Tatts Group Limited v The Treasurer of Victoria; Tabcorp Holding Limited v The Treasurer of Victoria

[2015] HCATrans 28

[2015] HCATrans 028

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M67 of 2014

B e t w e e n -

TATTS GROUP LIMITED (ACN 108 686 040)

Applicant

and

THE TREASURER OF VICTORIA

Respondent

Office of the Registry
  Melbourne  No M68 of 2014

B e t w e e n -

TABCORP HOLDING LIMITED (ACN 063 780 709)

Applicant

and

THE TREASURER OF VICTORIA

Respondent

Applications for special leave to appeal

KIEFEL J
NETTLE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 13 FEBRUARY 2015, AT 1.58 PM

Copyright in the High Court of Australia

____________________

MR N.J. YOUNG; QC:   If the Court pleases, I appear with MR N.P. DE YOUNG in the first of those matters, and MR C.G. BUTTON in the second matter.  (instructed by Clayton Utz and Allens Lawyers)

MR S.G.E. McLEISH, SC, Solicitor‑General for the State of Victoria:   If the Court pleases, I appear with MR O. BIGOS for the respondent in each matter.  (instructed by Corrs Chambers Westgarth Lawyers)

KIEFEL J:   Yes, Mr Young.

MR YOUNG:   If the Court pleases, the application arises in relation to the proper construction of section 3.6.3A.  That section is set out in the judgment of the Court of Appeal at pages 40 and 41 of the application book.  The learned trial judge concluded on the proper construction of the section in its wider context that subsection (2) was the critical provision and that it conferred a discretion on the Treasurer, in consultation with the Commissioner, determining the amount of the levy in respect of the financial year.

The Court will have seen that the relevant issue was that the gaming operator’s licence expired on 16 August, however, the Treasurer determined that he had no discretion and imposed a levy on the operators although they had only operated for 46 days in the same amount as they would pay had their licences continued the entirety of the 2012/2013 year.

KIEFEL J:   Given the formula for the health benefit levy which appears at page 39, the matter which would arise from it, putting aside however else one finds the discretion, that the Treasurer would determine in determining the amount of the levy, would be how many gaming machines there were.

MR YOUNG:   Well, the formula is the method, but the actual operative amount of the levy is determined under subsection (2) and there is a point to that structure, as the primary judge observed, which is that the formula operates by reference to a proxy, and always did.  If the Court turns back to page 35, the Court will see the form of the provision as first enacted.  Again, there was a method of calculation as one step and an operative determination as the second step.  The method of determination under section 135A(1) was based on the number of gaming machines operating on 30 September in each year.

KIEFEL J:   I take your point.  The Treasurer has to determine the matters in subsection (2) as relevant to the formula.

MR YOUNG:   Yes, and he is required to adopt a particular method as the first step towards that determination and at all relevant times that method involved the use of a proxy.  First it was 30 September and then, to take your Honour back to the provision your Honour took me to at page 39, the formula became what the Court of Appeal called a “hybrid period”.  If your Honour looks at subsection (1) of 3.6.3 at page 39, the proxy period was partly a 12 month period commencing in the December in the preceding year and running up to and including November in the financial year.

So the formula at all times operated by reference to a proxy, and the judge found that because it operated by reference to a proxy there was objectively always good sense in a two‑step determination process; first, the formula produces a figure but then the operative step was for the Treasurer, in consultation with the Commissioner, to make the final determination of the amount of the levy.  Between the previous years and the final year there was another change of language.  In the prior year, your Honours will see from 3.6.3(3) at the top of page 40, the determination by the Treasurer was:

the amount of the levy on each gaming operator for a financial year –

being assessed.  That language changed when we came to the year of expiry.  Subsection (1) at the top of page 41 commences with “In respect of”, and the same phrase is used in subsection (2) “in respect of”.  So it is no longer a determination for the year, it is a determination in respect of the year.  The Court of Appeal thought that change of language was of no significance, but if what it draws attention to is that in the final year where the licences are expiring at midnight on 15 August; it is going to be determination in respect of that limited period of 46 days.  That is borne out by the second reading speech at the bottom of page 41, last two lines:

not intended to increase the quantum of the levy that would have been payable by the gaming operators for the period until 16 August 2012 if the gaming operator licences had not ceased.

KIEFEL J:   In 3.6.3A(2) “in respect of” might suggest a wider consideration, but “the financial year” is simply the period referred to in paragraph (1), is it not?

