Permanent Trustee Australia Ltd v Commissioner of State Revenue [2004] HCATrans 43 (4 March 2004)

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Permanent Trustee Australia Ltd v Commissioner of State Revenue [2004] HCATrans 43 (4 March 2004)

Last Updated: 9 March 2004

[2004] HCATrans 043

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M277 of 2003

B e t w e e n -

PERMANENT TRUSTEE AUSTRALIA LIMITED

Appellant

and

COMMISSIONER OF STATE REVENUE

Respondent

GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 4 MARCH 2004, AT 10.20 AM

Copyright in the High Court of Australia

MR J.W. DE WIJN, QC: If it please the Court, I appear with my learned friend, MR M.K. MOSHINSKY, for the appellant. (instructed by Allens Arthur Robinson)

MR P.J. HANKS, QC: Your Honours, I appear with my learned friend, MR C.J. HORAN, for the respondent. (instructed by State Revenue Office of Victoria)

MR D.M.J. BENNETT, QC, Solicitor-General of the Commonwealth of Australia: If the Court pleases, I appear with my learned friend, MR G. WITYNSKI, for the Attorney-General of the Commonwealth, intervening as of right. (instructed by Australian Government Solicitor)

I am intervening substantially in the interests of the respondent, but would seek to address after the respondent because of a major matter on which we take issue with the respondent concerning its application to reopen the decision in Rowell v Worthing. If the Attorney-General for Western Australia makes submissions to the effect that the hotel is not a Commonwealth place, I would seek to have a reply to Western Australia in relation to that issue. If the Court pleases.

MR R.J. MEADOWS, QC, Solicitor-General for the State of Western Australia: May it please the Court, I appear with my learned friend, MR R.M. MITCHELL, on behalf of the Attorney-General for Western Australia intervening. (instructed by Crown Solicitor’s Office Western Australia)

MR M.G. SEXTON, SC, Solicitor-General for the State of New South Wales: If the Court pleases, I appear with my learned friend, MR I. MESCHER, for the Attorney-General for New South Wales who intervenes. (instructed by Crown Solicitor for New South Wales)

MR C.J. KOURAKIS, QC, Solicitor-General for the State of South Australia: If the Court pleases, I appear with my learned friend, MR R.D. DE PALMA, for the Attorney-General for South Australia intervening. (instructed by Crown Solicitor’s Office (South Australia))

GLEESON CJ: Mr de Wijn.

MR DE WIJN: If I could take the Court first to the Mirror Taxes Act and draw the Court’s attention to one of the key provisions. It is to be found at tab 2 of our chronology in the book of materials.

KIRBY J: How are you going to handle the application to reopen? You are going to deal with that in reply?

MR DE WIJN: I thought I would deal with that in reply, if that is convenient.

GLEESON CJ: If that becomes necessary.

MR DE WIJN: Yes.

GLEESON CJ: Yes.

MR DE WIJN: I am in the Court’s hands, but I thought I would do it that way. Can I take your Honours first to the definitions section, section 3 of the Mirror Taxes Act. The definition of “applied law”:

means the provisions of a State taxing law that apply in relation to a Commonwealth place in accordance with this Act.

Over to the next page, the definition of “scheduled law”:

in relation to a State, means a law that is specified in Schedule 1 in relation to the State, but does not include any part of such a law that is prescribed by the regulations for the purposes of this definition.

Then “State taxing law” is defined:

in relation to a State, means the following, as in force from time to time:

(a) a scheduled law of the State –

that is the ones we find in Schedule 1 –

(b) a State law that imposes tax and is prescribed by the regulations for the purposes of this paragraph;

(c) any other State law of the State, to the extent that it is relevant to the operation of a law covered by paragraph (a) or (b).

Section 4 is a curious provision. It says:

This Act has effect only to the extent that it is an exercise of the legislative powers of the Parliament under the following provisions of the Constitution –

and relevantly paragraph 52(i) of the Constitution. The charging provision, I suppose it is best described as, or the key provision, is found in section 6.

GUMMOW J: Just looking at section 4 for a minute, there is no reliance on section 51.

MR DE WIJN: There is no reliance on section 51.

GUMMOW J: Or section 98.

MR DE WIJN: That does not mean, with respect, that it would not be a law that would be capable of being enacted.

GUMMOW J: Quite. Well, I am not sure about that.

MR DE WIJN: Well, that is another argument, but in terms the Act says it is only an exercise of legislative power under section 52(i) and the other provisions.

KIRBY J: Have you ever seen that before?

MR DE WIJN: I have, and it is a curious provision. One of the things that - - -

KIRBY J: It would seem that an Act passed by the Federal Parliament is either valid or invalid under the Constitution.

MR DE WIJN: Precisely, your Honour, and throughout - - -

McHUGH J: Was there not some similar drafting in Newcrest, the legislation we considered in Newcrest?

GUMMOW J: Yes.

MR DE WIJN: Maybe, but one would have thought that the legislation was either valid or invalid.

KIRBY J: Maybe it is equivalent to saying our only purpose is to enact a law within those powers and if you think that it is only valid under another power it is not our purpose to enact the law.

MR DE WIJN: Precisely, but it is not as if we would say Parliament can choose where it gets its authority from. Particular laws are either authorised or are not authorised. This might limit the effect of the legislation so that if, for example, it was found that the law was not authorised under section 52(i) but it could be authorised under section 51(ii), then the law does not apply as a matter of interpretation of the statute.

KIRBY J: Is this explained in the second reading speech of the Minister?

MR DE WIJN: It is not explained in terms, but what the second reading speech does say is, in effect, we do not have to worry about the restrictions in section 55 or 51(ii) or section 99 because we are enacting the law under 52(i). What I think is a curious concept is - - -

KIRBY J: That was in case the Senate was watching.

MR DE WIJN: In case the Senate was watching. What seems to be the curious concept is that Parliament can choose to enact a law under a particular provision of the Constitution. They might say it is only effective to the extent to which it is within that power, but I am not at all sure that Parliament can pick and choose - - -

GUMMOW J: That is what they have said.

MR DE WIJN: Yes, that it is only an exercise of legislative power to this extent.

GUMMOW J: So it is a pro tanto modification of 15A of the Interpretation Act probably.

MR DE WIJN: Perhaps. Section 6 starts with another definition, “excluded provisions”:

excluded provisions, in relation to a State taxing law, means provisions of that law to the extent that they are excluded by paragraph 52(i) of the Constitution.

GUMMOW J: That is a defined expression.

MR DE WIJN: It is. Perhaps that means, if one interprets Allders into that paragraph, those provisions – that is excluded provisions in relation to a State taxing Act means those provisions insofar as they apply with respect to places acquired by the Commonwealth for public purposes.

GUMMOW J: It is defined in section 3.

MR DE WIJN: Yes, it is.

GUMMOW J: It means it is “inapplicable by reason only of the operation”.

MR DE WIJN: Subsection (2) is effectively the charging provision:

Subject to this Act, the excluded provisions of a State taxing law, as in force at any time before or after the commencement of this Act, apply, or are taken to have applied, according to their tenor, at that time, in relation to each place in the State –

and we emphasise the words “in the State” –

that is or was a Commonwealth place at that time.

Subsection (3) is again a curious provision. It says:

Subsection (2) does not extend to the provisions of a State taxing law in so far as it is not within the authority of the Parliament to make those provisions applicable in relation to a Commonwealth place.

It suggests that Parliament contemplated that some State provisions may not be able to be picked up and, as it happens, a similar provision was included in the Application of Laws Act 1970. Your Honours will find that at tab 4 in the bundle of materials.

It is almost the same word for word that is in section 4(5)(c). That is the subsection that says this section shall not:

(a) have effect so as to impose any tax;
(b) have effect so as to confer any judicial power; or
(c) extend to the provisions of any law of a State in so far as it is not within the authority of the Parliament to make those provisions applicable in or in relation to a Commonwealth place.

So the similar wording has been picked up. In subsection (4) the applied law has effect subject to any modifications and the modifications are provided for in section 8 and there are a number of ways in which modifications may be made. Regulations may prescribe modifications, or the treasurer of a State may, by notice in writing, prescribe modifications. Subsection (3) provides that “a notice under subsection (2) is a disallowable instrument”.

KIRBY J: Was there ever a report or a parliamentary paper that explained the purpose or principle behind this mirror legislation?

MR DE WIJN: Yes, there was. There was an explanatory memorandum.

KIRBY J: Nothing apart from the explanatory memorandum dealing with the clauses.

MR DE WIJN: No, I think there was only an explanatory memorandum - - -

KIRBY J: Where do we find that?

MR DE WIJN: At tab 11.

KIRBY J: Thank you. Do not take yourself off your path.

MR DE WIJN: I will take your Honours to it in due course. It was clear that it was a reaction to the decision in Allders. The explanatory memorandum makes that clear. The Mirror Taxes Act goes on to deal with a number of other miscellaneous provisions: jurisdictions of courts, procedures, certificates about ownership of land, et cetera.

KIRBY J: Does it imply that Allders came as a happy surprise to the federal Parliament?

MR DE WIJN: Yes, it does. It also implies that – yes, well I will not say any more - perhaps to the States, it was clear that the States have got together - - -

KIRBY J: It was not a happy surprise for them.

MR DE WIJN: No, it was not happy. Section 23 of the Mirror Taxes Act provides that the revenue collected under the Mirror Taxes Act must be credited to consolidated revenue and there is also, in section 23(4), an appropriation of the consolidated revenue, effectively to the States.

GLEESON CJ: Is this a law that could have originated in the Senate?

MR DE WIJN: We think not, because of the appropriation and because it imposes taxation – the main point. If I can turn now to the section 55 point, which is the first point we deal with in our outline, the point of principle raised by what I might describe as the section 55 point is as set out in paragraph 16 of our submissions, namely, whether a law which Parliament has exclusive power to make, pursuant to section 52(i) of the Constitution, which is also a law imposing taxation, is required to comply with section 55 of the Constitution. As a matter of construction - - -

KIRBY J: We had a case – it does not seem to be referred to in the submissions, or at least I have not seen it – in which there was discussion of the history of the Senate’s role and the purpose behind section 55. Do you remember what that case was? Was that the Queensland case involving State taxes? There was a case where this was discussed, since Allders, and I just could not find it referred to - - -

MR DE WIJN: Since Allders. Austin?

KIRBY J: No, it was not Austin.

MR DE WIJN: There was some discussion about section 55 in Austin.

KIRBY J: I will keep thinking about it if I can.

MR DE WIJN: We will follow it up, your Honour. We say that, as a matter of construction, there seems little doubt that section 52, which is said to be subject to this Constitution, is qualified by section 55, insofar as it is a law in respect of Commonwealth places which is also a law imposing a tax. It is clear, in our submission, that section 55 is not limited to laws authorised solely under section 51(ii), and we have referred in our written submissions to the Air Caledonie Case (1988) 165 CLR 462 and the Australian Tape Manufacturers Case [1993] HCA 10; (1993) 176 CLR 480. They were both cases where it was held that a particular levy – to use a neutral term – was a tax, and that although in the one case it was or could have been authorised under the immigration head of power and in the other under the customs head of power, it was still a tax and notwithstanding authorised under those sections had to comply with section 55.

GLEESON CJ: How do you deal with the scope of the expression “one subject of taxation” when you are dealing not with a general law imposing taxation, but with a law imposing taxation in respect of one specific or particular subject matter, such as Commonwealth places?

MR DE WIJN: With respect, the subject matter of tax is not the Commonwealth Places.

GLEESON CJ: The expression is “one subject of taxation”.

MR DE WIJN: Yes, and the cases indicate that one has to look at how taxes have been dealt with historically and what Parliament had in mind when it was looking at the issue and the subject of taxation, with respect, is not the Commonwealth place. The law is made in respect of places acquired by the Commonwealth for public purposes but the subject of taxation is either income tax or stamp duty or payroll tax, some of those well-established subjects of taxation.

GLEESON CJ: I understand that in the context of a general tax.

MR DE WIJN: With respect, your Honour, this is the imposition of 24, or whatever the number is, general taxes but made to apply in a particular location. The subject of tax does not change, the area of operation does. One might give an example where one has income tax but there might be special provisions that apply in relation to mining properties, for example. In section 122A of the Income Tax Assessment Act there is, or certainly used to be, incentives, I suppose, additional depreciation, allowances for expenditure incurred in respect of mining operations on a mining property. So the subject of taxation remains, we would say, with respect, income tax, but it operates in a particular area.

KIRBY J: This is the second question, is it not?

MR DE WIJN: It is the second question.

KIRBY J: You have to first meet a suggestion that section 55 does not cover section 52.

MR DE WIJN: We do.

KIRBY J: Notwithstanding the words “subject to this Constitution”.

MR DE WIJN: Perhaps, dangerously, the Chief Justice moved me off my track, but I wanted to deal with the point - - -

GLEESON CJ: No, you courteously answered the question.

MR DE WIJN: The first point we do have to make good is that section 52 is subject to 55 and perhaps I will return to that and come back to your Honour the Chief Justice’s question. We would say that as your Honour Justice Kirby pointed out in Eastman 200 CLR 465 - and I know your Honour was in dissent in Eastman, but not in this point – both sections 51 and 52 are concerned with the grant of legislative power and both are expressed to be “subject to the Constitution” and it would be strange, we would say, if “subject to the Constitution” meant something different in section 51 to what it means in section 52.

KIRBY J: Given that the purpose is to protect the role of the Senate in the enactment of legislation and given that that can be done both under section 51 and 52 and given the express language it seems to me very hard indeed to say that 52 is not governed by 55.

MR DE WIJN: With respect, your Honour, we would agree. The respondent relies, and we would say almost solely, on Buchanan. We would say Buchanan is, indeed, a very thin thread to rely on in this case. It was a case dealing with the territories power in section 122. Section 122 of the Constitution is not expressed to be subject to the Constitution.

GUMMOW J: Well, there are now territorial senators.

MR DE WIJN: Yes.

GUMMOW J: So 122 to that extent authorises, as I understand it, the creation of the position of territorial senators. So they get into the rest of the Constitution.

MR DE WIJN: They do and - - -

GUMMOW J: And Buchanan assumes the contrary, you see.

MR DE WIJN: And the point I was going to make, that as a matter of wording we are in a much stronger position - and the words “subject to” obviously are of some significance. There has been perhaps a reading down of, I would not say the Buchanan principle but the principle that section 122 is unqualified whatsoever. Before going to that, I just want to take your Honours to a short passage in Svikart v Stewart [1994] HCA 62; 181 CLR 548 at 561 in the joint judgment of Chief Justice Mason and Justices Deane, Dawson and McHugh, the paragraph starting at about point 2 of the page, nearly point 3, the first full paragraph:

Section 52(i) provides for the exclusive power to make laws with respect to the seat of government as well as places acquired by the Commonwealth for public purposes . . . That power is not made subject to the Constitution as is the power to make laws with respect to the seat of government under s 52(i).

The words “subject to”, we say, are important and that passage that I have just read was picked up and cited with approval by your Honours the Chief Justice and Justices McHugh and Callinan in Eastman at 333 to 334.

Now, we say, your Honours, that the reasoning in Buchanan relied very much on considerations peculiar to the territories power in section 122, as it was considered in the early part of this century.

GUMMOW J: And to the Senate as a States’ house.

