of the existing valuation may necessarily have to take you back to considerations which apply to a first general valuation. If it has never been rated, if it has never been subject to a valuation for rating purposes, then perhaps that gives a stronger basis for 5A to apply.
MS KENNY: Yes.
KIEFEL J: It is called a supplementary valuation, but this part of the land has not been subjected to valuation before. If there are particular circumstances pertaining to it in relation to improvements, this would be the first time that it could be taken into account.
MS KENNY: Yes, your Honour, that is correct.
HAYNE J: Ms Kenny, can we dissect (6), and can we dissect (6) having regard to 5A. First, can I attempt to wrestle with (6)(b) and understand at least the grammar of it. The valuer in making a supplementary valuation must assess the value is the way in which you begin the task of understanding, is that right?
MS KENNY: Yes.
HAYNE J: The obligation is cast on the valuer making a supplementary valuation to:
assess the value that the land to which the supplementary valuation applies would have had if –
So you are looking to valuation it would have had if a condition has been met:
if at the time at which the last valuation . . . was made it had been in the condition in which it is at the time of the making -
So that invites attention to whether there has been an alteration in the condition of the land between the two times specified. Is that right so far?
MS KENNY: Yes, it is.
HAYNE J: Then the valuer is commanded to “assess the value” of the land, according to that description:
having regard to every circumstance which affects the value of the land at the time of the making of the supplementary valuation –
is that right?
MS KENNY: Yes.
HAYNE J: If. So every circumstance is then cut down, “if it”, that is, “every circumstance”, the circumstance to which you are having regard:
if it is a circumstance requiring the making of a supplementary valuation –
Do you accept that that is the way in which (6)(b) is to be understood as a matter of the words that are set out?
MS KENNY: Yes, I do, your Honour.
HAYNE J: Now, what is the phrase, what are the words upon which you hook the requirement of the valuer to take account of what you describe as a change in the law? Which words in (6)(b) are engaged to achieve that consequence or result?
MS KENNY: Because, your Honour, subparagraph (b) refers to “the value”, so you are engaged in an exercise of valuation in contradistinction to the use of the term “general levels of value” in the preceding (a). What the valuer is doing here and is doing it at the date of the supplementary valuation is engage in exercise of valuation of off the site value. That site value has only relevance to the assessment of land tax. When you are considering it at first, your Honour, the fact that there has been a change in the law, we submit, is relevant, is something that can be considered.
HAYNE J: I understand that is the point you are seeking to make. I am not doubting that is the point to which you want to get. What I want to understand is, what are the words, what is the phrase, what is the element in (6)(b) that provides the verbal hook on which you hang this consequence? At the moment you say, well, the search is for value.
MS KENNY: That is the significant exercise.
HAYNE J: I understand that as far as it goes, but is that the only hook on which this part of the argument hangs? It may be a sufficient hook, I just do not know, but I just need to know where it is.
MS KENNY: We say, your Honour, in relation to (b) that you engage in an exercise of assessing the value which takes you back to applying general levels of value in 1993, but if it is not clear from (b), then we go to section 5A(1) which clarifies that the valuer must take into account everything that is relevant to that value.
FRENCH CJ: The question, I suppose, to put it another way or perhaps the way I would put it, on the basis of what I put to you before, is there an escape hatch in the language of subsection (6) which allows you to go outside the range of circumstances referred to there to deal with a change in the law?
MS KENNY: It is doubtful, your Honour.
FRENCH CJ: You think it has to be found in (6)?
MS KENNY: If you are dealing with the circumstances at (6), yes, but it does not prevent application of the overriding obligation. It comes back to the point, your Honour, that what (b) is doing is saying that you must have regard to these, but it is not an exhaustive list of what you can have regard to. So that, the fact that it is not an exhaustive list, takes you to other matters which can be considered, which is section 5A(1).
FRENCH CJ: You must assess the value having regard to and I suppose you would look to those words “assess the value”?
MS KENNY: Yes, but I also look to the fact, your Honour, that section (6) does not set out an exhaustive criteria. It simply says that you must have regard to these.
GUMMOW J: Well, we are back there.
CRENNAN J: What is the force of the “if”? It is a condition.
HAYNE J: “Having regard if.”
CRENNAN J: It conditions the circumstances. There must be a circumstance requiring the making of a supplementary valuation under subsection (2).
MS KENNY: Well, that means that you must take into regard, when you are making a supplementary valuation, the particular circumstance that triggered it if you are going under subsection (2). So you must have regard to that. It does not mean to say that (6)(a) and (b) is exhaustive. It does not prevent you then from also satisfying the overriding burden, which is in section 5A(1).
CRENNAN J: Well, I suppose some might say that 5A(1) is not available because it is expressly provided in (6)(b) how the valuer is to go about a supplementary valuation. So I am not sure why you call 5A(1) an overriding provision.
GUMMOW J: Because it is unless otherwise expressly provided.
MS KENNY: Yes, but what 5A ‑ ‑ ‑
GUMMOW J: Section (6) has the word “must”.
MS KENNY: Your Honours will no doubt recall that we still are able to bring ourselves within (n), the order‑in‑council and even on the appellant’s construction of that particular subsection, we are able to rely upon ‑ ‑ ‑
GUMMOW J: Paragraph (e), are you not?
MS KENNY: No, (n), your Honour; (n) on page 29.
GUMMOW J: I know, but if you do not get in (n), you say you are in (e), do you not?
MS KENNY: Yes, if we do not get in (n), we say we are in (e).
FRENCH CJ: You say (e) is not a circumstance which actually affects value?
MS KENNY: Yes, that is right, which affects value. In any event, your Honours, in many respects this point about the supplementary valuation digresses from what our overriding point is and that is that regardless of what the valuer took into account then, when you decided to lodge an objection if you were not satisfied with that valuation, the valuer or the court or tribunal had the power to increase to decrease it and when engaged in the course of that particular valuation exercise, undoubtedly the overriding obligation of section 5A(1) was applicable.
CRENNAN J: May I just take you up on that? In relation to appeal book 408 at paragraph 46, there is a description of the amended site value of Barton Place which follows the objection to the 2000 general valuation. The 2000 general valuation is on the previous page for Barton Place. It is the first entry, 2,044,800, which one would assume has taken into account the amendments, the legislation. Then when there are discussions post‑objection, that site value is considerably reduced to 221,000.
MS KENNY: Yes, that is correct.
CRENNAN J: Then just for a minute, if I may, taking you back to 403 of the appeal book at paragraph 26, you have the site value of the supplementary valuation in line 3 of the order of two million. A Mr McDonald says in his affidavit, which is at 95, and I do not ask you to turn to it, that he took into account the amending legislation. So you have the supplementary valuation and then the 2000 general valuation with site values of the order of two million, and then you have them reduced after discussion post‑objection to 221,000.
Now, just assuming for a minute that there has been a mistake in the supplementary valuation and the 2000 general valuation evidenced by the reduction in the site value, on your argument – I just want to understand it – if there were indeed mistakes in the site valuations in the 1997 supplementary and in the 2000 general, that does not matter if you have not made an objection within the timeframe set out under the Act. Is that the argument?
MS KENNY: Slightly different, your Honour; it does obviously matter to the appellants, but you have your chance to object and if you do not object when you get notice of that site value then yes, you lose it. That is what happened in 1997, your Honours. They had notice of the site value – would it help for me to take you to their notice of objection that they lodged in 1997?
CRENNAN J: No, I understand that they did not object in relation to site value.
MS KENNY: They did not object in relation to the site value. When it came to 2000, which was the same site value as in the 1997 supplementary valuation, they did object and because of that the statutory scheme resulted in this reduction. I am not sure whether that answers your question ‑ ‑ ‑
CRENNAN J: I suppose what I am saying is if you somehow were able to determine that a valuation upon which tax was assessed was in fact wrong, subject to an error of some sort, perhaps because of a misunderstanding about the improvements which were to be taken into account, because Mr McDonald said he did take into account the new legislation, I take it that if there is no objection made within the timeframe that is just too bad.
MS KENNY: That is correct. That is if you received your notice of valuation, though, your Honour. If you have not ‑ ‑ ‑
CRENNAN J: Under 48 you can do it late.
MS KENNY: You can do it again when you get the land tax assessment notice, but if you do not do it then you cannot do what the appellants sought to do; leave it and then seek to appeal under the land tax regime because section 24A prohibits you from doing that.
CRENNAN J: So section 48 really is your last opportunity to object in relation to a valuation which is too high?
MS KENNY: Yes, that is correct, and just on that point, obviously my learned friend makes much of the fact that there was this significant reduction in site value, but the explanation for it is not because the supplementary valuation was not taken into account, we would say. It is because the process of discussion and negotiation resulted in an agreement to reduce it because the Port had never been valued before, and I suppose it was a concession on the part of the valuer that when he did take 2(2AA) into consideration the first time around he may have got it wrong, but it does not mean that it was not taken into consideration. But even if it was not taken into consideration, as soon as they got notices off it they could have started the objection procedure, could have gone all the way to court as they did with the objections to the net annual value and capital improved value, and achieved a negotiated outcome.
KIEFEL J: Could I just ask you then to clarify the process that is undertaken in what is called a supplementary valuation when land has never been valued for rating purposes before? That might be a misdescription, but it has become rateable. In this case there was an earlier valuation for the area generally in 1993. Is that correct?
