Roy Morgan Research Pty Ltd v Commissioner of Taxation & Anor

[2010] HCATrans 323

[2010] HCATrans 323

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M89 of 2010

B e t w e e n -

ROY MORGAN RESEARCH PTY LTD

Applicant

and

COMMISSIONER OF TAXATION

First Respondent

ATTORNEY-GENERAL OF THE COMMONWEALTH OF AUSTRALIA

Second Respondent

Application for special leave to appeal

FRENCH CJ
CRENNAN J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 10 DECEMBER 2010, AT 9.31 AM

Copyright in the High Court of Australia

MS J.J. BATROUNEY, SC:   If the Court pleases, I appear for the applicant with my junior, MR G.A. HILL.  (instructed by Hall & Wilcox)

MR S.P. DONAGHUE:   If it please the Court, I appear with my learned friend, MR D.F. O’LEARY, for the Commonwealth Attorney‑General, the second respondent.  (instructed by Australian Government Solicitor)

FRENCH CJ:   Yes, Ms Batrouney.

MS BATROUNEY:   If the Court pleases, special leave should be granted in this case for three reasons.  The first reason is that there is a real tension between the majority in Blank Tapes, who equated public purposes with being in the public interest, and the minority view in Blank Tapes, which was applied in Luton v Lessels, where it was held that although the scheme in question was undoubtedly in the public interest, it was not one for “public purposes”, as that phrase is understood in the context of determining whether or not an exaction is a tax.

CRENNAN J:   There is nothing antithetical between the two notions though, is there?  In other words, you could have a scheme which is in the public interest which would not disqualify it from also being for public purposes.

MS BATROUNEY:   Of course not, your Honour.  But the reverse is not necessarily the case.  I will come back to that, if your Honour pleases.  The second reason we say that special leave ought to be granted is that clarification is required as to the extent to which a revenue‑raising purpose must exist, before an exaction can be said to be for public purposes.  In Blank Tapes, the majority discounted this factor, but the minority in that case, and all the Justices in Luton v Lessels, regarded a revenue‑raising purpose as significant, if not decisive.

Thirdly, we ask whether the creation and subsequent extinguishment of a private debt, as in Luton, is the only countervailing consideration in the absence of which money paid into consolidated revenue will be regarded as taxation, or is the fact that the exaction is a mechanism for adjusting the private incidents of a private relationship with no revenue‑raising purpose another countervailing consideration?

Before I elaborate on those grounds, may I take your Honours very briefly to three sections of the Superannuation Guarantee (Administration) Act that I think it is important to take note of?  The Act is in the joint book of authorities at tab 1, and may I take you to section 19(1), which is at page 23 of the Act.  Section 19(1) is headed “Individual superannuation guarantee shortfalls” and your Honours will see in subsection (1) that:

An employer’s individual superannuation guarantee shortfall for an employee for a quarter is the amount worked out using the formula –

On the left:

Total salary or wages paid by the employer to the employee for the quarter –

Your Honours, would you take from that, please, that the levy is not a percentage of payroll.  It is an amount that is levied on an individual employee’s wages.  Secondly, could I take your Honours to section 63B, which is at page 73 of the Act.  Section 63B is headed “Overview of this Part”.  Subsection (1) states:

If a payment to which this Part applies is made, the Commissioner is required to pay (or otherwise deal with) an amount, which is called the shortfall component, for the benefit of a benefiting employee under sections 65 to 67.

From that, your Honours, please take that the superannuation guarantee levy is to be paid for the benefit of a benefiting employee, not to a group of employees.  Finally, your Honours, section 64B(2), which is the next page, page 74, you will see at section 64B(2) that:

The shortfall component for a payment, in respect of a particular employee, is the employee’s proportion of the lesser of the following amounts:

(a)the amount of the payment;

(b)the amount of the total employee entitlement –

So take from that, your Honours, that the only amount that is paid into consolidated revenue is an amount that is paid by the employer.  If the employer pays less than what the employee is entitled to, that is the amount that is paid into consolidated revenue ‑ ‑ ‑

CRENNAN J:   So it is not an antecedent obligation?

MS BATROUNEY:   Your Honour, it depends on what one terms an antecedent obligation.  In Luton v Lessels, Justice Callinan referred to the obligation of a parent to provide for the maintenance of its child ‑ ‑ ‑

FRENCH CJ:   But it was a statutory obligation.  In effect, it was enforced, because it was enforcing an order, was it not?

