Tangentyere Council Incorporated v The Commissioner of Taxes of the Northern Territory of Australia

[1992] HCATrans 330

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Darwin No D7 of 1992

B e t w e e n -

TANGENTYERE COUNCIL

INCORPORATED

Applicant

and

COMMISSIONER OF TAXES OF THE

NORTHERN TERRITORY OF AUSTRALIA

Respondent

Application for special leave

to appeal

DEANE J
DAWSON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 12 NOVEMBER 1992, AT 11.21 AM

Copyright in the High Court of Australia

Tangentyere 1 12/11/92

MR R.A. CASTAN, QC: If the Court pleases, I appear with my

learned friend, MR H. REICHER, for the applicant.

(instructed by Pamela Ditton)

MR T.I. PAULING, QC, Solicitor-General for the Northern

Territory: If the Court pleases, I appear for the respondent, the Commissioner of Taxes. (instructed by the Solicitor for the Northern Territory)

DEANE J: Yes, Mr Castan.

MR CASTAN:  May it please the Court, may I hand to the Court

firstly copies of two letters that were omitted

from the materials and that perhaps are directly

relevant to a consideration of this application.

Could I also hand to the Court copies of the

legislation, the Payroll Tax Act of the Northern

Territory in a consolidated form, which will make it easier hopefully for Your Honours to consider

the matters that we seek to put on this application

for special leave.

Perhaps I should draw Your Honours' attention

before turning to the history of the litigation, to the letters because they are the source and the key

to the litigation. Your Honours will see that in

1979 a letter was sent to the Tangentyere Council,

then differently spelt, but it is the body

concerned, in which it was said:

The Council is regarded as a public benevolent

institution for the purposes of the Payroll

Tax Act and is exempt from lodgement of

returns and payment of tax subject to the

Constitution and activities of the Council

remaining unaltered.

Then in December 1985, a letter was sent, being the

second of the two letters, saying:

Exemption from stamp duty and payroll tax was

granted to your organisation on

24 September 1979 based on the objects and

activities of the council as they were

understood at the time. On a re-examination

of your constitution and role in the community

it is clear that an exemption no longer

applies.

The courts have narrowly defined a public

benevolent institution as a body organised for

the direct relief of poverty sickness and

distress.

Your council however was established to

administer the affairs of a number of fringe

Tangentyere 2 12/11/92

camps around Alice Springs and while the

services provided involve the welfare of the

camp dwellers its main objects and activities

are not directed at the relief of poverty

sickness and distress.

I regret -

and so on.

DAWSON J: Is the first letter exemption from furnishing

returns, or is that a matter of debate?

MR CASTAN: It says:

is regarded as a public benevolent

institution ..... and is exempt from lodgement

of returns and payment of tax.

That is how it is expressed.

DAWSON J: It looks like it, does it not?

MR CASTAN:  It certainly looks like it. What this

application is about is in the nature, in effect,

of an application for mandamus to the Court of

Appeal of the Northern Territory. I say that

because the litigation has, so to speak, gone awry.

What happened was that a notice of objection under

the sections which I will take Your Honours to

briefly in a moment, a notice of objection to the

decision that the Council was not a public -

DEANE J:  We have read the documents. Why do you not take

us straight away to the relevant statutory

provisions?

MR CASTAN:	Yes, I am content to do that.
DEANE J:	I have had great difficulty in following

through -

MR CASTAN:  Could I take Your Honours to section 6 of the

legislation, and Your Honours will see there that

it is provided that:

Subject to and in accordance with this Act,

there is payable in respect of all wages paid

or payable by an employer or a group on or

after 1 July 1985 -

and this is the updated consolidation, but there

are equivalent provisions - and being wages paid,

and that is all it says. It says -

at the rate of 5 per cent.

Tangentyere 3 12/11/92

Now, that is the section which imposes payroll tax.

And section 7, which is on page 64,031, then says:

Tax shall be paid by the employer who pays or

is liable to pay the wages in respect of which

the tax is payable.

Could I then take Your Honours to

section 9. Now, Your Honours will see that in

section 9(a), which is the relevant provision, it

was amended in 1981 to this form but it provides:

Section 6 does not apply to wages paid or

payable -

(a) by a religious or public benevolent

institution, or by a public hospital, to a
person during a period in respect of which the

institution or hospital, as the case may be,

satisfies the Commissioner that the person is

exclusively engaged in (the) religious work,
work of a public benevolent nature or work of

the hospital of a kind ordinarily performed in

connection with the conduct of public

hospitals, as the case may be.

So Your Honours will see there are two, so to

speak, criteria. It does not apply to wages paid

by a public benevolent institution to a person

during a period in respect of which the institution

satisfies the Commissioner that the person is

exclusively engaged in the work of a public

benevolent nature.

We then turn to section 14. Your Honours will

see that 14(1) provides:

If the Commissioner is of the opinion

that tax will not be payable by an employer,

or, if paid, would be refunded, he may issue a

certificate to that employer exempting him

from furnishing returns under section 13, and

an employer to whom such a certificate is

issued may refrain from furnishing returns

under that section but shall, unless the

contrary is expressed in the certificate,

furnish a return relating to each financial

year within 21 days after the close of that

financial year.

14(2) provides that the exemption may be

conditional. I do not think that is relevant, but

14(2A) provides:

The Commissioner may, at any time, by

notice in writing, revoke a certificate issued

under sub-section (1).