MR DE WIJN: And the Senate as a States’ house. It concerned the power to make tax laws for a territory. By contrast, we say the Mirror Taxes Act enacts a law imposing tax which applies only to the six States. Notwithstanding that we are dealing with Commonwealth places, it is clear, we would say, that they are still part of a State in the Commonwealth in a political sense. The Commissioner’s submission says the States do not have any interest in Commonwealth places. With respect, that is not the case and not made out and entirely contrary to what was said in Worthing at page 124. Justice Windeyer, at the bottom of 124, the very last line, said:

Such places are quite different from territories surrendered to and accepted by the Commonwealth under s. 111 of the Constitution or otherwise acquired, within the meaning of s. 122. The difference is the difference between political dominion and a proprietary interest . . . When the Commonwealth acquires land within a State it becomes in a sense a tenant in fee simple. But the theoretical anomaly disappears if the fee be regarded as in reality merely a description of the nature and quantum of a proprietary interest –

And then down to the very bottom of the page:

The acquisition by the Commonwealth of places in Australia as post offices, naval and military barracks . . . does not mean that they cease to be in a political sense parts of the State within the geographical boundaries of which they lie. They are not like territories surrendered by a State according to s. 122.

At about point 4 of the page, his Honour says:

Territories surrendered to the Commonwealth by a State, and over which the Commonwealth exercises political dominion, can be properly called enclaves: places acquired and held by the Commonwealth as Commonwealth properties within a State to my mind cannot.

We would say it follows that the reasoning in Buchanan at page 327 to 330 would suggest that where the Commonwealth place remains part of the State in the political sense – suggest that it does – therefore Commonwealth taxing laws imposed in respect of such Commonwealth places should be subject to section 55, to ensure the protection that was intended to be afforded to the States and its residents.

The proposition that section 122 is not governed by other provisions of the Constitution is not something that can be accepted as absolute today. In Spratt v Hermes Chief Justice Barwick made the point at page 242 that section 122, although a broad power, was qualified, and the point was made again in Capital Duplicators [1992] HCA 51; 177 CLR 248 in the joint judgment - and I just need to refer to the pages without reading from them - at 272 in the joint judgment of Justices Brennan, Deane and Toohey their Honours say that:

the scope of section 122 may be qualified by other provisions in the Constitution –

and there is a reference to Spratt v Hermes in the passage of Chief Justice Barwick. At 276, at the bottom of the page, we have referred to these passages in our submissions, and 279, and in the judgment of Justice Gaudron at 288 and 287.

So we would say as a matter of statutory construction and as a matter of reading the Constitution as a whole, bearing in mind that Commonwealth places remain part of the States in the political sense Justice Windeyer described, it would be clear, we would say, that section 52 must be read subject to section 55 insofar as it imposes a tax law. The next question then is whether the Mirror Taxes Act fails to comply with the first and/or second paragraphs of the Mirror Taxes Act.

GUMMOW J: What is the consequence of non-compliance with the first paragraph for your case?

MR DE WIJN: The non-complying provisions go out - - -

GUMMOW J: Yes. What is the practical result for these assessments?

MR DE WIJN: The non-complying provisions go out. One of the non-complying provisions would be the objection provisions and they are the only place one finds objection provisions and one would then have an incontestable tax which would be invalid for that reason.

KIRBY J: You have to still overcome the second point which the Chief Justice was asking you about because it is one thing for 55 to govern 52. It is another to say that there is a breach of 55 in the way this Act is structured. There are two questions. One is whether, conceivably, the Constitution operates, and the second is, if it does operate has it been breached and there are strong arguments - - -

GUMMOW J: I am trying to get an answer to the first question.

MR DE WIJN: There are two paragraphs to section 55. The first is that:

Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.

That is the Dymond point, if I can put it that way.

GUMMOW J: And you say the net result would be an incontestable tax?

MR DE WIJN: What would happen is that the non-imposing provisions, the penalty provisions and all of those other provisions, would go and with it would go the objection provisions, because the only place one finds the objection provisions is in the ancillary provisions, and one would be left with an incontestable tax.

GLEESON CJ: That is the step I am just a little puzzled about at the moment. Let us suppose you had a law imposing taxation and nothing in the legislation setting up a procedure for objection and review. Why does it follow that a taxpayer cannot by any means dispute an assessment?

MR DE WIJN: One would have to find some other means of - - -

GUMMOW J: Well, they would just refuse to pay the debt. You have an answer to an action in debt.

MR DE WIJN: That may be the answer.

GLEESON CJ: We looked at this, did we not, in a case in relation to customs duty?

GUMMOW J: Yes, we did.

GLEESON CJ: A few years ago.

MR DE WIJN: The consequence of infringing the first part of section 55 is that the extraneous provisions drop by the by. It means there are no machinery provisions. It does not get us anywhere unless one somehow invalidates what is left.

GUMMOW J: Well, it does not get you anywhere if this debt point - - -

MR DE WIJN: Well, it does.

GUMMOW J: Yes, Malika v Stretton is the case.

HAYNE J: 204 CLR 290.

MR DE WIJN: The second paragraph of section 55 is the one that gets us a lot further, and that is:

Laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with one subject of taxation only –

We would say that one only needs to look at the schedule to the Mirror Taxes Act to see the disparate subjects of taxation: payroll tax, stamp duty, debits duty. Three more disparate subjects of taxation.

KIRBY J: That depends on how you classify it and that gets back to the Chief Justice’s question. If you classify it as a taxation designed to deal with the peculiar problem of Commonwealth places, then it passes muster, does it not? I know that that is not how it has been in practice read in the past, at least in State tax legislation/

MR DE WIJN: That classification, we would say, is highly artificial. That classification seeks to classify the subject of taxation by reference to the location in which it operates. That is not the subject of taxation. With respect, that is the geographical area in which it applies. In my example of the mining - - -

KIRBY J: It is the subject matter of the taxation. Maybe that is the distinction you draw, that it is not the subject. The subject of taxation is that upon which the taxation falls.

MR DE WIJN: The income, or the payroll tax, or the instrument in the stamp duty context. That is the subject of taxation. Just to repeat the example I gave before about the mining provisions – and one can no doubt think of a lot of other provisions – the subject of taxation is still income tax, but they might operate differently on a mining property, or on a primary production property, or whatever. One would not say, with respect, that the subject of taxation is primary production property - - -

GUMMOW J: One can approach this at large, but one approaches it through Resch’s Case, does one not?

MR DE WIJN: Your Honour is correct and if - - -

GUMMOW J: Resch’s Case says that the courts take what the Americans would call a deferential position, where the legislature takes a view as to what a subject of taxation is because there - - -

MR DE WIJN: Can I deal with that very point, your Honour? At paragraph 43 of the respondent’s submissions, it is a convenient place to find the passage. If I could ask your Honours to turn to paragraph 43 of the respondent’s submissions. The respondent there sets out a passage of this Court from the Second Fringe Benefits Tax Case [1987] HCA 38; 163 CLR 329 at 344. Over the page, page 14 of the respondent’s submission, in the second full paragraph there extracted the Court says:

Although the court is bound to insist on compliance with the requirements of s 55 so that the section achieves its purpose of enabling the Senate to confine its consideration in each case to a taxing statute dealing with a single subject of taxation, in applying the test stated above, the Court will naturally give weight to Parliament’s understanding that its Tax Act deals with one subject of taxation only.

Now, if we turn to what Parliament’s understanding was – and I ask your Honours to turn to the book of materials, to tab 11, the explanatory memorandum, and I ask your Honours to turn to paragraph 1.15. Your Honours will see from paragraph 1.15 that Parliament’s understanding was that section 55 simply did not apply. So Parliament did not have any understanding that it was dealing with a discrete subject matter of tax. It had in mind that section 55 might be a problem, but thought it was not a problem because it simply did not apply to section 52. Reading from the explanatory statement:

The limitation on the Commonwealth’s taxing power, precluding its use so as to discriminate between States or parts of States, does not apply to the Bill. The Government is also advised that the constitutional limitations on laws imposing taxation, requiring laws imposing taxation to deal with no other matter, and requiring such laws to deal with one subject of taxation only (Constitution, section 55), do not apply to the Bill.

GLEESON CJ: What is it about the expression “subject of taxation” that produces the consequence that where you have legislation like this aimed at a special and particular problem and a unique legislative response to the problem, that it is not capable of being regarded as one “subject of taxation”. Where does that expression come from?

MR DE WIJN: I am not sure where the expression comes from. It certainly appeared to be parliamentary practice, I think overseas in England, before our Constitution for taxing Acts to deal only with one subject in the traditional sense, and that has certainly been the assumption of this Court right through the last century.

HAYNE J: What, an assumption that this is a reflection of British parliamentary practice?

MR DE WIJN: No, an assumption that subject matter of tax meant a subject such as income tax or stamp duty or land tax. There is no other example that we have been able to find anywhere where the Commonwealth Parliament has sought, in one enactment, to pick up more than one traditional subject - - -

HAYNE J: This problem is a problem of first impression and to suggest, as you do, that the Court has previously assumed to the contrary is rather to draw a long bow, is it not Mr de Wijn? If this is a problem of first impression, it is a problem of first impression.

MR DE WIJN: With respect, your Honour, section 55 is a saving provision in the Constitution designed to protect the Senate and designed to have each “subject of taxation” considered separately.

KIRBY J: That is why I mentioned to you this has been discussed in a case recently, within the last two years, and the history and purpose of the provision of section 55 was discussed.

GUMMOW J: It was an issue in Austin.

KIRBY J: I recollect that it is explained in Quick and Garran.

GLEESON CJ: It is related to the problem of tacking, is it not?

MR DE WIJN: It is.

GLEESON CJ: How does a problem of tacking arise in relation to legislation of this particular kind? Do you mean the Senate might have thought, we are happy enough to have mirror tax legislation in relation to Commonwealth places in respect of stamp duty, but we are not too keen on mirror tax legislation in relation to land tax.

MR DE WIJN: Your Honour, I was perhaps too quick to say yes in response to the question of tacking. The tacking problem is the first paragraph of section 55, that is dealing only with imposition of taxation so to avoid having a law that deals with the imposition of taxation having something added on to it. The separate subject matter is a separate protection designed to ensure that one does not put together - - -

GLEESON CJ: You cannot present the Senate with a packaged deal.

MR DE WIJN: A packaged deal, exactly, a packaged deal of subjects of taxation.

GLEESON CJ: The House of Representatives cannot confront the Senate with a take it or leave it approach to a package of taxation measures. Why is Parliament not entitled to regard this particular law in this particular situation as a discrete taxing measure?

MR DE WIJN: It is a discrete response to a problem, but it is a problem, the Allders problem, that bears on a number of different taxes. So we have a problem perceived from the decision in Allders. It applies not just to one subject of tax, it applies to a number of subjects of tax, and it applies because particular subjects of tax apply in respect of a particular location. The location is the Commonwealth place. It is the relationship with the Commonwealth place that determines whether the States can or cannot impose the tax that has the required relationship. We would say it is entirely artificial to then sort of classify the subject of tax as the Commonwealth place.

It is the relationship with the Commonwealth place that gives rise to the inability of the State governments to legislate for those taxes, but that inability applies to a number of subjects of taxation. States do not impose income tax any more, but it could be income tax, it could be payroll tax.

GUMMOW J: It could not be land tax though.

MR DE WIJN: In fact, land tax has come in – it could not be land tax because the States cannot tax the Commonwealth.

GUMMOW J: Because of 114.

MR DE WIJN: Precisely, but land tax has, in fact, been included in the schedule by a regulation. It does not affect us because it happened after, but there may be provisions in the Land Tax Act where lessees, for example, might be deemed to be owners, so that there may be some overlap. But generally what your Honour Justice Gummow says is correct because the States could not tax the Commonwealth.

The relationship with the Commonwealth place is not the subject of taxation. It is the matter that determines whether the State has or has not exceeded its authority. The subject of taxation does not change and what the Parliament has done is, in fact, put together a package of disparate taxes and said, “Take it or leave it”. Now, as it happens, it was taken, but the subject matters of tax remain – we would say, with respect, stamp duty, stamp duty as they apply in the particular relationship; payroll tax, as it applies in a particular place – and we would say that is clearly the subject matter of taxation, not the relationship with the Commonwealth place. The relationship is not the subject matter.

HAYNE J: That is the subject of taxation is not acts, matters or things connected with the relevant locality?

MR DE WIJN: That is not the subject of tax. The subject of tax - - -

HAYNE J: Is the Stamps Act not relevantly a tax on the transaction?

MR DE WIJN: No, the Stamps Act that we are concerned with is a Stamps Act on instruments - - -

HAYNE J: I thought that was the dissenting view in Allders.

MR DE WIJN: The dissenting view in Allders was just because it is a duty on instruments does not mean there is not a sufficient relationship with the Commonwealth place.

HAYNE J: Because it is an act, matter or thing connected with the relevant locality, relevantly?

MR DE WIJN: Because it is in respect of the relevant locality, but the subject matter of the tax remains the instrument.

CALLINAN J: I would have thought that was clearly rejected in the joint judgement at page 676. That argument is really described there as a “slogan”. The first complete paragraph on page 676.

MR DE WIJN: The argument in Allders was an argument about relationship. Because stamp duty was a duty on instrument, it could not be in respect to a Commonwealth place. That does not change, with respect, what the subject of taxation is. Just because something is in respect to a Commonwealth place – take the income tax example again. Income tax might be payable on income derived from sources in Australia. The subject of the tax is the income. What determines whether it is payable is the source in Australia. One would not say the subject of income tax is Australia. Income tax might be payable by residents of Australia. So the relationship or the necessary test is residency, for example, but one would not say the subject of taxation is residence. The subject of taxation is the income. That is what is being taxed.

GLEESON CJ: It might depend on the context in which you ask the question might it not? The expression “subject matter of taxation” may have some flexibility about it.

MR DE WIJN: It may, your Honour, going back to the precise words of section 55 – “one subject of taxation”, not subject matter.

GLEESON CJ: Yes, well, first of all, that does not mean a person, does it? Although there is a section in which you could describe a person as a subject of taxation.

MR DE WIJN: We were not suggesting that it is a person, we were suggesting that it was the subject of taxation. The cases would say that it is to be determined by looking at what have traditionally been regarded as disparate and different subjects of taxation.

GLEESON CJ: That is what gives rise to my question. Whether or not, in a context such as the present, it is appropriate to be governed by what has traditionally been regarded in the context of general tax law as a subject of taxation. We are dealing with a very special and particular problem, you know.

MR DE WIJN: We are dealing with a special and particular problem, but the special and particular problem is a tax problem. One cannot get away from that. The Commonwealth - - -

GLEESON CJ: Going back to the relationship between the two Houses of the Federal Parliament, what is it about the relationship of the two Houses of the Federal Parliament and what has been done in the present case that gives rise to a problem?

MR DE WIJN: The problem is that - - -

GLEESON CJ: In particular, a problem of tacking, that is to say, presenting legislation on a take it or leave it basis in relation to a number of matters that the Senate might want to regard as different matters.

MR DE WIJN: One does not say there is not a problem because the legislation was passed. One looks at the protections that are put into the Constitution in respect of taxing laws. The Senate is entitled, and the States are entitled, to have put up one subject of taxation at a time. So that in a general sense if one was saying –leave aside the discrimination point and the preference point – but if one was saying, “I want to introduce a specific tax for Victoria”, one would have thought it would be clearly contrary to section 55 if Parliament said, “Well, you’re going to get a package and it’s going to include income tax, land tax and stamp duty”. That is just broadening the geographical area. One would have thought that was clearly contrary to section 55. The fact that this legislation deals with the relationship in a smaller geographic area does not change, we would say, the construction one gives to section 55.

