Totalizator Agency Board v Com of Taxation

[1997] HCATrans 41

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S161 of 1996

B e t w e e n -

TOTALIZATOR AGENCY BOARD

Applicant

and

COMMISSIONER OF TAXATION

Respondent

Application for special leave to appeal

BRENNAN CJ
GAUDRON J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 13 FEBRUARY 1997, AT 12.31 PM

Copyright in the High Court of Australia

MR B.J. SHAW, QC:   If the Court pleases, I appear with my learned friend, MR C.M. CALEO, for the applicant  (instructed by Ernst & Young Legal Services)

MR S.J. GAGELER:   If the Court pleases, I appear for the respondent.
(instructed by the Australian Government Solicitor)

BRENNAN CJ:   Yes, Mr Shaw.

MR SHAW:   If the Court pleases, it is true that the provisions of the Sales Tax (Exemptions and Classifications) Schedule have altered since the time....for this case but the continuing importance of the question which arises is, in our submission, demonstrated by the affidavit material which has been filed.

GAUDRON J:   Why is that not a matter to be sorted out between government and government, rather than taking up the time of this Court?  It is eminently within the capacity of governments to sought that out.

MR SHAW:   They have sorted it out on the - - -

GAUDRON J:   Subject to this Court intervening, apparently.  Well, not expressly so subject but - - -

MR SHAW:   Your Honour, they made an arrangement that compensation would be paid in respect of sales tax amounts which would have been payable had the alterations not been made.  In our submission, that having happened, the importance of the question remains.

GAUDRON J:   I must say, for my part, I would not regard it as something that gave the case a special character warranting the attention of this Court.  I would have thought if governments are going to enter into agreements on that basis, then so be it.  The consequences should lay where they fall.

MR SHAW:   Your Honour, the fact is that for continuing importance I do have to rely the arrangement which has been made.  The fact is that the arrangement has been made.  It was not made, as we would understand it, with a view to troubling this Court because one imagines the matter would have been resolved before but it has not.  There is, in fact, a continuing importance of a financial kind to the governments and it is perfectly true, I suppose, in respect of all cases except perhaps criminal cases, that parties might, if they chose, come to some arrangement between themselves which would mean that this Court would not have to be troubled.  But nobody has ever suggested that the fact that cases might be settled is sufficient reason for the Court refusing to hear them, if they are not.       In our submission, this is a case of an ordinary kind which, it is true, could have been settled but has not.  In any case, we do have to rely on that and if that is insufficient, well, it is insufficient, and I have said what I can in support of it.

In our submission - I was going to say “the real hurdle” but in view of what your Honour says - the other hurdle which I need to overcome is to demonstrate that there is a good argument that the court below was wrong.  What the court held was that the TAB did not fall within either branch of item 126 in the First Schedule to the Act and that is conveniently set out in the applicant’s authorities at page 3, and it is:

Goods for use by:
(a) an Australian government; or
(b) an authority that is completely controlled by an Australian government, and whose expenditure is exclusively borne by that government; or -

something which does not matter.  It is to be noted in subsection (3) that:

“Australian government” means the Commonwealth, a State -

or Territory, in effect.  Now, in our submission, leaving out the presence of (b), there would be a good deal to be said that had “Australian government” stood by itself, defined in that way, for the proposition that “State” means “State” in the constitutional sense.  After all, section 17 of the Acts Interpretation Act says a State means a State of the Commonwealth unless the contrary intention appears.  One finds, looking, for example, at the Judiciary Act that “State” is used in that Act in that constitutional sense and one finds in the Sales Tax Imposition Act in section 4 an express adoption for the purposes of that Act of the meaning of “State” in section 114 of the Constitution. It is conceded that the Board here is the State for the purposes of that section.

The proposition that it is the State for the purposes of the item is met in this way.  It is said if you look at how the item stood before in the old Act, that is to say, item 74, one sees that an expression was used which has a much more confined meaning.

McHUGH J:   I think we have all read the judgments.  What you have to persuade us is that the views are wrong, both in terms of (a) and in terms of whether or not the expenditure is exclusively borne by the authority.