Tangentyere 4 12/11/92

And 14(3) provides:

The issue of a certificate under sub-

section (1) does not exempt an employer from

the payment of any tax, notwithstanding that
it may have the effect of postponing the time

for payment of any tax.

It is somewhat curious, Your Honours, and I will

come back to how this all appears to work. But if

we go to section 18, Your Honours will see that the
way in which the payroll tax system works is that

employers paying payroll tax send in their cheques

with their monthly returns. That is the essence of

the matter. So by being exempted from putting in a

return, one is effectively exempted from paying

payroll tax on a monthly basis. Section 18
provides:

An employer liable to pay tax referred to in section 6 shall pay the tax within the time

within which he is required by this Act to

furnish the return of the wages in respect of

which the tax is payable.

And, section 19 provides, in addition to section 18

which provides for payment with return so that

there is no process of assessment necessarily

essential to the obligation to pay - the obligation

to pay arises coincident with the submission of a

return, but, section 19 also provides that where

the Commissioner finds in any case that tax or
further tax is payable by an employer, the

Commissioner may assess the amount of the wages or

interstate wages and calculate the tax - - -

DEANE J: Well then, and subject to what Mr Pauling might

say, is it a fair enough statement to say that the

effect of the Act is that the exemption does not

stop the tax being payable, but stops it being due?

MR CASTAN:	being payable but it -We would say that the effect is that it stops it
McHUGH J:	How can you say that having regard to

section 14(3)?

MR CASTAN: Well, what section 3 is saying is that there is

no necessary exemption, but you may never be called

on to pay the tax, so it may not be payable at all.

De facto it is not payable. To make sense of the

word "payable" it is one thing to say one is

incurring, what we might call, a nominal

liability. But in reality, if in the real world

you do not have to pay - if you get a letter in

1979 that says, "Don't put in returns and don't pay

tax.", and you do not and you are not expected to

Tangentyere 12/11/92

and it is not asked of you, the notion that somehow

between 1979 and 1985 there is some unquantified,

ongoing liability accruing in an organization such
as a hospital or a public benevolent institution,

so that the auditor or the accountant is somehow

expected to make provision for some liability

because, though they do not have to pay, and though

the Commissioner said they do not have to pay, but
the Act is there saying, "Well, it might be

payable.", or, as it is put, "It is payable, so you

should be making provision for it.", leads to what

we can only suggest is a ludicrous result.

McHUGH J:  What you have said is hardly an accurate

description of the way the Act works, is it? If

you are a public benevolent institution, then you

are not liable, full stop. It has got nothing to

do with what is said in the certificate. What

section 14(3) says is that the issue of the

certificate does not exempt you from the payment of

any tax, notwithstanding that it may have the

effect of postponing the time for payment.

MR CASTAN:  Yes.

McHUGH J: But if you are liable, you are liable.

MR CASTAN:	If you are liable, you are liable, but if you have been told by the Commissioner not to put
returns in and not to pay, then - - -
DAWSON J:	It merely means that the Commissioner is not

requiring you to pay it, but the Act might.

MR CASTAN:	Yes, and that
DEANE J:	And it does not become due until the Commissioner

assesses under section 19.

MR CASTAN:  Yes, but the effect of that would be of course

that then at some later stage a new Commissioner on

DEANE J: It would be extraordinary if it were otherwise.	a change of view might turn round and say, "For the last 10 or 15 or 20 years - - -
What if your client had put in a completely false account of its activities?
MR CASTAN:	In so far as what Your Honours are putting to me

is that subsection (3) reflects the

well-established principle that there is no

estoppel against the Commissioner, we have no
difficulty with it. If that means that it is

payable but not due or potentially payable but not

due, we have no difficulty with it.

Tangent ye re 6 CASTAN, 12/11/92

DEANE J: Let us see where that leads us to in terms of the

Full Court.

MR CASTAN:  Then if one goes to section 20, we see that

section 20 provides:

Where the Commissioner finds in any case that tax has been overpaid, he may refund to the

employer who paid the tax the amount of tax

found to be overpaid.

That gives him a power to refund and leads to the

interesting and difficult question of what might

happen in a situation in which, say, a hospital

mistakenly makes payments of payroll tax for a

newly-established hospital and then ultimately it

is realized that that should not have happened.

Then the Commissioner becomes aware and he says,

"Look, you didn't need to pay. I'm going to send

you back the money." There is a real difficulty

about how the section operates in that kind of a
case if in fact it is only the Act that is

operative and the Commissioner cannot make any
determination, because he cannot make such a

finding on the view that has been expressed by the

Court of Appeal of the Northern Territory, though

the Act obligates him to.

Can we then turn to the relevant section upon which the Court of Appeal made their decision.	It
is section 34 at page 64,161. This section
provides that:

A person who is dissatisfied with any

decision, determination or assessment made by the Commissioner under this Act, by which his

liability to pay pay-roll tax or further tax

is affected may ..... lodge ..... an objection -

There is a provision then in 35 for appeal in the

usual way.	The significance of section 34(1),
Your Honours, is that it is not in the form that

one finds in the Income Tax Assessment Act or one

finds in the latest amendment of the New South

Wales Pay-roll Tax Act. It is not dependent on

assessment. It speaks of a decision, a

determination or assessment by which the liability

to pay payroll tax is affected. Nor does it deal

with a decision, determination or assessment by

which liability to pay payroll tax is imposed. It

speaks of "affected".

