Racing Queensland Board v Commissioner of Taxation

[2020] HCATrans 94

[2020] HCATrans 094

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B5 of 2020

B e t w e e n -

RACING QUEENSLAND BOARD ABN 80 730 390 733

Applicant

and

COMMISSIONER OF TAXATION

Respondent

Application for special leave to appeal

BELL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

FROM SYDNEY BY VIDEO CONNECTION TO CANBERRA

ON FRIDAY, 3 JULY 2020, AT 12.30 PM

Copyright in the High Court of Australia

MS K.A. STERN, SC:   May it please the Court, I appear with MR P.G. BICKFORD, on behalf of the applicant, the Racing Queensland Board.  (instructed by Clayton Utz)

MR P.A. LOONEY, QC:   May it please the Court, I appear with MS C.M. PIERCE, for the Commissioner of Taxation.  (instructed by the Australian Government Solicitor)

BELL J:   Justice Gageler and I are of the view that the most efficient course is for us to deal with the matters sequentially, and that is the way we propose to proceed.  So if we turn, firstly, to Ms Stern in the Racing Queensland Board case. 

MS STERN:   Thank you, your Honour.  Your Honours, if I can first indicate that I propose only to address orally in relation to the matters in paragraphs 5 and 6 of our special leave application, at the special leave book page 89, namely, what I described as the onus issue and the intervention issue.

BELL J:   Yes.

MS STERN:   If I can deal first with the onus issue.  We say that the Full Court of the Federal Court erred in this matter in its approach to the onus of proof in tax appeals, and that is a matter of general significance, and that, in effect, the court held that the onus was on the applicant to disprove all possible bases upon which it could be said that the applicant was liable to pay racing fees to jockeys – that is, to negative all possibilities – whereas the correct approach is that tax appeals are adversarial proceedings and that in that context the issues, including the factual issues between the parties, are defined by the appeal statements with the necessary consequence that the taxpayer here had the onus of proof within the ambit of those defined issues.

If I could first take your Honours to the legislation that was at issue. Your Honours will find at page 101 of the application book sections 11 and 12 of the Superannuation Guarantee (Administration) Act 1992, and your Honours the form of the legislation there was in force in that form during the relevant period, 2009 to 2014. Your Honours will see section 11(1) which defines “salary or wages” inclusively to include in subparagraph (d):

payments to a person for work referred to in subsection 12(8) –

Then at section 12(1) your Honours will see that:

employee and employer have their ordinary meaning.  However, for the purposes of this Act –

there is an expansive definition of those terms and the relevant subsection is over the page, subsection 8(a):

a person who is paid to perform or present, or to participate in –

here relevantly sport:

is an employee of the person liable to make the payment –

and in that way the legal issue which arose was whether or not the applicant was liable to make payment of racing fees to jockeys in Queensland. 

BELL J:   Yes.

MS STERN:   If I could then take your Honours to what we say is the critical legislation in relation to taxation appeals. Your Honours will see that at page 105. Your Honours are no doubt familiar with the grounds of objection and burden of proof, namely that the appellant, section 14ZZO(b) of the Taxation Administration Act 1953:

has the burden of proving that:

 . . . the assessment is excessive or otherwise incorrect –

But critically we say in the context of adversarial litigation that onus of proof has to have regard also to the rules of court and the relevant practice note.  Hopefully your Honours have what we filed as a supplementary application book.  

BELL J:   Yes. 

MS STERN: At page 4 of that supplementary application book, your Honours will have the Federal Court Rules, and over the page at page 5 rule 33.03, and it was in this form that the relevant period of the litigation and – your Honours will see the AOD appeal, which is an appeal under the Taxation Administration Act section 14ZZ, there is an obligation on the Commissioner within 28 days to file a statement that – at paragraph (a)(iv):

a statement . . . that outlines the Commissioner’s contentions and the facts and issues in the appeal as the Commissioner perceives them –

Also at subparagraph (b) to serve that on the applicant.  So we say it is clear from the rules of court that within the context of this adversarial litigation the Commissioner is obliged to outline his contentions and the facts and issues in the appeal and there is elaboration upon that in the taxation practice note which is at page 6 of the supplementary application book. 

At page 7 there is a heading towards the bottom of the page “Appeal Statements”, and it is provided by reference to rule 33.03 of the Federal Court Rules that the:

appeal statement shall avoid undue formality and state in summary form the following:

(a)      the basic elements of the party’s case –

the relief, the issues they believe “are likely to arise” and:

(d)the principal matters of fact upon which the party intends to rely ‑

and over the page, the contentions.  Then at paragraph 3.4 there is a requirement that it has to be “filed and served upon the applicant”.