MS BATROUNEY:   It was, but Justice Callinan referred to the obligation of a parent.  Here, we say that the vast majority of employers are in fact required to pay award superannuation, and in that sense, there is an antecedent obligation.  But if your Honours please, could I go back to the ‑ ‑ ‑

FRENCH CJ:   Sorry, can I just understand this.  Is it your contention that the obligation created by the Act to pay the shortfall component gives effect to, or is in the enforcement of, an antecedent private obligation?

MS BATROUNEY:   Yes.  In the vast majority of cases, as I say, the employers are obliged to provide award superannuation, and indeed, if I could jump forward, the purpose of the Superannuation Guarantee Acts was in fact to enforce that antecedent obligation.  Could I hand up to your Honours a copy of the Senate report that set out what was the purpose of the superannuation guarantee levy, and that is the first report of the Senate Select Standing Committee on Superannuation which is headed “Safeguarding Super” in June 1992.  Could I quickly take your Honours over to ‑ ‑ ‑

FRENCH CJ:   Sorry, can I just ask you, is the existence of that antecedent obligation, perhaps derived from an award or agreement, is that necessary to the operation of the scheme?

MS BATROUNEY:   No, it is not, but ‑ ‑ ‑

FRENCH CJ:   It is an antecedent outside the State duty in a sense.

MS BATROUNEY:   It is, but the amounts that are paid or payable by the employer are calculated by reference to the amounts the employer has already paid under its private contract with the employee.

FRENCH CJ:   Yes.

MS BATROUNEY:   For example, if the employer has paid three per cent, and the levy is nine per cent, it only has to pay an extra six.

FRENCH CJ:   Pay the shortfall.

MS BATROUNEY:   Yes.  Page 13 of the Senate Select Committee report is under the heading of “Compulsory Employment Based Superannuation”.  You will see that at paragraph 2.29, it is said that:

In the August 1991 Budget, the Treasurer foreshadowed the Government’s intention of introducing a Superannuation Guarantee Levy (SGL) commencing on 1 July 1992.  In December 1991, the Treasurer issued a paper on the levy which stated that it would facilitate:

And the second dot point there is –

an efficient method of encouraging employers to comply with their obligation to provide superannuation to employees -

At paragraph ‑ ‑ ‑

CRENNAN J:   I think, in fact, the Full Court took up this point at 107 of the application book in paragraph 74 where the Full Court speaks of the scheme operating as an incentive and an encouragement.

MS BATROUNEY:   As distinct from an obligation, and when one finds the actual legislation it does not refer to an antecedent obligation.  Perhaps the drafters of the legislation were minded in relation to this very problem.  But in referring your Honour to that retirements income policy, that is the very error that the Full Court made in confusing the public interest with public purposes, and could I come to that very important distinction between public purpose and public interest.  To do this, your Honours, may I read from one short passage, and this is the only passage I am going to refer the Court to and this is a passage from Chief Justice Gleeson in Luton, which is at tab 3 of the authorities ‑ ‑ ‑

CRENNAN J:   This is paragraph 12, is it?

MS BATROUNEY:   Yes, it is, your Honour, 210 CLR, and at page 343 at point 1, could I just take your Honours through this, how his Honour elucidates the difference:

What constitutes a sufficient public purpose may be a matter of contention, as in Australian Tape Manufacturers Association Ltd v The Commonwealth.  Quick and Garran, writing in 1901, said:

“Taxation may now be defined as any exaction of money or revenue, by the authority of a State, from its subjects or citizens and others within its jurisdiction, for the purpose of defraying the cost of government, promoting the common welfare, and defending it against aggression from without.”

That, perhaps, illustrates the risks of definition.  Depending upon what is meant by “promoting the common welfare”, it may be difficult to reconcile with the decision in the Australian Tape Manufacturers Association Case.  Directly or indirectly, all legislation is aimed at promoting the common welfare.  The legislative powers of the Parliament are to be exercised for the peace, order and good government of the Commonwealth.  A law which imposes on one person an obligation to pay money to another, or to the government, will, by hypothesis, be enacted in pursuance of some policy or purpose which is regarded by the Parliament as in the public interest.  The concept of “public purposes” in the present context is narrower than that.