We would respectfully submit that the manifest

error in what the Court of Appeal of the Northern

Territory has done is to have joined up those two

notions. One only has to consider, as Your Honour

has just put it to me, that although the income tax

Tangentyere 12/11/92

under 14(3) becomes payable, it is not due.

Manifestly the liability is affected.

DEANE J:  Mr Castan, the point is a fairly simple one. I do

not think it is going to get any better or worse by

expanding on it. Can I ask you this: was an

express application made to the Full Court to deal

with the proceedings as proceedings for declaratory

relief, if their view prevailed in the long run?

MR CASTAN:  Your Honour has put it to me in terms of "was an

express application made?"

DEANE J: Yes.

MR CASTAN:	Would Your Honour excuse me a moment to enable proper instructions to be obtained in the terms
that Your Honour has put the question? My
instructions, Your Honour, are that in the course
of discussions over that very issue counsel for the
Tangentyere Council, the applicant here, said,
"Well, what could be done is to treat it", I am not
sure if he used the words "nunc pro tune" but
certainly he said, "treat this as an application
for a declaration". That appears at page 44 of the application book, where a passage from Mr Larkins'
submissions is set out.

But the way in which Your Honour has put it,

"was an express application made in a formal

sense?", I cannot respond to that in a positive way

other than to say in the course of discussion with

Their Honours that suggestion emanated from

counsel. I am not sure if that adequately answers

Your Honour's question but it was certainly

discussed as an appropriate course but rejected as

an appropriate course by Their Honours.

DEANE J:	You continue with your submissions.
MR CASTAN:	There is one other particular aspect of the construction point that we do seek to draw to
Your Honours' attention, that perhaps is additional
to that which, as Your Honour has said, is fairly
apparent and that is that the second limb - - -
DEANE J:	I was not implying that it is necessarily correct.

I was simply saying that it is the sort of point that once you see it it is either right or wrong.

MR CASTAN:	Quite. The other point that is of the same kind appears from section 9(a), the exemption, which one
can see manifestly has two components, one of which
is purely a matter, as Your Honours have put it to me, of the operation of the Act, as it is said -
that is to say, by a public benevolent institution
- but the second of which is manifestly a matter
Tangentyere	12/11/92

which does depend on the Commissioner's decision,

satisfaction in that case.

So that it is simply not the case that the

whole of the decision about liability is dependent

solely on the operation of the Act; it is dependent

on two components and the decision that he is not

satisfied, obviously, is his decision and if he

makes such a decision that affects liability. we

simply point that out as manifestly so on the face

of section 9.

I should say that the current status of the

position as between the parties is that it has been

indicated to us by our learned friends that they

equally desire that the matters which have been

fully litigated before His Honour Mr Justice Angel

at considerable length and expense and then fully

argued - the substantive issue about the exemption

in section 9(a) - before the Court of Appeal, we are agreed it is desirable that we should obtain

the ruling on that. And that if it were possible

to obtain a decision on a declaration, effectively

as though it were on a declaration, they would

desire that.

DAWSON J:  Was the point on which the court decided the question argued?

MR CASTAN: That is this point of the section 34

jurisdiction point?

DAWSON J: Yes.

MR CASTAN:  Yes, it was argued. It was raised by the court.

DAWSON J: It was.

MR CASTAN:  Yes, raised by the court in the course of

running, but I think, when you say argued, I am not

sure - - -

DAWSON J:  And that construction of the Act was opposed by

both sides, was it not?

MR CASTAN:  I think that is the position. I am instructed,

not argued in any great detail, but both sides were

agreed that it was desirable that the court - - -

DAWSON J:  Not go off in that way.

MR CASTAN:  - - - not go off in that way. I think that was

the correct answer; it was raised in the course of

running by Their Honours, and the parties responded

and one sees a part of that response - it may be

desirable to take Your Honours to page 44 so that

Your Honours see at least some of what is put.

Tangentyere 9 12/11/92

Perhaps at the foot of page 43, the passage sets

out something of what occurred and this will assist

Your Honours to see how it occurred. It is put

that:

Mr Justice Martin raised the fundamental point

- whether there had ever been a "decision" in

terms of section 34(1) upon which the whole

edifice of objection, decision, appeal and

further appeal had been erected - at a very

early stage in the hearing of this appeal.

The parties were given an opportunity to be heard on the question and had ample

opportunity to consider and deal with it. The
Court was informed that as between the parties

it was "common ground that there is such a

decision", as Mr Larkins, QC, senior counsel

for the respondent, put it at transcript

page 75. At page 10 Mr Larkins said:

" - - - for a practical matter the

parties have been content to argue this

(appeal) on the basis that there was a
decision affecting the liability of

Tangentyere to pay pay-roll tax and there's never been any argument or

dispute about the basis of the initial

appeal."

Mr Larkins also said at page 75:

"What the parties have done in the
present case, in a sense, is, brought to

the Court a more general question of

principle. That's a convenient and

sensible course and we - - - have joined in that by having had the hearing before

Mr Justice Angel - - - being treated by

the parties as, in a sense, an

application for declaratory relief - - -"

And then, His Honour Mr Justice Kearney goes on:

With respect, the words emphasized do not

reflect the true position.  A party is bound

by its conduct of legal proceedings. The case

was instituted and argued before His Honour as

an appeal under section 35(1) of the Act.