MR YOUNG:   No, “the financial year” is the year of assessment, that is, in this case, the year ending 30 June 2013.  The year that was used in the formula was a partly prior proxy year ‑ ‑ ‑

KIEFEL J:   Was the hybrid period.

MR YOUNG:   If we look at it this way; that the licences operated for 12 years and 46 days under this legislation, if we go back to the first day when the levy was imposed.  The Treasurer’s construction has the consequence that the operators are bound to pay a levy equal to 12 years and nine months.  Why nine months?  Because the proxy period effectively is nine months because three of those months will count as zero – they are after August.  So the effect is rather extraordinary.  The construction ignores the two‑step taxing process.  It brings about the result that in the final year the operators, although they only held their licence for 46 days, are taxed as if they held it for the full year, which when you then factor in the proxy figures it becomes as if they held it for nine months, and the levy for that 46 days exceeded the entirety of the before tax income from the operation of those gaming machines in that 46 day period.

KIEFEL J:   How do you say the discretion arises?  There is not much of a change of language.  You say the discretion was always there.

MR YOUNG:   Yes, that is what we said.  We said the discretion was always there, recognising the structure of the section in that the methodology, the formula, the starting point, involved the use of a proxy, and there was always a risk that using a proxy might throw up a figure which because of, for instance, the surrender of the licence in any year became quite inappropriate to use as the final amount of the levy.  So, the language is changed to allow the Treasurer to focus on the fact that the licence was only held for 46 days, but the determination ‑ ‑ ‑

KIEFEL J:   I am sorry, but how do you get to that point?  What is there in the language that says we are focusing on 46 days?

MR YOUNG:   Can I list the matters in the language, your Honour?  First, both courts, that is, the primary judge and the Court of Appeal, recognised that the words “in accordance with” as a matter of natural usage admitted of a number of meanings including in conformity with or proportionately with.  So the whole phrase “calculated in accordance with” as a matter of language does not require a precise mathematical calculation that leads only to one figure.  The words “in accordance with” allow some adjustment so long as it is in conformity with or proportionately with and, as I said, both courts accepted that that was the meaning of those words.

Secondly, the two‑step structure, in our submission, is in recognition of the fact that a proxy is being used as the starting point.  Thirdly, the phrase is “The Treasurer, in consultation with the Commission, is to determine”.  There is no limits on that process of consultation.  The Court of Appeal said that the Treasurer had nothing to do other than recognise the formal calculation made under subsection (1) when it came to subsection (2). 

Now, there are no limits on that phrase as to what the Treasurer is to consult with the Commission about.  It is not just the number of gaming machines on a particular day and a particular month, it is unlimited.  The phraseology of “determine” is also a word which, according to its natural usage, admits of a range of meanings.  Both the primary judge and the Court of Appeal said that “determine” admits of a range of meaning running from mere calculation to a deliberative process as to what is the correct and appropriate amount of the levy, having regard to the circumstances of the year under assessment.

The last matter textually that I have mentioned is the change of language from “for the financial year” to “in respect of the financial year”.  That change did not need to be made if the mere fact that the companies held licences for 46 days warranted an assessment as if they held the licences for the entirety of the year.  You would simply retain the words “for the financial year”.

Now, those contextual matters were brought to bear by the primary judge.  His conclusion of his reasoning is at paragraph 57, page 23.  Now, that is a conclusion referring to a combination of matters.  There are seven matters of context, structure and purpose identified by the primary judge running from paragraph 45 through to that conclusion at 57.  The Court will see it opens with the conclusion and then the reasons are given.  The first is that the established High Court Rules concerning the strict interpretation of taxing statutes are engaged.  Then there are a series of reasons going to the structure, history and the contextual matters that I have pointed to.

So, if I can sum it up this way.  The trial judge adopted what this Court has more than once described as the modern approach to statutory interpretation.  That is to say, an insistence that context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and I have paraphrased CIC Insurance, Project Blue Sky and Baini in making that submission.

Now, in contrast, what did the Court of Appeal do?  The Court of Appeal did exactly the opposite.  It focused entirely on subsection (1) and the words “calculated in accordance with”.  Having determined that those words meant the precise arithmetical calculation and nothing else, they say that controlled the outcome, and the other contextual matters and structural matters were not addressed until the court had arrived at that view that drove the outcome.

