Rainsong Holdings Pty Ltd v Australian Capital Territory

[1993] HCA 68

HIGH COURT OF AUSTRALIA

MASON CJ, BRENNAN, DEANE, DAWSON, TOOHEY, GAUDRON AND McHUGH JJ

RAINSONG HOLDINGS PROPRIETARY LIMITED v AUSTRALIAN CAPITAL TERRITORY AND ANOTHER (1993) 178 CLR 634, (1993) 93 ATC 5087, (1993) 118 ALR 47, (1993) 27 ATR 42,

(1993) 68 ALJR 87

7 December 1993

Constitutional Law (Cth)

Constitutional Law (Cth)—Duties of excise—Exclusive power of Commonwealth Parliament—Territory law imposing licence fee on sellers of certain videos—Fee for first two months fair and reasonable amount to be assessed by Commissioner—Commissioner to take into account value of stock in first two months of licence and income likely to be received in those months—Fee for third month based on Commissioner's estimation of likely trading in videos for typical month—Fee for subsequent months calculated upon value of videos sold in month two months preceding commencement of renewal period Validity—The Constitution (63 and 64 Vict. c. 12), s. 90—Business Franchise ("X" Videos) Act 1990 (ACT)—Business Franchise ("X" Videos) (Amendment) Act 1993 (ACT).

Orders

Answer the questions reserved for the consideration of the Court as follows: (1) Are any, and if so which, of the provisions of the Business Franchise ("X" Videos) Act 1990 (A.C.T.) invalid as imposing, in any respect, either a duty of excise or a duty of customs or both within the meaning of s.90 of the Commonwealth Constitution? Answer: Sections 5(2)(b), 9(2)(c), 19, 20 and 20A of the Business Franchise ("X" Videos) Act 1990 (A.C.T) are invalid as imposing duties of excise.

(2) Are any, and if so which, of the provisions of that Act invalid under the Australian Capital Territory (Self-Government) Act 1988 (Cth) as being a law with respect to a "classification of materials for the purpose of censorship"? Answer: Does not arise.

(3) If the answer to any part of question (1) or (2) is "yes", are any, and if so which, further provisions of the Act incapable of being severed from those provisions and therefore invalid? Answer: No answer to question (3). The parties be at liberty to address argument on question (3).

The defendants to pay the plaintiff's costs of the questions reserved.

Decisions

MASON CJ, BRENNAN, DEANE AND McHUGH JJ This case concerns the validity of the Business Franchise ("X" Videos) Act 1990 (A.C.T.) ("the Act") as amended by the Business Franchise ("X" Videos)
(Amendment) Act 1993 (A.C.T.). Brennan J reserved for the consideration of the Full Court pursuant to s.18 of the Judiciary Act 1903 (Cth) questions substantially the same as those reserved in Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No.2) ((1) Unreported, 7 December 1993.). Those questions are as follows:

(1) Are any, and if so which, of the provisions of the Business Franchise ("X" Videos) Act 1990 (A.C.T.) as amended by Act No.15 of 1993 invalid as imposing, in any
respect, either a duty of excise or a duty of customs
or both within the meaning of s.90 of the Commonwealth
Constitution?
(2) Are any, and if so which, of the provisions of that
Act invalid under the Australian Capital Territory (Self-Government) Act 1988 (Cth) as being a law with
respect to a "classification of materials for the
purposes of censorship"?
(3) If the answer to any part of questions (1) or (2) is
"yes", are any, and if so which, further provisions of that Act incapable of being severed from those
provisions and therefore invalid? The parties agreed, and Brennan J ordered, that the submissions of the parties and interveners in Capital Duplicators made to the Court in that case be accepted mutatis mutandis as submissions made to the Court in this matter. The Court has also considered further written submissions filed by the parties.

The 1993 Amendments 1. The relevant provisions of the Act prior to its amendment are set out and discussed in the judgments in Capital Duplicators. It is unnecessary to repeat them here. The effect of the amendments to the Act is as follows.

2. The primary amendment to the Act involves the replacement of the "advance fee" with (i) an "initial fee", in relation to the grant of a licence; and (ii) an estimated franchise fee, in relation to the second renewal of a licence.