KIRBY J: What is the history behind – in the English parliamentary practice and the struggles between Parliament and the Crown - over taxation. What was the history that preceded that, that is reflected in section 55? Was it that it is easier for Parliament to reject a particular taxing measure than it is to reject a whole swag of them and to interrupt the revenues of the Crown and that, therefore, it should be done bit by bit.

MR DE WIJN: Exactly, to avoid the “take it or leave it” package the Chief Justice mentioned. To avoid saying - - -

KIRBY J: But a robust Parliament could say, “Well, it’s too bad. We won’t have the lot”.

MR DE WIJN: A robust Parliament might.

KIRBY J: It is steeped in constitutional history here, and I am sure it is all explained in Quick and Garran, no doubt elsewhere, but in order to understand what 55 is getting at, it is helpful to know what the history behind it is. It is an ancient parliamentary history.

MR DE WIJN: I appreciate that, your Honour.

KIRBY J: And we have looked at it in recent years.

MR DE WIJN: Your Honour, could I take your Honours to paragraph 17 of our written submissions, page 8. It starts at page 7. The first paragraph of section 55 of the Constitution as related to section 53 was intended to prevent the practice of tacking. The purpose of the second paragraph of section 55 was to ensure separate consideration by each House of particular kinds of taxation, so that each would be considered on its merit and not just as an element of the overall package, and that is from the Second Fringe Benefits Tax Case. That may have been the case that your Honour Justice Kirby was referring.

GUMMOW J: These are federal considerations.

KIRBY J: The case I was referring to was one in which I participated, and I did not participate in that one.

MR DE WIJN: No.

KIRBY J: We have debated this in recent years.

MR DE WIJN: Perhaps Luton v Lessels [2002] HCA 13.

GLEESON CJ: That is the case about the collection of money owing by defaulting child supporters.

MR DE WIJN: So we say that the parliamentary history and the cases make it plain that the second part of section 55 was to ensure separate consideration of particular kinds of taxation, so that you just do not get an overall package as in this case. The way in which to resolve the problem, or the way in which to do it properly is to ensure, as has been done for 100 years, that each traditional subject of taxation, each subject of taxation and, with respect, it is difficult to see how the relationship with the place can be the subject of taxation - the subject of taxation is the - - -

GLEESON CJ: It depends on the degree of particularity or generality, but if you look at the Income Tax Assessment Act somebody reading through that might be able to identify many subjects of taxation within the Income Tax Assessment Act.

GUMMOW J: That is what Resch was all about, was it not?

MR DE WIJN: Precisely.

GUMMOW J: .....did not work.

MR DE WIJN: For that reason this Court has said you do not analyse the subject of taxation in the way economists might. You look at it in an historical sense and you look at what Parliament intended. Now, what is plain from the explanatory memorandum is that Parliament did not consider that this was one subject of taxation. Parliament considered that it did not need to comply with section 55, so it did not have to worry about it. So if one is looking at what Parliament had in mind, Parliament said, I do not need to worry about it. It did not consider it was dealing with one subject of taxation. If any inference is open from the explanatory memorandum, it is the contrary inference. It thought it was dealing with more than one subject matter, but it thought it did not matter.

HAYNE J: That seems to have put a gloss on what is said in Resch.

GUMMOW J: Page 223, 66 CLR about point 4. Section 55:

is concerned with political relations, and must be taken as contemplating broad distinctions between possible subjects of taxation based on common understanding and general conceptions, rather than on any analytical or logical classification.

MR DE WIJN: Yes, and the broad - - -

GUMMOW J:

What is the subject of the tax may be gathered from a general consideration of the enactment . . . that it is for the legislature to choose its own subject and that its choice is fettered neither by existing nomenclature nor by categories that have been adopted for other purposes.

So your reference to tradition is not right, I think, if Resch stands. It is always treated as authoritative in this field.

MR DE WIJN: The subject of taxation is on no view, we would say, the Commonwealth place. The Commonwealth place – repeating the submissions – but the Commonwealth place is not the subject of taxation. The subject of taxation is, in the case of payroll tax the wages, or in the case of stamp duty the document or the transaction, but that is not the - - -

HAYNE J: I understand you say that the Commonwealth place is not the subject of tax. That does not inevitably lead to the consequence that the subject of the tax is not taxation in Commonwealth places. Now, it may be that that is not a single subject, but simply saying that the subject is not the Commonwealth place does not lead to the conclusion you assert?

MR DE WIJN: The expression “taxation in Commonwealth places” is merely a general description. One could simply say that all Commonwealth taxes are Commonwealth taxes. That does not make Commonwealth taxes the relevant subject of taxation. That is just a generic description of all of the taxes. The subject of taxation is not the general description. It is the particular tax that this Act or the particular taxes that this Act picks up.

HAYNE J: It seems to me at the moment that the essence of your point is captured in Clause 1.1 of the explanatory memorandum by the use of the plural form:

provides the framework for the imposition of taxes.

At the moment, that is the essence of the point that you make.

MR DE WIJN: With respect, that is a good summary of the point, but the “taxes” that the explanatory memorandum refer to are the taxes picked up in the schedule, which are disparate taxes. It is, we would say, artificial and it would defeat the purpose of section 55 if one were able to just broaden the definition to say it is any Commonwealth taxes, or any taxes.

Can I go now to the section 99 point. The Commissioner’s argument in relation to the section 99 point appears at paragraph 49 of the Commissioner’s submissions. The Commissioner says:

The reference in s 99 to laws of “revenue” (at least in so far as it covers taxation laws) should be similarly construed as limited to laws which are supported, or are capable of being supported, by the legislative power conferred by s 51(ii).

Now, we say the imposition of taxes such as stamp duty in respect of Commonwealth places – or, for that matter, more widely – is capable of being supported under section 51(ii), no question about that.

The second point we make is that the words in section 99 are plain and they apply to any – we emphasis the word – any law of revenue. Clearly, we would say, the Mirror Taxes Act is a law of revenue no matter what head it is authorised under. To the extent that the expression “revenue” in section 99 of the Constitution is broader than the expression “taxation”, it would indeed be a strange result if, to the extent that revenue was broader, section 52 would be subject to section 99, but not otherwise. That seems to be the consequence of the Commissioner’s argument.

GUMMOW J: What do you say about the proposition in paragraph 55.2 of the respondent’s submissions ?

MR DE WIJN: Can I come to deal with that in a moment?

GUMMOW J: Yes.

MR DE WIJN: The third point about section 99 being subject to section 52 is that we say that if section 99 were limited in its application to laws only authorised under sections 51, 52 or 53, it would be otiose, except to the extent perhaps that there was a difference between discrimination in 51(ii) and preference. The cases tend to suggest that certainly there is no significant difference.

Now, to answer your Honour Justice Gummow’s question, if we make good the point that section 52 is to be read subject to 99, the next point we have to make good is that there was a preference. Could I take your Honours to the schedule to our written submissions. What we have done there is assumed that the particular agreement to lease was executed in each of the six States of Australia, and, on the assumption that the take-out amount was, in effect, a premium, as it has been assessed, we have calculated the different amounts of duty in each of the States.

Your Honours will see, in the second last column, the figures vary enormously from 762,000 in Victoria, 254,000 in New South Wales, to an excess of 2 million in the other States, the 2 million being caused by the other States assessing premiums at conveyance rates of duty. So one will see an enormous difference and preference being given, in this case, to New South Wales.

GLEESON CJ: I am not sure whether you told us about this earlier and I am not sure whether it appears from the statute, but do the taxes raised under this legislation go back to the State?

MR DE WIJN: They do. There is an appropriation in the Mirror Taxes Act in section 23 where the taxes go straight back to the State. The theory is the States bear the administrative burden of collecting when there is an administrative arrangement in place.

Now, the only criteria or discrimen that determines which of those amounts of duty is payable is where the Commonwealth place is located. That is the only factor that determines which amount of duty is payable. Section 6(2) of the Mirror Taxes Act makes that plain and, for example, in relation to New South Wales, section 164 of the Duties Act defines a lease as “a lease of land in New South Wales”. So the only thing that determines which of those amounts of duty is payable is the location of the property.

The respondent says this does not give a preference because it imposes a uniform rule. With respect, we say, that is not so. The Mirror Taxes Act imposes as one Act, one law of the Commonwealth, 24 different sets of provisions which operate so that significantly different tax outcomes arise solely because the Commonwealth place is located in one State or another. That is not the operation of a provision uniformly. The discrimen is the State and the cases make it clear that, if that is the case, then it is an unlawful preference.

Can I take your Honours first to Cameron [1923] HCA 4; 32 CLR 68. This was the case where they had a different cost value for livestock depending on the State in which the livestock was situated. First, at page 71 at about point 6, Chief Justice Knox says:

It is manifest that the fair average value, as found by the table of stock in different States varies according to the State in which such stock are found; and that this is the only discrimen pointed out in the table.

Over to the next page, page 72 at about point 4, the Chief Justice says:

I respectfully agree with this definition, and add that when the localities selected to furnish the discrimen are States or parts of States the discrimination is expressly forbidden by sec 51(ii) –

and the later cases say that there is not a lot of difference between that sort of discrimination and preference. Justice Higgins at page 78 at about point 7 or 8 says:

Two pastoralists may in fact make £1,000 net profit – one in New South Wales, the other in Queensland; and yet under these Rules they may be treated as making unequal profit, and be liable to pay unequal income tax. The only reason for this result is that one is in Queensland, the other in New South Wales.

Finally, Justice Starke at page 79, about the middle of the page:

A law with respect to taxation applicable to all States and parts of States alike does not infringe the Constitution merely because it operates unequally . . . On the contrary, a law with respect to taxation which takes as its line of demarcation the boundaries of States or parts of States necessarily discriminates between them, and gives a preference to one State or part thereof over another State or part thereof.

MR GLEESON: Once again, the word “preference” is a word that takes its meaning from its context and its practical application, is it not?

MR DE WIJN: Yes, and the preference in this case is given to taxpayers in New South Wales over taxpayers in Victoria or Queensland. The preference is to the person entering into the lease so that if my client chose to enter into this very same agreement in New South Wales he would be advantaged.

HAYNE J: How is that said to be a preference to one State, or any partner of, over another State?

MR DE WIJN: It is the people in the State. That is what Cameron and James made clear. It is not the State as a State; it is the people in the State. What Cameron made clear was that one was talking about the taxpayers in the particular State and the different tax result that arises because you have a different cost base for the cattle, or whatever it is. It is not the State, per se; it is the people in the State. So the taxpayer, Permanent, had it gone to New South Wales and entered into this very agreement would have been advantaged or Permanent No 2 in New South Wales would have paid a lot less stamp duty or duty under the Mirror Taxes Act. This is Commonwealth legislation imposing a Commonwealth tax.

GLEESON CJ: On the basis of local rules.

MR DE WIJN: No, with respect, not on the basis of local rules, on the basis that the Commonwealth Act enacts, as a Commonwealth Act, its own legislation. This is a Commonwealth Act. It happens to pick up the words in the State Act, but it is a Commonwealth Act imposing tax at different rates and the only discrimen is where you happen to be, which State you happen to be in.

HAYNE J: Can you have a discrimination between States or parts of States which does not give preference to one State or any part thereof over another State or any part thereof?

MR DE WIJN: The cases suggest that there is not a lot of practical difference between discrimination in section 51(ii) and 99, although the wording is slightly different. I think the suggestion is that you cannot have discrimination without preference, but you might be able to have preference with discrimination. The other way around - you might be able to have preference without discrimination, but not the other way around. On no occasion have the courts identified any significant practical difference between discrimination and preference. For section 99 purposes the preference is clearly given, based on the location of the particular Commonwealth place. It is the sole factor it turns on and that is precisely what happened in James - - -

KIRBY J: Its purpose is to equalise people in different States in order to ensure that taxes of this kind are not avoided. Its object is not discrimination, but equality, and it is one respectful to the federal scheme because it permits the States to fix the tax and this is the vehicle by which it is imposed.

MR DE WIJN: With respect, your Honour, it does that in a way that is not permissible under the Constitution. We have a situation where the States are prohibited under section 52 from imposing stamp duty and the other duties if they have the necessary connection with a Commonwealth place.

KIRBY J: Your theory would require that the Commonwealth levy a uniform tax throughout the Commonwealth, get a pot of gold and give a reimbursement, or give a fund, under maybe section 96, to the States.

MR DE WIJN: If the Commonwealth wanted to introduce stamp duty, for example, in respect of Commonwealth places, it could do so quite easily. It could do so in compliance with section 55 and it could do so at a uniform rate that applied uniformly in respect of each Commonwealth place. Your Honour’s example - - -

GUMMOW J: Commonwealth places are in parts of States. People might be back here arguing section 99 from another viewpoint.

MR DE WIJN: With respect, your Honour, the relevant discrimen is the State. Although the Commonwealth place might happen to be in a State, and would happen to be in a State, the relevant discrimen for section 52 purposes is the acquisition of a property by the Commonwealth for public purposes. So one would not be discriminating if one imposed a particular rate of tax in respect of transactions in a Commonwealth place because the Commonwealth place is ambulatory. It is not selected as being a geographical region within a State or a State itself. It is the same as the mining example that I gave to your Honours earlier.

If the Commonwealth enacted a specific provision such as it has in section 122 allowing special concessions for mining properties, or expenditure incurred on mining properties, one would not say that the discrimen is part of the State. It is the mining property wherever it happens to be within the State. What Cameron and James make clear is that the discrimen needs to be identified as a State or identified as a geographical region within a State – say, the east half of Victoria or something like that. The Commonwealth place, although it happens to be in a State, does not take a geographical area within the State as the discrimen. So we say the Commonwealth could easily enact a level stamp duty to apply in all Commonwealth places, and that would not infringe section 92.

Your Honour Justice Kirby’s question about the equalisation I think can be dealt with by this response. Assume for a moment that each of the States imposed income tax and each of the States chose to do that at a different rate - 10 per cent in Victoria, 20 per cent in New South Wales. It would not be permissible for the Commonwealth to say, “We would like to equalise all taxpayers in Australia. So what we are going to do is impose an income tax of 40 per cent in Victoria, to bring it up to 50 per cent, and 30 per cent in New South Wales”. That would clearly not be permissible. That is what, in effect, is happening.

The problem is caused, if it is a problem – and we say it is not a problem – because the authority to tax in relation to these places is given to the Commonwealth and the Commonwealth is required to exercise that power in a particular way, a non-preferential way.

HAYNE J: Now, does this limb of your argument depend upon equating discrimination and preference?

MR DE WIJN: No, your Honour.

HAYNE J: I understood it to argue from 51(ii) to the content of 99. Is that right?

MR DE WIJN: We would say that the preference – if I can just go to James - - -

HAYNE J: I had in mind what Justice Dixon said in Elliott [1936] HCA 7; 54 CLR 657 at 682 to 683, particularly his Honour’s remark at 683:

I agree that it does not follow that every discrimination between States is a preference of one over the other. The expressions are not identical in meaning.

I have not yet, I fear, understood what your submission is about preference. I understand you to say there is discrimination, but what do you say is the preference of one State over another?

MR DE WIJN: The preference is the lower rate of duty or the lower rate of tax that is payable by New South Wales. That is the preference to those residents of New South Wales. That is a preference.

HAYNE J: I understand that, but then what are you doing about the words “preference of one [State] over the other”? Are you equating a preference to those who transact business in a State with a preference to the State, or preference of a State over another, rather?

MR DE WIJN: Yes, with respect. It is the people in the State - - -

GUMMOW J: What do you mean by “people in”?

MR DE WIJN: Well, the residents - - -

GUMMOW J: They do not have to be a resident.