As was pointed out in Airservices Australia v Canadian Airlines International Ltd, while an objective of raising revenue for the government is not a universal determinant, the presence or absence of such an objective will often be significant in deciding whether an exaction, or the imposition of a liability, bears the character of taxation.  That is the most usual form of public purpose involved; an idea reflected in what was said by Quick and Garran.

Your Honours, this quotation emphasises the very important distinction between public interest and public purposes, and indicates that revenue raising is the most usual form of public purpose, and it goes without saying that it is not a purpose, it is impossible for any revenue to be raised by the superannuation guarantee levy.

CRENNAN J:   Do you point to something in the Full Court’s decision where you say this error can be seen?  Perhaps some paragraph?

MS BATROUNEY:   Yes, your Honour.  In fact, I think your Honour just took me to it yourself.

CRENNAN J:   This is paragraph 74, is it?

MS BATROUNEY:   Yes, your Honour, at page 107 of the application book, right about point 4 on the page, the Full Court says:

In our respectful opinion, an exaction, the purpose of which is to encourage all Australian employers to contribute to the financial needs of all Australian employees in old age or infirmity is an exaction for public purposes.

With the greatest respect, one, that confuses public interest with public purpose and two, if that is a public purpose, then surely the purpose in Luton v Lessels of a parent caring for its child is also a public purpose.  But the High Court was very clear.  Each Judge in Luton v Lessels pointed out that although a scheme for ensuring that parents care for their children is clearly in the public interest it is not for public purposes, as that term is understood, in the characterisation of a taxation.

BELL J:   The Court came back to this aspect of it at paragraph 97, and again, the emphasis is on what is described as the incentive to make contributions being the deductibility, the converse of that being that in the event that the charge is levied, there is no deduction.  That is the scheme of the Act, is it not, when you have regard, if it is appropriate, to the income tax legislation?

MS BATROUNEY:   Yes, your Honour.

BELL J:   I suppose in that respect, there may be an issue about your submission that it is not revenue raising in any respect, depending on whether one has regard to that circumstance.

MS BATROUNEY:   I have not considered, your Honour, whether denying a deduction is raising revenue.  I suppose in one sense, mathematically, it must be.  But, as I say, that is certainly not the purpose of the legislation, and in our submission, it is not even a secondary purpose of the legislation.  The only amount that can ever be paid out of consolidated revenue is an amount that is paid into consolidated revenue by the employer.

Your Honours, if I could move on, if I could go further to the significance of revenue raising as establishing a sufficient public purpose.  As I say, it was an important feature of each Judge’s reasons in Luton v Lessels that the exaction in that case did not have a revenue‑raising function.  This was a significant indication that there was no public purpose in the sense described by Chief Justice Gleeson.  Justice McHugh, in dissent in Blank Tapes, stated that:

the chief feature of a tax is that it is raised to finance government expenditure.  It is raised “for the benefit of the Consolidated Revenue”.

Likewise, Justices Dawson and Toohey in dissent in Blank Tapes said of the statement in Air Caledonie that an exaction for purposes which could not properly be regarded as public could be a tax.  It is said that that statement was too wide, because it was to regard as dispensable a feature of a tax which is in truth indispensable, namely that the moneys raised be government revenue.

CRENNAN J:   What about the point raised against you in this context to be found at application book 169, paragraph 30 of the Attorney‑General for the Commonwealth’s submissions, where there is reliance on a passage from Northern Suburbs, and there is the highlighted observation, that:

the fact that the revenue-raising burden is merely secondary to the attainment of some other object . . . is not a reason for treating the charge otherwise than as a tax.

MS BATROUNEY:   That is, as I said, your Honour.  It is not even a secondary object in this legislation.  There can be – aside from what Justice Bell has raised – there can be no revenue raised.  There simply cannot be.  The only amounts that are paid into consolidated revenue are paid in in relation to a specified named employee ‑ ‑ ‑

CRENNAN J:   Are you saying that because the shortfall component paid for the employees corresponds exactly to the SGC?