MS KENNY: The land itself that was purchased, your Honour, was about 115 hectares and of that about 68 hectares, being the Barton Place, the main port area, was not rateable before ‑ ‑ ‑
KIEFEL J: Because it had been Crown land?
MS KENNY: Yes. The other part, the tenanted land, because it was occupied, it was rated ‑ ‑ ‑
KIEFEL J: I understand that the area we are talking about is the part that had not been rateable before. How does the valuer then go about the supplementary valuation? Has there been a valuation previously in the 1993 valuation which affects this land?
MS KENNY: No.
KIEFEL J: So it is starting with a clean slate?
MS KENNY: What would happen, your Honour, as ‑ ‑ ‑
KIEFEL J: Sorry, I am getting you out of order but – so when the supplementary valuation is done, where is the return marked on?
MS KENNY: The return in this case, your Honour, was marked on - a new rating card would have been created at the Shire of Glenelg in relation to the property which is 80510 and then the supplementary valuation was returned. It would have been noted on a card as I think Justice Mandie found, and the basis of the valuation is explained in that letter from Mr McDonald to the shire.
KIEFEL J: When it is called a “supplementary valuation” in this context, it is not supplementary to any valuation ever undertaken with respect to this particular land?
MS KENNY: That is correct, your Honour, it is only supplementary ‑ ‑ ‑
KIEFEL J: To the general valuation of the area - surrounding lands and other areas which might – in the district – is it broken up within various districts within the shire, or is it an across‑the‑board, general valuation?
MS KENNY: Each separate occupancy is ‑ ‑ ‑
KIEFEL J: Is separately valued.
MS KENNY: ‑ ‑ ‑rateable, so each separate occupancy has to be valued, but what they are using when they do the general valuation is general levels of value in an area and then ‑ ‑ ‑
KIEFEL J: When it is called a supplementary valuation it is not so much a supplementary valuation of that particular land as a supplement to the periodic valuations that are undertaken by the shire. Is that correct?
MS KENNY: Yes.
KIEFEL J: It is a supplement to the shire valuation, not to the valuation of the particular land.
MS KENNY: That is correct, your Honour, and ‑ ‑ ‑
CRENNAN J: There are two categories, are there not; general valuations and supplementary valuations?
MS KENNY: Yes, that is right. Your Honours, could I just take you to appeal book 114 and you will see that this is another notice of a supplementary valuation. In this particular case, this supplementary valuation, that was supplementary to the 1997 one because the reason for this supplementary is explained in Mr McDonald’s witness statement at appeal book 96, paragraph 29, but, essentially, the reason for the supplementary valuation here is that there was a consolidation of two parcels of land. It was vacant land, therefore, you had to add it back into the main land because it ceased to be occupied and also, there was a deletion from the main area because that property, P3185090, had become occupied for the first time. So in this case, your Honour, that is supplementary to the earlier one.
KIEFEL J: Which might be described, in fact, as a supplement to the valuation affecting that particular land.
MS KENNY: Yes.
KIEFEL J: Could I take you than back to – and I will not keep you too long on this – (e) under section 13DF(2):
If any land has become rateable since the return of the existing valuation –
Is the “existing valuation” defined for the purposes of that provision? Is it defined as a general or does it relate to that land?
MS KENNY: I do not believe that it is defined, your Honour, “existing valuation”.
KIEFEL J: But from what you said, there would be no existing valuation?
MS KENNY: No. How we read that, your Honour, is a reference to the existing valuation done at the last general valuation for the shire. That is how it should be read.
KIEFEL J: Yes, it would have to. Is paragraph (e) the only circumstance where, on your explanation, there is land which has never been subjected to a previous valuation, that is, specific to the land?
MS KENNY: Is paragraph (e) the only circumstance where you would have ‑ ‑ ‑
KIEFEL J: Example of a supplementary valuation undertaken where there has been no previous valuation of that specific land. I suppose section (2)(a), land which has not been included in relation to a valuation then in force.
MS KENNY: Yes, that would be another example.
KIEFEL J: There might be others. I will not hold you up.
MS KENNY: Yes, there may be others, your Honour, as well.
CRENNAN J: This is because the general valuation is confined to rateable land?
MS KENNY: Yes, that is right, your Honour. Now, your Honours, I think that I have covered most of the points that I wanted to but, in closing, what we say about 11.4(a) is that it required us to amend the legislation and that is what, in fact, what we did. We amended it in a way which picked up precisely the improvements that are referred to in clause 11.4(a). The amendments were introduced to section 2(1) were perfect reflection of the contractual obligation and that, in our submission, discharges any further obligation.
If we are wrong about that – as we have attempted to show you this morning it may well have been that, certainly in the case of the tenanted properties, the immediate effect of the amendment may not have been apparent. If you believe that there were port improvements on that land, then what you should have done is use the objection and appeal procedure. But in the case of Barton Place where most of the land did contain port improvements, then from the date of that amendment coming into force there was a supplementary valuation, so it did have immediate effect and even if you were not satisfied that it did not, you could use the objection and appeal process, go to the Supreme Court, if necessary and have an adjustment to value. They are the submissions, your Honour, on the notice of contention.
FRENCH CJ: Thank you, Ms Kenny. Mr Merralls, we will hear you on both the appeal and the notice of contention, but if you find it more convenient to proceed first to deal with the notice of contention issues ‑ ‑ ‑
MR MERRALLS: I think I do, your Honour. It is fresh in the mind.
FRENCH CJ: Yes.
GUMMOW J: That lectern is made for shorter people, Mr Merralls, you can raise it up.
MR MERRALLS: I beg your pardon?
GUMMOW J: You can raise up that lectern if you wish. It is made for vertically challenged people.
MR MERRALLS: I have a vivid memory of the old High Court at Darlinghurst which had an attachment like this and I spoke immediately before Mr Wilson, the Solicitor‑General for Western Australia, and the mechanism jammed. I had had it to full extent. Sir Garfield Barwick said, “Never mind, Mr Solicitor, we shall still hear you.” May I address first the submissions about section 13DF(2). In our submission, the initial words:
A supplementary valuation may be made in any of the following circumstances –
should not be read as though the word “only” had been present and we say that for two reasons. One is that what appears to be an exhaustive set of circumstances follows (2). It would be very odd if the supplementary valuer were to be at liberty to stray beyond those matters. We say that section 5A, which is said to be overriding even in terms does not override subsection (2) of section 13DF because the provisions of 5A are expressly qualified by the initial words “Unless otherwise expressly provided” and we say that express provision can be found in subsection (6)(b) which brings one back to the list of circumstances that are found in subsection (2).
If my learned friend’s submission is correct, then the words beginning “if it is” in subsection (6)(b) might just as well not be there. We accept and respectfully adopt the analysis of paragraph (b) put to my learned friend by your Honour Justice Hayne that it is a step process and that the last words expressly limit the preceding words. So that the words:
having regard to every circumstance which affects the value of the land at the time of making the supplementary valuation –
is limited to the circumstance that required the making of the supplementary valuation in question. That drives you back to the list of circumstances found in subsection (2). Otherwise, the valuer is directed to apply the hypothetical exercise that the initial words of paragraph (b) require, that is, if he is to:
assess the value that the land to which the supplementary valuation applies would have had if at the time at which the last valuation . . . it had been in the condition in which it is at the time of the making of the supplementary valuation ‑ ‑ ‑
KIEFEL J: Is it possible, Mr Merralls, to read the circumstances to which paragraph (b) refers as circumstances pertaining to the condition of the land?
MR MERRALLS: Yes.
KIEFEL J: And might it be limited in its reference to subsection (2) to circumstances of that description?
MR MERRALLS: No. It is all the circumstances in subsection (2).
KIEFEL J: But not all of them can relate to the condition of the land.
MR MERRALLS: Yes. Some would not, but it would not be – some of the circumstances would not require the whole of the hypothetical exercise to be conducted. But when one looks at the land that is being assessed one has regard to the matters directed by the initial words of paragraph (b). If there is to be any variation of those, then the variation is directed by the subsequent words.
KIEFEL J: What I am really inquiring is whether it is possible that (6)(b) might be restricted in its operation to matters affecting a change in condition of the land itself.
MR MERRALLS: We would say no, your Honour. That would be reading it down too much, although it certainly would include those matters.
As to the meaning of the words, if it is a circumstance requiring the making of a supplementary valuation, we say that one has to look at the precise language of the paragraphs of subsection (2) that are circumstances. In the case of paragraph (e), it is simply that land has become rateable since the return of the existing valuation which in most cases would be the general valuation, the last general valuation.
We say that there is no special magic in the expression “existing valuation”. It is simply a temporal adjective, and it would normally refer to the general valuation. I tried to think of an example where it might be another supplementary valuation. That may be a case, but I am afraid my dull mind did not extend to thinking of an example of where that would be so.
FRENCH CJ: The fact that the land has become rateable is an occasion for the carrying out of a supplementary valuation by reason of subsection (2), but it is difficult to see how it affects the value of the land for the purposes of (6)(b), and if it does not affect the value of the land, what then does the valuer do under (6)(b)?
MR MERRALLS: He would value it as though it was rateable at the time the last so‑called existing valuation was made.