MR DE WIJN: Well, they do not have to be residents, but it can be any relationship.

GUMMOW J: Exactly.

MR DE WIJN: But it is the doing of the business in building the hotel in New South Wales. Had Permanent built the hotel, had Permanent No 2 built an identical hotel in New South Wales, it could have got a clear preference of some hundreds of thousands of dollars.

CALLINAN J: Why does that not discriminate between the States themselves, in the sense that it imposes a tax, which enables one to get more stamp duty revenue than another?

MR DE WIJN: I think your Honour might be right. Can I take your Honours back to Cameron at page 79? Although the earlier passages I read dealt with discrimination, Justice Starke goes on and deals with preference. At point five he says:

A law with respect to taxation applicable to all States and parts of States alike does not infringe the Constitution . . . On the contrary, a law with respect to taxation which takes its line of demarcation the boundaries of States or parts of States necessarily discriminates between them, and gives a preference to one State or part thereof over another.

And the passage that your Honour Justice Hayne referred to in Elliott, it is perhaps necessary to read on, at the bottom of page 683:

To give preference to one State over another State discrimination or differentiation is necessary. Without discrimination between States or parts of respective States, it is difficult to see how one could be given preference to the other. But I agree that it does not follow that every discrimination between States is a preference of one over the other. The expressions are not identical in meaning. More nearly, if not exactly, the same meaning, is the expression “discrimination against”.

We do not take it that his Honour Justice Dixon is saying that there is a major difference between the expressions. We rely on there being a clear preference and the figures bare that out.

GUMMOW J: One purpose of this law is, as Justice Callinan has been pointing out to you, to provide appropriations in favour of the States under section 23. You, naturally enough, are obsessed with the position of the taxpayer, but the statute is all about disbursement of moneys under section 23. Now, does that have any bearing on the application of 99?

MR DE WIJN: It certainly gives, from that point of view - - -

GUMMOW J: The relevant law, 99, can be section 23 of this Mirror Taxes Act, can it not?

MR DE WIJN: Yes. It certainly gives a preference to one State over another.

HAYNE J: In what sense?

MR DE WIJN: More money.

HAYNE J: The mere fact of monetary difference?

MR DE WIJN: Yes.

HAYNE J: That seems to require, does it, that under 96 grants must be equal between the States?

MR DE WIJN: I am not sure that that - - -

HAYNE J: That would be a large result to arrive at.

MR DE WIJN: Yes. No, we do not contend for that result.

HAYNE J: I understand that. If you pitch it at the bare fact of different amounts of money going to each State, that may be leading you down a path, so it needs to be a more refined analysis than that, I think.

MR DE WIJN: We have, as Justice Gummow has correctly pointed out, focused from the point of view of the taxpayer and the preference to the taxpayers, and we would submit we do not need to go any further than that.

GUMMOW J: What is the relationship then between 96 and 99? In other words, what is the source of the law of section 23? What is the constitutional foundation of section 23? Is it just section 81?

MR DE WIJN: It is 81 - - -

GUMMOW J: Is it just section 81?

MR DE WIJN: Section 81 is all one would need for the appropriation.

HAYNE J: That seems to open up the AAP Case.

MR DE WIJN: Well, we will not go down – we are content to say that the preference is clearly given to, in our case, someone who chooses to build the similar hotel in New South Wales, and that is the very sort of preference that section 99 was intended to avoid. If I could just finish this point by taking your Honours to James [1928] HCA 45; (1928) 41 CLR 442 at 456, a decision of Chief Justice Knox and Justice Powers. Your Honours will recall there were two challenges to invalidity in James, one was to the legislation and one was to the regulation. Their Honours say, at about point 2:

The provisions of the Act are general and apply equally to the transport of dried fruits from any one State to any other State, without discrimination of any kind. There is no provision in the Act which distinguishes between dried fruits in Queensland –

et cetera, and went on to hold that the Act was not invalid, but then went on, about the middle of page 456, to say the regulations were invalid because you could only get a licence in four of the States and not in the two other States. At 457.3, their Honours said:

In our opinion this affords a clear instance of discrimination between States or of a preference to one State over another State.

Justice Higgins, at the bottom of page 460:

The section we have here to deal with (sec. 99) uses the word “preference,” not “discrimination”, but as one cannot conceive of any preference without discrimination, my remarks are quite relevant to this case.

HAYNE J: The question is the converse of that.

MR DE WIJN: The question of whether there is a preference is ultimately a question of looking at the legislation and looking at how it operates. We would say that the figures in the table show clearly a preference to one State, or transactions in one State over another. There is a clear preference. The figures are significant. The section 51(ii) discrimination point, we repeat what we said in our submissions in relation to that. There is a preference for section 99 purposes. There is clearly a discrimination between the States and we point again to the table.

The last point I want to deal with is the impermissible delegation point and make the point that what the powers of modification do - your Honours will recall that the laws that are picked up, so to speak, can be modified and they can be modified in a number of ways. One is by the State treasurer, and in this case, the modifications were made by the treasurer of Victoria and they appear at page 566 of the case stated book in volume 3, and the ones relevant to the Stamps Act start at page 573 and they are, in effect, modifications which substitute for the “State” “Commonwealth”, or substitute for “Her Majesty” in right of the State “the Crown in right of the Commonwealth”

The point we make about the impermissible delegation, if that is a correct description of the point, is that the power in relation to Commonwealth places resides exclusively in the Commonwealth. What the Commonwealth has attempted to do is to give to a State executive, in his capacity as a State executive, power to modify the Commonwealth law and that is not a simple delegation. That is giving to a State executive who derives his authority from the State Administration Act - the State Mirror Taxes Act, section 7, gives to the State powers to modify the Commonwealth law in such a way that the modified law is not a law made exclusively by the Commonwealth.

KIRBY J: This argument of surrender of power or abandonment of power or delegation of power is often raised, but I do not remember it being a very successful stream of authority. Where did the stream reach its highest zenith?

MR DE WIJN: Well, we would say Capital Duplicators 177 CLR 282, Justices Brennan, Deane and Toohey at about the first full paragraph:

The Legislative Assembly of the Australian Capital Territory has been erected to exercise not the Parliament’s powers but its own, being powers of the same nature as those vested in the Parliament. The Governor-General’s power to disallow an enactment –

and the respondent relies upon that here -

under s 35 of the Self-Government Act does not alter the independent character of the legislative power which s 22 purports to confer on the Legislative Assembly.

Then skipping down to the next full paragraph:

Although subordinate legislation on a subject within the exclusive power of the Parliament, made under and in conformity with a law of the Parliament, is valid, the doctrine of Victorian Stevedoring does not extend to legislation enacted by a legislature in exercise of its own plenary power -

Now, what we have here is the Victorian treasurer being authorised by the Victorian Parliament to make laws, so the treasurer derives his authority from Victoria and Victoria is exercising its own plenary power. This is not a question of delegation. This is a question of the modifications to the Commonwealth Acts being permitted to be made by the State treasurer who derives his authority from the State Parliament.

HAYNE J: What do you mean by that last step, “who derives his authority from the State Parliament”?

MR DE WIJN: Section 7 of the State Mirror Taxes Administration Act permits the treasurer to enter into these modification agreements. The State treasurer needs to derive his power from somewhere, and if State Parliament could not enact these modifications because it would be exercising its own plenary power, contrary to the requirement that section 52 gives exclusive power to the Commonwealth – if State Parliament could not exercise those powers, nor could, we would say, a treasurer of the State who derives his authority from the State. His authority could be no higher than what the State had. So one is not delegating, but one is giving to the State, in exercise of its own plenary powers, powers to modify and, in effect, make laws which it is the exclusive domain of the Commonwealth to make.

For those reasons, we say that it is impermissible – we use the word “delegation” in inverted commas – to permit the Commonwealth treasurer to make the modifications that were made and were essential, because without those modifications the stamp duty, or whatever it is, goes to the
State. My learned friends say in their submissions, well, they can do that because that is an appropriation under section 23. With respect, section 23 in the Mirror Taxes Act, which deals with appropriation, only deals with appropriation once the money is in the realm of the Commonwealth, so to speak.

KIRBY J: The other way to look on this is that it is a form of co-operative federalism of the kind that the Constitution envisages, though I know that that is an expression that has been criticised as a mere slogan.

MR DE WIJN: I would not want to say it is a mere slogan. We would say - - -

KIRBY J: You say this is co-operation pushed beyond the boundaries of the constitutional limit?

MR DE WIJN: Yes, section 55, section 99. They are express provisions in the Constitution to deal with express questions of taxation, you have an exclusive power in section 52 to make laws in respect of Commonwealth places, and effectively the Commonwealth handballs aspects of that law-making power to the States. If your Honours please.

GLEESON CJ: Yes, thank you, Mr de Wijn. Yes, Mr Hanks.

MR HANKS: Your Honours, we seek leave to persuade the Court that the Court’s decision in Worthing and, of course, the cases that followed Worthing should be reviewed.

GLEESON CJ: Do you want to say anything in support of that application in addition to what you have put in your written submissions?

MR HANKS: Just a couple of short points, your Honour, only to elaborate some of the points in the written submissions, very briefly, your Honour. Your Honours will understand that our fundamental attack on Worthing is based on what we submit is a misconception on the part of the majority, reinforced in R v Phillips particularly, of the proper approach to characterisation in the context of section 52 with essentially the current orthodoxy or received wisdom derived from those cases, being that a State law which operates in relation to acts, matters or things in a Commonwealth place is, by reason of that, a law with respect to a Commonwealth place. That is an approach to characterisation which does not find any mirror in the approach adopted by this Court when characterising laws for the purpose of section 51.

The additional point that we would make, your Honours, is that if our friends who appear for the appellant are right and a law such as the Mirror Taxes Act made under section 52(i) by the Commonwealth can be attacked for discrimination between States or parts of States or for giving preference to one State or a part thereof over another State or a part thereof, then there is a serious inconvenience that results from the holding in Worthing - the serious inconvenience being that it will not be open to the Commonwealth to pass assimilative legislation of the type found not only in the Mirror Taxes Act but in the Commonwealth Places Act.

That is essentially, one might say, the substantial inconvenience which we apprehend could result, though this is to anticipate the Court’s reaction to the arguments that our friends have put, the serious inconvenience that could result from the propositions in Worthing. Essentially, although at one point Justice Windeyer eschewed the term and Justice Menzies embraced it in Worthing, a consequence of that case and of Phillips is to create enclaves where State law cannot run and, if our friends are correct, where the capacity of the Commonwealth to correct that vacuum is severely inhibited. Thank you, your Honours.

GLEESON CJ: A majority of the Court is of the view that your application should be refused.

MR HANKS: If your Honours please.

KIRBY J: I take the view, following Justice Deane’s opinion in Evda Nominees Pty Ltd v Victoria [1984] HCA 18; (1984) 154 CLR 311 at 316 that you do not need leave. However, I have seen nothing that convinces me that the decision in Worthing and the cases that have followed it were incorrect.

MR HANKS: Your Honours please. We will deal with the arguments that our friends have advanced, essentially in the same order that our friends advanced them. The first point that we make in our written submissions, and which we make now, is that section 55, which goes to the form of laws imposing taxation, does not control the form of a law passed under section 52(i). I make that submission for the following reasons. The majority of this Court recognised in Allders that the power in section 52(i) is plenary. Justices McHugh, Gummow and Kirby and Justice Gaudron who adopted their Honours’ reasons - - -

KIRBY J: It is plenary, but it is said to be expressly subject to the Constitution. That includes section 55.

MR HANKS: That is so, your Honour but, with respect, that is the beginning of the question not the answer to the question. When it is said it is subject to the Constitution it must mean subject to those parts of the Constitution that have application to the power under section 52.

KIRBY J: It would be odd if that governed 51 and not 52, where exactly the same words are used.

MR HANKS: Not odd, your Honour. When one calls - - -

KIRBY J: It strikes me as very odd.

MR HANKS: It is properly described, that is the power in section 52(i), properly described as a plenary power. If the effect of invoking section 55 to control that power is to impede this charge of the federal Parliament’s exclusive legislative authority then there is good reason for arguing that it is not subject to that constraint, just as the majority - - -

HAYNE J: That argument is delightfully circular, Mr Hanks. It is saying, is it not, that the power is unfettered; because it is unfettered, it is not fettered by 55. Well, yes, that has a wondrous symmetry.

MR HANKS: It has a starting point, your Honour.

HAYNE J: Yes.

MR HANKS: It does have a starting point, and the starting point is the reasons for judgment of the majority of this Court in Allders, the proposition that the power is plenary, there of course invoked in relation to section 51(ii) and the qualification on the power to make laws with respect to taxation. There their Honours, we would have thought, were unequivocal that the power under section 52(i) is not subject to the constraint expressed in the proviso or the rider to 51(ii). We simply invoke that principle and apply it to section 55. That is our first point. The power is plenary. If the exercise of the exclusive power would be in some way impeded and rendered impracticable then it is appropriate, we say, to adopt the proposition that section 55 does not control the form in which laws appear on the statute book where those laws are supported by section 52(i).

The second way in which we would advance this argument is to consider the function and purpose of section 55. Our friends have responded to some questions from the Court on that. As we understand it, it may simply be explained as a provision which prevents tacking, as that term developed in parliamentary practice through the 18^th and 19^th centuries in the United Kingdom. Its primary purpose is to prevent the House of Representatives from exploiting the weakness of the Senate which arises from section 53, its inability to amend certain types of money Bills.

CALLINAN J: It seems an unlikely proposition, does it not, that they should be excluded from consideration by the Senate? The imposition of a prohibitive tax by way of a rate, for example, or some other charge upon Commonwealth land imposed by the Commonwealth. It seems unlikely, does it not? I mean, you may well be right, but - - -

MR HANKS: With respect, that might put our argument too high. We are not suggesting that the Senate is excluded from considering Bills of this character.

CALLINAN J: Well, preventing their passage.

MR HANKS: Nor would the Senate be precluded from doing that. Section 54 would prevent the Senate from amending a proposed law imposing taxation - - -

CALLINAN J: You know what I mean. We are talking about degrees of obstruction and prevention.

MR HANKS: The Senate has - - -

CALLINAN J: It is still an unlikely proposition, is it not? It strikes you initially as an unlikely proposition.

MR HANKS: Not if it be accepted that these Commonwealth places as originally conceived are places, although remaining parts of States, where Commonwealth laws cannot run. They are enclaves. The interest that the States would have in those places is necessarily faint, for that reason. Justice Gummow suggested that the concept of the Senate as an institution representing the interests of the States may not have survived the addition of territorial senators, but, so far as the Constitution is concerned, the Senate remains the house that is directly chosen by the people of the States, with each State having – that is, each original State having - - -

GUMMOW J: No, I was directing attention to the reasoning in Buchanan.

MR HANKS: Yes, well, there are undoubtedly some aspects of the reasoning in Buchanan that cannot survive and have not survived in relation to Territories. But we would say that despite the addition of the four territorial senators, the Senate remains a house where the political interests of the States are represented and the function of sections 53, 54 and 55 of the Constitution, dealing with the political relations between the House and the Senate, has to be seen in that context.

GUMMOW J: The States do have an interest in what goes on in these Commonwealth places that are within their area.

MR HANKS: Does your Honour say they have an interest - - -

GUMMOW J: Which is manifested in the Application of Laws Act.

MR HANKS: They have an interest?

GUMMOW J: They have a political interest. We are talking about political interests.

MR HANKS: They have an interest, your Honour, but that interest was one that could not be realised without the co-operation of the Commonwealth, without the action of the Commonwealth.