MS BATROUNEY:   Near as, exactly, yes.  There is not even a close correlation.  There is almost an identical correlation between what is paid in, and what is paid out.  Secondly, in relation to Northern Suburbs, your Honour, I would say that that has been overtaken by what this Court has said in Luton v Lessels.  Every single Judge in that case focused on revenue‑raising purposes, some of them saying it was decisive.  Indeed, Justice Kirby, the ratio of his reasons was that it was decisive.

So it is in this sense, your Honours, that we say that clarification is required of the statement of the majority in Blank Tapes that the fact that a levy is directed to be paid into consolidated revenue has been regarded as, and I quote, “a conclusive indication” that the levy is extracted for public purposes.  I am not sure what a conclusive indication is.  But the authority is that ‑ ‑ ‑

FRENCH CJ:   But you cannot debate that it is an indication.

MS BATROUNEY:   The authorities that were referred to as authority for that proposition are, firstly, R v Barger, where it was said in that case by Justice Isaacs that:

the imposition of a tax on any person or thing for the benefit of Consolidated Revenue is taxation -

Here, we say it is clear, particularly from the sections that I have taken you to that the money is not for the benefit of consolidated revenue.  In fact, the legislation specifically states that it is not for the benefit.  It is for the benefit of the benefiting employee.  It is for the benefit of the named employee.  The second authority that is referred to, for the conclusive indication point, is the statement by Chief Justice Latham in Moore that:

The moneys can then be spent for any purpose for which the Commonwealth may lawfully appropriate money.

Here, clearly again, the money that goes into consolidated revenue in relation to a specified named employee cannot be spent for any purpose of the Commonwealth.  It must be spent for that named employee.

FRENCH CJ:   I suppose it is the “it” that is sort of being referred, it is all merged into the one fund, and then there is an entitlement to pay out the equivalent amount.

MS BATROUNEY:   Yes.  The argument that the Solicitor ‑ ‑ ‑

FRENCH CJ:   Or an obligation to pay out an equivalent amount, I should say.

MS BATROUNEY:   Yes.  The argument that it is all fungible is an argument, in effect, that once it is paid into consolidated revenue, that is the end of the matter, and that is clearly not the case.  We say that the funds here are not for public purposes.  They are for private purposes.  The superannuation guarantee confers a private and direct benefit on the named employees.  We say we cannot really say what are and what are not public purposes.  Any number of things might be public purposes, but we can say the private purposes are not public purposes, and as the Commonwealth itself argued in Luton:

This case is much closer to the mere imposition of liability on one citizen to pay another, as opposed to the taxation of one citizen for the benefit of society.

In that case, as in this case, the amount paid was precisely the same amount received, and there was an existing relationship between the payer and the ultimate recipient.  This is the first case when this Court has had to consider how close a relationship can be before it is considered to be a private benefit, not a public benefit.  All the other cases this Court – apart from Luton, in which of course it was held it was not a tax, all the other cases are what is called “group relief schemes”. 

So quickly, Tape Manufacturers was a payment from a royalty to a group of owners of copyright.  Northern Suburbs was a training guarantee levy that was a percentage of payroll paid over to training guarantee funds.  Homebush Flour was the sale and repurchase of flour in order to fund relief for necessity of farmers.  Lower Mainland Dairy was an adjustment levy to transfer a portion of returns from the fluid milk market to the manufactured milk market.  Similarly, Parton v Milk Board was a levy on dairymen – there were no women then, apparently – per gallon of milk sold and used for marketing and compensation purposes.  So here we say this exaction in this case is not a group relief scheme.  It is an exaction which is in a

mechanism for adjusting the private financial incidents of a private pre‑existing relationship. 

We also say, your Honour, that unlike the decision of the Full Court, the fact of there being a pre‑existing private debt is not the only countervailing consideration that means that a payment into consolidated revenue is not taxation.  We say that it is clear that the superannuation guarantee scheme lacks the generality of expenditure that was there in all the group relief schemes.  As Callinan said in Luton ‑ ‑ ‑

CRENNAN J:   Justice Callinan.

MS BATROUNEY:   I am sorry, your Honour:

If a purpose of compensating copyright holders is a public purpose, it is not immediately apparent why a purpose of ensuring that child carers receive maintenance for children, should not also be –

a public purpose.  Your Honours might well say “and is not providing a retirement incomes policy also a public purpose?”  But the answer in Blank Tapes was that there was no necessary correspondence between the recipient and the payer.