Much time was devoted there to arguing the

nature of that appeal, though the Commissioner

conceded that as far as concerned the question

whether the Council was a "public benevolent

institution" for the purposes of paragraph
9(a), the appeal was in the nature of a
hearing de novo.

Tangentyere 10 12/11/92

And they were at issue on the question of

satisfaction and so on. Now, Your Honours will see

that is the way in which the parties approached it,

is expressed by Mr Larkins, and I do not think our

learned friends would demur from that, and the

court was not taken with that approach and took what, in our respectful submission, is a highly technical and, as we would respectfully submit,

erroneous view. Now, the issue -

McHUGH J: Well, coming to the question of error, when you

look at section 35 and 36, surely it is obvious

that section 34 is not applying to a section 14

revocation. I mean, section 35(2) talks about:

On appeal -

it should -

be limited to the grounds stated in his

objections; and

the burden of proving that any assessment

objected to is excessive lies on the objector.

And again, in 36:

tax may be recovered as if no appeal were

pending.

What sort of an order under section 35 would the

Supreme Court make in this particular case?

MR CASTAN:	The Supreme Court would allow the objection; there was a notice of objection here, a notice of
objection was lodged, Your Honour.
McHUGH J:	I appreciate your notice of objection, but you would allow an objection to what?
MR CASTAN:	To the decision or determination.

McHUGH J:  To the revocation?

MR CASTAN:  Yes. And Your Honour has assumed that the only

basis of those letters that might be taken is the

section 14 basis but, of course, that is not the

only basis. Even if there was no section 14 there,

in the ordinary administration of the Act - if

there was not a section 14 in this kind of

legislation - and where there is a dual test of the

organization as a public benevolent institution and

the Commissioner is satisfied, and the Commissioner

notifies, let us assume, "I no longer think you are

a public benevolent institution and I am not

satisfied", assuming he expressed it in those

explicit words, in our respectful submission it is

Tangentyere 11 12/11/92

clearly a decision or a determination by which the

liability to pay payroll tax is affected. It is

not one by which it is imposed.

Your Honours, the word "affected" has been, of course, much discussed and debated in the standing cases, the cases dealing with locus standi, and in the Administrative Decisions (Judicial Review) area

where the question is whether a person aggrieved is

defined as a person affected and, of course, the

definition that the courts have adopted is "any

person who is affected in a way different from the

general public". It is a word of very wide import.

McHUGH J: Well, it may be, but your liability to pay tax is

not affected by the decision of the Commissioner,

is it? He says that - - -

MR CASTAN:  Can I hand to Your Honours the New South Wales

form, and I have extracted only the relevant

section, and Your Honours will see that section 32

in the New South Wales form now reads:

A person -

(a) who is liable to pay tax and who is

dissatisfied with an assessment of the tax

made by the Chief Commissioner; or

(b) who has paid tax and who is dissatisfied

with a decision of the Chief Commissioner with

respect to the amount of tax refunded under

section 19,

may, within 60 days ..... object to the

assessment or decision.

And one sees under "History", Your Honours will see there - this being a CCH extract:

History

S 32(1) substituted by No 100 of 1988,

Sch 4(8), effective 1 January 1989.

And the previous section 32(1), prior to 1989, was

in the form that is the Northern Territory form we

are here looking at, and the New South Wales

legislature, no doubt for good reason, has chosen

to limit the right to make objection to assessments

and refund decisions. Previously the legislation

in New South Wales was the same as it now is in

Victoria, in Queensland, in South Australia and the

Northern Territory, that is to say, it went beyond

that limited class of case that the New South Wales

legislature, in its wisdom, has now chosen to

restrict those objections to.

Tangentyere 12 12/11/92

Now, in our respectful submission, one cannot ignore those kinds of distinctions and say, "Well,

really, what 34(1) means is the same as what the

new 32 in the New South Wales legislation means".

The legislatures are well conscious of this, and in

New South Wales, they have chosen to go back to the

income tax formulation or a slight variant of it as

distinct from this more general formulation.	And
that is, in our respectful submission,

understandable given that the nature of payroll tax

and the mechanism for paying payroll tax is by

payment on lodgment of monthly returns. So that

ordinarily taxpayers of payroll tax do not ever

receive assessments. It is true there is a power

to issue an assessment if there is a default or if
there is a dispute about it, but ordinarily they do

not.

In our respectful submission, one cannot and

the court should not have treated the word "affected" as though it meant "imposed" or

"assessed". The legislature has used a much

broader word and, manifestly, the liability to pay

has been deferred, if nothing else. It has been

postponed or deferred by this decision, whether it
be a section 14(1) decision or it be a decision by
the Commissioner independently of any power that he

has under section 14(1) to give certificates

exempting returns. Even if all he did was write

and say, "I now consider that you are a public

benevolent institution" and then subsequently, "I

now consider you are not", in our respectful

submission he would be making a decision which

affects because, in effect, having had that from

the Commissioner, where else is one to get it from other than from he and thereafter one does not, in

fact, pay.

If I may, with respect, say to Your Honours we

are dealing here, in our respectful submission,

with the real world and in the real world of

taxpayers, if the Commissioner says, "Don't pay",

you do not pay and if he says, "You have to pay",

then you start paying. And that liability to pay,

and it may be in the technical sense that 14(3)

seeks to preserve the concept of no estoppel, we

accept that, but there is an effect and one cannot

pretend there is not an effect. In this case, the

effect was that no tax was paid for six years, and

then tax had to be paid, and that is, we would

respectfully submit, a very dramatic effect.