3. The initial fee is, on its face, assessed more subjectively than the advance fee; it comprises "such an amount as is assessed by the Commissioner as being fair and reasonable in the circumstances" ((2)
s.19(1), as amended.). In making a decision as to a fair and reasonable fee, the circumstances the Commissioner is required to consider include ((3) s.19(2), as amended.):
"(a) the wholesale value of the total stock of "X" videos -

(i) held by the applicant for the purpose of trading on the date of the application; and (ii) estimated as likely to be acquired by the
applicant in the month in which the licence is to be granted and the following month for the purpose of trading; (b) the estimated value of that portion of the stock

referred to in subparagraphs (a)(i) and (ii) in relation to which a franchise fee would become payable if the licence were to be renewed for the second and third month after the month in which it is granted; (c) the gross income from trading "X" videos estimated as

likely to be received by the applicant in the month in which the licence is to be granted and the following month; (d) initial fees assessed in relation to other

applications".

The initial fee is in effect the fee for the first and second months of a licence, as it is calculated by reference to the value of and gross income from trading in the videos in the first two months of the licence and, under s.9(2)(c), an application for renewal of a licence for the month following the month in which the licence was granted need not be accompanied by the franchise fee or estimated franchise fee. The initial fee, unlike the previous "advance fee", need not accompany the application for the grant of a licence but must be paid before the licence is granted ((4) s.5(1), (2), as amended.).

4. An application for renewal of a licence for the second month following the month in which the licence was granted must be accompanied by an estimation of the franchise fee. The estimated franchise fee is to be calculated under s.20A, a new section which sets out an independent formula to calculate the franchise fee for renewal in relation to the second month following the initial grant. The estimated franchise fee is calculated on the same basis as the franchise fee for subsequent renewals, but is based on the Commissioner's estimation of the likely trading in "X" videos under the licence for a typical month instead of being based upon actual trading in the two months prior to the month for which the licence is renewed.

5. The 1993 amendments amend the definition of "wholesale value", thereby minimizing the impact of the initial and franchise fees on the tariff differential between local and imported goods. The amendment makes it clear that the licence fees are imposed on the price of the videos after any Commonwealth duties are imposed.

6. The 1993 amendments also clarify an ambiguity that existed in the Act as originally enacted in relation to the fee payable for the third and fourth months of a licence. However, the resolution of the ambiguity is not relevant to the question whether the Act as amended is invalid as a result of s.90 of the Constitution.

7. The 1993 amendments do not alter the character of the fees payable under the licensing scheme established by the Act. The "initial fee", although assessed by the Commissioner as a fee that is "fair and reasonable in the circumstances" ((5) s.19(1).), is, by virtue of s.19(2), assessed on the basis of the wholesale value of the "X" videos held and likely to be held during the first two months of the licence. The gross income likely to be received from trading in the videos in the first two months of the licence is also to be taken into account under s.19(2). The calculation of the franchise fee payable upon every renewal subsequent to the first two renewals remains unchanged.

8. Thus, the Act, as amended, remains one directed to the raising of revenue, rather than to the creation of a regulatory scheme designed to protect the public. For the reasons given in Capital Duplicators, we would answer the questions reserved as follows: (1) Sections 5(2)(b), 9(2)(c), 9(2A), 19, 20 and 20A of the Business

Franchise ("X" Videos) Act 1990 (A.C.T.) as amended by Act No.15 of 1993 are invalid as imposing duties of excise.

(2) Does not arise.

9. The parties did not address full argument to the Court in relation to those provisions of the Act which might not be severable from those provisions found to impose an excise and which therefore may be invalid. It would be appropriate for the parties to address argument on this point to the Court before any decision is reached as to severance of other provisions of the Act. Accordingly, we shall not deal with that issue now.