FRENCH CJ: But its status as rateable land does not affect its value, does it?
MR MERRALLS: No.
FRENCH CJ: Then I am just wondering if (6)(b) is limited in its application to consideration of circumstances under (2), which affect the value of the land, what is there for him to do?
MR MERRALLS: You go back to the value that it would have had, if it had been in that condition at the time the supplementary valuation had been made.
FRENCH CJ: All right.
GUMMOW J: This expression “land has become rateable” in (e) is a reference back to 154 of the Local Government Act, is it not? All of these provisions in the Valuation of Land Act are controlled by Division 3A, which is talking about Local Government Act valuations.
MR MERRALLS: Yes.
GUMMOW J: So I suppose you ask before the land has become rateable by looking to the operation of 154 of the Local Government Act, do you, which tells you what land is rateable.
MR MERRALLS: Yes, I think that is so, your Honour. It is really the cessation of one of the circumstances set out in subsection (2) of that section.
GUMMOW J: Of 154?
MR MERRALLS: Of 154, yes.
BELL J: So appreciating there were particular difficulties with this land which had not previously been rateable, but your submission is, as to (e), that what one would do, and conventionally it might be easier, is one would look to comparables as at March 1993 in arriving at the valuation under (e)?
MR MERRALLS: Yes, because there is a hypothesis that the words pose. Some of this land became rateable because it was no longer public authority land, some of it became rateable because the boundaries of the municipality of Glenelg had been enlarged and, in particular, enlarged into what might be called the bay area to the water. If I can go back to 154DF. The other paragraph that is relied upon ‑ ‑ ‑
FRENCH CJ: Section 13DF.
BELL J: Section 13DF.
MR MERRALLS: Sorry, your Honours, 13DF. The other paragraph that has been relied upon is (n). Paragraph (n) is rather an oddly‑worded paragraph inasmuch as the expression “order of the governor in council” or “order‑in‑council” is repeated and there is a temptation to say that it is the same thing, although, as I understand it, my learned friend is saying that the consequence that is said to have materially altered the value was the amendment of the Act to introduce section 2(2AA).
Our submission about this is that one cannot simply have regard to an order‑in‑council that may refer to land adventitiously as an order‑in‑council specifying land for the purposes of this paragraph, but what is required is an order‑in‑council made for the purposes of the Valuation of Land Act, not for some other statute, and the order‑in‑council that is relied upon does not fit that bill. It was made for the purposes of the Local Government Act.
HAYNE J: Whether or not that is a sufficient answer to reliance on (n), the order‑in‑council relied on is an order altering the boundaries of the shire. Is that right?
MR MERRALLS: Yes.
HAYNE J: The consequence of the alteration of the boundaries of the shire, so far as this land was concerned was, was it not, to make land not previously rateable rateable? Is that right?
MR MERRALLS: Yes. That would have been a consequence of it because it brought the land within the municipal area. Some of the land might have been rateable elsewhere if it was in some other municipal area, but regards the seabed that would certainly be so.
HAYNE J: But (n) is introduced by the condition, if for any reason other than a reason referred to in (a) to (m)?
MR MERRALLS: Yes.
HAYNE J: Does not the expansion of the municipal district, thus making rateable land not hitherto rateable, fall within (e)?
MR MERRALLS: It would fall within (e), yes.
HAYNE J: If that is so, does one ever enter the turmoil of paragraph (n)?
MR MERRALLS: I do not think you do as regards that land, no.
HAYNE J: Is there any other case presented by the reliance of the State on the particular order‑in‑council other than well, we have brought into the rateable area bits that were hitherto not rateable?
MR MERRALLS: I do not know how far they would take it. I think they would simply say that it simply identifies land.
HAYNE J: That would present a question ‑ ‑ ‑
MR MERRALLS: That is right, your Honour.
HAYNE J: ‑ ‑ ‑ not yet answered about the engagement of the condition for (n).
MR MERRALLS: What your Honour says is correct. That is right. That is the short answer to the question. One does not have to then say that it must be made specifically for the purposes of the Valuation of Land Act, although we do say that. We say really it would be quite silly if any order‑in‑council which simply described land satisfied the section and then you said here is the land and now we are going to find that its value has been materially altered by something else, by a change in legislation or a local by‑law. There must be some sort of rational connection between the two. We say that that rational connection is provided by the fact that the two subparagraphs of (n) require the land to be specified – not merely mentioned in but specified, which seems to connote specification for a purpose.
HAYNE J: Presumably it is (n)(ii) which is said to be engaged – land in any area specified.
MR MERRALLS: Yes. I assume that is so, your Honour.
HAYNE J: But that then provokes the further question under (n) of whether, as a consequence of the order‑in‑council, that seems to be what is required by the concluding three lines of (n) as a consequence of the order‑in‑ council, site value is or is likely to have been materially altered.
MR MERRALLS: No, that is the point that I opened with, your Honour, that (n) refers to order‑in‑council in two limbs or two parts. It is not necessarily the same order‑in‑council. I do not think that they rely upon the order‑in‑council. I think they are relying upon the Act.
HAYNE J: As a consequence of any Act, I see.
MR MERRALLS: As a consequence of the amending Act.
HAYNE J: I see, thank you.
MR MERRALLS: Yes, I am sure that that was what the submission was, what I understood it to be.
FRENCH CJ: This was not an alteration to site value, it was really an alteration to the law by which site value was ascertained.
MR MERRALLS: The site value is determined, yes. I suppose they would say that it is a consequence, not a direct consequence. They are, in conjunction with our submissions in reply, our submissions about section 13DF. May I turn to the last submission that my learned friend made about the undertaking which the State engaged itself by clause 11.4 of the contract. I take your Honours to the terms of 11.4. My learned friend referred only to paragraph (a). I am going to take your Honours to both paragraphs of it.
GUMMOW J: We have to see where they are placed in the contract, do we not? They are placed under the heading “Adjustment”, not under the heading “Completion”. Completion was to take place on 1 March 1996 we see from clause 6.1. I do not know whether that actually happened or whether it was delayed. The contract itself was only entered into on 15 February, so it was a very short period, and then there are some temporal questions about the operation of 11.4, I think. Clause 11.4(a) says “The State . . . will effect”, the question is, when? Clause 11.4(b) suggests it may be before or after completion, I suppose.
MR MERRALLS: It may, but paragraph (b) suggests that it may not be immediate.
GUMMOW J: Yes.
MR MERRALLS: Although it concedes that it may be before or after completion.
GUMMOW J: Does 11.4(b) operate this way? I do not know why people keep saying in the event that – if the amendments have not become law before completion, then for such time thereafter as the purchaser is assessed, then the State will refund and that obligation to refund will expire or not be called into operation as at such time when the State gets around to amending the law.
MR MERRALLS: And it is effective.
GUMMOW J: Yes.
MR MERRALLS: Because the amendment must ensure is very important.
GUMMOW J: Yes, and that word “ensure” is rather slippery.
FRENCH CJ: Do you carry that into (b) through “relevant”?
MR MERRALLS: Yes. It would have to be, your Honour, in our respectful submission, so that the amendment must be effective. Paragraph (b) seems to have been cobbled together from conveyancing boilerplate provisions. It uses conveyancer’s language and has been adapted to rather extraordinary circumstances. The expression “refund or allow” is obviously a conveyancing expression. It is a well‑known conveyancing expression. It is used in conventional adjustment provisions in contracts of sale.
GUMMOW J: I think the words “do not become” really mean “if they have not become”.
MR MERRALLS: Yes. They have their tenses a bit muddled too. We say that what they – merely to enact the amendment to insert 2(2AA) did not complete their undertaking or obligation, if you like to call it that. It had to be effective to do what was undertaken, and in this case that would have required the making of an order‑in‑council that satisfied paragraph (n) because otherwise the provision was in suspension until the next general valuation was made of the land some four or five years later.
We, of course, dispute the submission that it became immediately effective and was required to be applied by a valuer in making a supplementary valuation for the reasons that I have given in association with the first submission.
We feel bound to draw the Court’s attention to the existence of a case, about which we have just learnt, in the Court of Appeal of the Supreme Court of Victoria about the objection provisions of the Valuation of Land Act in association with the Land Tax Act. The case has been reported. We were not aware of it, it seems our learned friends were not aware of it either. It is the case of the Melbourne City Council v Port of Melbourne Corporation, oddly enough another port case.
It is a decision of the Court of Appeal comprising Justices Buchanan, Eames and Nettle, the judgment of the Court having been delivered by Justice Nettle. We have the electronic version, but we have recently learned that the case has been reported in (2005) 139 LGERA 318. I do not know whether it is in any of the taxation series; they sometimes seem to slip through the cracks in the citator.
The point that is made in the judgment of Justice Nettle is that the right to object against a municipal valuation which is used by the Land Tax Commissioner occurs when the rate notice of that valuation is given to the person concerned and when a valuation is made which is used for the purposes of subsequent assessments of land tax there is not a renewed right of objection then. It is only if a supplementary valuation is made or the value is somehow altered that a right arises to object, but not to the valuation generally, only to the valuation as it affects particular land. At paragraph 25 of his judgment Justice Nettle says:
The issue of a land tax assessment may enliven the right of objection under s 16 in respect of a piece or parcel of land comprised within the land tax assessment, as, for example, where there is included in the assessment a piece or parcel of land at a value determined by a rating authority under the Valuation of Land Act but of which notice has not before been given to the taxpayer under the Act. But such a right of objection is and remains a right under s 16 of the Valuation Act, and so is limited to objection against the value of that piece or parcel of land as it was determined by the rating authority under the Valuation of Land Act.