DAWSON J:  Would you remind me of the section that actually

imposes the periodic liability to pay payroll tax?

MR CASTAN:  Yes, section 6 imposes the tax.

Tangentyere 13 12/11/92

DAWSON J: Yes, but where does it appear that you have to

put it - with your return you have to put in your

cheque?

MR CASTAN:	18, Your Honour.
DAWSON J:	Thank you.

MR CASTAN: There is provision, also, of course, for further

returns and annual returns and the others but, in

the ordinary case - and there is provision, as I

mentioned for assessments, but in the ordinary

case - - -

DAWSON J: But if you look at 18, if he is not required to

furnish a return he is not liable to pay the tax

referred to in section 6.

MR CASTAN: Quite so.

DAWSON J: That is one reading of it, is it not? Is that

one reading of it?

MR CASTAN:  Yes, Your Honour. We would respectfully submit

that is exactly the position. He does not have to

pay. There may be, in a sense, a liability of

some

DAWSON J:  No, it is not that he does not have to pay, he is

not liable to pay.

MR CASTAN:  Yes, well, it goes that far. There is a problem

also with the definition of "tax". The word "tax"

itself is a defined term and, in a sense, there is

a circularity of the definition. It perhaps

complicates the matter.

DAWSON J:  I do not know about that. I do not know about

the proposition I was putting to you.

MR CASTAN:  But, in any event, the liability to pay is

clearly affected by a release, if I might call it

that, or being excused from putting in returns.

The liability in the sense of the potential

imposition of tax by the Act may still be, so to

speak, lurking in the background. There may be no

estoppel.

DAWSON J: That is the question: does liability to pay

include the time of payment? The time for payment is certainly affected but, in one sense, you could say the liability is unaffected and the Act is

careful to make sure that that is so.

MR CASTAN:  A liability to pay but which is indefinitely

deferred, which does not have to paid. A letter

which, in 1979, for instance, says, "You don't have

Tangent ye re 14 CASTAN, 12/11/92

to put in any returns and you don't have to pay

tax.", and which then continues in that way for

five or six years, and there will be dozens of such organizations in many States and territories - this

is fairly standard, with variants such as we have

seen in New South Wales, but this structure of

payroll tax legislation which was taken from the

original federal legislation is common with some

variance.

There have been hundreds, perhaps thousands,

but certainly hundreds of such letters or their

equivalent, as the 1979 letter and, no doubt,

innumerable instances of what we might call - for

want of a better word - "revocation" or a change of

view. To say that all that is happening but it has

no real effect, is not really a decision affecting

anything, is to ignore the real world, in our

respectful submission.

McHUGH J: It does not ignore the real world. If your

appeal fails, you have got to pay the tax

notwithstanding the fact that you have had these

letters since - - -

MR CASTAN:  You cannot bring the appeal. The Court has told

us we cannot appeal.

McHUGH J:	No, but I am assuming in your favour that you would have a right of appeal. The fact is that you
have got to pay the tax notwithstanding the letter.
MR CASTAN:	Yes.
McHUGH J:	Or if you have a declaration, or you are refused

a declaration.

MR CASTAN:  Yes, and the consequence will flow, depending on

the way a court ultimately decides the issues. We accept that, but in our respectful submission, one

cannot say of the decision that is made that it has

not affected the liability to pay. It may not have	imposed a tax, but has affected the liability to
pay. It is the very thing it does affect.

McHUGH J: Well, it has affected the time to pay. It has

not affected the liability to pay, has it?

MR CASTAN:  One can equally well say - Your Honour is

treating the word "affected" as though it means

either made it applicable or made it

non-applicable. In our respectful submission,

there is a whole range of lesser effects that it

might have had on the liability to pay. The choice

is not merely between saying the liability to pay

is there or is not there. Changing the liability

from one which is due monthly to one which is due

Tangentyere 15 12/11/92

at the end of an indeterminate period is an effect

on the liability. It is a different liability.

The accountants or auditors doing the accounts of

this organization might put it, on the one hand

under the heading of "deferred liabilities", while

in the other case they would put it as a regular

monthly obligation, and they would treat it totally

differently.

McHUGH J: That is true, but it is the liability to pay

payroll tax that has to be affected, not the -

MR CASTAN:  In our respectful submission, on any view it is

affected, even if it is not imposed by the decision

concerned. That is really the issue that is raised

here. Now, in a practical sense, of course, as we

stress, we are anxious and we understand our

learned friends are anxious to not have to set at

nought what has been a very substantial exercise in
having these matters determined both at first

instance and the on appeal, where the principal time spent on the appeal was, of course, on the substantive issue, not on this question of the

jurisdiction.

DEANE J:  Mr Castan, is there not another problem, and that

is this: as I follow what is in the application

book, the issue raised by the objection by reason

of the way the Commissioner put it was, "Was your

client a public benevolent institution?". But the

papers seem to indicate there is now no dispute

about that, and the dispute is about whether

employees of your client are exclusively engaged in

public benevolent work.

MR Cl.STAN: That is not quite the way it happened,

Your Honour. The position is this: it was

said - and there was dispute between the parties

about whether the notice of objection sufficiently

raised the question of satisfaction, the second

limb issue; that came on before His Honour

Mr Justice Angel as a preliminary point, I am

instructed, the question of whether or not that was

in issue before him, given the limits of grounds

and the like. He ultimately ruled that it was

within the terms of the notice of objection.