FRENCH CJ:   Yes, thanks, Ms Batrouney.  Your time is up.

MS BATROUNEY:   I am sorry, your Honour.

FRENCH CJ:   That is all right.  Mr Donaghue.

MR DONAGHUE:   Your Honours, the Commonwealth’s Attorney‑General submits that special leave should be refused in this case for two reasons.  First, the Full Federal Court was undoubtedly correct in holding that the superannuation guarantee charge is imposed for public purposes and, second, the Full Court was likewise correct in analysing Luton v Lessels as consistent with the prior authorities of this Court, and for that reason, there is no inconsistency that requires the grant of leave to be resolved.  If I can develop both of those points.

The applicant’s argument, as your Honours understand, turns on the meaning of the “public purposes” requirement in the classic formulation from Chicory Marketing Board.  Your Honours can see that formulation at the bottom of page 106 of the application book:

“a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.”

It is apparent just on the face of the formulation, your Honours, that the “public purposes” requirement is linked to the exaction, that is, the money must be exacted for public purposes.  It is not tied to the ultimate expenditure of the money and that is a point that assumes particular importance where, as here, the funds go into consolidated revenue because once they go into consolidated revenue, contrary to my friend’s submission, those funds are available to be expended for any purpose for which the Commonwealth can lawfully expend funds.

The fact that there is a notional earmarking in the legislation so that you have an amount going out that corresponds roughly, though not as closely as my friend suggests, to the amount going in, is really neither here nor there from the perspective of the tax having raised revenue that is available to be expended for Commonwealth purposes.

FRENCH CJ:   Except it does not depend upon the existence of an antecedent obligation?

MR DONAGHUE:   That is right, it does not.  Whether or not ‑ ‑ ‑

CRENNAN J:   It is really the correspondence that Ms Batrouney is relying on.

MR DONAGHUE:   It is, but even if that correlation was as close as is suggested – and for present purposes, we accept that there is a reasonably close correlation – the link is broken by the consolidated revenue fund.

FRENCH CJ:   Why is that?

MR DONAGHUE:   Because, your Honour, once the charge has been paid and has gone into the consolidated revenue fund, even if Part 8 were invalid, entirely invalid, those funds would be there, available to be expended for any public purpose.  The notion that there is a necessary earmarking of the moneys raised by the charge to be paid out denies the whole purpose of the consolidated revenue fund, which was explored particularly by Justice Brennan in Northern Suburbs, who explained that that fund was created in order to avoid the confusion that arises from trying to link particular expenditures to particular charges.

BELL J:   One of the reasons that is put against you as to why special leave should be granted is you have very strong support in Tape Manufacturers for the contention that the “public purpose” argument ends with the money going into the consolidated revenue fund.  One does find expressions in Luton v Lessels to rather modify that.

MR DONAGHUE:   Your Honour, in our submission, there is a critical distinction that is overlooked ‑ ‑ ‑

BELL J:   The anterior liability.

MR DONAGHUE:   That is one, your Honour, but the distinction to which I referred is the distinction between something being conclusively established to be a tax, and something establishing one element of the definition, the “public purposes” element, and in my submission, the authorities make clear, and Luton v Lessels does not deny, that you can have all of the elements, including the “public purposes” element, and still not be a tax, and we submit that that is what Luton v Lessels is.

So Luton v Lessels does not deny that there was a public purpose.  It says even though you have a public purpose, you do not have a tax, and that is the same as a fee for service, a fee for privilege, a penalty – there are all sorts of things that can raise money that is paid into consolidated revenue that are not taxes.  We submit that the critical passages in Luton v Lessels do not actually support the proposition that the applicant seeks to raise here.

Your Honours, we submit that the Full Court was correct in concluding that there were public purposes for two reasons.  The first is that the Full Court was correct, we submit, in its finding at paragraph 74 that Justice Crennan has already mentioned, on page 107 of the application book, that the charge provides an incentive for:

all Australian employers to contribute to the financial needs of all Australian employees in old age or infirmity -

The incentive comes principally from two places.  The first is that the amount paid, pursuant to the charge, includes not just the amount that could have been contributed voluntarily, the nine per cent, but also a notional interest component of 10 per cent, and an administration fee, which is admittedly relatively nominal, $20 per person, but the 10 per cent nominal interest rate is, we submit, a significant factor.  Your Honours can see those components through section 17 of the (Administration) Act, but I will not take the Court to them. 