MR SHAW:   Indeed; one or the other.  If one looks at item 74 one finds that there what was exempted were:

Goods for official use.....by a department of the Government.....or an authority -

described in the same way precisely with a proviso for that in the case of trading enterprises, an arrangement is made for the payment of amounts of stamp duty - sales tax.  The proposition is, in our submission, that “a State”, as it now appears in item 126 is to be read in the same sense as “a department of the Government” in item 74 because the same dichotomy is adopted. 

Now, it is submitted that the words are very different:  “a department of the Government” is something very different from “a State” and the proposition made by Justice Hill is, in our submission, insupportable.  If I could go to page 49 of the application book, at the bottom of the page:

The 1992 legislation eliminated reference to a “department of ... Government” and substituted for it the simple expression “an Australian government” defined in Item 126(3).  It retained the dichotomy.....To construe the words “an Australian government” as encompassing all bodies which may be recognisable as the Crown.....is to give no effect at all to the dichotomy -

and he goes on.  So, first of all, he is there looking at the words “an Australian government” and not “a State” which is what, in our submission, he should have been looking at and, secondly, he has simply assumed that the same dichotomy has been adopted in the new item as occurred in the old when the words are, it is submitted, completely different.  He relies, in part, on what appears at page 45 in relation to the explanatory memorandum but, in our submission, here one has very different words which his Honour says are to be accorded the same meaning, despite their difference, on the basis of an assumed adoption of a former dichotomy which depended on the very terms which were used in the old item.  In our submission, that is merely to assume the answer.

One needs to, indeed, in respect of the other part of the item, to look at the literal meaning and see what that is and, in our submission, the literal meaning is the constitutional meaning and the presence of subparagraph (b) does not lead to the conclusion that the two, (a) and (b), are mutually exclusive but simply that there has been a minor extension in (b) which may encompass some of (a) but there is no reason to read them as mutually exclusive at all.  In our submission, the reasoning is simply not sustainable. 

McHUGH J:   Can you give me an illustration of an authority that is completely controlled by an Australian government which is not an Australian government?

MR SHAW:   There were two examples from the cases.  One was the Australian Hostels Case and the other was - I will find the example, your Honour, but there are cases of companies incorporated which are completed owned by the government and whose expenses are borne which simply do not seem to fall within the ordinary meaning of the Crown, and there are two cases which deal with that.  I will give it to your Honour in a minute.

As to the other branch, in our submission, the majority in the Federal Court cannot be right.  They said that the expenditure of the authority was not exclusively borne by the State because it was borne either wholly or completely by the Board itself.  Now, if I could just go back to what your Honour asked me.  It is the Australian Coastal Shipping Commission ‑ ‑ ‑

McHUGH J:   And O’Reilly.

MR SHAW:   Yes, your Honour, and the other one is the Commonwealth Hostels Ltd - - -

McHUGH J:   Bogle.

MR SHAW:   Yes, which is in 89 CLR.  The reason why we say the majority cannot be right in respect of that is because of the terms of item 74.  It will be recalled item 74 had a proviso and the proviso was that in the case of goods for the use of:

a department or an authority.....an arrangement has been made.....for the collection and payment by the State.....of sales tax upon the sale value of goods sold by the Government of the State.....and by every such authority.....in the conduct of an enterprise which.....is a trading enterprise.

So that it was contemplated that authorities completely controlled by and the expenditure of which is exclusively borne by the government of a State might include trading enterprises.  Now, trading enterprises necessarily have income and obviously the expenditure of such authorities would partly be met by the income of the trading enterprise.  If the meaning accorded to the phrase “by the majority” were true the proviso would be completely without effect.  So, it is submitted that that cannot be right.

Justice Hill adopted a different view of one which he had expressed in the Bank of Western Australia Case but it is submitted that when one looks at the facts of this case one can see that the expenditure of the Board is exclusively borne by the State, and for this reason:  a totalizator is
described in the definition section of the 1916 Act as, amongst other things:

a system used to enable persons to invest money on horse races.....with a view to successfully predicting specified outcomes.....and to enable the money left after providing for the payment of commission to be divided and distributed among those persons who successfully predict those outcomes.