10. The defendants should pay the plaintiff's costs of the questions reserved.

DAWSON J These proceedings were heard concurrently with those in Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No.2) ((6) Unreported, 7 December 1993.). The plaintiffs in that case challenged the validity of the Business Franchise ("X" Videos) Act 1990 (A.C.T.) ("the Act"), only before 1 April 1993, by which date the plaintiffs had been placed in liquidation, and had ceased to trade. The plaintiff in this case, Rainsong Holdings Pty. Ltd., challenges the Act as amended by the Business Franchise ("X" Videos) (Amendment) Act 1993 (A.C.T.) on 1 April 1993.

2. In this matter Brennan J referred questions to the Court in identical terms to those referred in Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No.2), except that they raise the validity of the Act as amended.

3. Under the Act as amended an initial application for a wholesale licence must be accompanied by an initial fee assessed by the Commissioner on a basis which the Commissioner considers fair and reasonable having regard to ((7) s.19.):
(a) the wholesale value of the applicant's total stock of
"X" videos held or likely to be held in the first and second
months, (b) the fee likely to be payable in respect of that total stock
in the third and fourth months, (c) the gross income likely to be received from trading in videos
in the first two months, and (c) the initial fees assessed for other applications.

4. It seems that none of this fee is repayable if the Commissioner's reasonable estimates turn out to be wrong. No licence fee is payable
in the second month ((8) s.9(2)(c).), presumably because the Commissioner takes this period into account in assessing the initial fee. The licence fee for the third month is the franchise fee which the licensee would pay in a "typical month", having regard to the level of the licensee's trade in the first two months ((9) ss.9(2A), 20A. The licensee estimates what the Commissioner will estimate, and any difference between the two estimates is refundable: s.20A(4).). The licence fee for the fourth and subsequent months, calculated in the same way as before the amendment, is 40% of the wholesale value of videos supplied in the month which occurred two months before the licence period. Retail licence fees are calculated in an analogous way to wholesale fees, and are only payable in respect of videos which have not been taken into account in the calculation of any other licence fee.

5. Assuming that the fees charged by the Act for a licence to wholesale or retail "X" videos are taxes upon goods, they are taxes upon sale or hire, and apply whether the goods sold or hired are locally manufactured or produced or imported. For the reasons I gave in Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No.2) ((10) Unreported, at pp.43-44.), therefore, they are not duties of excise.

6. The amendments raise no matters which affect the view which I expressed in Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No.2) that the Act is not a law for the classification of materials for the purposes of censorship.

7. It follows that the questions referred to the Court should be answered:
1. No.
2. No. 3. Unnecessary to answer.

TOOHEY AND GAUDRON JJ Brennan J referred for the consideration of the Full Court questions identical to those referred in Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No.2) ((11) Unreported, High Court of Australia, 7 December 1993.), save that they concern the Business Franchise ("X" Videos) Act 1990 (A.C.T.) ("the Act") as amended by the Business Franchise ("X" Videos) (Amendment) Act 1993 (A.C.T.). The proceedings were heard concurrently with Capital Duplicators (No.2).

2. The effect of the amendments was to substitute an "initial fee" for the original "advance fee" and to require payment of that fee before the grant of a licence, rather than the previous requirement that an estimate be paid at the time of application and the advance fee be paid in full at the expiration of the licence period. Also, unlike the advance fee, the initial fee relates to the first two months of the licence. Section 19 calculates the initial fee as one which the Commissioner assesses as fair and reasonable; the advance fee was calculated as 40% of the value of relevant "X" videos traded in the licence period. Section 19(2) identifies the circumstances the Commissioner is required to consider in making an assessment of what is fair and reasonable. Those circumstances relate mainly to the value of stock in the first and second months of the licence and income likely to be received in those first two months. There is a new formula, in s.20A, whereby the franchise fee for the second renewal of a licence is calculated.

3. There are other amendments which it is unnecessary to detail. Nothing in the 1993 amendments changes the character of the fees charged by the Act. They are taxes imposed for a licence to sell or hire particular commodities and they apply equally, whether the "X" videos are manufactured locally or whether they are imported. For the reasons we gave in Capital Duplicators Pty. Ltd. (No.2), they are not duties of excise. Likewise, the amendments do not affect the character of the Act as not a law for the classification of materials for the purposes of censorship.

4. We would answer the questions referred as follows:
1. No
2. No 3. Unnecessary to answer.