The other, we submit, critical incentive, is the point your Honour Justice Bell raised about deductibility.  We have cited in our submission the provisions of the Income Tax Administration Act 1997 that have the consequence that if you make a contribution of superannuation voluntarily, it is tax deductible.  If you pay the charge, it is not. 

So the consequence of those incentives is that in the very large majority of cases, the charge has a consequence entirely independent of whether or not there is a flow through of funds paid pursuant to the charge to consolidated revenue, and then out again.  The mere existence of the charge creates a strong incentive for employers to act in a particular way, and that is something that a tax law can properly do, and this Court so held in Northern Suburbs, and your Honours would not know that the legislative regime in Northern Suburbs, the training regime, was plainly the model for the superannuation guarantee legislation.  The Full Court accepted that it was the legislative model, and the regimes are very, very similar.

In the Northern Suburbs Case, the Court accepted that the intended consequence of the regime was that no money at all would be raised by the training charge because employers would contribute, themselves, directly the amount required for quality, employment‑related training, and the revenue raising objective was secondary, so that it was only those employers who did not make the contributions that they should otherwise make that would have resulted in funds being paid. 

There, as here, they were paid into consolidated revenue and there, as here, that is a revenue‑raising objective, although admittedly of a secondary kind.  But we dispute the proposition that there is no revenue raising objective here, and their Honours pointed out that to deny the character of a tax to a charge simply because it was intended to modify behaviour is quite inconsistent with long history, including history relating to protective tariffs which are intended to modify behaviour, rather than to raise revenue.  They have the consequence of raising revenue, but only to the extent that they fail to encourage a modification in behaviour.

Your Honours, we understand that our friends say that the Full Court was wrong in stating that encouraging employers to contribute to the financial needs is a public purpose, but we do not understand why.  The only submission that is made is that is a conflation of public purposes with public interest, but as Justice Crennan pointed out, those concepts are not inconsistent.  The Full Court found, and never made any finding in these reasons that this charge was imposed in the public interest.  It found, in paragraph 74, that it was imposed for public purposes, and we submit it was correct to do so.  Quite independently of that reasoning, your Honours, the Full Court also correctly ‑ ‑ ‑

BELL J:   Can I just take this up with you?  As I understand Ms Batrouney’s point, it is that one sees this direct correlation with money being raised, albeit going into the consolidated revenue fund, but the exact, or very close to the exact amount going out to nominated employees.  Useful as that may be, in a general public interest sense, because it is providing for them in their old age or in infirmity, it is distinct from the notion of governmental expenditure on enterprises of various kinds.  What is being collected is specified sums of money that are going to specified employees by reason of the fact that the employment relationship – that is the distinction between public purpose and public interest, and I am not quite sure how you meet that.

MR DONAGHUE:   Your Honour, we submit that the proposition that a tax can transfer wealth from one group to another is well established.  It is established by Tape Manufacturers and Northern Suburbs amongst others.  The suggested point of distinction that here, there is an individual, we submit, is really ultimately a false distinction because in any transfer scheme, ultimately one gets to the point of assisting an individual farmer, or an individual milk producer.  The money is transferred in relation to a group, but ultimately applies to the benefit of particular individuals in the group.

The same was true in Tape Manufacturers with the copyright compensation scheme.  The charge was paid by vendors of blank tapes, but ultimately flows through to specific individual copyright owners.  That is a point, your Honours, that Justice Kirby picks up in Luton v Lessels in rejecting an argument that is much the same as the argument advanced here.  Your Honours will see that at page 370 of the judgment, paragraphs 113 and 114, particularly in paragraph 114.  His Honour describes the argument as “unconvincing”:

Whilst the exaction of moneys in the legislation considered in Tape Manufacturers did, in one sense, address “groups” in the community, so does the present legislation.  Legislation, of its nature, is normally concerned with the general and not, as such, with individuals.

His Honours then goes on to discuss blank tapes:

The only difference was that, in the present, the conduit led into and out of the constitutional Consolidated Revenue –

His Honour accepted that that was a factor in our favour, if you like, that it tended to suggest even more strongly that the charge should be characterised as a tax.  Your Honours will ‑ ‑ ‑

BELL J:   The distinction here, between what Ms Batrouney characterises as the group cases and this, is the contention that Joe Smith working for Roy Morgan can bring proceedings against the Commonwealth to recover the sum.

