Tasty Chicks Pty Limited and Ors v Chief Commissioner of State Revenue

[2012] HCATrans 293

[2012] HCATrans 293

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S192 of 2012

B e t w e e n -

TASTY CHICKS PTY LIMITED

First Applicant

ANGELO TRANSPORT PTY LIMITED

Second Applicant

SOURIS HOLDINGS PTY LIMITED

Third Applicant

MINUS SOURIS

Fourth Applicant

JENNY SOURIS

Fifth Applicant

and

CHIEF COMMISSIONER OF STATE REVENUE

Respondent

Application for special leave to appeal

FRENCH CJ
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 NOVEMBER 2012, AT 11.20 AM

Copyright in the High Court of Australia

__________

MR C.J. BEVAN:  May it please the Court, I appear with my learned friend, MS A. TSEKOURAS, for the applicants.  (instructed by Barraket Stanton Lawyers)

MR J.K. KIRK, SC:   May it please the Court, I appear with my learned friend, MR I.C. LATHAM, for the respondent.  (instructed by Crown Solicitor for New South Wales) 

FRENCH CJ:   Yes, Mr Bevan.

MR BEVAN:   Your Honours, on 5 October last year, this Court set aside the first decision of a Court of Appeal on the ground of jurisdictional error and remitted the Commissioner’s appeal to the Court of Appeal for further hearing.  In this Court’s decision, the Court enunciated the correct approach of a primary judge exercising jurisdiction under section 97 of the Administration Act to a review of discretionary decisions by the Commissioner.  This application invites the Court to articulate the correct approach to the next stage of that review process, which is the exercise of appellate jurisdiction by the Court of Appeal in respect of a decision, at first instance, re‑exercising a discretion of the Commissioner in the context of the principle of appellate intervention enunciated in House v The King.

FRENCH CJ:   You say, I see at paragraph 48 of your submissions at 171 of the application book, that the matter:

raises the issue of the proper function of an intermediate appellate court on a further hearing on remittal from this Court.

That is pitching it at a level of generality which does not seem to be supported by your submissions.  Is not your real complaint that they did not do on this particular remitter what this particular remitter required them to do.

MR BEVAN:   Correct.

FRENCH CJ:   Well, what is the general point of principle?

MR BEVAN:   The general point of principle is, firstly, the Court of Appeal failed to appreciate the nature of the error this Court corrected in its decision.  If your Honours go to page 140, your Honours will see in paragraph 48 their Honours said that the Court of Appeal:

approached this issue on the basis that the Chief Commissioner had to establish error on the part of the primary judge when determining an appeal –

to that court –

from a discretionary decision of the Chief Commissioner to which those same principles applied . . . The High Court held . . . that this approach was wrong because of the nature of the jurisdiction and powers conferred by s 97.

Now, that was wrong.  The subject matter of the jurisdictional error dealt with by this Court was the Court of Appeal limiting the jurisdiction of Justice Gzell, having regard to the principle enunciated in Avon Downs.  It had nothing to do with the exercise of jurisdiction by the Court of Appeal hearing an appeal from Justice Gzell, and that is made clear in paragraph 12 of the judgment of this Court which your Honours will find at page 99.  This Court, there, said, starting at line 3:

the appeal to the Court of Appeal will require reconsideration in the light of the determination by this Court of the nature of the “review” upon which Gzell J was engaged under s 97 of the Administration Act.

Now, the failure to appreciate that this was an Avon Downs issue and not a House v The King issue, led the Court of Appeal into error in its ratio determination of the remitted appeal because, having wrongly recited the error which was corrected by this Court last October, their Honours went on using what, we say, is an interesting conjunction, nevertheless, at the top of page 141 to adopt the approach to the construction and application of the de‑grouping provisions in the second and third periods, enunciated by Justice Handley delivering the leading judgment in the Court of Appeal on the first occasion.  And, what their Honours did is to adopt paragraphs 109 and 111 where his Honour found that Justice Gzell asked the wrong question and then said what he thought the right question was.  But, omit paragraphs 110 and 133 which is referred to at the top of page 141.