GUMMOW J: Absolutely.

CALLINAN J: Their interest is readily apparent here. This case is really about a major hotel and the State might have an interest in liquor, the sales of liquor and taxes on sales of liquor, an interest in rates because other rateable property could be adversely affected. These airport sites now are huge. They are building all sorts of commercial establishments on them and I would think the State would have an intensive interest in many aspects of it – not just airports, but airports are good example.

MR HANKS: But the consequence of the operation of section 52(i) is that the interest cannot be realised. It cannot be given effect to. It is now a matter of exclusive Commonwealth responsibility.

CALLINAN J: If you are right in your argument, and only if you are right in your argument with respect to section 55.

MR HANKS: Your Honours, it is essentially a starting point for this argument that it is exclusive Commonwealth responsibility and, as I understand it, that is the consequence of this Court’s decisions from Worthing to Allders.

CALLINAN J: What about Commonwealth excise duty on liquor sold at an airport? Is that a law with respect to taxation?

MR HANKS: Yes, it is. That is a law with respect to taxation.

CALLINAN J: The Senate could not have anything to do with that?

MR HANKS: I am sorry, your Honour, I misunderstood. That would be a law with respect to taxation in its application outside Commonwealth places, but it would be supported by section 52(i) in that setting.

CALLINAN J: The Senate could not do anything in relation to that under section 55? If it were tax, say there were some other Commonwealth law in the same enactment not related to excise, section 55 would not apply, according to your argument.

MR HANKS: I think your Honour might be positing a hypothetical special Commonwealth places excise. It only works in that setting, with respect. It is not confined to Commonwealth places.

CALLINAN J: It may well be. You would have a duty free liquor, you see.

MR HANKS: If it is a general excise, then it would be caught by section 55 and any matter in there that fell outside the categories of permitted provisions would be, first, caught by the first paragraph of 55 and, if it dealt with another subject, the whole legislation could be invalidated. So our second point in support of this proposition which would exclude 52(i) laws from section 55 is that those are laws in which the Senate is representing the States has no interest of the kind contemplated by the cases that deal with or explain the purpose behind section 55.

Our friends have placed some reliance on what said in Capital Duplicators 177 CLR. In paragraph 23 of our friend’s written submissions it is suggested that there are statements in Capital Duplicators to the effect that section 122 would be subject to restrictions in 51(iii) and 99. As we understand it, our friends seek to invoke that line of reasoning to bring 55 to bear on 52(i). The relationship between these provisions that deal with financial matters is perhaps a little difficult, but in that case at 276, their Honours Justices Brennan, Deane and Toohey address, about point 7 on the page, this issue of:

the surrender of part of a State to the Commonwealth and its acceptance by the Commonwealth and its acceptance by the Commonwealth pursuant to s 111 –

this is in relation to the creation of a Commonwealth territory. It would be surprising if that removed the area –

from the operation of the constitutional provisions designed to create and maintain the free trade area.

Their Honours later proceeded on the assumption – and what was at issue in this case was whether section 90 applied to the territories power – at page 279 that unless section 90 did limit section 122, section 122:

would be a Trojan horse available to . . . defeat the express requirements of s 51(iii).

So their Honours, although holding that section 90 constrained the legislative power of the Territories under 122, saw a sharp distinction, it would seem to us, between section 90 on the one hand and section 51(iii) on the other.

Our friends also contend, in paragraph 24 of their submissions, that section 55 has been held to control laws made under heads of power other than section 51(ii), the power to make laws with respect to taxation, and our friends there refer to the Air Caledonie Case and to the Australian Tape Manufacturers Case. The first of those is in 165 CLR. Your Honours will recall that that was an attack on section 34A of the Migration Act, section 34A which imposed an arrivals clearance fee, in effect. Your Honours will see from page 466, the first substantial paragraph on that page:

The plaintiffs’ attack on the validity of s 34A took the form of two broad submissions . . . in the alternative. The first was to the effect that the provisions of the section could not properly be characterized, for constitutional purposes, as a law with respect to any of the designated heads of Commonwealth legislative power.

Now, this was the plaintiffs’ argument and it is clear from the catalogue that is then set out of the Commonwealth’s answer – the Commonwealth invoked various heads of power but not the power with respect to taxation. Their Honours went on to say:

The plaintiffs’ other broad submission was to the effect that the purported exaction of the immigration clearance fee was “taxation” for the purposes of s 55 –

So there were these two lines of attack: not a law with respect to any of the nominated heads of power; alternatively, it imposed taxation and breached section 55. Their Honours then said at point 7 on the page:

Since the question of characterization raised by the plaintiffs’ first broad submission was postulated upon the assumption that s 34A is not, for constitutional purposes, a law with respect to “Taxation” (Constitution, s 51(ii)), it is appropriate to turn initially to the question whether the exaction of the immigration clearance fee would, for relevant purposes, be taxation.

Then the balance of their Honours’ reasons goes into this question as to whether it can properly be characterised as taxation. Your Honours will recall that the debate was essentially whether it was a fee for services or taxation. Their Honours concluded that it was not a fee for services.

Our short point is that when their Honours then went on to find that there was a breach of section 55, that followed their Honours having characterised section 34A as a law imposing taxation and we would say necessarily as a law with respect to taxation within section 51(ii). Respectfully, we would submit that the same observation can be made in relation to the other case that our friends relied on, Australian Tape Manufacturers 176 CLR. I will not take your Honours to that case, but we say that in that case, too, much of the analysis on the part of the Court is concerned with the question of whether the levy could properly be characterised as taxation in a case where the plaintiffs specifically pleaded that the imposition of a levy was effected by a law with respect to taxation.

There are, we would say in summary, good reasons why, when section 55 talks of a law imposing taxation, it is directed at a law supported by section 51(ii), a law with respect to taxation, and is not directed at a law supported by section 52(i). However, on the assumption that we may not persuade the Court on that threshold point, we turn to the two elements or limbs of section 55:

Laws imposing taxation shall deal only with the imposition of taxation, and

the consequence being that –

any provision therein dealing with any other matter shall be of no effect.

GUMMOW J: What does the expression “imposition of taxation” encompass in terms of the various provisions of the Stamps Act 1958 (Vic)?

MR HANKS: At the least, your Honour, section 17 plus the third schedule. If your Honours have the appellant’s materials, behind tab 7 one finds an edited version of the Stamps Act 1958. Section 17 is on page 18:

Subject to the exemptions contained in the Third Schedule and in any Acts for the time being in force, there shall be charged for the use of –

and the following two words have been altered by the notice from the treasurer, so it would now read:

charged for the use of the Crown in right of the Commonwealth upon the several instruments specified in the said Schedule –

that is, the third schedule –

the several duties and additional duties therein specified.

Your Honours have an extract of the third schedule, which occupies the last four pages behind this tab. As we understand it, it would be section 17(1) at least, plus the third schedule, which would impose the taxation and would be the law imposing taxation for the purposes of section 55. The question then is whether there are provisions in, as I say, the Stamps Act dealing with any other matter, that is, dealing with a matter other than the imposition of taxation.

Our friends have identified a number of provisions in footnote 34 of their submissions. There is a set of provisions which our friends have identified that are said to deal with administration and machinery, with returns and assessments, with the determination of questions of law and fact relating to liability, collection and recovery of the tax and criminal offences. The catalogue is, we accept, broadly descriptive, although some of the provisions that our friends have referred to were repealed. According to this print of the Act, they do not actually appear in the Act – but that is only a minor quibble. The description which our friends offer of the provisions we accept. The question is whether it can be said that those provisions deal with a matter other than the imposition of taxation. We have advanced this submission in our written submissions, that the approach adopted - - -

GUMMOW J: Where do we see that, Mr Hanks?

MR HANKS: Pardon me, your Honour, we will just turn that up. We apologise.

GUMMOW J: This could be quite important.

MR HANKS: Yes, 39, I believe, your Honour. Yes, your Honour would need to go back to 38, essentially. It is put very shortly there.

GUMMOW J: Well, they get into Dymond territory, do they not?

MR HANKS: We do, your Honour, we link it into Dymond territory. We say that the views expressed by the majority in that case were, with respect, incorrect. Too narrow an approach was taken to this concept of dealing with the imposition of taxation, and your Honours will recall that in that case, the Court found that the law which was under challenge was not a law imposing taxation so that the observations on what the impact of section 55 might be on such a law were necessarily obiter. Your Honours can pick that up, I believe, at page 21 in the judgment of Justice Fullagar who might be thought to be speaking on behalf of the majority.

KIRBY J: What is the exact citation, please?

MR HANKS: It is [1959] HCA 22; 101 CLR 11, and at page 21, at point 7 on the page, Justice Fullagar, after considering the provisions of the Assessment Act, found that the Act did not impose a tax and, therefore, the Act was not a law imposing taxation. It was in that context, nevertheless, that the view was expressed.

GUMMOW J: He accepted the Isaac’s view, did he not?

MR HANKS: That is right, your Honour. On the other hand, we might go, if I could, to Justice Taylor - - -

GUMMOW J: At 24.

MR HANKS: Exactly, your Honour, and his Honour has set out a list of those matters which, in his Honour’s view, dealt with the imposition of income tax in this particular case. First of all:

s 204 provides that any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified . . . Section 205 . . . accelerate the due date for payment and s 208 stipulates that income tax when it becomes due and payable shall be a debt due to the King on behalf of the Commonwealth -

Those provisions, his Honour said:

deal with the imposition of taxation and their true character is to be found in a particular examination of their substance and effect and not by reference to the legislative category -

His Honour went on to say, as we understand it, endorsing views expressed by other members of the Court, that:

“provisions for the assessment, collection and recovery of tax are provisions which deal with the imposition of taxation -

His Honour has there cited views expressed by Justice Higgins, Justice Starke, Chief Justice Sir John Latham and Justice McTiernan.

Now, if those views be correct – and we understand that Justice Menzies took the same approach. If I can take your Honours to page 26.8, and on the following page at point 5, where his Honour made the point that Justice Isaacs was:

alone in his opinion that a law providing machinery for the assessment, levying, collection and recovery of tax - - -

GUMMOW J: He was alone, but he was usually pretty vociferous. This is an example.

KIRBY J: A lot of his dissents have been vindicated, not least in the Engineers’ Case.

MR HANKS: It was not a dissent, with respect, your Honour.

KIRBY J: Not in the Engineers’ Case, it was not, but there were earlier decisions.

MR HANKS: One would think that Justice Isaacs wrote the majority.

KIRBY J: I was referring to the earlier decisions where he heralded the doctrine that ultimately was accepted.

MR HANKS: Yes. Nevertheless, your Honour, occasionally, we would suggest, Justice Isaacs might have been mistaken, with respect.

GUMMOW J: Are there any decisions of the Court where this difference of opinion has actually been critical to an outcome?

MR HANKS: No, we think not. That would probably be because, as has been pointed out, indeed, in this case, the Commonwealth has adopted the practice – one might describe it as a parliamentary practice – of separating the imposition from all the associated incidental provisions.

GUMMOW J: How far back does that practice go, do you know?

MR HANKS: I cannot answer that definitively, your Honour. I believe it goes back to before 1910, but I will try to answer that after lunch if I can.

GUMMOW J: Certainly by the time of the first income tax legislation in the 1910s, 1920s.

MR HANKS: Yes.

KIRBY J: And in the State sphere, so we are told in the written submissions, similar distinctions are drawn.

MR HANKS: That is the case, I think, in Western Australia, your Honour.

KIRBY J: I thought we were told in Victoria, but maybe not. Maybe I misunderstood.

MR HANKS: No, I think not, your Honour. I am certainly not going to tell your Honour that is the case in Victoria.

KIRBY J: What about in England? Do we know the parliamentary practice in the United Kingdom?

MR HANKS: The parliamentary practice in the United Kingdom at the time of Federation is explained in Quick and Garran. I will just get the reference for your Honour. That might be the most relevant inquiry. I have to confess that this passage deals with the subject of taxation point, rather than with matters other than the imposition of taxation, but there is a useful account and it is in section 256 of Quick and Garran. The learned authors use that system for identifying the paragraphs, the American section symbol, the “ss”.

As I read it, they say that during the 19^th century the government and the Commons adopted the practice of presenting to the Lords a single finance Bill at the time of the budget containing all financial measures and insisting that it be dealt with as a whole, so that all species of tax - - -

GUMMOW J: But they were looking at it through the focus of the second limb of 55, really. That is what drives the discussion, so it seems.

MR HANKS: That is so, your Honour, but nevertheless the fact that that was the practice - - -

GUMMOW J: Yes, you say that helps you.

MR HANKS: Not entirely – and I will come back to whether it helps us, your Honour. At the moment I was just responding to Justice Kirby’s question. We think that is a useful account from which one could conclude that there was no sensitivity in the practice adopted in the United Kingdom, no sensitivity to the issues presented by section 55.

KIRBY J: It is perhaps reflective of the struggle between a democratically elected House and another House which had all sorts of other people in it. Our Senate does not have that vice, but it does not have to be elected in the same way as the House of Representatives is directly - - -

MR HANKS: No, but, of course, one cannot readily and immediately translate the developments of English constitutional history and the relationship between the Commons and the Lords because of the characteristics that your Honour referred to into the Australian context, that is so, but there was an attempt, plainly, in sections 53 and 54 to inhibit the capacity of the Senate to deal with money Bills, just as parliamentary practice in the United Kingdom had developed - - -

GUMMOW J: Yes, I understand all of that, but how would that debate inform one way or the other? What is meant by this notion of “deal only with the imposition of taxation”?

MR HANKS: In the following way, I think, your Honour. One bears in mind that the function of 55 is to protect the Senate against being overborne or having its limited power of amendment abused so that it ought not be presented with matters that properly can be seen as distinct from the imposition of the taxation, either because they deal with other matters, matters other than imposition of taxation, or because they deal with a different subject of taxation.

KIRBY J: That is very well entrenched, is it not, in the federal practice now? You get the Appropriation Bill and you get other administration Bills which have all the details that are not actually the appropriation. Appropriation Bills, as I remember them, are very brief.

MR HANKS: Your Honour, there are always two Appropriation Bills, hand in hand, one for the ordinary annual services of the government and one for other purposes. I was coming back to our tax situation. We would say that what is required is to give meaning to these terms dealing with the imposition of taxation – give a meaning which will serve the purpose that section 55 is directed towards, namely ensuring that the Senate is not confronted with a Bill that has tacked onto it matters that it otherwise would be able to object to.

GUMMOW J: So it is the second paragraph of 53, is it? The first limb of 55 is protective of your second paragraph of 53.

MR HANKS: That is so. Yes, your Honour. Indeed, all of 55 is directed to that paragraph of 53. It is our submission that provisions dealing with assessment and other matters that are ancillary to the collection of the tax which is imposed are properly described as laws that deal with the imposition of taxation. Before I leave Re Dymond could I draw your Honours’ attention to - - -

HAYNE J: And are, therefore, subject to the prohibition on amendment?

MR HANKS: They would be if placed in the Bill. It is a Bill for a proposed law imposing taxation.

GUMMOW J: On the present hypothesis we have this statute which is such?

MR HANKS: Yes, indeed. Absolutely, your Honour. Of course, if the House of Representatives and the government chooses to present them in different Bills the inhibition does not operate, but that is a matter of parliamentary practice where, no doubt, protestations from the Senate may play a part in the practice that is adopted. To go back to Re Dymond on page 27, could I draw your Honours’ attention to the last paragraph which identifies the parliamentary convention in existence in 1893. At about point 7 on the page his Honour says:

the parliamentary convention, upon which ss 53 to 55 of the Constitution were unquestionably based, prevented the Lords from amending Bills which they received from the Commons dealing with aids and supplies, so as to alter –

those matters –

its duration, mode of assessment, levy, collection, appropriation, or management; or the persons who pay, receive, manage, or control it; or the limits within which it is leviable.