MR DONAGHUE:   To recover a sum of money, yes.  That is true.  But we submit that that does not change the analysis of the exaction side of the equation, which is in fact an exaction that first groups the individual employees before imposing the charge.  So the charge is imposed upon the superannuation guarantee shortfall, defined in section 17 as the sum of all of the individual guarantee shortfalls.  So you do in fact, in this legislative regime, have a grouping, a charge imposed, and then ultimately a re‑fragmentation of a sum of money to be distributed to individuals.

But we submit, your Honours, that the close correlation does not assist my friend, and while your Honours still have Luton v Lessels there, if I could invite your Honours to turn to paragraph 60 in the joint judgment of their Honours Justices Gaudron and Hayne – and this is a judgment on which my friends rely – their Honours point out that:

There is, therefore, under the Registration and Collection Act, more than the mere earmarking of a compulsory exaction for a particular application.  Imposing a financial burden on one group in society for the benefit of another group in society will often constitute a tax.  Pointing to some identifiable relationship between the group of payers and the group of recipients or even to some relationship between a particular payer and a particular recipient will not usually require some different conclusion.

Their Honours then go on to explain their different conclusion in terms that, particularly in the last six lines of that paragraph, squarely, upon the substitution for an antecedent liability of a new amount by way of taxation.  So their Honours did not have any difficulty with the proposition established by the majority judgment in Tape Manufacturers that you could pay from one group to another and still be a tax and, indeed, in Tape Manufacturers itself, we submit that all members of the Court, if confronted with this regime, would have characterised the regime as a tax, and they would have done so because all members of the Court accepted that if money is paid into consolidated revenue that establishes that the levy is imposed for a public purpose. 

The difficulty that the minority saw in Tape Manufacturers is that they were concerned that there was a bypassing because the money there did not go into consolidated – I withdraw that.  There is some difficulty in the analysis of the case, but the funds in Tape Manufacturers were directed to be paid to a private company limited by guarantee, which was the collecting society, and so did not have the character of money so clearly being raised for possible government expenditure via payment into and out of the consolidated revenue fund.

Your Honours, just to finally make good the point that we have raised about consolidated revenue, if I could direct your Honours’ attention to the First Uniform Tax Case in 1942.  It is included in a supplementary bundle of cases that should have been provided to the Court, and I invite your Honours to look at page 414 of that judgment, at about point 7 on the page.  Chief Justice Latham there explains in, we submit, conventional terms, the effect of payment into the consolidated revenue fund, saying that:

All taxation moneys must pass into the Consolidated Revenue Fund . . . where their identity is lost, and whence they can be taken only by an appropriation Act.  An appropriation Act could provide that a sum measured by the receipts under a particular tax Act should be applied to a particular purpose –

That, we submit, is exactly what Part 8 of the (Administration) Act does.  But this would ‑ ‑ ‑

FRENCH CJ:   That affects the appropriation?

MR DONAGHUE:   Yes.  The amount to be appropriated is linked to the amount raised under a particular charge, but the point that his Honour is there making is that that means only that the sum fixed is to be taken out of the general consolidated revenue.  There is no earmarking in the ordinary sense.  So that passage really, your Honours, is why I say that the interposition of the consolidated revenue fund in this case is fatal to the proposition that correspondence between amounts paid in and amounts paid out means that this charge is not a tax. 

I think, your Honours, the only point that I need finally to address is the basis of the decision in Luton v Lessels, and again, contrary to the submissions put by my friend, who submitted that all of the members of the Court found that there was no public purpose, and for that reason that the charge in issue in that case was not a tax, we submit that it is not clear that any member of the Court so held.  Justice Kirby expressly held that there was a public purpose. 

Chief Justice Gleeson, with whom Justice McHugh relevantly agreed, explained his conclusions relevantly in paragraphs 14 and 15 on page 344 of the judgment, and those conclusions rest squarely, we submit, on the fact that there was an antecedent obligation that was being cancelled and replaced by the tax, particularly at the end of paragraph 14, and the whole of paragraph 15, your Honours will see that reasoning ‑ ‑ ‑

FRENCH CJ:   Sorry, the head of power which authorises the appropriation?