Of course, when you actually go to Justice Handley’s reasoning, it is quite apparent that his Honour’s enunciation of the test or restatement of a test and specification of its application which is to be found at page 85 – that is the relevant part of Justice Handley’s judgment – it is quite apparent that his Honour approached the question of statement of the statutory test and its application informed by the assumed application of the principle in Avon Downs.  In paragraph 109, we find the first step in his Honour’s reasoning, where he says Justice Gzell:

asked himself the wrong questions

and, it cites what he attributes to Justice Gzell.  At 110, Justice Handley said:

However, s 16C(4) also provided that . . . “any other matter that the Chief Commission considers relevant”.  The relevance of other matters is to be determined by the Commissioner –

citing, Avon Downs.  And, critically:

The matters considered relevant by the Commission cannot be disregarded simply because the Court has a different opinion.

Now, that is step 2 in the reasoning.  Step 3 is:

the test . . . is whether the taxpayer “has continually carried on the business concerned . . . substantially independently of the other members of the group”.

And, that is the third step in the test.  The fourth step is, 112:

The factors relied on by the Commissioner, viewed in that light, established a powerful case.

This involves, in effect, a reconsideration of the same factors because these factors were analysed by Justice Gzell in his judgment in the context of 16C(4), the last limb.  When you go over the page to 113, the concluding step is that:

the real question is whether the Commissioner’s failure to be satisfied of this. . . was vitiated by any error of the kinds identified. . . in Avon Downs.

Now, if your Honours go back to 141, the failure of a Court of Appeal to appreciate the precise error – jurisdictional error – led it to undertake this, what I call, cutting and pasting exercise where they simply take the paragraphs from Justice Handley’s reasoning in the first decision and leave out the paragraphs which cite Avon Downs.  But, of course, the whole Avon Downs thesis is informing Justice Handley’s enunciation of the test because, effectively, what Justice Handley did, on that occasion in enunciating the test the way he enunciated it, was adopted wholeheartedly on the second occasion by the Court of Appeal.  The Court of Appeal recognised at paragraph 13 of its decision which your Honours will find at page 125.  At the top of page 126, they say:

The consequence is that this Court on remitter must determine afresh the Chief Commissioner’s appeal on grounds 8 to 15 in light of the decision of the High Court.

That would have required their Honours to simply ignore the original decision and treat the appeal as if it were starting afresh and look at the reasoning of Justice Gzell and analyse whether Justice Gzell had made an error, having regard to the grounds of appeal and the submissions put to his Honour and, indeed, put to their Honours on the second occasions.  But, their Honours did not do that.  They actually used as the point of reference what I would term a sanitised version of Justice Handley’s reasoning by taking out the offending references to Avon Downs. 

Now, if they were going to start afresh, they would have treated Justice Handley’s decision as if it never existed.  They would treat the matter as if this were an appeal from Justice Gzell starting afresh.  And, the reason they go back to their earlier decision and, ultimately, expand upon the reasoning in it, is they did not appreciate that this was a complaint about an error about the way in which Justice Gzell exercised his jurisdiction at first instance and rather perceived it as the way in which they exercise their jurisdiction on appeal.

GAGELER J:   Well, the very passage that you point to at page 141 is the passage where Justice Handley is addressing the way in which Justice Gzell considered the fact as the first instance.

MR BEVAN:   Correct.  And, the point I am making is that his Honour approached the matter under what we describe as the mistaken impression that this Court’s decision in Avon Downs required this approach to be adopted because it was a discretionary decision of an administrative decision‑maker.  But, of course, in its decision this Court said Avon Downs has no application, on the proper interpretation of sections 97 and 101 – particularly 101(b) of the Administration Act.  This is a review on the merits, and it is a review in which Justice Gzell can exercise in his discretion the discretion to de‑group again, having regard to the matters in section 16C(4) – ownership, control and nature of the business and any other matters considered relevant by the Commissioner. 

Of course, that means any other matters considered relevant by Justice Gzell because the effect of sections 97 and 101 is he is undertaking the same exercise as the Commissioner.  But, it does not permit the Court of Appeal to do that.  The Court of Appeal must pass the House v The King threshold.  There must be demonstrated error on the part of Justice Gzell in his enunciation of the test or in his application of it.  Their Honours went on and said at paragraph 52 on 142 or, perhaps, starting at 142, paragraph 51:

the primary noted at [126] –

that was the paragraph referred to earlier –

that the question of independence “is to be judged in terms of ownership, control and nature of the businesses”.

In 52 they go and cite R v Hunt in which a majority of this Court said that where a decision‑maker must take matters into account, those matters have fundamental importance.  Their Honours then went on to say:

It would be incorrect if it was also understood to be a statement that those were the only matters to be considered.