Then his Honour, over the page, goes on to talk about the parliamentary convention which:

developed in Australia of having separate “tax” Acts –

but if, as his Honour put it, a parliamentary convention which was operative in the United Kingdom, at the time that our Constitution was drafted and adopted, saw the Upper House as lacking the capacity to alter the matters that are listed there, and it would follow, in our submission, that the provisions in the Stamps Act, to which our friends draw attention, can be characterised as dealing with the imposition of taxation without doing violence to the principle underlying section 55.

GUMMOW J: Fairly relevant or incidental to the imposition?

MR HANKS: Yes.

GUMMOW J: Sir Hayden Starke said.

MR HANKS: That is so, your Honour. Can I make one further observation in this context. That reference to Erskine May’s Parliamentary Practice and the passage that his Honour has referred to survives in the 22^nd edition of Erskine May, published over 100 years later in 1997. I will just get the reference, if it might assist, your Honours.

KIRBY J: Is that in our papers or just in this secret collection of your own?

MR HANKS: No, it is not, your Honour. I found it in the library this morning, your Honour. In that edition there is a passage which is in identical language to the language used in the 1893 edition and paraphrased by Justice Menzies and can be found on page 797 of the current edition.

KIRBY J: What do you get from that?

MR HANKS: This proposition, that it does no violence to the object and purpose of section 55. Section 55 is not a mere formula, it has a particular function and purpose identified in many judgments of this Court. It does no violence to, and, indeed, is consistent with, that object and purpose that a law imposing taxation can include matters answering the description of the provisions that our friends object to, dealing with assessment, collection, appeals, reviews. Those are all incidental to the imposition of the tax, properly incidental.

KIRBY J: It does not seem very comfortable with the words that are used in the Constitution.

MR HANKS: The phrase, your Honour, is dealing with “the imposition of taxation”. The phrase is not “imposing taxation”. So the question is whether those other provisions relating to assessment, for example, valuation, objections, reviews, appeals, penalties for non-payment – can it be said of them that they deal with the imposition of taxation?

GLEESON CJ: I suppose the narrower the meaning you attribute to the expression “laws imposing taxation”, the wider the power of amendment you leave to the Senate.

MR HANKS: Yes and no, your Honour, because the power of amendment is itself subject to the possibility that that Bill may include some ancillary matter consistent with the reading of the first part of section 55 which we advance, so that by narrowing the concept of imposing taxation or imposition of taxation one does not automatically expand the amending power of the Senate. It is only the first step in that expansion. The second step would be to constrain the meaning of the phrase “dealing with the imposition of taxation”. Anything that properly falls within that category “dealing with the imposition of taxation” can be included in the proposed law and in the resulting Act without invalidity.

GLEESON CJ: Is that a convenient point in your argument to adjourn, Mr Hanks?

MR HANKS: It is, your Honour.

GLEESON CJ: Then we will adjourn until 2.00 pm.

MR HANKS: Thank you, your Honour.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.01 PM:

GLEESON CJ: Yes, Mr Hanks.

MR HANKS: Our friends also challenge some provisions in the Mirror Taxes Act itself on the basis that they deal with matters other than the imposition of taxation. If your Honours were to look at our friends - that is the appellant’s - written submissions, paragraph 18(1) refers to sections 8 through to 25 of the Mirror Taxes Act.

I will not trouble your Honours to look at those provisions in detail but they do, in our submission, deal with ancillary matters. They contain provisions that can fairly be described as relevant to, or incidental to, the imposition of a tax that is imposed by the Mirror Taxes Act. They deal with such matters as the modification of the applied laws, that is section 8 that our friends have taken the Court to, Commonwealth and State arrangements for the performance of functions under those laws. Those functions would be performed, of course, in relation to the assessment collection of tax. They deal with the receipts of the tax and to consolidated revenue and the appropriation of consolidated revenue in order to provide for the boomerang payment back to the States.

All of those are matters that are properly, in our submission, characterised as incidental to the imposition of the tax and on the construction that we urge on the Court, the construction of the first paragraph of section 55 they do not infringe that provision.

If I could turn then to the second paragraph of section 55, the requirement that laws imposing taxation shall deal with one subject of taxation only. Based on what his Honour Sir Owen Dixon said in Resch, recited in the Second Fringe Benefits Tax Case – his Honour said, at page 223:

[Section 55] is concerned with political relations, and must be taken as contemplating broad distinctions between possible subjects of taxation based on common understanding and general conceptions, rather than on any analytical or logical classification.

Based on that, your Honours, and accepting, as Sir Owen Dixon went on to say:

that it is for the legislature to choose its own subject and that its choice is fettered neither by existing nomenclature nor by categories that have been adopted for other purposes.

KIRBY J: But it is always subject to the Constitution.

MR HANKS: What does the Constitution mean, your Honour? That is the question.

KIRBY J: Yes, but the Parliament cannot be final by reference to the nomenclature that it chooses. That is the whole point of the rule of law.

MR HANKS: That is so, your Honour, but what is a subject of taxation? If the Parliament addresses taxation in a particular way it may, by doing that, by the way in which it treats the taxation in its own legislation, create a subject of taxation. It is in that context, as we understand it, that this Court said in the Second Fringe Benefits Case [1987] HCA 38; (1987) 163 CLR 329 at 343 at the bottom of the page, the very last four words:

“however, that it is for the legislature to choose its own subject and that its choice is fettered neither by –

again, this is a reference to Sir Owen Dixon –

existing nomenclature nor by categories that have been adopted for other purposes.”

Plainly, that was endorsed by the three members of the Court who delivered that joint judgment, the Chief Justice, Sir Anthony Mason and Justices Wilson, Dawson, Toohey and Gaudron.

KIRBY J: I just do not think that can be taken at face value, because it has to conform to the Constitution. That requires having a theory about what the constitutional provision is aimed at doing, understanding its history and purpose and its function in the modern Australian Constitution.

MR HANKS: Yes, your Honour. Undoubtedly, the second paragraph of section 55, as with the first, is designed to prevent tacking in the one Bill. It provides in particular the substantial sanction, namely, invalidity, but its purpose is to prevent tacking, so that the weakness of the Senate in relation to the amendment of laws imposing taxation cannot be exploited. That is its function and purpose, and always has been. We would respectfully suggest that there is no occasion to depart from that as the function or purpose of section 55, even with the passage of more than a century. The question is whether, by choosing to deal with a subject of taxation that it has chosen as a single subject, the government and the House of Representatives can be accused of exploiting the Senate’s weakness.

KIRBY J: But could it be said that here the lumping in of the various kinds of taxation prevents the Senate dealing severally and separately with different kinds of taxation, which apparently has been the federal legislative practice in the past – to deal with them separately?

MR HANKS: With respect, your Honour, this is a peculiar piece of legislation addressing the narrow application and operation of taxation. It is not a law of general application. It is confined to Commonwealth places, and as such it was, we would submit, open to the Parliament to choose to deal with that as a single subject. That is what the Parliament - - -

KIRBY J: The Senate raised no objection in the passage of this legislation to the combination? I mean, speaking for myself, I would not want to do anything that infringed on the respective powers of the Chambers of Parliament.

MR HANKS: It is not being suggested, your Honour, that there was any objection raised within Parliament, but essentially, the question before the Court must depend on whether the Act, as passed, infringes the second part of section 55. Does it deal with more than one subject of taxation? It is our submission that one derives, one characterises, one identifies what is the subject of taxation by looking at the provisions of the Act. One does not derive that by looking at the explanatory memorandum, and if one looks at the Mirror Taxes Application of State Laws Act it is plain that it is subject is with the application in Commonwealth places of taxes applying to acts, matters, persons, things in or connected with those places. That is its subject. Its subject is the taxation of matters connected with Commonwealth places, and if that is its subject then there is no violation of the second paragraph of section 55.

KIRBY J: We have some parliamentary materials in the appellant’s materials, but not any record of consideration of the matters in the Senate.

MR HANKS: Your Honour will see that what we have there is the second reading speech of the Minister, which is extremely brief – it might occupy seven or eight lines – and we have the explanatory memorandum, but that is all.

KIRBY J: He might have thought that brevity was a way of avoiding any difficulties.

MR HANKS: There are many other possible explanations, your Honour. The explanatory memorandum itself is not brief, it is quite extensive. So if I might return to the section 55 point, it is our submission that there is no violation of either the first or second paragraph of section 55. We therefore move on, if we might, to the attack that is based, as we understand it, on 51(ii) and 99 in the Constitution. In Allders, a majority of this Court concluded that the power conferred by section 52(i) is not subject to the constraint in - - -

KIRBY J: Just before you leave 55, is there anything in the United States Constitution or jurisprudence that is relevant? Do they have a similar provision, or not?

MR HANKS: I will hazard an answer to that, your Honour. The answer would be “No”. I am hazarding it without even looking at the Constitution, because it is my understanding that it is a regular practice to include controversial matters in appropriation Bills, in order to ensure that they will not be blocked. That is my understanding, your Honour.

GUMMOW J: We looked at this in Paliflex.

MR HANKS: I think we looked at a different issue - - -

GUMMOW J: Sorry, in the course of argument in Paliflex, if I remember.

MR HANKS: Yes.

GUMMOW J: The answer was, they do not have section 55.

MR HANKS: In Allders, three of the current members of the Court, Justice McHugh, Justice Gummow and Justice Kirby, together with Justice Gaudron, endorsed the proposition that the power in 52(i) is not subject to the constraint in 51(ii). With respect, we commit ourselves to that proposition, too. One can readily see why that would be so. If the power conferred by 52(i) to make laws with respect to places acquired by the Commonwealth – perhaps I should remind your Honours that the passage at which that proposition was endorsed in Allders is at page 679.

GUMMOW J: The answer in the United States is Article I, section 7:

All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments –

So they have part of 53, but they do not have 55.

MR HANKS: Yes, thank you, your Honour. That reference, your Honours, was 186 CLR 679. One can readily understand why the plenary power conferred by section 52(i) would not be subject to the constraint of 51(ii). Commonwealth places, necessarily, are located in States. That is inevitable. Indeed, as Svikart says, that is the only place you will find them.

GUMMOW J: No one disputes that.

MR HANKS: No, indeed, but they are located in the States and if the power conferred by 52(i) was subject to the constraint of 51(ii) so as to preclude discrimination between States or parts of States, the power given by 52(i) could not be exercised in relation to taxation matters. It is as plain as that. There would inevitably be a discrimination when the power was exercised between those parts of States that were Commonwealth places and those parts of States that were not. For the same reason, we would argue that the constraint in section 99, “The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof”, has no application to a law made under 52(i).

One can approach that by analogy with what was said in Allders about 51(ii). The very same arguments would apply, that is that the plenary and exclusive power to make laws with respect to Commonwealth places would be impeded, if not nullified, at least in relation to matters of revenue if section 99 applied.

One can also derive support from what was said in relation to section 99 in Morgan v The Commonwealth [1947] HCA 6; 74 CLR 421. Your Honours will recall that the issue there was whether a particular law relating to part of the national security regulations, in fact, so it would have been supported by the defence power - whether that law could be attacked for giving preference contrary to section 99 and the Court concluded that it could not. In that context, because it was said that this was a law for regulation of trade or commerce rather than revenue, the Court said that constraint only applies to laws that are supported by the trade and commerce power, which is section 51(i). Now, their Honours did not address directly whether section 99 might be confined to laws supported by the taxation power, 51(ii), but consistent with that reasoning, we would say that it should.

So there are reasons why we say that the threshold that the appellant must cross is not crossed. The appellant cannot invoke, in our submission, either 51(ii) or 99 in support of its attack on the Mirror Taxes Act. If it were able to cross the threshold, nevertheless, we have developed the argument, and I shall not say any more about it orally - we have developed the argument in paragraphs 55 to 58 of our written submissions, the argument as to why we say that the Mirror Taxes Act essentially imposes a uniform rule with respect to taxation and does not discriminate and does not give preference.

Perhaps, if I could respond to what I understood to be a question Justice Hayne raised of our friends. “Preference” in this context we would understand to mean some tangible benefit or advantage or some priority of treatment. We would derive that language from what was said in Elliott v The Commonwealth [1936] HCA 7; 54 CLR 657. The descriptions that I have offered, your Honour, come from page 671, point 7, the Chief Justice, Sir John Latham.

KIRBY J: But can there be any greater tangible benefit or advantage or treatment in this context than getting more money?

MR HANKS: I will come to that in a moment if I might, your Honour. I will just complete the short catalogue of references, if I may.

GUMMOW J: Sir John Latham cannot mean tangible. Tangible means you can touch it. He means perceptible, does he not?

MR HANKS: That is so, your Honour.

GUMMOW J: Tangible means you can touch it.

MR HANKS: Yes, I appreciate that. I think Sir John Latham may not have been using it in that literal sense, but more figuratively. Perhaps appreciable is what his Honour had in mind. Justice Rich at 678, point 7 and Sir Owen Dixon at 683, point 5 - those are passages where their Honours consider the meaning of “preference” in this setting.

Now, how does the Mirror Taxes Act operate? Does it give a preference in that sense or does it do no more than equalise the burden of taxes as between those acts, matters or things connected with the Commonwealth place and those acts, matters or things that lie outside the Commonwealth place, but in the same State?

KIRBY J: But the section is addressing the Commonwealth and the different States, not internally within the one State. It is addressing the position vis-à-vis other States, and vis-à-vis other States one State is getting more than another under a federal tax.

MR HANKS: No more or no less than the taxpayer would incur if the taxpayer - - -

KIRBY J: Yes, but that is intrastate. The Constitution is looking at interstate.

MR HANKS: I appreciate that, yes, your Honour, but the preference is not, in our submission, any benefit or advantage or priority of treatment because it is not, in this setting, appropriate to isolate the treatment of the Commonwealth places from the treatment to which those immediately outside the places would be subjected.

KIRBY J: Is that the way you approach it in the written submissions? Is that the best argument that you can put?

MR HANKS: That is the best argument I am going to put this afternoon, your Honour, yes.

KIRBY J: By the way, section 7 of the Constitution of the United States provides that a Bill for the raising of revenue can arise in either House of Parliament. It then has a complicated procedure for presenting them to the President; two-thirds can override the presidential veto and so on. But it does seem that they address their attention to the British parliamentary system and decided that they would not follow the same thing, or maybe it arose at an earlier time in the historical evolution of the United Kingdom Parliament.

MR HANKS: Yes, your Honour. Just to come back to Justice Kirby’s objection, there is - - -

KIRBY J: It was just a helpful intervention.

MR HANKS: Of course, your Honour, stimulating and helpful. Another way of analysing the effect of the Mirror Taxes Act is that it does formulate a uniform rule and the difference in treatment is a consequence of the differences in the State laws in the context of which that uniform rule operates. It is a CSR v Irving proposition, Colonial Sugar Refining v Irving, see - - -

GUMMOW J: 1906?

MR HANKS: Yes, your Honour. It would appear to us, with respect, that there has been no departure from that formulation through cases such as Cameron and James that our friends have referred to, Conroy v Carter as well. All of those adopt the same formulation, that if the differential treatment is a consequence of State legislation, the context in which the uniform federal rule operates, then there is no denial of either 51(ii) or 99.