DEANE J: But the Full Court have indicated fairly clearly

that they disagree with that.

MR CASTAN: Well, in our respect submission, they have not

and that certainly, in our respectful submission,

was not argued before them, and it was not the

subject of a notice of appeal. The notice of appeal of the Commissioner did not include an

appeal from that determination - as it happens done

by way of a preliminary hearing - but that

Tangentyere 16 12/11/92

determination by His Honour Mr Justice Angel was

not the subject of any appeal. And the

Commissioner, certainly in relation to that, is in a position where he can either contest the issue,

or he can waive the issue.

The question of whether the grounds covered by

a notice of objection are sufficient is a matter

for section 35(2) combined with whatever stand the

parties take. And ultimately, if the matter is

contested before the primary judge, a party accepts
the ruling of the primary judge on that issue and

then, in fact, devotes the entire thrust of its

argument to dealing with that very matter on

appeal, it is not, in our respectful submission,
for the court to say, "Well, the notice of
objection is one that did not cover this." The

party, the Commissioner, is not appealing from a

ruling which held that the notice of objection did

cover that. In our respectful submission, that

does not go to jurisdiction.

We understand the way in which the matter is

put if it does go to jurisdiction, but the

subsidiary point Your Honour has raised does not go

to jurisdiction, in our respectful submission, and

it was not open for the Court of Appeal to even

consider it, given that it was not the subject of

appeal, and given that the party concerned devoted

all of its argument to that very issue. They were

well represented by leading counsel who were well

in a position to contest it on the basis that they

wanted to take the point about the notice of

objection if that was what they sought to rely on.

They did not. So we would respectfully submit

that that cannot assist the matter. Ultimately it

comes back to a simple - - -

DEANE J: Except at page 52 of the application book,

Mr Justice Martin says:

For the reasons already given there was no

justiciable question arising upon appeal as to

the status of the respondent -

that issue is gone -

and what his Honour termed the "subsidiary

question" did not arise because it formed no

part of the respondent's objection to the

Commissioner.

whether the subsidiary question was open.

That seems to, as I say, indicate that the Full

Tangentyere 17 12/11/92

MR CASTAN:  I understand what Your Honour says, and that is

what is being said but, as we understand it - and I

will just check my instructions again as to

precisely what happened, because I was not there -

that was not argued before Their Honours and it was

a matter on which Mr Justice Angel had ruled prior
to the commencement of the trial.

I can indicate to Your Honours that the

question of the adequacy or inadequacy of the
notice of objection was not argued at all before
the Court of Appeal and was not the subject of the

notice of appeal before the Court of Appeal. In

our respectful submission, that is not a basis on

which the Court of Appeal was entitled to determine

the matter.

The only other matters I would put are these,

Your Honours. We would respectfully submit that

what should have happened is that the Court of

Appeal should have dealt with the matter nunc pro tune and should have dealt with the substance of

the matter and was in a position to do so and had the parties willing to do so before it and should

have dealt with the substance for the reasons

given.

We should mention to Your Honours in that

context that the position that obtains now is that the Court of Appeal has before it the whole of the

argument on the substantive issues that were before

it. In other words, it has had the matter fully

argued that are in issue between these parties and

has not determined them. The effect of its

decision is that it has set aside the decision of

Mr Justice Angel, thereby taking the parties back to a situation where the whole of the proceedings

are rendered nugatory. That is, in our respectful submission, an undesirable result in the interests of justice and alone should give rise to the grant of special leave.

We should indicate to Your Honours - obviously

it is a matter for the Court - that so far as we

the substantive issue as to whether or not the	are concerned, it would seem that the argument on section 34 which has already been canvassed, is
short and could be dealt with by this Court either
now, if that were possible, or dealt with in effect
by allowing the appeal and dealing with the issue,
if that were practical.

McHUGH J: But what will come of this? Supposing the

Commissioner sued you for the tax and you had

Mr Justice Angel's judgment upheld. How could you

Tangentyere 18 12/11/92

rely on it in any way? It just seems to me to be

some sort of an advisory opinion.

MR CASTAN:  In our respectful submission, it is not that.

The view that it is that is, in our respectful

submission, erroneous. If this Court upheld that

view after granting special leave, then no doubt

that would be the case and we would have to back to

square one. What we would seek to do on the grant

of special leave, were it to be granted, would be

to endeavour to convince Your Honour and the other

Justices of this Court that that view is not the correct view and it was not advisory, that it was a

substantive decision dealing with - it was a

decision of a court on a properly constituted

appeal under section 35.

Of course, if this Court rules adversely to us

and upholds the Court of Appeal, we will no doubt
do as best we can, but we are endeavouring to

expedite and to bring on in the most practical way
possible a situation in which we can have the
matter dealt with in substance. But manifestly of

course, if all of Your Honours were to take the

view that Your Honour Justice McHugh has put,

then - - -

DEANE J:  But have what matter dealt with in substance, the

subsidiary question?

MR CASTAN: Well, it is not. It is called a subsidiary

question but the second limb has been fully argued

and both parties are anxious to have the answer to

it. I do not suggest that this Court would provide

the answer to that. This Court merely has to

consider the matters that the Court of Appeal

considered on section 34 and that is a very short

point and, we would respectfully submit, wrongly

determined by the Court of Appeal but we are

content to argue that at the soonest possible

moment and it is extremely short, as Your Honours

have already observed. That is really the scope of

the matter, as we would seek to put it.