But, his Honour did not consider only those matters.  He went on and considered all of the matters the Commissioner asked him to consider:

The primary judge then dealt with the ten further matters relied on by the Chief Commissioner.

A number of those matters, the Court of Appeal said, had nothing to do with the statutory criteria but, nonetheless, his Honour considered them.

The ultimate conclusion is:

Because the primary judge gave consideration to these other matters and rejected them as not relevant, it cannot be said that he only had regard to matters concerning ownership, control or the nature of the businesses or that he failed to take account of s 16C(4).

That was developed further at page 147 in paragraphs 61 and 62 where the Commissioner’s complaint that his Honour did not consider other matters was, again, rejected.  And, a further complaint that his Honour did not consider the matter – the cumulative effect of the matters referred to by the Commissioner was also found to raise a different question.  So, his Honour was found to have correctly applied the test that was specified in C(3) and C(4), having regard to the way in which the Commissioner asked his Honour, at first instance, to approach the matter.

Now, what happened in the Court of Appeal – the Court of Appeal embraced, during the course of argument, the reasoning of Justice Handley and gave the Commissioner leave to amend his notice of appeal a week later to allege a misstatement or misapplication of the statutory test.  But, the genesis of that was the Court of Appeal, the second time in argument, because Justice Handley said it the first time in the decision.  It was not supported by grounds of appeal or arguments – written arguments put by the Commissioner.  The Court of Appeal in the second decision in its second hearing seized upon the reasoning of Justice Handley in the first decision because it did not appreciate that that reasoning was flawed because it was informed by a misconceived notion of restrictions on the ability of Justice Gzell to apply the statutory test.  Your Honours, this becomes apparent at the foot of 141 in paragraph 49, their Honours said:

Although ground 12A(a) describes the error as wrongly restating the statutory test, the argument also asserted the application of the wrong test.

Ground 12A(a) is to be found on page 140 in paragraph 47, and their Honours noted that we addressed because we were asked to address the matter in that way.  The first complaint wrongly confining himself to the matters in C(4) was ultimately rejected at 52 and at 61 and 62.  Then the second complaint, which is the misapplication point, is identified in the last sentence starting “Secondly” at the foot of page 141.  This is where, in effect, a new test or an additional test is enunciated by their Honours, where their Honours at page 144, paragraph 56 say:

The second way in which it is said that the primary judge applied the wrong test emphasises that the Chief Commissioner is required to determine whether the business of the person sought to be excluded is carried on substantially independently of other members of the group.

What their Honours meant by that was, you must take into account the ordinary meaning of “substantially independent” by reference to the ordinary meaning of independent.  This is said to be a test which applies even after one applies the test in accordance with the requirements of section 16C(4), the text of which is set out at the foot of page 139.

FRENCH CJ:   Well, now, can I just understand where we are?  We have moved, have we, from whether the Court of Appeal properly characterised or undertook its task to the question of whether it was properly construing the relevant provisions?

MR BEVAN:   Correct, and the link between the two is, your Honours, that their Honours approached the matter on the basis that Justice Gzell had to approach the matter that way because of the constraints upon him in re‑exercising the Commissioner’s discretion.  We say that the error in the construction of the legislation flows from the error as to the nature of the jurisdictional error committed the first time.

GAGELER J:   But, if you look at  page 144, line 50 ‑ ‑ ‑

MR BEVAN:   Yes.

GAGELER J:    ‑ ‑ ‑ where it is said that:

The primary judge did not address whether the businesses of Tasty Chicks and Angelo Transport were carried on substantially independently of that of M&J Chickens in this sense.

Now, if that is a correct characterisation of what the primary judge did, does not error flow from it?

MR BEVAN:   Well, we say that even if – two issues.  The first is, their Honours are enunciating a different test, but the last three words of that sentence are in this sense.  So, they are enunciating a new approach.

GAGELER J:   And, is that wrong, in your submission?

MR BEVAN:   We say it is.  We say, that you need to go to C(4), you apply ownership control ‑ ‑ ‑

GAGELER J:   This is a construction point at this stage, is it?

MR BEVAN:   It is.

FRENCH CJ:   This is a construction point which, you say, is a separate basis for the grant of special leave.

MR BEVAN:   Correct, correct.

GAGELER J:   Let us just talk about the nature of the jurisdiction being exercised by the Court of Appeal.

MR BEVAN:   Sure.