Could we say something very shortly about a submission that our friends put towards the close of their submissions. Responding to our horrible consequences argument when we said in our written submissions that if the power in 52(i) was subject to 99 and was subject to 51(ii), it would not be possible for the Commonwealth Parliament to impose a tax confined to Commonwealth places in order to fill the vacuum found to exist in Allders.

KIRBY J: That is not quite right. They could impose in the normal way a federal tax which was uniform throughout the nation, they could do it at the top rate, pocket the difference and simply reimburse the States under section 96, if that can be done, in a differential way.

MR HANKS: And then somehow ensure that the money paid to the States found its way back to the poor taxpayers who have borne a double burden, the taxpayers outside Commonwealth places. It would be a very cumbersome process, your Honour.

KIRBY J: But one of the complaints here, as I remember it, is that there is a lot of paper to be filled in and – I think you raised this complaint – it is a very cumbersome - - -

MR HANKS: None of us likes paper, your Honour.

KIRBY J: Well, that is right, but given that you are stuck with some paperwork, it is just a different paperwork.

MR HANKS: There is a simple point that I wish to make in response to our friends. Our friends did not make the point that your Honour made. Our friends’ point was that the Commonwealth could legislate, could impose a tax which would be limited to, confined to, Commonwealth places, because, adopting the form of analysis favoured by Sir John Latham in Elliott’s Case, the places would not be chosen as parts of States, but for some other reason. They would not be chosen as such as parts of States. That was the way in which Sir John Latham formulated the escape clause, as it were, from section 99 in Elliott’s Case. He said here the particular places which get different treatment – registration of waterside workers, essentially, for employment – they are chosen as ports. They are not chosen as parts of States. Therefore there is no breach of section 99.

Your Honours will recall that Sir Owen Dixon sat in that case, but later, in Commissioner of Taxation v Clyne [1958] HCA 10; (1958) 100 CLR 246 at 266, Sir Owen Dixon expressed his inability to appreciate the distinction that Sir John Latham had sought to make in Elliott:

I find myself unable to appreciate the distinction between the selection by an enactment of an area in fact forming part of a State for the bestowal of a preference upon the area and the selection of the same area for the same purpose “as part of the State”.

In short, if section 99 did apply to a law made under 51(ii), the approach that our friends would favour as a means of allowing the Commonwealth to selectively tax Commonwealth places would only be upheld if one accepted the very artificial approach that Sir John Latham proposed in Elliott’s Case. It is a form of approach which, we would submit, respectfully, has lost favour with this Court. This Court is more concerned with substance when it comes to determining whether there has been some contradiction, some breach of the constitutional prohibition.

Moreover, if our friend’s argument was accepted, it would not be open to the Commonwealth to enact a law taxing a particular Commonwealth place, a specified place. We would remind your Honours that in Worthing’s Case the members of this Court, in the majority in that case, proceeded on the clear assumption that the Commonwealth Parliament could enact a place-specific law under 52(i). The Chief Justice, Sir Garfield Barwick at pages 102, point 1 and 103, point 3; Justice Windeyer at page 126, point 5 and Justice Walsh at page 136, point 2 – each of them accepted that the Commonwealth could legislate with respect to a specific Commonwealth place, but if 52(i) is controlled by 99 or 51(ii), that power is very much constrained. Indeed, it is impossible to see how it could be exercised so as to deal with taxation. There is one final matter that we should deal with before I conclude - sorry, just a few small supplementary matters.

KIRBY J: Delegation of - - -

MR HANKS: Yes, that is the one matter that I wish to deal with in substance. Before I deal with that, your Honours, my friend indicated to Justice Kirby that it was thought that it was Luton v Lessels where your Honour considered the history behind 53, 54 and 55.

KIRBY J: That was mainly focused on whether the law was a law with respect to taxation. It did not really deal with this matter.

MR HANKS: It is reported in [2002] HCA 13; 210 CLR 333 and the paragraphs we believe where your Honour did consider this were 96 to 103. That was our reading of the judgment. I think Justice Gummow asked me before lunch when it was that the practice - - -

GUMMOW J: It seems to start at least with the Land Tax Act in 1910.

MR HANKS: That is the earliest that we can find, your Honour.

GUMMOW J: That is the earliest I could find too. It may be some hidden opinion of Sir Isaac Isaacs when he was Attorney-General.

MR HANKS: Yes. We have not yet been able to unearth that, your Honour, but prior to the Land Tax Act it appears that - and the Commonwealth relied exclusively on customs and excise and the early excise tariff Acts do not observe this distinction - - -

GUMMOW J: No, they do not.

MR HANKS: So for some reason it manifested itself in 1910, it seems, for the first time. Justice Kirby asked my friend whether there might be any other account of the government’s intention or the purpose behind the legislation in the Parliamentary materials. The only thing that we have been able to identify is a document which is referred to in some of the submissions in this case, a press release from the Commonwealth treasurer dated 6 October 1997. Would it assist your Honour if I were to hand that up?

KIRBY J: If there is no objection.

MR HANKS: I have copies of that here, your Honour.

GLEESON CJ: Thank you.

HAYNE J: It is adding a new horror to construction.

MR HANKS: I am not inviting the Court to use it. If I could just deal with one other technical point. I did refer the Court to the 22^nd edition of Sir Erskine May and the learned Solicitor-General for Western Australia pointed out that I gave the Court a page reference that was one page out – I did say 797, it should have been 798. Thank you.

Now, if I could just deal very briefly with the delegation point, or the abdication point, as it is said. We have responded to that in our written submissions. There is only one matter that we wish to deal with orally and that is that as we understood our friends to say at the end of their submissions, one of the bases on which it can be said that this legislation involves an abdication of power is that State treasurers have the power to amend Commonwealth legislation and State treasurers derive that power from State law.

Our friends, as we understood it, referred the Court to the State Administration Act which is behind tab 9 in their materials, Commonwealth Places (Mirror Taxes Administration) Act 1999 (Vic), section 7 of which reads:

Despite any State law, a State authority has any power, duty or function that the Commonwealth Act authorises or requires the authority to exercise or perform.

In our submission, section 7 does no more than remove a possible impediment that might be present to the full operation of section 8 of the Mirror Taxes Act. The power of the treasurer to modify applied laws comes directly out of section 8(2) of the Mirror Taxes Act. That Act is behind tab 2. So the authority or power of the treasurer does not derive from State law. It derives from the law of the Commonwealth; it derives from section 8(2). It is to be exercised in writing - - -

GUMMOW J: There was a point that used to exercise Justice Selway when he was the South Australian Solicitor, which was, to put it shortly, in the absence of section 7 of the State Act, could the Commonwealth of its own force require the State functionaries to perform any function for the Commonwealth benefit.

MR HANKS: We would understand that section 7 was designed to address that but, your Honour, critically in that question that your Honour put was the word “require”. Section 8(2) does not require a State minister or State treasurer to do anything. It authorises, it confers a power. So, in our submission, the power comes directly from a law of the Commonwealth. It is, of course, subject to immediate and close supervision of a kind contemplated by section 8(3) because the notice is a disallowable instrument for the purposes of the Acts Interpretation Act.

The power itself is, of course, subject to withdrawal by Act of Parliament. So there is no loss of control. The treasurer’s authority comes from Commonwealth law. The Commonwealth Parliament is in a position, just as in Dymond’s Case the Parliament was said to be in the position
immediately to supervise and check any exercises of power by the delegate. Your Honours, those are the respondent’s submissions.

GLEESON CJ: Thank you Mr Hanks. Yes, Solicitor for the Commonwealth.

MR BENNETT: If the Court pleases, I will deal with the various topics involved in this case in the same order as that in which they appear in our written submissions. If I appear to touch lightly upon some of them, it is because they have been adequately dealt with by my learned friend, Mr Hanks, and I will endeavour not to repeat the matters which he has put. I can also pass very quickly over the early parts of our submissions because your Honours have refused leave to reopen Worthing v Rowell and Muston. I do not need to deal specifically with Part III in paragraphs 12 to 19 because that seems to follow from Allders and there has been no challenge to Allders.

As I have indicated, if my learned friend, the Solicitor from Western Australia, seeks to raise an argument that this is not a Commonwealth place because of the lease I would seek leave to have that dealt with in an additional reply.

GUMMOW J: It is not dealt with at the moment, is it, in your written material?

MR BENNETT: It is not, your Honour, no. In relation to the argument about delegation which commences at paragraph 23, in a sense that argument is irrelevant because it would have no effect on any relevant right of the appellant because of the matters set out in paragraph 71 of our submissions. We also point out in relation to the quotation from Capital Duplicators, that that case involved the nature of the grant of power to the Australian Capital Territory in the course of a grant of plenary power which used the words “peace, order or good government” and it was largely the significance of those words which denied the status of the government of the Australian Capital Territory as a delegate.

However, I should remind your Honours that there was a reference to the question of the significance of the power to disallow in the judgment of - at page 265 in the dissenting judgment of the Chief Justice and Justices Dawson and McHugh. Their Honours, at the top of that page, certainly gave greater significance than the majority to the significance of the power of disallowance. However, as I have said, it does not really affect the result in this case because as the majority stressed it involved a grant of plenary power, as in the early Indian cases at the end of the 19^th century. That was Apollo Candle, Burah and - - -

GUMMOW J: Apollo is from New South Wales - - -

MR BENNETT: Yes, I am sorry. Burah and there was another – there were two from India and one from New South Wales, as I recall, your Honour. I have forgotten the name of the third one. They were the cases which held that where there was a grant of plenary power it - - -

KIRBY J: But that would not be the only derogation from a legislature’s power that would offend the principle given that the Constitution confers power on the federal Parliament. A point would be reached where you would snap the connection with the federal power and the legislative function of the federal Parliament if it were giving away law-making power to another body.

MR BENNETT: Yes. The short point is, as we have said in our submissions, this case falls a long way short of that. It is a delegation for a purpose of ensuring that the Act achieves its objective. It is a fairly limited delegation in that sense and it is subject to disallowance. Of course, there are many cases in which the Commonwealth law, in an ambulatory manner, picks up State law and applies it as Commonwealth law. Perhaps the clearest examples are sections 68 and 79 of the Judiciary Act.

There are other examples, Hooper v Hooper, concerning the former Matrimonial Causes Act, and, of course, the Commonwealth Places (Application of Laws) Act, the effect of which was foreshadowed by this Court in Rowell’s Case. So we would submit there is no question in this case of any invalid application of power.

Turning to section 55, we make three submissions, as your Honours see. The first is that section 55 does not apply to taxation laws under section 52(i). The second is that it deals with only one subject of taxation, and the third is that, contrary to the obiter views of four of the seven Justices in Re Dymond, the mere fact that machinery provisions are included does not take it outside section 55.

CALLINAN J: I do not see myself, Mr Solicitor, how you can possibly have the imposition of tax unless you do have some effective means of collecting it.

MR BENNETT: Your Honour, if that is so, then the means are included in the word “imposition” in section 53.

CALLINAN J: I know what was said in Dymond, but I must say, with all due respect, it seems to me to be ludicrous to suggest that you can impose tax, or that there is an imposition of tax, unless there is some effective means of collecting it.

MR BENNETT: Your Honour, if that is so, the whole argument against me falls away.

KIRBY J: Yes, but nobody doubts that you need it, the question is whether you have to do it in two Bills. No one doubts you need the machinery.

CALLINAN J: I am not putting that, I am suggesting that there is no imposition without an associated means of collection. You do not impose tax by simply enacting legislation for its assessment.

MR BENNETT: If that is so, your Honour, section 55 does not have anything to operate on in this case.

KIRBY J: Or ever.

MR BENNETT: Yes, your Honour. The purpose of section 55 was to avoid tacking major matters of government policy having nothing to do with revenue - - -

KIRBY J: I do not see “major” in there. I will have another look to see if it says “major”.

MR BENNETT: Your Honour will not see the word “policy” either. When one looks at the purpose of section 55 in conjunction with section 53, there is simply no need for it to apply to this type of case. May I illustrate that in this way. In Re Dymond, there were two different views expressed. One was the view expressed by Justice Fullagar, with which three Justices agreed, that there were really three types of provision. There was the provision imposing tax, there was the provision which dealt with the imposition by dealing with matters such as deductions, who actually pays it, how it is calculated and so on, and then there was the third category of machinery provisions. There was a distinction between the second and third, so that machinery provisions did not fall within the words “deal with the imposition of taxation”.

The important point about Re Dymond, apart from all the observations being obiter, is that all seven of the Justices in that case held that there was a distinction between a law imposing taxation and a law dealing with the imposition of taxation. The point which I wish to make is that once one accepts that, once one accepts that the two phrases are not coextensive, it follows that the Constitution leaves at least a small area in which the House of Representatives can tack, to use the word that has been used in a couple of the cases, measures onto a Bill which cannot be amended by the Senate and thereby have provisions which could on their own have been amended by the Senate enacted into law. That follows on all seven judgements.

So the question the Court has to consider is the size of that area which is left between imposition of taxation and dealing with the imposition of taxation. What we submit is that machinery provisions are either within section 53 as imposition, in which case no problem arises, or, if not, certainly within the words “dealing with the imposition” in section 55.

KIRBY J: Does that submission conform to the practice of the Commonwealth Parliament?

MR BENNETT: Your Honour, the practice, we would submit, has been adopted for more abundant caution.

KIRBY J: But your answer is, “No, it does not”.

MR BENNETT: That is so.

KIRBY J: You are here for the Executive Government. We at least have to keep in mind our obligations and the constitutional obligations to the Parliament, including the Senate.

MR BENNETT: There is no doubt of that, your Honour. I do not suggest for a moment that one can ignore section 55, but it is important - - -

KIRBY J: Insofar as your submissions do not conform to the practice of the Federal Parliament, it puts one on notice that one has to tread with some care, because there is an ancient disharmony between Executive Government and Parliament.

MR BENNETT: Your Honour, the practice which has been adopted by the Parliament is totally consistent with the Parliament wisely taking a view that for more abundant caution it should take a particular approach in relation, generally, to taxation legislation. There are cases, of course, of which this is a prime example – and this I will deal with when I come to the general argument about section 55 – where the degree of inconvenience is such that it rather illustrates the inapplicability of section 55 in this area. The analogy upon which we draw is Buchanan’s Case. Now, of course, Buchanan’s Case concerned section 122, rather than section 52(i), but Buchanan’s Case had, on its facts, a lot in common with this case.

Your Honours will recall that what occurred there was that there was a single generic law passed when South Australia ceded the Northern Territory to the Commonwealth which picked up a vast array of South Australian laws and applied it to the Territory in much the same way as legislation in the 19^th century had done on the establishment of particular colonies and on the separation of particular colonies. The adoption of existing laws in a place when there is a change of control is, of course, a common feature of legislation.

Now, what was pointed out in that case, among other things, was that it would be quite unreasonable to subject the legislating authority to restrictions such as section 55 when a whole body of law was being taken over for a particular reason, and that is rather analogous to what is happening here where a whole body of laws in different States doing different things are taken over for a single reason, that single reason being to enable the taxation laws applying in the Commonwealth places to coincide with the laws in the surrounding State territory. That is the single objective and the single purpose.

Now, that is a reason, of course, why – it is the principal reason – the argument that the Act deals with multiple subjects of taxation is incorrect. It does not deal with multiple subjects of taxation. It deals with a single subject which we have identified in paragraph 46 of our submissions and that is matters relating to a Commonwealth place in respect of which the States cannot validly impose taxes. Perhaps one could add the words “and in relation to which they have purported to do so”. That is a slightly narrower version of the same subject; one could adopt either. That is a legitimate subject of taxation. That was the way the matter was approached.