DEANE J: Thank you, Mr Castan. Yes, Mr Solicitor.

MR PAULING:  Your Honours, it is with some regret that we

have to say that in our submission the decision of

the Court of Appeal is not attended with sufficient

doubt and, in our respectful submission, is plainly

right. It is clear that both sides, however well

or ill advised, believe that they were there to get some sort of declaratory relief from the court, but

my instructions are that the totality of that is

set out at page 44 of the appeal book, that

Justice Martin had in fact raised it very early in

the piece and pointed out that they may have

Tangentyere 19 12/11/92

nothing before them and, indeed, that Justice Angel

had nothing before him. But apart from those two

passages nothing else happened.

I imagine that if, in fact, an application to

somehow change the nature of the proceedings had

been properly based and properly mounted it would

have been agreed to, because there are questions

that the Commissioner would like to have resolved

if he could, but I am unable to advance an argument

which would show how this Court could assist in

this process because, for the reasoning put forward

in relation to section 34, we say there was nothing

before Justice Angel and that the question of

whether or not a particular institution is exempt

from the payment of tax is a question of status

determined by the Act, a status that the

Commissioner has got nothing to do with in terms of

making any decision.

Properly constituted in an application for declaratory relief a judge of the court could, as

between the Commissioner and a particular body,

declare that status, which would have the effect of

exempting certain of their wages from the payment

of payroll tax, but we are unable, although we have

given consideration to it, to find some way in

which this Court could make any order that would

change things. What seems to be needed is to start

proceedings for declaratory relief anew.

DEANE J: But why did not the first decision of the

Commissioner exempting from lodgment of returns

have the effect that the payroll tax never became

due?

MR PAULING:  Your Honour, the question of whether or not

payroll tax became due depended on two things:
firstly, the question of the status of the
institution, in the first part of section 9; and

secondly, whether or not the wages were paid for a

DEANE J: But does not one have to be under an obligation to	person exclusively engaged in the work of a public benevolent nature.	lodge a return before payroll tax becomes due, as
distinct from payable?

MR PAULING: Well, the primary section to go to is

section 6, of course, which talks of liability to

taxation, so the primary thing one looks at - - -

DEANE J: But section 18 deals with when the tax becomes

due.

Tangentyere 20 12/11/92

MR PAULING:	It deals with the timing of payment of taxation, but not the question of when it becomes
payable.
DEANE J:	No, but when you have to pay it.
MR PAULING:	Sorry, it deals with when you have to pay it

rather than whether it is payable or not.

DEANE J:  And until you have to pay it, in a real sense it

is not due.

MR PAULING: That is right.

DEANE J: Well then, why was not the effect of the

certificate, or the exemption, whatever it is

called, that the tax simply did not become due?

MR PAULING: Well the problem is, I suppose - - -

DEANE J: Unless and until, of course, an assessment was

issued under section 19.

MR PAULING: Well that is still the situation that there has

never been an assessment and no request for payment

of any tax. All this has gone off on this

hypothetical basis to try and determine whether or

not - - -

DEANE J: But why was not the decision to withdraw the

exemption - why did it not have the effect that as

from that time there was an obligation to lodge

returns and therefore payroll tax became due? Your

answer is, if they were exempt, nothing became due?

MR PAULING:  Yes. What opinion the Commissioner had as to

whether they were a public benevolent institution

or not, had nothing to do with it. The question is

whether that was indeed their true status, because

if it was their true status, then in respect of the

exempted wages, no obligation arose; it was a

statutory exemption rather than a mechanical

under section 14, for example, which is really	exemption that was granted by the Commissioner
confined to a limited range of situations. And
indeed, one can envisage the sort of situation
where somebody scaled down the size of their activities and write to the Commissioner saying,
can we be relieved temporarily from our obligation
to lodge returns, and he can say, yes. He could do
that, but when this, that and the other happens in
the future then you must start again. Let us say a
situation where you had an abattoir that only
operated through a particular time of the year.
The Commissioner might say, well in respect of the
months you are not actually paying wages, do not
lodge returns and I will exempt you.

Tangentyere 21 12/11/92

But it is a different sort of exemption from

the section 9 exemption. One is an exemption from

liability; the other is an exemption from

furnishing returns with the notion that if you did

have a liability and you then furnished a return,

you should also furnish the payment under

section 18, because that is the timing.

DAWSON J: But surely you could regard liability as not

only, or being confined to, ultimate liability;

liability concerns not only the ultimate liability,

but when and how payment is to be made, does it

not?

MR PAULING: There is considerable force in that

proposition, except that the Act, when it talks of

liability to taxation, does so in a very particular

way.

DAWSON J: In an ultimate sense.

MR PAULING:  Yes. And when one looks as sections 13,14 and

18, one sees that this relates to the mechanism by which that liability is exposed, by which you have

to put in returns, by which payment is regulated to

coincide with the lodgment of returns, because the

whole -

DEANE J:  On one approach, and it is quite confusing, but it

only affected the liability to pay tax if the

objection was wrong, and if, I mean, if the

Commissioner was right and they were not a public

benevolent society or institution, it did affect

the liability to pay tax in one sense, but if the

Commissioner was wrong, it did not affect the

liability. Do you follow the point?