MR DONAGHUE:   In this case, your Honour, or in ‑ ‑ ‑

FRENCH CJ:   In this case.

MR DONAGHUE:   Your Honour, that was a matter of debate in the Full Federal Court.  A number of heads of power were relied upon by the Commonwealth.  The Full Federal Court accepted our submission that the pensions power did authorise the appropriation, and my friends have chosen ‑ ‑ ‑

FRENCH CJ:   That is your contention.

MR DONAGHUE:   Indeed, and there is no appeal against that reasoning.  We submit that at least the pension power applies.  So your Honours can see two members of the Court, Chief Justice Gleeson and Justice McHugh, relying expressly on the antecedent obligation there.  I have already taken your Honours to paragraph 60 where Justice Gaudron and Justice Hayne likewise rely expressly on the antecedent obligation, and what their Honours are there finding is not that there is no public purpose, but that notwithstanding that all of the positive elements identified in Matthews v Chicory exist, there is a countervailing consideration. 

The case is no different than the cases establishing that a fee for service is not a tax, or a fee for a privilege is not a tax.  It sits comfortably within a coherent body of authority in this Court, and we submit leave is not required to resolve any inconsistency.  If the Court pleases.

FRENCH CJ:   Thank you, Mr Donaghue.  Yes, Ms Batrouney.

MS BATROUNEY:   If your Honours please, if I could start at the end.  My learned friend said that the Court in Luton would say that the superannuation guarantee was a tax because it was paid into consolidated revenue.  That is simply not the case.  Chief Justice Gleeson and Justice McHugh said that the matter was not decisive at page 344, point 1.  Justices Gaudron and Hayne said that the matter was not conclusive at page 354, point 4, and at page 370 Justice McHugh said the matter was not determinative. 

In each case, the Justices relied on, and in some cases, held it determinative that there was no revenue‑raising purpose and because there was no revenue‑raising purpose, there was no public purpose.  As Chief Justice Gleeson said, revenue‑raising purpose is the most usual form of public purpose when one is determining whether or not an exaction is a tax.  So when each of the Judges in Luton referred to the lack of a revenue‑raising purpose, by doing that, they are referring to the lack of public purpose.

My learned friend says that public purpose attaches only to the exaction and not to the expenditure.  Your Honours, that is certainly not the way the group relief cases were decided.  In each of the group relief cases,

the courts determined the purpose of the exaction by the purpose to which the funds were expended.

My learned friend says that the link is broken by simply the payment into consolidated revenue and that is certainly not the way that Luton v Lessels was decided.  My learned friend said that the nominal interest component establishes a lack of close correlation.  Your Honours, the notional interest component must go to the specified employee, as is specified in section 64B(4)(c).

My learned friend said that the training guarantee model was similar to this model.  Your Honours, it is simply not.  The differences are vast.  The training guarantee levy is a percentage of payroll, as distinct from an amount calculated by reference, not only to the amount of wages paid to an individual employee, but also calculated by reference to what the employer has already privately paid to that employee, and at the other end of the scale, the training guarantee levy was to be expended on training guarantee funds that were set up by the State governments under training guarantee agreements, whereas here, as we have said, the superannuation guarantee is to be paid to specified named employees.

Finally, my learned friend says that this case is similar to the cases in relation to protective tariffs and that protective tariffs have been held to be taxation, even though they have no revenue‑raising purpose.  Your Honours, as I say, in Luton v Lessels, each Judge regarded the fact that there was no revenue raised by the child protection legislation as significant, if not decisive, in that matter.  If your Honours please.

FRENCH CJ:   Thank you, Ms Batrouney.  There will be a grant of special leave in this matter.  What is your estimate as to time - one day, one and a half?

MS BATROUNEY:   Your Honour, I would say a day and a half maximum.  As always, it would depend on how many other Attorneys intervene ‑ ‑ ‑

FRENCH CJ:   Interveners come in, yes.

MS BATROUNEY:   If your Honour please.

FRENCH CJ:   Do you agree with that, Mr Donaghue?

MR DONAGHUE:   I do, your Honour, yes.

FRENCH CJ:   Yes, all right, thank you.  The Court will adjourn briefly to reconstitute.

AT 10.15 AM THE MATTER WAS CONCLUDED