So where a valuation is used time and time again, one does not have any right of objection. It is only where it has been varied and then to the extent and in respect of the circumstance in which it has been varied. We have made a submission about the effect of section 13DH of the Valuation of Land Act which requires the valuer to perform his duties in a particular way and although the Court of Appeal did not rule upon that submission which was made before that court, we repeat it. That section, 13DH provides that:
(1)A valuer must return valuations in the prescribed form.
It appears that the so‑called valuation returned by Mr McDonald as a supplementary valuation here was not in the prescribed form but was merely in the form of a letter:
(2)Before any valuation and return is made the person appointed to make it must make a statutory declaration that the valuation and return will be impartial and true to the best of that person’s judgment and will be made by that person or under that person’s immediate personal supervision.
There was no evidence of that, and that:
(3)An entry must be made in the minutes of the meetings of the council of the making of the declaration and of its date.
The validity of the making of the supplementary valuation for non‑compliance with section 13DH was put in issue in the Supreme Court. I refer your Honours to the defence of the State which is found at page 20 of the appeal book. Paragraph 10(e) merely alleges that several supplementary valuations were made and refers in subparagraph (i) to a supplementary valuation on 7 March of what is, in effect, Barton Place at $2 million. In our reply we pleaded, on page 37, in paragraph 2 that:
the letter dated 7 March 1997 from Mr McDonald to the Shire of Glenelg was not a Supplementary Valuation within the meaning of Section 13DF(3) –
The onus of proof rested upon the defendant and, in our submission, it was not satisfied by the evidence before the court.
FRENCH CJ: That might be an appropriate moment to adjourn. Adjourn to 2.15 pm.
AT 12.45 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.16 PM:
FRENCH CJ: Yes, Mr Merralls.
MR MERRALLS: There is one other matter concerning the notice of contention that I wish to mention, your Honours. My learned friend mentioned the tenanted land and said that there had been no supplementary valuation of the tenanted areas. That is true; the only so‑called supplementary valuation was made of Barton Place. She also said that it was not clear whether any port improvements were on the tenanted areas. My instructions are that the tenanted areas did include some port improvements.
She also said that the tenants paid the land tax that was assessed upon land within the tenanted areas. That is not correct. The assessment was made upon the Port of Portland, not on the tenants. That was in compliance with sections 39 and 42 of the Land Tax Act. I am instructed that reimbursement provisions were in many of the leases, but the reimbursement was at individual tenancy – individual ownership rates, not on an amount assessed at what is commonly known as the aggregated rate, which is a higher rate because the land tax in Victoria is assessed upon an ascending scale depending upon the aggregate value of the aggregate land holdings of the assessed taxpayer. Even where there was a reimbursement pursuant to a covenant in a lease, it would be less than the amount that would be apportioned to the area occupied by a tenant.
I turn now to the main appeal. May I take your Honours to the beginning of the events which lead to this case? Until the sale, the bed, soil and shores of the waters and lands of the Port were vested in the authority upon trust for the purposes set out in section 15(1) of the Port of Portland Authority Act 1958. Those were the purposes set forth in the Act. That was really for the conduct of the court.
In the mid 90s many State instrumentalities providing services such as transport, power and port facilities were, to use the popular word, privatised by the government, that is to say, they passed from government ownership, whether or not conducted by the government itself or by a statutory authority, to private ownership but were still subject to certain regulation by statute and contractual provisions between the government and the operator. It is, I think, a matter of common knowledge that the operators of transport facilities in Melbourne receive subsidies for certain purposes and pay penalties upon certain occurrences from and to the government.
The privatisation of port facilities was conducted under a statutory scheme constituted by the enactment of the Port Services Act 1955. That is the first Act in our bundle of legislation. It provided for the privatisation of three ports, the Port of Portland being one of them. For the benefit of your Honours from other States, perhaps I should say that there are four deepwater ports in Victoria – Western Port, the Port of Melbourne, Geelong and Portland. Portland, unlike the other three ports, is in a sense an artificial port because it faces Bass Strait and it was necessary to build breakwaters to make it suitable for port purposes.
The Port Services Act contained both general provisions and provisions applying to individual ports. The relevant provisions for the Port of Portland are found in Division 3 which amended the Port of Portland Act in various ways. It is Division 3 of Part 10 of the Act which begins at page 124. That Act brought the Treasurer and the Minister, the Minister administering the Port of Portland Act, into the scheme for the sale of the port property and undertaking and the amendments to the Port of Portland Act conferred a bevy of powers on the Treasurer, both positive powers and powers to veto or prohibit the acts of the authority in relation to the sale or lease of port property.
May I take your Honours to section 147 of the Port Services Act at page 125 of the reprint which inserted a new section 4A in the Port of Portland Authority Act.:
In addition to its other powers under this Act, the Authority must (if directed in writing to do so by the Treasurer after consultation with the Minister) sell, assign, transfer or otherwise dispose of any part of its assets, liabilities, undertaking or business to any person or body specified in the written direction, at the price specified in the written direction and subject to and in accordance with the other conditions (if any) specified in the written direction.
That is the critical section under which the contract for the sale of the port assets was made. Subsection(2) says that:
The exercise of a power conferred by sub‑section (1) has effect despite anything to the contrary in this Act and even if, as a result of the exercise of that power, the Authority is no longer able to carry out a part of its functions under this Act.
Subsection (3) gives an exemption from stamp duty and other taxes for the actual transaction of sale or lease. Section 6B, which was also introduced by the Port Services Act, which is on page 127, gave the Treasurer power to:
give to the members of the Authority written directions in relation to the performance of the functions or exercise of the powers of the Authority.
By subsection (2) it is stated that:
The members of the Authority must comply with any direction given under sub‑section (1).
Section 17B, which was substituted for a previous section, gives the Treasurer an additional power over the sale or granting of a lease or licence over any land and it prohibits the authority, under section 17A, from selling, et cetera, any land “without the prior written approval of the Treasurer”. Section 17E:
(1)The Treasurer, after consultation with the Minister, may exercise any power of the Authority with respect to –
(a)the sale of, or the granting of a lease of or licence over, any land; or
(b)the sale, assignment, transfer or disposal in any other way of any part of the assets, liabilities, undertaking or business of the Authority –
and the exercise of that power by the Treasurer is for all purposes as effectual as if it had been exercised by the Authority.
So by this collection of provisions the authority is virtually sidelined and is given a nominal role. The active decision‑making functions in relation to the sale or disposal of port assets is taken by the Treasurer.
Section 17F puts the sale of port land in a rather special position by excluding the operation of section 32 of the Sale of Land Act which requires certain notices to be given containing information on the sale of property. Section 42, which was introduced by section 151 – I am sorry, subsection (2) is substituted by section 151 – requires:
“(2A)The proceeds or instalments of proceeds derived from any exercise, after the commencement of section 151 of the Port Services Act 1995, of a power under section 4A, 17A or 17E of this Act must be paid into the Port of Portland Authority Fund.
(2B)The Authority must deal with any proceeds or instalments of proceeds referred to in sub‑section (2A) as directed by the Treasurer in writing.
(2C)The Treasurer under sub‑section (2B) may direct the Authority –
to apply the funds in any of a number of ways that are set out, repaying, discharging or satisfying certain liabilities. In point of fact, I understand that section (2C)(a)(ii) was invoked in relation to the price received for the sale of the Port of Portland assets:
(b) to defray any specified expenses . . .
(c)to pay any specified part of the proceeds or instalments of proceeds referred to in sub‑section (2A) into the Consolidated Fund.”.
So that in the end, after all liabilities have been discharged, the money comes back to the – or the money comes to the consolidated fund.
Sections 70 and 71 of the Port Services Act provided for the revocation of the reservation of certain land vested in the Port of Portland Authority with the issue of Crown grants. I will not read those sections at page 55. To complete the survey of the port services legislation, perhaps I should mention an Act that was passed after the sale of Port of Portland which provided for the repeal of the Port of Portland Act for the abolition of the Port of Portland Authority and for the transfer of its assets to the State Electricity Commission.
The State Electricity Commission, as the provisions that we have included in the folder of materials shows, was used as a sort of universal receptacle of the net proceeds of sale of various State utilities, even though the SEC itself had ceased to function as an electricity authority. It became the successor of the Gas and Fuel Corporation and of the various port authorities and it was required to establish a fund into which moneys received from the funds of the abolished authorities would go.
FRENCH CJ: This all rather incidental to your main thrust, is it not, Mr Merralls.
MR MERRALLS: I have one sentence to go, your Honour.
FRENCH CJ: Too late.
MR MERRALLS: From that fund the moneys goes back to consolidated revenue. It is true, this Act was passed after sale but, in our submission, it is relevant to have regard to it now as showing that this was a systematic scheme which was designed to achieve the purpose of first passing the conduct of the authority’s activities into private hands, secondly, to regulate to some extent the conduct of those activities after they passed into private hands and, thirdly, to get the net proceeds of sale back to the State.