Can I make that good, if I may?  Would the Court please go to the Court of Appeal’s judgment at page 44, paragraph 29?  I just draw attention to “unambiguously clear”; two lines on “the multiplication exercise”; first line of paragraph 30 and the last few words, and then this critical reasoning in paragraph 31:

Since the amount of the levy payable could be calculated precisely, it followed necessarily that the Treasurer’s obligation ‘to determine the amount of the levy’ was an obligation to perform that arithmetical calculation.

Now, that drove the result.  That same reasoning is repeated at page 50.

KIEFEL J:   Well, the Court of Appeal preferred to place more weight upon the words in paragraph (1) but, Mr Young, essentially does not your argument come down to, or accept that in paragraphs (1) and (2) of the provision the language is susceptible to more than one meaning, and really special leave is being sought by the applicants so that they might argue that (1) the language might be understood to carry it over more strongly one way than another ‑ ‑ ‑

MR YOUNG:   Your Honour is largely correct, but can I ‑ ‑ ‑

KIEFEL J:   I say that for this reason, because that then throws up, does it not, the essential problem with this application?  That is, it concerns a statute which is no longer of relevance and so where is the question of general importance?

MR YOUNG:   Yes, I will address that question first and then if I may come back to the reason why my answer to your Honour was slightly qualified?

KIEFEL J:   Sure.

MR YOUNG:   Your Honour is right, that we say that if a proper contextual approach is taken to the interpretation of the legislation, it ought to be clear that there are alternative meanings that can be given to the operation of these provisions.  The reason why we say that, notwithstanding that this section is no longer operative, there is a special leave question are threefold.  They are these.  First, the Court of Appeal took as its guiding principle from the outset of the judgment the proposition that statutory interpretation begins and ends with the words “Parliament has used”; that is paragraph 1.  Later the court said that primacy must be given to the text.

Now, that is, with all respect to their Honours, a departure from what this Court has described as the modern approach to construction.  It is an appropriate case, in our respectful submission, in which this Court can give guidance so that an holistic approach is taken to the interpretation of legislation that takes account of contextual matters, purpose, legislative history and so forth ‑ ‑ ‑

KIEFEL J:   What would you have this Court say at the conclusion of arguing this appeal that it has not said before?

MR YOUNG:   That the textual emphasis on one provision, not being the decisive provision, has taken the recent references to the importance of the text to a length that was never intended, and it has produced a result – and I will come to this – which is not only extraordinary but unjust in the circumstances of this impost.  Now, that is one reason, your Honour.  The second is this.  If we are right that there are, or at least there is a real case that there are alternative meanings of the kind we contended for, that directly brings into play the principles concerning the construction of taxing statutes; Anderson’s Case and other like cases. 

The primary judge said that they were engaged, and if they are engaged it was quite clear that they would lead to a different outcome.  Now, the ongoing status or precise force of that line of High Court cases was left open by this Court in Alcan.  The primary judge points that out at page 13, paragraph 27.  The principles from the earlier cases included such things as “penal statutes should be construed strictly” and “ambiguity in tax statutes should be resolved in favour of the taxpayer”.

Now, Alcan left that open, saying that the fact that it was a tax Act remained relevant, without explaining precisely how, but that otherwise general principles of statutory interpretation applied.  This case, because of the result that arises, does directly expose the issue of the precise continuing force of Western Australian Trustee and Anderson and like cases.  That is the second reason.

The third reason is that the interpretation favoured by the Court of Appeal is open to substantial doubt and it has produced the substantial injustice that companies have been required to pay a levy in the order of 40 million, whereas the pro rata levy for a period of 46 days is in the order of five to seven million.  Now, if we are right that there is real doubt about the correctness of this construction, that is a result, in our submission, that brings into play the interests of the administration of justice having regard to the nature of the outcome.

The outcome is extraordinary and harsh.  If two alternative constructions are open then Cooper Brookes is directly in play in the sense that you take into account the harshness and capriciousness of the outcome as one of the reasons for favouring one of those open interpretations rather than another.  Now, I was going to return ‑ ‑ ‑

KIEFEL J:   I see the light.

MR YOUNG:   I do, your Honour, yes. 

KIEFEL J:   Thank you.  We need not trouble you, Mr McLeish.

There is insufficient reason to doubt the decision of the Court of Appeal in this matter.  Moreover, there is no question of general importance which would warrant the grant of special leave.  Special leave is refused with costs.

AT 2.21 PM THE MATTERS WERE CONCLUDED