Now, if one goes to the applicant’s authorities and looks at the 1964 Act, at page 20, it will be seen that in sections 12 and 13 of the Act - 12 is at page 20 and 13 is at page 23, what the Act does is legalise the operation of totalizators by the board.  It then creates a fund in the way which is dealt with first of all in section 13A at page 24.  It provides for the deduction of moneys refundable to investors to be taken out and a distribution of the balance in accordance with the provisions of the division.  One example of that is 13B.  Amounts, which are referred to in 13A(b) are partly paid to the Minister and partly retained by the Board as commission, and then other sections go on to provide that in various way.

The distribution is dealt with in section 14 and in section 14(3), at the bottom of page 27, it provides that:

The Board shall apply amounts paid to the Board as commission.....and.....any other income of the Board:

(a)  firstly in or towards paying the costs and expenses of the operations of the Board -

and then in various other ways, ending up with the balance going to racing clubs and the Greyhound Racing Control Board and so on.

So that what one has is a fund which is wholly created by the State.  It is a fund which - - -

BRENNAN CJ:   It is created by the bettors, is it not, by the investors?

MR SHAW:   Your Honour, it depends on two things, I suppose.  Firstly, on the statutory provisions which provide for legalising the activity and how the money is invested are to be dealt with and it then depends, of course, on somebody putting some money in.

BRENNAN CJ:   That is right.  When they put the money in the bets are received as agent for racing clubs.

McHUGH J:   That is the critical point, that the Board is merely an agency.

BRENNAN CJ:   Under 12(2).

MR SHAW:   Which section is your Honour referring to?

BRENNAN CJ:   Section 12(2) of the Totalizator (Off-course Betting) Act.

McHUGH J:   Section 12(2), it is at page 21.

MR SHAW:   It is true, your Honours, that the moneys are paid in by the investors and it is initially their moneys but then the funds are - - -

BRENNAN CJ:   No, it is not their moneys.  It is, when it is paid in, received as agent for the relevant racing club.  So, it is their money, the racing club’s money; subject to a statutory control of the fund.

MR SHAW:   Yes.  If I could take your Honours to 13A, your Honours will see that that section deals with money:

placed in a totalizator conducted by the Board in respect of any event or contingency in accordance with section 12(3) -

not 12(2), and the provisions there are slightly different.  But what your Honour says is true, the moneys do have to come in but the fund is created by the Act, that is to say, by the State and it could have provided for the amounts of commission all to be paid into consolidated revenue and then paid out to meet these various expenses.  Instead, it shortcuts it and what one has is a fund which is created in accordance with the legislation so it is the legislation set up by the State which provides for these funds.  In our submission, in those circumstances, it is possible to say that the expenses are exclusively borne by the State because it is the State which provides for the creation of a fund.

McHUGH J:   That turns the whole history of this legislation on its head.  It is the racing clubs that historically conducted the totalizator and then in

1964 they set up the TAB in which the TAB would collect bets as agent for the clubs but each club still conducted the totalizator and the money is the clubs’ money and the 1964 Act directs how that money is to be paid.  Certain money is to go to the TAB for conducting the operations and certain money is to go to the government and certain money is to go to the investors.  The TAB is, in effect, just a trader.  It gets an income; has its own expenses.

MR SHAW:   All I can say, your Honour, is it is set up by the State and the fund is one provided for in the legislation.

BRENNAN CJ:   Yes.  Well, we understand that.

MR SHAW:   If the Court pleases.

BRENNAN CJ:   We need not trouble you, Mr Gageler. 

The prospects of the applicant’s success on appeal if special leave were granted are insufficient to warrant a grant of special leave.  Accordingly it will be refused.

MR GAGELER:   I seek costs, your Honour.

BRENNAN CJ:   With costs, Mr Shaw?   Special leave will be refused with costs.

AT 12.53 PM THE MATTER WAS CONCLUDED