GAGELER J:   Now, the appeal statement here, Ms Stern, is at page 151, relevantly at page 154.

MS STERN:   Yes, your Honour.

GAGELER J:   You see issue 2 - is not the problem for your argument the wording of paragraph 24.3?

MS STERN:   Well, your Honour, we say that when one looks at paragraph 24.3, the pleading or the setting out of that issue in the appeal statement is directly referenced to paragraphs 11 to 15, and when one ‑ ‑ ‑ 

GAGELER J:   But is not the problem the words “inter alia”?  I mean, if the parties had proceeded on the basis that all that mattered was what was to be made of the application, then most of the evidence in this case would have been beside the point, would it not?

MS STERN:   Your Honour, we say that, notwithstanding the “inter alia”, the Commissioner has in the appeal statement clearly relied upon one aspect of the context as giving rise to the relevant contractual obligation, and the only matter that has been referenced is that which is set out on the previous page, in particular the fact of payment and then the jockeys’ licence application. 

So to the extent that facts have been set out as underlying the contention that is raised, as is required in an appeal statement, the only matter that has been relied upon is the jockeys’ licence application, whereas when one looks at what the Full Court relied upon, the Full Court expressly found that the jockeys’ licence application did not give rise to a contractual liability, but relied on matters outside of that and beyond that.

In that context, whilst there are the words “inter alia” in the appeal statement, the only matters of fact that have been set out as being relied upon and as giving rise to the contractual obligation are the matters set out on page 153 of the application book, namely the application, jockeys’ licence application, and the fact of the jockeys having been paid.

I wonder if I could just ‑ and your Honours are aware that we rely upon Commissioner of the Australian Federal Police v Hart and the particular ‑ the identification in that context of issues being defined by the pleadings.  In the light of your Honour’s question, perhaps if I could just go to the way in which the case was determined, first by the primary judge and then by the Full Court, in relation to the relevance of the application form.

If I could take your Honours in that context first to the decision of Justice Logan, the primary judge, at page 31 of the application book – and, your Honours, in particular at paragraph 74.  Your Honours will see there that it is made clear in Justice Logan’s judgment that the:

submission and acceptance of a Jockey Licence Application does not render a person an employee of the Board. 

Then if I could ask your Honours to go please to page 80 of the application book, at paragraph 113 of the Full Court’s judgment, and it is made crystal clear there that the obligation to pay the riding fee:

did not come from any obligation arising because –

of the application for and grant of the licences:

It arose dehors of the licensing of the jockeys.  To the extent to which that process was relevant, it was limited to –

certain statements.  Your Honours, we say that in making that finding, the Full Court effectively, within the ambit of the issues as raised, should be found as finding that the applicant had upheld or satisfied the relevant onus of proof, namely of establishing that the one factual matter relied upon in the appeal statement was not made good.

Your Honours, further, the onus of proof loomed large in the analysis of the Full Court.  The Court will see from page 47 of the application book - in particular the last five lines in paragraph 5 at page 47, reference to the Commissioner’s submission that the applicant:

did not discharge its onus of establishing that the assessment was excessive –

and the court upholding that submission.  Further, if your Honours could turn to page 59 of the application book, paragraph 48, the court identified very clearly there:

It may well be that the case will turn on –

the onus, and that is indeed what the court found.  It is set out there, lines 3 to 5:

Satisfaction of that onus requires the QPC to demonstrate that it was not liable to pay the riding fees.  That may be achieved by establishing that some other entity was liable to make them.

It is clear there that the Full Court’s analysis is effectively one of requiring the club to disprove all possibilities and, indeed, identifying one way of doing that would have been that some other entity was liable to make them.  We say that in reasoning in that way the court has gone beyond the ambit of the issues as presented in the appeal statement notwithstanding that the words “inter alia” were used and has effectively imposed an almost limitless burden on the applicant of disproving any possibilities as to the ways in which the contract would arise.

BELL J:   Does one read the statement in paragraph 48, to which you direct our attention, in light of the further statements at paragraph 88 where their Honours observed that the applicant:

attempted to discharge its onus by asserting the existence of a contractual arrangement whereby the owners were liable to pay the riding fees to the jockeys and not it. 

MS STERN:   I am so sorry, your Honour, I have just found it difficult to catch the paragraph number - it is entirely my fault.