The asset sale agreement was made on 14 February 1996. We refer to the making of that agreement in paragraph 15 of our submissions. Your Honours have been taken to it, or to some of its provisions this morning. It is quite a long agreement and it is interesting to note that one of the annexures to it is a channel operating agreement which ensured the efficient operation of the port by association with other persons or instrumentalities after the sale, that is to say, that the purchaser was not to be responsible for dredging channels and so on for the port.
The Valuation of Land Act was amended by the State Taxation (Omnibus Amendment) Act 1996, section 27(2), by the insertion of section 2(2AA) which, as my learned friend mentioned this morning, adopts part of the language of clause 11.4(a) of the contract of sale. We ascertained from the internet that the contract of sale of the Geelong facilities contained precisely the same term and was, in fact, drawn by the same firm of solicitors, so that it appears that the amendment of the Valuation of Land Act was not specific to the sale of the Port of Portland.
My learned friend has also mentioned that the special definition of improvements, or rather the special exception of improvements, was needed because there was previously an exception from the concept of improvements, or the definition of improvements, in the Valuation of Land Act, improvements that had been constructed by the Crown or statutory authorities and so it was necessary to make an exception from the exception.
The land tax status of the port land before the sale is found in the Land Tax Act, section 9(1)(b). My learned friend referred the Court this morning to the exemption from the useable rates which was by section 20 of the Port of Portland Act itself. Section 9(1)(b) of the Land Tax Act exempted, amongst other lands:
land which is vested in any public statutory authority, other than land vested in a declared public statutory authority -
I have already referred to the terms of clause 11.4 and submitted that the undertaking given by paragraph (a) was not satisfied simply by the enactment of a provision which adopted the language of exclusion found in that paragraph itself. The word “ensure” in the phrase:
to ensure that the unimproved site value used as the basis for assessment of land tax liability for the Real Property” –
the real property being a defined term –
excludes the value of buildings –
required that it should be effective, in our submission. When paragraph (b) is read in conjunction with paragraph (a), in our submission that is quite clear because one has to be able to ensure that as a result of the amendments the land is not assessed at a rate higher than it would have been if the relevant statutory amendments were not law.
FRENCH CJ: Paragraph (b) is not necessarily positive on non‑compliance with (a), is it? There might be a delay, for example, in an enactment and you will assert that you are entitled to recovery of any land tax payable during the period of the interregnum.
MR MERRALLS: Yes. That is why the phrase “refund or allow” is given. It is sometimes found in contracts of sale where the amount of an orthodox adjustment has not been ascertained at the time of completion and would only be ascertainable later.
GUMMOW J: This reference to the “State refunding”, would that, if not performed, pick up section 26 of the Crown Proceedings Act (Vic)?
MR MERRALLS: Yes, we would say so, yes.
GUMMOW J: Which appropriates consolidated fund to meeting any judgment that was sustained by the State if it failed to refund?
MR MERRALLS: Yes. Should be recoverable as a debt on, I think it is called, Park v Shepherd principles. Paragraph (a) can be viewed in three ways. One is creating what was intended to be an enforceable obligation, another is that it should be construed as a sort of best endeavours clause. The third is that although it is couched in the language of agreement to do something, it refers to the state of affairs or factum upon which the obligation created by (b) is dependant.
The valuation process that was followed is set out at great length in the judgment of Mr Justice Mandie at first instance. I will give your Honours the reference without reading them. In paragraphs 12 to 15 found on pages 397 to 398 of the appeal book. The valuations themselves and assessments are described in paragraphs 20 to 49, and by Mr Justice Buchanan in paragraphs 64 to 71 of his judgment, those last passages being at pages 399 to 408 and 456 to 457.
We have set out as an annexure to our submissions in reply a table which shows the dates on which various assessments were made, the site value that was referred to or used for each assessment, the amount of land tax paid and the reference to the making of those assessments in the appeal book. Below the table is a statement of the dates on which the various amounts were paid. The table shows that it was not until what is called the second amended 1997 assessment, which was made on 10 July 2000, that the site value of 1.4 or 1.3 million, that had previously been used, was increased to 4.5 million, more or less.
It was on that date that two amended assessments were made and the first assessment or only assessment for 1999, and four days later an assessment was made for 2000. Those were the first assessments made using the so‑called supplementary valuation, which included Barton Place. The previous assessments resulted in a comparatively small amount of land tax being assessed. The assessment for 2001, which was made on 9 March 2000, was the first assessment based upon the second general valuation of the lands in the area and after objection and the statutory discussion device, that was reduced to roughly a million dollars.
Having paid the substantial amounts that are shown in that table the Port of Portland, not having received satisfaction from the State from its request for the repayment of a large amount of the amount paid, brought the present proceedings against the State. The pleadings first related to the appropriateness of the use of subsection (2AA), whether it had been used, but I am instructed on the second day of the trial the State’s third amended defence was amended to include the allegation of invalidity which is found in paragraph 48. That is on page 34 of the appeal book. It is a rather bald plea:
Further, or alternatively, clause 11 of the Agreement is void and/or ultra vires the power of the defendant by Ministerial or Executive act to bind the Parliament and no action can be brought to enforce such a term and the defendant cannot be sued for any failure of the Parliament to give effect to the term.
It is a sort of rolled‑up defence. It does not attempt to differentiate between paragraph (a) and paragraph (b) of clause 11, nor does it state the basis of the allegation that the term was void apart from that it exceeded the power of the defendant, what is called ministerial or executive act. That plea was upheld by Mr Justice Mandie and his reasons for doing so are summarised in paragraph 19 of our submissions. He held that:
“The State cannot validly promise to release a person from taxes imposed by Parliament without parliamentary approval. A promise by the State to return to the taxpayer tax duly payable and collected, or an equivalent sum, is equally unenforceable.”
He referred to a passage in the judgment of Lord Justice Scrutton in the London County Council Case, which in turn referred to the Bill of Rights, and the Bill of Rights surfaced in the Court of Appeal in its own right. The Bill of Rights in Victoria is one of the what are called transcribed Acts in the Imperial Acts Application Act 1980, which dates back to an Imperial Acts Application Act of I think – I think it was 1915; it was the work of Sir Leo Cussen, which is the model upon which Imperial Acts Application Acts have been based in, I think, Queensland and New South Wales. I noticed in a judgment this Court delivered yesterday some reference was made to that. I also noticed that my explanation of the use of 1688 as the date of the Bill of Rights is well understood by the members of the Court.
Perhaps I should say that in the materials filed by our learned friends, the version of the Bill of Rights originally filed was that of the Australian Capital Territory, and I think they have now substituted for that, or added to that, the original text of the Bill of Rights. In fact, for the law of Victoria the text of the Bill of Rights, that is the law is that which is transcribed by that Act which is in our material – that is required by ‑ ‑ ‑
FRENCH CJ: Given the vesting of the legislative power of the State of Victoria in the Parliament under section 15 of the State Constitution Act what room is there for executive dispensation absent statutory authority?
MR MERRALLS: Well, that is the question.
FRENCH CJ: Yes.
MR MERRALLS: The question is whether it is needed. We do not doubt that the Bill of Rights is law within the State of Victoria.
FRENCH CJ: Even without the Bill of Rights, one looks at section 15 of the Constitution Act.
MR MERRALLS: Yes. It is the same idea that has passed into general constitutional theory of the supremacy of Parliament. Is that what your Honour is ‑ ‑ ‑
FRENCH CJ: Yes.
MR MERRALLS: Yes. It really does not matter. We would say that there is no difference between what has passed into general constitutional acceptance and what is actually found in the text of the Bill of Rights. The appeal from Mr Justice Mandie was dismissed by the Court of Appeal unanimously in respect of paragraph (b) with Mr Justice Nettle expressing the view that on the present state of the authorities, the better view was that that covenant was void, the other members of the Court not making that sort of reservation and then there was a difference of opinion about the enforceability of paragraph (a) with Mr Justice Nettle dissenting on the ground that paragraph (a) was permissible in the context of a commercial arrangement between the State and its instrumentalities ‑ ‑ ‑
FRENCH CJ: As a best endeavours provision?
MR MERRALLS: Yes. We do not put our case under paragraph (a) any higher than Mr Justice Nettle did, and he accepted the right of the State in the appropriate circumstances not to honour the undertaking, but he held that in view of what it had done, it had not intended not to honour the undertaking but that it simply did not go far enough in what it did because of the labyrinthine statutory provisions. It had not been understood that the enactment of 2(2AA) did not alone ensure that the improvements in question would not be taken into account.
First, we say that the agreement in clause 11.4 was within the common law power of the Executive. Secondly, we say that if that were not so, then it was given statutory authority by section 4A(1) of the Port of Portland Act as amended to do so. In paragraphs 22 and 23 of our written submissions we set out in detail grounds for the submission that the agreement to 11.4 was within the common law power. As your Honour Justice Gummow observed, the process of appropriation to satisfy the obligation is now regulated by section 26 of the Crown Proceedings Act.
We have referred, in footnote 4, to certain articles and texts by learned writers regarding the power of the Executive Government to contract. As your Honours are aware, until Bardolph’s Case there was, to use the word raised this morning, somewhat of an elision between the notion of the power to enter into a contract and the satisfaction of an obligation thereby incurred, but the distinction was clearly made in Bardolph’s Case and the authority given to the Executive Government to enter into contracts is no longer hedged about by the doubts that were manifested in the New Zealand cases that are cited by our learned friends from the 1890s and onwards.