GAGELER J:   Focusing on that language ‑ ‑ ‑

MR BEVAN:   Yes.

GAGELER J:    ‑ ‑ ‑ does that display error on the part of the Court of Appeal?

MR BEVAN:   It does, for two reasons.  The first is, we say, that “in this sense”, is an unwarranted enunciation of an additional test.

GAGELER J:   Well, that is your construction point.

MR BEVAN:   Yes, yes.  We also say that the factors in 56 and, indeed, the factors relied on in 59 over on page 146, involve findings which are inconsistent with the findings of the primary judge.  Again, this goes back to the jurisdictional question of the limits to which the Court of Appeal is able to override the findings of the primary judge.

FRENCH CJ:   The Court of Appeal can interfere with an error of law as to the construction of the statute, can it not?

MR BEVAN:   It can, your Honour.

FRENCH CJ:   And, it can also interfere with an error in the application of the statute, properly construed, can it not?

MR BEVAN:   It can, your Honour.  There is no dispute.

FRENCH CJ:   The error is identified at 58, is it not, at 145?

MR BEVAN:   Yes.  Now, we say that if his Honour was found to have correctly analysed ownership, control and nature of a business back at the top of 143, which was his analysis in the context of C(4), he cannot have fallen into error in terms of 58. 

GAGELER J:   Why?  Why not?

MR BEVAN:   Because he has looked at the nature or activities of the business which he was required to look at in the terms of C(4).  What the Court of Appeal required is that he look at them again, after he has correctly looked at them in the context of C(4) because of this ordinary meaning of “independent”.

GAGELER J:   Is it the construction point again?

MR BEVAN:  It is.  We say, if you have correctly looked at them in the context of C(4), which is extracted at the foot of 139:

In determining whether a person carries on business substantially independently . . . the Chief Commission is to have regard to the nature and degree of ownership or control . . . the nature of each of those businesses and any other matter that the Chief Commissioner considers relevant.

His Honour was found at 52, 61 and 62 to have correctly done that.  That is what Parliament specified he had to do.  But, their Honours have said, independently of that, you must look at the concept of substantial independence because of the ordinary meaning of “independent” and see whether you come up with the same conclusion.  And, they came up with a different conclusion:  58 is where they say he made an error in the approach, and then their conclusion that the influence exists is in 60.  Of course, we say, what does influence add to control?  Influence is control.  If there is a finding that has correctly dealt with the issue of control, then he cannot have fallen into error because he has not separately considered control in the context of influencing the conduct of other parties.

FRENCH CJ:   Thank you, Mr Bevan.  Yes, Mr Kirk.

MR KIRK:   Your Honours, two issues have been raised this morning and I will deal with them in turn.  Those two issues are, first, the Court of Appeal is said to have misconceived the nature of its task.

FRENCH CJ:   Just a minute.  Mr Kirk, we will not need to hear you on the question of the construction question, just on the first question.

MR KIRK:   Yes, that the Court of Appeal misconceived the nature of the task.  There are three points we seek to make.  First, the only clear articulation, as we understand it, of what our learned friends say should have been done, is that the principles in House v The King should have been applied.  That appears to be the complaint.  The principles in House v The King were accepted and put by both parties to be applicable.  If your Honours go back to 139, paragraph 46 at the bottom of the page and if your Honours review that paragraph, your Honours will see that it was put by both parties and accepted by the Court – see the last sentence – that principles of House v The King applied. And, if your Honours then turn to page 145 – as your Honours already have done – and look at paragraph 58, the Court will see that there were errors identified by his Honour Justice Meagher or, perhaps, one error put two ways that:

the primary judge applied the test too narrowly –

i.e. misdirected himself –

and as a result did not take into account matters which he was bound to consider –

that is, did not take into account mandatory relevant considerations.  Now, that is fairly and squarely within House v The King error.  So, the first point is the complaint made has no foundation.  The second point is that great weight is sought to be made of page 141, paragraph 48, of the Court of Appeal’s judgment.

FRENCH CJ:   I am just wondering about the first sentence.  It is characterising the earlier approach of the court as an erroneous equation of the Chief Commissioner’s role as appellant to that court with the role of the primary judge in reviewing the Chief Commissioner.