BELL J:   No, no, I was asking how your submission is affected by paragraph 88 on page 71 of the application book where their Honours observed that:

the QPC attempted to discharge its onus by asserting the existence of a contractual arrangement whereby the owners were liable to pay the riding fees ‑ ‑ ‑

MS STERN:   Your Honour, we favour that was not what the club thought to do and that that was a mischaracterisation of the way in which the applicant approached both the proceedings before Justice Logan and the proceedings on appeal and that the club indeed approached those proceedings on the basis of seeking to establish that the contractual liability was not established by virtue of the application form which was what was relied upon in the appeal statement. 

It is quite right that the club put on evidence of the way in which the centralised prize money scheme operated but that evidence was put on with a view to disproving the central plank of the Commissioner’s case, as we understood it, namely that it was the application form which provided the basis for the contractual liability to arise. 

So, your Honour, we would say and, indeed, in the notice of appeal which the Court will have starting at page 37 - and this was of the Commissioner’s notice of appeal from the decision of the primary judge - the Commissioner, in fact, alleged as a ground of appeal that the centralised prize money system was something which – the question whether that imposed any liability did not arise on the evidence before the court and that that scheme should have been regarded as nothing more than an administrative expedient.  Your Honour, we say that the paragraph 88 does not impact upon our submission in relation to the ambit of the issues as defined by the appeal statement.

Your Honours, if I could move on to the second ground which is the question of the intervention issue and the approach to the evidence.  If I could ask your Honours to go first to the decision of the primary judge at page 10 of the special leave book and your Honours will see in paragraph 8, on page 10, the witnesses identified.  One was a Mr Stout and one was a Mr Turner. 

From the bottom of page 8, Mr Stout was required for cross‑examination and thus gave oral evidence.  At page 11, at paragraph 13, the primary judge identified he had no reason to doubt the accuracy of Mr Turner’s account.  But then, more significantly, at paragraph 14, at the bottom of the page, the primary judge set out his assessment of Mr Stout – identified the range of roles he had undertaken and his experience – and identified at the bottom of paragraph 14, at the top of page 12, that:

Mr Stout gave candid, honest oral evidence when under cross‑examination -

and then, in paragraph 15, found that each of those witnesses had a thorough understanding of the practices, both before and after the introduction of the GST. 

In paragraphs 16 and 17, significantly, his Honour identifies that the evidence of those witnesses provided useful background to the dilemma presented by the introduction of the GST and the response to that dilemma.  The relevant scheme was introduced in response to the introduction of the GST and that was not controversial.  Each had an understanding as to the position after that response in relation to the provision of services by an engagement of jockeys.  Then, his Honour set out in paragraph 17, that what followed next was drawn from the evidence of those two individuals.  

BELL J:   Ms Stern, can I just ask you this?  Accepting that his Honour made findings in relation to the credit of witnesses such as Mr Stout, I am just not sure how that bears on the analysis in the Full Court, picking it up at application book 70, and following where, from paragraph 85, the criticism that is made is that the focus was wrongly on the understanding of individuals who gave evidence before the primary judge about what would be happening on the introduction of the CPS and that that, in their Honours’ view, distorted the primary judge’s fact finding on the relevant issue.  So, we are not dealing with a Fox v Percy situation.

MS STERN:   Your Honour, we put it on the basis that the Full Court in fact erred because the primary judge accepted that the witnesses could and had given evidence of what happened after the introduction of the scheme and made findings in relation to the scheme after it was introduced.  In that regard, we say – if I could ask your Honours to turn to page 47 of the special leave book, paragraph 5 at line 18, the Full Court found, at lines 18 and 19, that the club:

did not adduce any direct evidence that the scheme intended to be introduced . . . was actually put into effect or, if it was, it remained in effect in the Relevant Periods -

whereas the findings of the primary judge in fact were that the witnesses’ evidence could be accepted as to the scheme actually being implemented and as to the essential characteristics of that scheme.  Your Honours, that is really in a nutshell what we say is the error because the primary judge did make those findings on the basis of Mr Stout’s evidence.

GAGELER J:    Ms Stern, I am sorry - it may not be apparent to you in Sydney that the red light is on here in Canberra.  I just wanted to point that out.

BELL J:   Thank you.

MS STERN:   Your Honour, I have already made the submissions that I intended to make in support of the two grounds.

BELL J:   Thank you, Ms Stern.  The Court will adjourn briefly to consider the further conduct of the application.

AT 12.55 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.59 AM:

BELL J:   We do not need to hear from you, Mr Looney.

We are not satisfied that it is reasonably arguable that the Full Court went beyond the issue identified in paragraph 24.3 of the respondent’s appeal statement in its determination of this matter, nor are we satisfied that the Full Court failed to properly exercise its appellate function.  The application is dismissed with costs. 

AT 12.59 AM THE MATTER WAS CONCLUDED