In paragraph 23, we can see that the Executive’s power to enter into particular contracts may be limited by statute. In all the cases, including the gold dollar loan cases in the 1930s in this Court, it is emphasised that a contract made by the Executive may be abrogated by statute. I will refer presently to a difference of opinion between Justice Williams in those cases, and other members of the Court, about the sufficiency of a later statute to abrogate a particular contract.
GUMMOW J: Mr Merralls, could you just look at page 391 of the appeal book for a minute. That was a direction by the Treasurer pursuant to section 4A of the Authority Act.
MR MERRALLS: Yes.
GUMMOW J: It specifically picks up the asset sale agreement.
MR MERRALLS: Yes, I believe it was annexed to it.
GUMMOW J: Yes, exactly. One of the terms of the sale agreement is that the purchase price has this adjustment system in it. Why is not that something that would have sufficient legislative backing by section 4A?
MR MERRALLS: We say it does. Yes. I am sorry. What is your Honour’s question?
GUMMOW J: Why then do we need to worry about King James II?
MR MERRALLS: We say we do not. If so say all of us, perhaps I can resume my seat.
GUMMOW J: Did the Court of Appeal deal with that point, that is what I am worried about?
MR MERRALLS: They did not agree with that.
GUMMOW J: Was it in play in the Court of Appeal?
MR MERRALLS: I did not appear in the Court of Appeal, but as I understand it, it was. Yes, it was. I need not go over all this Bardolph stuff if that is the answer, and we say that it is the answer. We say, in any case, you have statutory authority here because you have this complex statutory scheme giving all sorts of powers to the Treasurer and the Minister with respect to the sale.
GUMMOW J: The Treasurer has joined as representing the State as a party to the contract, too.
MR MERRALLS: Yes.
FRENCH CJ: Is the statutory authority equally good for (a) and (b) of clause 11.4?
MR MERRALLS: We are not worried about (a).
FRENCH CJ: The crux of your case is (b), is it not?
MR MERRALLS: Our case really rests upon (b); (a) is only important as laying the foundation for (b). I think I have called it the factum for (b) because it contemplates a state of affairs where there is a difference between two amounts of land tax – one, an amount that would have been paid in certain circumstances and the other amount that has been paid. We say this is a legitimate term to incorporate into a contract for the sale of something like the assets of the Port. We deal with that in our written reply.
FRENCH CJ: Let us assume that the directions power under 4A, which you rely upon, would not authorise a provision in terms of 11.4(a) even when construed on a best endeavours basis, which is the basis upon which you construe it, is (b) still good as directed?
MR MERRALLS: Yes.
FRENCH CJ: On the basis that even if it is because of invalidity – sorry, notwithstanding invalidity of (a), the factum still arises? Well, no, that cannot be right.
MR MERRALLS: It depends what view you take of (a), of course. I postulated three possible views of (a) this morning. We would say that the third does, it satisfies it.
FRENCH CJ: I mean (b) talks about the relevant statutory amendments, which are those of the character described in (a).
MR MERRALLS: Yes, if they do not come to pass. You can imagine a term like (b) being in a contract of sale between individuals where an amendment to a taxing Act is in the air, is being bruited by a government and the parties wish to ensure that the amount paid as consideration for the sale is upon the footing that those amendments will come to pass, or those changes or the tax regime will come to pass, it would be not unusual to have something like 11.4(b) which provided a form of adjustment because the person making the payment simply does not know what he is buying at that stage. It is being bought under the risk that a certain state of affairs will not come into existence that would affect the value of the property bought and would affect the amount that he might pay in consideration.
FRENCH CJ: I suppose I am really thinking in terms of severability of (b). You cannot understand (b) without reading (a). If (a) is invalid ‑ ‑ ‑
MR MERRALLS: No. It all depends what your Honour means by “if (a) is invalid”.
FRENCH CJ: Not authorised by the directions power and beyond the power of a State to contract in those terms.
MR MERRALLS: To contract in that way, nevertheless, its text is there and it provides the basis for the operation of (b) so that you would be in a situation akin to that that I postulated a moment ago between private individuals selling property when it is not known whether a particular taxing regime is going to come into force or not and the parties wish to have certainty and so they fix a price which is payable upon certain assumptions, but if those assumptions are proved wrong, they provide for repayment or allowance depending upon whether the possibility becomes certain before or after the date of completion.
GUMMOW J: But I suppose one construes (a), if possible, to give it an operation that is effective rather than invalid, and that would ‑ ‑ ‑
MR MERRALLS: 11(a)?
GUMMOW J: Yes, (a). That would suggest that it is to be read that it will use its best endeavours to effect.
MR MERRALLS: Yes.
GUMMOW J: That is an ordinary way you would construed a commercial contract, you give it an effect if you can.
MR MERRALLS: Yes.
FRENCH CJ: But validity is attacked even on that basis, is it not?
MR MERRALLS: I believe it is.
FRENCH CJ: Yes, on the basis that you cannot constrain somebody to present something in Parliament or ‑ ‑ ‑
MR MERRALLS: My learned friend is nodding, yes.
HAYNE J: But even if it is in that sense invalid, assume for the purposes of argument that the State cannot make an agreement that it will use best endeavours to alter the law, (b) can still be given sensible operation?
MR MERRALLS: That is our submission.
HAYNE J: In that event, (b) is to be understood as saying, if the law from time to time is in form one, certain commercial consequences follow. If the law from time to time is in form B, certain other commercial consequences follow, namely, allowance or refund.
MR MERRALLS: Yes, and that would be the sort of provision that you would find, absent paragraph (a), in a commercial agreement for the sale of assets between private individuals where there was a state of uncertainty.
HAYNE J: Although the commercial consequences identified in (b) as refund or allowance are computed by reference to two different tax regimes, I would understand your submission to be that it is not a case of refunding tax, it is simply a case of making either an allowance in purchase price or refund of part of purchase price.
MR MERRALLS: Yes, which is calculated by reference to a tax liability, yes. Perhaps I do not have to say this but we submit that the two cases, the New Zealand case of Rothmans of Pall Mall and Re Michael; Ex parte WMC Resources are distinguishable because they do involve attempts to entrench contracts by binding future parliaments in another area of activity from the present one. Why did the contract take this form? It took this form because it was made pursuant to blueprint statute which would regulate the sale of the assets of a number of instrumentalities. That probably explains why it did not follow the form of statutes that are quite familiar in Western Australia, State agreements which are often annexed to a statute and ‑ ‑ ‑
FRENCH CJ: And if so annexed, have the assistance of the Government Agreements Act in that State.
MR MERRALLS: Yes. Well, there are all sorts of problems with attempts to entrench statutes, and possibly they always will be, have been found to be insoluble. We have referred to two very long articles by Mr Warnick of Perth, who is an expert in this area, in which he sets out various statutory schemes that are adopted or methods that are adopted to give certainty to State agreements.
FRENCH CJ: Fortunately we do not have to visit that menagerie.
MR MERRALLS: My learned friend, Mr Meadows, would be familiar with those matters and no doubt will address your Honours about them.
FRENCH CJ: Within limits, I think.
MR MERRALLS: We hope he does not have to. My learned friend refers to the way Mr Justice Buchanan – I think this is in our written submissions. He said that 4A(1) could only authorise the Treasurer to specify terms of an agreement of sale between the authority and the purchaser. That is a slightly different point. We have dealt with that in our written submissions that section 4A should be construed narrowly so as to confine the reciprocal obligations to the nominal or actual seller, vendor and the purchaser.
It allowed for, for example, third party guarantees to be stipulated as conditions of sale. It would be absurd to construe it so narrowly as to exclude them. In any case, the State does have a real interest here and it is not improper for it to adopt the continuing role of being obliged to honour the obligation when the authority’s functions are going to cease on the sale of the assets and the authority may well have passed out of existence by the time 11.4(b) is spent.
To sum up this part of the argument, we say that this is a perfectly legitimate commercial obligation undertaking. It should not be regarded as a dispensation from the operation of the taxing Act. It does not purport to exempt the purchaser from liability and it depends simply upon a state of affairs that may be measured by something that is unknown at the time the contract is made, or uncertain at the time the contract is made, which will bear upon the value of the asset acquired and the price paid. We say that it is not dispensation and it is not within the concept of dispensation.
HAYNE J: Well, in the manner in which Mr Justice Buchanan dealt with it at paragraph 43 of his reasons, page 448 of the appeal book, which is I think the central paragraph of his Honour’s reasoning, or at least the conclusion of his Honour’s reasoning on the 11.4(b) point, you would say I think that your case falls within the kind of case contemplated in the last two sentences of that paragraph, namely, purchase price can be struck one way, his Honour says it can only be done once for all. I assume your riposte to be, well, why only once for all, why can you not do it over time as facts occur?
MR MERRALLS: Yes. I was puzzled by that passage, if I may say so, your Honour. His Honour does take a very limited view of 4A and I am not sure to what extent he was dazzled by observations of Sir Owen Dixon in Thomson’s Case and Sir Victor Windeyer in the Placer Case in doing so, but he does appear to have been influenced very strongly by them. He seems to have regarded this as a statutory equivalent of something else, or rather a contractual equivalent of something else, to have said that because you chose this path you cannot say that it is in substance that path, the path that he has described in those two sentences.