MR KIRK:   Might I say this frankly and with very great respect to his Honour; these two sentences are not the two clearest sentences   His Honour is ever going to write.  But, if your Honour looks to what his Honour refers to, namely, paragraphs 110 and 113 of the first Court of Appeal judgment which can be found at page 85 of the application book.  This is part of the reasoning of his Honour Justice Handley and paragraph 110 and 113 bring out, what might be called, the Avon Downs error.  Namely, that in his Honour Justice Handley’s view the principle of the Supreme Court – the standard of review of the Supreme Court should have been Avon Downs review – review for jurisdictional error, if we can call it that – rather than standing in the shoes.

So, although those two sentences of Justice Meagher are not, with great respect to his Honour, overly clear, his Honour understood the point.  Furthermore, his Honour had quoted paragraph 22 of this Court’s judgment earlier in the decision at page 122, paragraph 3, his Honour quoted that culmination of this Court’s reasoning.

The other point that might be made about it, your Honours, is that regardless of those sentences, what the Court of Appeal was doing was precisely what my friends say they should have been doing – that was the first point I was seeking to make – that they were engaging in review for House v The King error. 

The third point we seek to make, to drive this home, is that if your Honours turn to the reply in writing of my learned friends, relevantly at page 235, your Honours will see what, in substance, my learned friends’ argument amounts to.  It amounts to saying that where the Court of Appeal said it had considered the matter afresh, that is not to be believed.  If your Honours turn to paragraph 12 and if I can just draw to your Honours’ attention some of the language – the last three lines:

the Court of Appeal instead –

and your Honours might review (b).  Then if your Honours turn over the page to page 236, paragraph 14, again (a) and (b), and then paragraph 15, the first sentence.  Your Honours will see the words “lip‑service” and last sentence.  Now, that sort of language is, in essence, suggesting the Court of Appeal when it said was considering the matter afresh is not to be believed.  The language is not appropriate.  The submission is without merit. 

The Court of Appeal expressly indicated it was considering the matter afresh and it said so at page 125, paragraph 13.  That is what it was required to do.  That is what it did.  The only sin in the end seems to be either that the Court of Appeal got it wrong, which raises the issue of statutory construction, or that there was some sin in even referring to what the Court of Appeal had said the first time.

FRENCH CJ:   Well, that is your three point.

MR KIRK:   Indeed.  If it please the Court?

FRENCH CJ:   Yes, thank you.  Yes, Mr Bevan.

MR BEVAN:   Your Honour, the high point of the failure to start again is this approach to the actual appeal on the second occasion.  The Commissioner did not contend for, in his grounds of appeal, this – what I might term – further review of the material after 16C(4) has been exhausted, having regard to the ordinary meaning of “independence”.  That is why their Honours refer to the matter arising during argument.  Indeed, the ground of appeal which is said to support ground 12A(a) which is set out at paragraph 47 on page 140, arose during the hearing of the appeal. 

The genesis of this approach was an embracing during the hearing of the appeal of the enunciation of the test by Justice Handley on the first occasion.  We say that, although my learned friend says the first sentence of paragraph 48 is not perhaps as accurate as Justice Meagher could have made it, nonetheless, it is instructive that his Honour then went on, having recited what the supposed error was with – as I said in-chief – the conjunction, nevertheless, to embrace the reasoning of Justice Handley by excising the offending references to Avon Downs.  

One will never know, never know, whether Justice Handley would have adopted that approach without his reliance on Avon Downs.  The correct approach, if in fact the Court was true to its word and it was going to start afresh as it said in paragraph 13, was just to simply ignore the entirety of the reasoning in the first decision because it was fundamentally flawed by jurisdictional error, and simply treat the appeal afresh, which means look

at the reasoning of Justice Gzell, look at the grounds of appeal and then decide the matter.  But, by going back to the original submission, in our submission, you cannot confidently say – indeed, you cannot, on any view of it say – that they did start afresh.  If your Honours please?

FRENCH CJ:   The applicants for special leave assert that the Court of Appeal of New South Wales did not undertake the task remitted to it by this Court following the successful appeal against its earlier decision.  In our opinion, that complaint is not made out, having regard to the Court of Appeal’s enunciation of the task which it had to undertake and the approach it did take.

The application also asserts that the Court of Appeal misconstrued and misapplied provisions of the Pay‑roll Tax Act 1971 (NSW). The relevant provisions have been repealed and replaced by a new provision with some different wording. No general principle is raised concerning the construction of the question of repealed provisions which would warrant the grant of special leave.

The application for special leave will be refused with costs.

At 11.55 AM THE MATTER WAS CONCLUDED