MR PAULING: Yes, I follow the point, Your Honour, but what

would bring about the liability is not what the

Commissioner did and it would not affect it, it is

whether or not his opinion happened to coincide

with the reality or - - -

DEANE J:  You are missing the point. Assume that they are

not a public benevolent institution.

MR PAULING:	Yes.
DEANE J:	The Commissioner's decision did affect, in one

sense, their liability to pay tax because it
required them to pay it at the time they were

required to lodge returns, whereas while his

exemption - which on that assumption, was a wrong

assumption - applied, they did not have to pay it

until and unless they got an assessment.

Tangentyere 22 12/11/92

On the other hand, if their objection be

correct, and they were a public benevolent

institution, the withdrawal of the exemption did

nothing at all.

DAWSON J: 

In other words, if you are not liable to pay the

tax at all, no decision can affect the time or
place of payment.

MR PAULING: That is true, but one comes back though to

section 14(3), that is that the issue of a

certificate - if that is what this is said to be,

the issue of a certificate under section 14 - does

not exempt an employer from the payment of any tax,
notwithstanding it may have the effect of

postponing the time for payment of any tax. We

would submit that what is meant there is, by "from

the payment" is "from the liability for the payment

of any tax".

Indeed, that then gets us to the stage where

we support the Court of Appeal on the basis that

there was not any decision affecting a liability.

But as I say, I am in the curious position where

both sides agree that they would like some

determination of issues which, if they can be

crystalised, do not any longer involve any argument
as to whether the Tangentyere Council was a public

benevolent institution. That is not in dispute.

The argument was whether Justice Angel really

applied the Avon Downs test in correcting, as he

seemed to be doing somehow, the Commissioner's view that people were not engaged exclusively in work of

a public benevolent nature.

DAWSON J: Well, is there not some process by which

proceedings for declaratory relief could be
instituted and, by consent, the evidence heard in

the earlier proceedings be treated as evidence in

those proceedings?

MR PAULING:

Yes, my learned friend and I have discussed

that possibility and we - - -

DAWSON J: And the question referred to the Full Court?

MR PAULING:  Yes, well, we would, as I say, support such a

process and I have already raised it, but on this

application the situation I am driven to is to say

that the decision of the Court of Appeal was

correct and there is no basis for this Court to

entertain an appeal by the grant of special leave.

But I might say, were there to be declaratory

relief sought and differently constituted

proceedings, my learned friend could be assured

that getting the mechanical bits out of the way

Tangentyere 23 12/11/92

would be done with as much expedition as possible.

It is both sides that want clarity about some

issues to do with this Act.

DAWSON J: There is no doubt this Court could intervene on

the basis that, in all the circumstances, the

proceedings should have been converted into

proceedings for declaratory relief, but it is a
very great intrusion into the procedural matters of
the Supreme Court in a context where you have the
additional complication that they say what they
call the subsidiary question was not open on the

objection.

MR PAULING:  And a further problem, really, that one of the

members of the Court of Appeal will soon cease to

be a member of that court to become the

Administrator of the Northern Territory. So that

all really we can offer the Court is some assurance

that if differently constituted proceedings were

got up they would be brought up quickly and much of

the evidence that is already in by consent would

become evidence before whoever was to finally

determine the issue. But I cannot support my

learned friend's proposition that the decision of

the Court of Appeal was wrong.

I might also say, Your Honours, that there

were two matters raised in the affidavit in support

of the application for special leave; one

concerning a question of the status of the Council
as a public benevolent institution and I am able to

inform the Court, and there is no doubt about it,

that that is not in contention; the second concern,

a large sum of money that had been paid to

Tangentyere Council in respect of costs and my

instructions from the Commissioner are not to seek

the recovery of them. So that those two issues of,

no doubt importance, according to Ms Ditton's

affidavit, are no longer in issue, and the

questions that are sought to be resolved are

narrow.

DEANE J: Thank you, Mr Solicitor. Yes, Mr Castan.

MR CASTAN:  Perhaps the only matter I would seek to mention

is to illustrate the difficulty and, as we would

respectfully submit, the manifest error of the

position taken by the Court of Appeal, is that our

learned friend's indication here and now that the

question of the status, the question of public

benevolent institution, is no longer an issue

itself is, according to the view that the Court of

Appeal has taken, and our learned friend says he

cannot resist, is itself of no significance to us.

It does not mean a thing until we get a declaration

Tangent ye re 24 12/11/92

to that effect. It is just an interesting

statement of opinion, apparently. Notwithstanding that he is able to stand up here in the High Court of Australia and give that assurance, according to

this view of the law it is quite an interesting

statement but it is of no legal significance

whatsoever, and that illustrates what we submit is

themanifest error. I think that is the only matter

I need to put by way of reply.

DEANE J:  Thank you, Mr Castan. The Court will take a short

adjournment to consider the course it will take.

AT 12.21 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.32 PM:

DEANE J: In a context where no express application was made

to the Full Court for the reconstitution of the

proceedings as proceedings for declaratory relief

to deal with what the Full Court referred to as the

subsidiary question, we do not think that the case

is an appropriate one for the grant of special

leave to appeal. In reaching that conclusion, we

have taken account of the assurances given to the Court by the Solicitor-General. Accordingly, the

application for special leave is refused.

AT 12.33 PM THE MATTER WAS ADJOURNED SINE DIE

Tangentyere 25 12/11/92