In conclusion of this part of the argument may I say that the kernel of our case is found in paragraph 42 of our submissions and in paragraphs 3 and 5 of our reply, and we also adopt, gladly, paragraphs 6 and 20 to 43 of the submissions of the Attorney‑General for Western Australia.
FRENCH CJ: Paragraphs 43 and 44 are really picked up in what you have already said about 4A, are they not?
MR MERRALLS: Yes. I should have said 44, not 43. We say that the cases that are, as it were, relied upon by the majority in the Court of Appeal have nothing to do with the case. I would be quite happy to go through them and to comment on passages in those judgments. I have already done so in the written submissions. The closest case to this is the Eastern Extension Case which did involve a large public utility and a contract between colonial governments or the government of the, I think it was called the Province of South Australia and the company that was to operate the cable linking Australia with the rest of the world; a most extraordinary contract. The project was the broadband of the 1890s. It was a tremendous project. It involved tremendous expense and a great deal of engineering skill and ingenuity.
HEYDON J: You have covered all this in paragraphs 34 to 36, I think, of your written submissions, have you not?
MR MERRALLS: Yes. The condition that was considered there is set out on page 432, clause 19. There were two agreements that were considered in that case and concerned with the 1900 agreement:
Each of the Governments of the respective contracting Colonies should cause all cables . . . which are used solely for the purpose of the cable business of the Extension Company or their assigns or for laying repairing or working any of their cables land lines or cable ships to be relieved from all custom duties and wharfage rates in its own respective Colony and shall cause every vessel which shall be used by the Extension Company or their assigns for the purpose of laying repairing or duplicating any cable or any vessel belonging to or chartered by the Extension Company or their assigns in which any such cable cable apparatus and telegraph instruments machinery stationery and goods as aforesaid shall be carried to be exempt from all port and light duties whether upon entering any port or passing through any waters of any such Colony or otherwise howsoever and shall also repay to the Extension Company such sums as will be sufficient to recoup the Extension Company any income tax and any rates or taxes parliamentary or otherwise which the Extension Company shall be required to pay in such respective contracting Colony except rates and taxes on premises occupied as local offices for the purpose referred to in clause 16 hereof.
A most extraordinary set of benefits under taxing provisions. The case concerned the assumption by the Commonwealth, after federation, of obligations of the State, certain departments under section 85(iv) of the Constitution. The issue concerned primarily the construction of clause 19 as to whether the taxes, et cetera, that are referred to are only those imposed by the colony or whether one can carry over the text of clause 19 to the post‑federation period by including taxes imposed of the character referred to by the Commonwealth and the case was virtually lost on that point, although the reasons for judgments differ slightly.
GUMMOW J: These colonial governments were not selling any of the colonial property.
MR MERRALLS: No, far from it. They were offering inducements.
GUMMOW J: They were granting a franchise of some sort to operate this telegraph system.
MR MERRALLS: I do not think they were even granting a franchise.
GUMMOW J: No, it does not seem to say it is exclusive.
MR MERRALLS: I think that they did not have to. That was the only person who was prepared to do it and at great risk.
GUMMOW J: Yes.
MR MERRALLS: It was an incentive because of the tremendous cost of this project, incentives being given to them to undertake the work. The interesting thing about the judgments is that there is not a word about parliamentary supremacy or the ability of a colony to enter into a contract which offered such concessions. It just seems to have been assumed that they could. If that assumption had not been made then the whole case would be pointless, there would be no question of arguing whether this was an exemption or an undertaking to recoup amounts after assessment and payment and so the characterisation question that was posed to the court simply would not have arisen. If the court was apprised of this matter, as undoubtedly it would have been, learned judges ‑ ‑ ‑
HAYNE J: Much may turn, I suspect, on the matters in paragraph (2) of the case stated at page 428 which suggests that:
As a result of negotiations and pursuant to the powers in that behalf conferred by the Anglo‑Australian Telegraph Act1870 (S.A.) –
So who knows what statutory authority was lurking behind all of these arrangements. One assumes they were not done simply on executive fiat.
MR MERRALLS: I think that – I had read that paragraph as referring to the 1870 agreement.
HAYNE J: Be that as it may.
MR MERRALLS: I do not know whether the other agreement – it just simply does not refer to it in paragraph (4) but, yes, your Honour, I think that would probably be so. We have not looked at that Act. We would be quite happy to so overnight.
HAYNE J: Much may turn on what use Mr Hanks makes of it all.
MR MERRALLS: I will not elaborate the arguments I am about to - our submission is found in paragraph 35. Then we have the Ford dollar bond cases, or should I say gold dollar bond cases, as the interest was to be paid in gold in New York. They are rather funny cases because they raise different questions.
The fundamental point was that decided in Magrath’s Case as to whether the terms on which the bonds were issued simply involved an undertaking confined to the point of payment that the coupon holders were to receive a stack of dollars amounting to the total amount of interest without deduction.
The question was whether the Commonwealth’s undertaking was satisfied at the point of payment by the payment of the gold coins, or whether it extended further to the potential liability of the recipient to tax, and there was a difference of opinion. In fact, when one reads the judgments, perhaps the outcome is a little surprising.
It was held that the Commonwealth had promised the holder not only that the specified amounts would be paid on the dates fixed without deduction, but that the interest paid would not form part of his assessable income for the purposes of Commonwealth income tax.
I think it is possible to read between the lines in the following case of Thomson that if Justice Dixon had been a member of the Court in Magrath’s Case, it would have been decided somewhat differently, but there it was. There was a difference of opinion between even members of the majority in Magrath’s Case about the entitlement to receive the amounts or the right conferred by the terms of the bond issue.
Mr Justice Williams’ judgment depended very much upon the statutory authority that was given for the tax‑free term and he conceded Parliament’s ability to abrogate the right by specific legislation, but he applied the maxim of generalia specialibus non derogant and regarded the later taxing Act, which amended the basis of taxing income received from sources outside Australia in the hands of Australian resident taxpayers as being a general act and the contractual undertaking conferred pursuant to statutory authority by the issue of the bonds as being a special right. That is found at pages 183 and 184. Mr Justice McTiernan agreed with him on page 175.
Mr Justice Rich agreed in the construction of the term, but had it not been for the concession, as it were, by the Commonwealth that if an unfavourable answer were given to the first question posed, the Commonwealth would not seek an answer to the second question which dealt with the right of recovery of tax paid in respect of that interest, but would pay the amounts. Mr Justice Rich was disposed to make some remarks, strictly obiter, they would have to be, about how he would have answered question 2 if the Commonwealth had not been prepared to repay the tax.
GUMMOW J: Mr Merralls, section 2 of the Anglo‑Australian Telegraph Act 1870 (SA) empowered the Governor to enter into the contract set out in the report at 33 CLR upon such terms as:
The Governor with the advice of the Executive Council . . . shall deem most advantageous for –
the province of South Australia.
MR MERRALLS: General words.
GUMMOW J: Yes, very general words.
MR MERRALLS: Of course, for the 1870 contract South Australia was not the only party. As I understand it there were concessionary provisions given by other colonial governments.
GUMMOW J: It just seems to be assumed that there was no Bill of Rights problem involved because of the broad terms of the legislative approval.
MR MERRALLS: Yes, that is right. In our respectful submission, correctly assumed. If I can go back briefly to Magrath’s Case. The Chief Justice, Mr Justice Starke, simply held that the contract was satisfied at the point of payment and so they did not have to become involved in these other questions, obiter or otherwise. Thomson’s Case concerned the nature of the payment of the calculated equivalent of income tax levied on the Australian holder of bonds. In fact, it was an estate duty case. The question was whether, before the death of the lady, Mrs Thomson, she had an enforceable right or whether, after her death, her estate was the fortunate recipient of an ex gratia payment, and the latter view prevailed.
The judgments differed very much between majority and dissentients and, in fact, one finds judges that have been on one side in Magrath’s Case appearing on the other side in Thomson’s Case, perhaps on different grounds. Chief Justice Latham alluded to the maxim generalia specialibus but he departed from Mr Justice Williams by saying that the taxpayer had lost any right of recovery by failing to take advantage of the objection and appeal provisions of the Income Tax Act and, as a result of that, when the Commonwealth made the ex gratia payment, which apparently it conceded it had the right to do – I think Justice Crennan raised a similar question this morning and was told that the Commissioner of State Revenue in Victoria would not have that power, but that conclusion appears to have been made by Chief Justice Latham on page 17.
FRENCH CJ: You are dealing here with the application of that case by Justice Buchanan, I think, in support of the proposition that a substantive exemption is exercised with a purported dispensing power, is that right? I am just looking at paragraph 45.
MR MERRALLS: Paragraph 45 of his Honour’s judgment?
FRENCH CJ: Yes, at 449. I am just wondering to what point are taking us in respect of Thomson’s Case?
MR MERRALLS: We say Thomson’s Case is irrelevant. The decision rested upon a number of different views of what had occurred. There is no majority view that the term of the issue of the bonds amounted to a dispensation, although Mr Justice Dixon’s judgment may be read as indicating that that was his view.
HAYNE J: Some emphasis was given by Justice Buchanan at page 444, paragraph 31 of his reasons, to the passage in Thomson’s Case at page 28. In particular, I think the emphasis seems to be given to the words appearing in the last four lines of page 28 of 77 CLR, or the last four lines, if you like, at paragraph 31 of the reasons of Justice Buchanan “imposition of a tax necessarily”, et cetera. Now, what answer do you make there for reliance or the invocation of those statements?
MR MERRALLS: We say that they were directed to a different state of affairs where the contract is equated with an exemption from the tax. If one looks at pages 30 to 31 of Mr Justice Dixon’s judgment, you will find his views for rejecting the generalia specialibus argument first of all by saying that the exemption is not contained in a statute, but secondly that:
The clause is not expressed in language amounting to a clear and unambiguous declaration that in no circumstances will the interest ever be taken into account –
which is an implied criticism of Magrath, and thirdly, that he regarded this as an example of an exemption of interest. He deals, in the middle of page 31, with the way that exemptions had been traditionally granted from the payment of tax.
HAYNE J: In addition, I wonder whether what is said on page 28 may not have to be understood in the context of the facts which yielded the dispute, in particular, the fact that we were concerned with a subsequent Act, an Act subsequent to the contract, and that subsequent Act was treated as, in effect, overriding, to use an imperfect term, of the contractual obligation.
MR MERRALLS: Yes. Well, he certainly says that, but he appears to go just a little further in the last sentence, but, in our submission, if he did mean to make a wider statement than was required by the case, it certainly should be regarded as pure obiter dictum and it ought not to be read as a general proposition that applies in any case in which an agreement by a government to pay an amount which is measured by or is referable to an amount of taxation should be regarded as a dispensation. We would say that one simply does not know from that passage what Mr Justice Dixon would have said about the present problem. It is not directed to it and it should not be regarded as stating a proposition of law as a sort of eleventh commandment which is applicable to any case of the kind that I have mentioned.
His Honour’s judgment does, of course, explore in great detail the changes that have been made to the income tax regime for the income from sources outside Australia, of Australian resident taxpayers. His Honour appears to be particularly concerned about that and makes the sensible observation that when the bonds were issued it was contemplated they would issued to Americans and not to Australians, and it was an assurance to the American investors that they need not fear the Australian taxation authorities.
There is one point that I did not mention about Chief Justice Latham’s judgment and that was that he at page 19 recognised the distinction between an exemption and a promise in certain circumstances to recoup. We would say a fortiori a distinction should be recognised between exemption, between contravention of section 12 Bill of Rights and the sort of obligation incurred by paragraph 11.4(b).
Justice McTiernan agreed with the Chief Justice. Justice Starke adopted the converse of the Chief Justice’s view saying that if the repayment was made in consequence of an unauthorised exaction, the Commissioner was legally obliged to refund. He does not refer to the objection and appeal provisions. That is found on page 23 and
Justice Williams’ dissent depended upon the nature of his majority judgment in Magrath’s Case.
So the case concerned a contention that the terms of the bonds conferred a general exemption from the operation of the income tax legislation, present and future. The only common ground between the
majority Justices was that this could not be done. That does not provide a basis for a conclusion in the present case that a clause such as 11.4(b) cannot be done. Our other submissions, I think, are sufficiently stated in our written submissions and in our reply. If the Court pleases.
FRENCH CJ: Thank you, Mr Merralls. Yes, Mr Hanks.
MR HANKS: Your Honours, Mr Meadows is appearing for the Attorney for Western Australia and his submissions support the orders that our friends for the appellant seek. If it suits the Court’s convenience, we propose that we should follow Mr Meadows.
FRENCH CJ: Yes, all right.
MR HANKS: That certainly suits Mr Meadows.
FRENCH CJ: Mr Meadows.
MR MEADOWS: May it please the Court. Might I say that Mr Hanks and I had discussed this earlier and we had agreed that it would be appropriate for the Attorney to put his submissions before Mr Hanks. Might I begin by saying that the Attorney has sought to be heard on three issues. First, that the Executive Government lacked the capacity to contract in relation to the exercise of legislative functions and that the existence of such a capacity would be inconsistent with the entrenched powers of the Victorian Parliament to legislate and also the principles of responsible government. I do not propose to address the Court in relation to that basic proposition, but simply to rely on our written submissions in that respect and, as I understand my learned friend, Mr Merralls’ submissions, he would seem to accept that proposition. The second issue that we wish to address the Court on related to ‑ ‑ ‑
GUMMOW J: I am not sure that is right, Mr Meadows. One of Mr Merrell’s submissions is that paragraph (a) is to be construed as a best endeavours undertaking.
MR MEADOWS: Yes, I understand ‑ ‑ ‑
GUMMOW J: Do you say that that would be invalid?
MR MEADOWS: For different reasons, your Honour.
GUMMOW J: As distinct from lacking a great deal of content, perhaps? That is one thing. Whether it is invalid is another.
MR MEADOWS: On two bases, we would submit, its validity is questionable or is to be questioned; firstly, in relation to it being contrary to public policy and, secondly, as running foul of Article 9 of the Bill of Rights. If I could seek to put our position at the moment, so far as the case for the respondent is concerned, we agree with their submissions in relation to the invalidity of clause 11.4(a) and we would accept what they submit in paragraphs 47 to 54 of their written submissions. However, we would seek to make oral submissions as to why the proposition that a construction of clause 11.4(a), that all it requires is that the Executive Government do what it lawfully and effectively could do to procure legislative change, has problems in two respects.
Now, we address this issue as to the invalidity of that clause as contravening public policy in our written submissions in paragraphs 15 to 19. The first point we make is that the enactment of legislation is a parliamentary function. All that the Executive can lawfully and effectively do to procure legislative change is for the Minister, or a Minister, to introduce a Bill into Parliament and for members of the government in Parliament to support that Bill.
In our submission, it would be contrary to public policy for the Executive Government to enter into an agreement which would require the Executive Government and the members of Parliament who belong to that government to support a Bill in that particular form. We set out in our written submissions, particularly beginning at paragraph 12, the grounds upon which we submit such a provision is contrary to public policy. The second basis upon which we submit that paragraph (a) has difficulties is because of Article 9 of the Bill of Rights, which, of course, deals with the scope of parliamentary privilege.
We refer in our submissions to what was said in Prebble v Television New Zealand Proprietary Limited [1995] 1 AC 321 and, in particular, what is said in the passages at pages 322 to 334 about the basic concept underlying Article 9 and, in particular, what is aid at page 334. I will not take your Honours to the actual text of that passage, but we submit it accurately reflects the state of the law in relation to parliamentary privilege.
FRENCH CJ: So members of the Executive Government cannot bind themselves in their capacity as members of Parliament. That is what you are really saying, are you not?
MR MEADOWS: That is right, your Honour, that is what we are saying and we would submit that the principles underlying Article 9 have been accepted by this Court first of all in Sankey v Whitlam (1978) 142 CLR 1 and we would refer to the judgment of the then Acting Chief Justice Sir Harry Gibbs at page 35 to the effect that:
a member of Parliament should be able to speak in Parliament with impunity and without any fear of the consequences.
Similarly, in Egan v Willis, we would refer to the discussion of the effect of Article 9 and also its relationship to the common law, particularly to the judgment of Justices Gaudron, Gummow and Hayne at page 445 where they suggested that direct application of Article 9 to the circumstances prevailing, certainly in New South Wales, created some difficulties, but that it was reflective of the common law which was applicable in that State.
We also refer to what Justice Kirby said at page 490 in paragraph 133, and also what was said by Justice McHugh at pages 461 to 462 and, in particular, at page 462 in paragraph 69. I will not take your Honour to those passages, as I am sure they are familiar to you.
But if an undertaking by the Executive Government to do what it could lawfully do to procure legislative change gave rise to an enforceable obligation, the assessment of whether there had been a breach of that undertaking would inevitably require examination of what did or did not occur in Parliament, a questioning of the acts and motives of the members of Parliament, including ministers, and any attribution of liability on the Executive Government, liability to damages for instance, would be by reference to steps which were or were not taken in Parliament. This, we would submit, would inevitably result in the contravention of Article 9 of the Bill of Rights, and the principles of parliamentary privilege, whether they ‑ ‑ ‑
KIEFEL J: However you say it would not contravene that, as I understand your paragraph 19 in your written submissions you say that it would not be a contravention:
for a Minister to introduce a Bill and for members of the government in the Parliament to –
be seen to support that Bill and speak accordingly.
MR MEADOWS: It is in the context of where it was before a court, where it was being alleged there had been a breach of that undertaking. Inevitably, that would involve an examination of what had taken place in the Parliament, and that, we would say, infringes Article 9, and indeed the common law.
FRENCH CJ: That might be a convenient moment, I think, Mr Solicitor.
MR MEADOWS: If it please the Court.
FRENCH CJ: We will adjourn until 10 o’clock tomorrow morning.
AT 4.19 PM THE MATTER WAS ADJOURNED
UNTIL FRIDAY, 27 AUGUST 2010
Key Legal Topics
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Administrative Law
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Constitutional Law
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Statutory Interpretation
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Judicial Review
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Jurisdiction
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Standing
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Statutory Construction
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Proportionality
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