My learned friend has quoted the explanatory memorandum which said it is not necessary to comply with section 55, but that again is a remark inserted, we would submit, for more abundant caution. It is quite apparent from the explanatory memorandum, when it is looked at as a whole, that the subject of the legislation is the subject which I have just identified. One sees that perhaps most clearly in paragraph 1.18:

The scheme of the Bill is to apply provisions which mirror those of certain State taxing laws in relation to Commonwealth places in the same State.

Then there is a definition. The words immediately before that in 1.16 are that:

Differences between the taxing laws - - -

KIRBY J: Which tab is this behind, please?

MR BENNETT: I am sorry, tab 11.

KIRBY J: Thank you. Did you say 1.18?

MR BENNETT: Yes, your Honour, and 1.20 perhaps:

The Bill thus seeks to impose mirror taxes only where State taxing laws are invalid.

It is that which illustrates the subject with which Parliament was concerned. Now, it may be that in order to avoid a more detailed discussion of the type which we are arguing about in this Court the explanatory memorandum said, “Look, this doesn’t apply because section 55 doesn’t apply to this law”. But, nevertheless, the central purpose is itself sufficient to demonstrate the subject that Parliament thought it was legislating in respect of.

GUMMOW J: Apropos the first branch of 55, in Osborne v The Commonwealth [1911] HCA 19; (1911) 12 CLR 321 at 326 Chief Justice Griffith referred to the English practice of Acts imposing taxation like the English Annual Finance Acts which both impose taxes and contain a complete scheme for their collection. So there was no necessary English parliamentary practice like that introduced here.

MR BENNETT: No, that is so, your Honour. There certainly were different views expressed in the Convention debates.

GUMMOW J: Tacking was another question. Tacking is putting in – what Sir Edmund Barton said at page 353:

measures of finance when unjustly bound together.

That is one species of tacking. Another species of tacking is a measure of finance with something quite unrelated to it tacked on.

MR BENNETT: Yes, but neither, your Honour, in my respectful submission, encompasses a measure of finance together with the necessary ancillary provisions to enable that measure of finance to be effected.

GUMMOW J: Well, I think that was Sir Samuel Griffiths’ view and I think that his view is your view.

MR BENNETT: Yes. Your Honour, that is dealt with in paragraphs 49 to 54, but one has to ask what is the interest of the Senate which is taken away if there is this difference between “imposition” and “deal with imposition”.

GUMMOW J: Amendment, I suppose.

MR BENNETT: Yes, amendment, your Honour, of machinery provisions on their own. Now, it is still, of course, open to the Senate to reject the whole Act, the whole Bill. If the phrase “imposition of taxation” is narrower than “taxation”, it is only in that area that the tacking can occur and the tacking simply prevents amendment of machinery provisions on their own. One has to ask, “Is that a serious derogation of the powers of the Senate?” bearing in mind that the purpose of the compromise was to give the House of Representatives a high degree of control over taxation legislation.

So whether one gets the result in the way that Justice Barton did it, the way he suggested in the Convention debates, by saying that imposition includes what is ancillary to imposition, or whether one gets there by saying that even if it is not, section 55 permits one to join the imposition with the machinery necessary to impose - - -

GUMMOW J: Because it is dealing with.

MR BENNETT: Because it is dealing with. Whichever result one takes, the relevant constitutional policy is successfully honoured. Why, one asks rhetorically, is it inconsistent with the division of functions that the Senate should not have the power to amend the machinery which is necessary to bring the imposed tax into operation?

There were some extreme examples given in one of the cases of a poll tax on persons, proposed by the House of Representatives, and an amendment by the Senate amending the word “persons” to “horses”, and the suggestion that by altering the incidence of it in some way one can totally change the nature of the imposition, and that if section 53 was limited to the section of the Act which said, “Income tax at the rate set out is imposed in accordance with this Act”, section 53 would have very little effect at all. So, in my respectful submission, it is the minority view of Justices Menzies, McTiernan and Taylor in Re Dymond which should be preferred. Of course, not being ratio, this Court is free to select between the majority and minority views in their obiter in that case.

There is reference in the speech of Acting Chief Justice Barton in Buchanan at page 328 to tacking being concerned with matters “extraneous to the object of taxation”. That again supports a broad view of the words “dealing with”, whatever view one ultimately takes of the word “imposition”. We submit that whether one gets there by giving a wide meaning to imposition, or whether one gets there by giving a wide meaning to dealing with imposition, in my respectful submission, even if section 55 applies, it does not affect this legislation.

Now, I have referred to the issue of whether section 55 applies at all beyond section 52(i). There are references in the judgments in Buchanan, referred to in our footnotes 60 and 61, which at least suggest that section 55 is so limited. In particular, might I remind your Honours of what was said by Acting Chief Justice Barton in that case. It is [1913] HCA 29; 16 CLR 315 at 329 to 330.

At the bottom of page 329:

I return to the strong connection between sec 51(ii) and sec 55. Both of them are in a form devised for the protection of State interests, a purpose having no place, nor any analogy, in sec 122. They are checks on a Parliament primarily intended to exercise great legislative powers with a due regard to those interests.

Then he distinguishes section 122. He then says:

I cannot think, then, that in legislating for a territory in pursuance of sec 122 Parliament is bound to have regard to the provisions of sec 55, which, in my judgment, are referable to “taxation” only as the word is used in sec 51(ii) – the taxation of a Commonwealth whose component parts are the States.

He says the reason that he distinguishes Territories is the taxation for them is not:

the taxation of the Commonwealth which is the subject matter of secs 51(ii) and 55.

So his Honour clearly regards section 55 as limited to section 51(ii) and his Honour’s reasoning would apply equally to section 52(i).

KIRBY J: It does not fit very comfortably with the language of the Constitution, those words which are common to 51 and 52. You have to effectively disregard those words and say the subject matter means that those words do not apply and that is doing a strange act of surgery on the text, given that each of them are grants of legislative power and that obviously you pick up Chapter III by those words. So why do you differentiate?

MR BENNETT: Your Honour, I suppose section 54 clearly deals only with section 51(ii). That is a starting point.

KIRBY J: But on the face of things it is not the same clarity.

MR BENNETT: It is not the same clarity, your Honour, but when one looks at the purpose of sections 53 and 55, that purpose being that section 51(ii) provided for “taxation; but so as not to discriminate between States or parts of States”, there was a fear that taxation might be imposed in a manner which was so high that it affected the interests of some States for the benefit of others. There was, therefore, a control given to the Lower House elected directly by all the people of Australia in a proportion different to that which occurred in the Senate.

KIRBY J: It is quite a significant difference, because Tasmania is a much smaller state, and therefore you are weighting the proportions differently in the Senate than you do in the House.

MR BENNETT: Yes, and therefore the imposition of taxation, which could not discriminate between States or parts of States, was very much a concern of the House, which was directly elected by all of the people in a comparatively equal manner.

KIRBY J: Yes, but unless you take quite a narrow view, you do get the problem of tacking. You are excluding the Senate from its constitutional role. Anyway, I think you have put the argument. I am not seeking to re-debate it all with you, but it is a quandary.

MR BENNETT: When one considers the close relationship between machinery provisions and imposition provisions, one wonders what is the great privilege which the Senate is being given and what is the great danger it is being protected against, in relation to the amendment of machinery provisions without amending the imposition. The imposition itself, if taken literally and extremely narrowly, is something one would hardly ever wish to amend.

Coming back to section 52, where one deals with taxation of Commonwealth places as part of the Commonwealth plenary power over those places, that is not the same sort of issue with which the lower House, elected equally by all Australians, would be concerned, with its primacy, or the Senate, with its residual privileges, in relation to it, because it is not something which is concerned with the same sort of issue as section 51(ii). It is a particular and narrower aspect of taxation.

KIRBY J: Yes, but what one has to keep an eye on in a case like this is that to solve a particular, peculiar and rather special problem, this Court does not send a signal concerning the interpretation of the Constitution that changes a century of the practice of the Parliament of Australia, which has very good demographic reasons behind it in the way legislation has been structured.

MR BENNETT: Your Honour, I can only repeat that the fact that Parliament, for more abundant caution, having on one occasion had legislation held to be invalid in this Court, and therefore it avoids that risk by doing things in a particular way – one does not treat that as some sort of admission that the dicta of this Court, which it chose to follow, are necessarily accepted as correct for all time. Many things are done for more abundant caution.

GLEESON CJ: Mr Solicitor, what would be the example of a taxing law with respect to “the seat of government”?

MR BENNETT: I suppose, your Honour, a heavier tax on parliamentarians’ salaries. One would have to identify the seat of government, which this Court has not done, but one could impose - - -

GLEESON CJ: It is a metaphorical expression, really, like seat of wisdom.

KIRBY J: I think we are within the seat of government.

MR BENNETT: Well, there are different views as to how far it extends, your Honour, but there is no reason why people should not live in the seat of government and maybe be subjected to particular taxes, to bring that - - -

GLEESON CJ: Well, a poll tax. Sir Garfield Barwick once said that if you imposed a poll tax on everybody who was in Canberra at midnight on 31 December, the result of that would be simply to create a traffic jam on the road to Goulburn at lunchtime on 31 December. Suppose you had a poll tax on people who work or live in the seat of government, and suppose you had a stamp duty on people who issued certain documents in the seat of government, would that be one subject of taxation or two subjects of taxation?

MR BENNETT: It might depend, your Honour, on the circumstances in which it was imposed. If there already was a range of taxes imposed by the Australian Capital Territory, which necessarily operated in the seat of government, and there was concern that the effect of section 52(i) was to exclude those taxes from operating in the seat of government and the Parliament decided to enable the ACT Government to impose those taxes by a composite Act, that, your Honour, in my respectful submission, would be a single subject of taxation. It might be a different subject if there were different types of taxes of that type imposed without such a common feature.

The subject matter has to be looked at in the context of the legislation as a whole, and the topic which I have identified in that hypothetical, as well as in the present case is, in my respectful submission, a permissible subject of taxation. There is no doubt if one were describing this Act to a student, one would not describe it as an Act dealing with stamp duty, payroll tax and a list of other taxes. One would describe it as an Act circumventing the - to use a slightly offensive word which I may resile from if I need to - effect of the inability of the States to impose their otherwise general taxation schemes in particular places.

KIRBY J: I have no doubt that is the way you would describe it, but perhaps the appellant would describe it as an Act imposing taxes of various kinds, and it would depend on the purpose for which you were describing it in the interest of the party doing the describing.

MR BENNETT: Your Honour, the only freedom or right which the appellant can point to is one which it gained by virtue of the operation of section 52(i), and we would submit it is open to the Commonwealth, with its powers under section 52(i), in effect, to avoid that consequence. A decision to do so is, in my respectful submission, a single decision to do a single thing in respect of a single overall subject of taxation. The cases, of course, say one can take a broad view of what is a subjective taxation.

That brings me to the question of discrimination. Your Honours, again we make the two separate submissions. First, the prohibition in section 51(ii) does not apply and, secondly, that even if it does, there is no discrimination. I will be making the same submission a third time in relation to section 99, that section 99 does not apply to a law under section 52(i) and that, if it does, there is no preference in this case.

Now, some of the arguments on the first and third of those submissions are very similar, as are the arguments on the second and fourth, and it is convenient to deal with them together. The starting point is that section 52(i) is geographic. It is a very wide exclusive power given in relation to certain types of place. Those types of place are going to vary enormously. They can extend, obviously, from lighthouses to airports to government departments to military bases to post offices, and no doubt many other facilities and places.

To suggest that Parliament has been given exclusive power to make laws for them but cannot single them out is, in our respectful submission, a complete inconsistency. It is clear, for the reasons given by my learned friend, that Parliament can under section 52(i) make laws for a single Commonwealth place. Whenever it does so, since Commonwealth places have to be in States, it is going to do something which has a discriminatory effect of some kind within that State, whether it is positive or negative.

For that reason, we would submit, the limitation which appears in section 51(ii) is quite inappropriate when applied to section 52(i). If we go back perhaps to the early years of air travel, if we assume that the only international airport in Australia was at a single place, the Commonwealth could clearly legislate in relation to matters such as taxation concerning that place under section 52(i), and it could hardly be an answer to say, “Oh, that discriminates between States because only one State has an international airport under section 51(ii)”.

KIRBY J: Maybe it would require legislation which acts evenly, but only bites in the place where it has application, and then you have no discrimination. If you build an airport in another place, it bites, and if you do not have one, it does not bite, but that is not discrimination.

MR BENNETT: It might even be narrower than that, your Honour, because it may be the Commonwealth would wish to legislate in relation to major international airports, airports above a particular size. It may be it would wish to legislate in relation to lighthouses, which obviously exist in larger numbers in some States than in others. In my respectful submission, the concept of a geographic power such as that contained in section 52(i) is inconsistent with a concept of non-discrimination, because to legislate in relation to Commonwealth places, and particularly where the power is an exclusive power given in the language normally associated with a grant of plenary power – to tie that to any concept of discrimination or preference would be to limit the power to an extent that could not have been intended by the use of the words in section 52(i).

That is the short answer. There is also, of course, an even clearer answer, that as a textural matter section 51(ii) does not in its form apply to section 52(i). It is simply an independent grant of power. What our learned friends seek to do is to read down the power in section 52(i) by reference to that limitation. One can look at other powers and see examples of cases where limitations which exist in section 51 simply could not apply.

GLEESON CJ: As I understand the argument against you, that is the one based on the amount of money that actually goes to the particular States, there would necessarily be a preference unless each State had exactly the same number of Commonwealth places.

MR BENNETT: That is exactly why section 99 could not have been intended to apply to section 52(i). If I can just return to the other examples of limitations on powers which could not possibly have been intended to apply to Commonwealth places, one of the powers that is given is fisheries in Australian waters beyond territorial limits. If a Commonwealth place included a lake or river which had fish, one would not say that section 52(i) does not apply to a law about those fisheries because they are not beyond territorial limits. One can take numerous examples of that sort.

The restriction on civil conscription in placitum (xxiiiA) has been held to apply only to medical and dental services. It certainly would not apply to a law in relation to a Commonwealth place, for example, conscripting people who live in lighthouses to turn on the light. Another example is State banking. Again, we would submit, it would be open to the Commonwealth to say no one shall open a bank on Richmond Air Force Base and to extend that to State banking. It would not be something done under the banking power, to which that is a limitation. It would be done under section 52(i).

One can go through section 51 and find numerous matters. Another example is “conciliation and arbitration for . . . industrial disputes extending beyond the limits of any one State”. Clearly the Commonwealth could enact legislation for settling an industrial dispute on a Commonwealth place, even if it did not extend beyond the boundaries of one State.

The restrictions imposed on the various powers are of their nature - in virtually all cases with the possible exception of section 51(xxxi) in some circumstances, and that is the.....argument - confined to those powers and in my respectful submission, would be quite inconsistent with the grant of a plenary power under section 52(i).

GLEESON CJ: But even if section 99 applies on the question of the meaning of “preference”, I suppose, although I do not know, that there are more Commonwealth places in New South Wales than there are in Tasmania. On that account alone, New South Wales is going to get more money than Tasmania under this legislation. So to apply section 99 you might need a slightly more sophisticated concept of preference.

MR BENNETT: One would, your Honour. It is inherent in the nature of the power under section 52(i) that almost everything one does is giving a preference. If one regulates trade and commerce, if one says planes landing in Sydney cannot land after 10 o’clock, but it is all right for them to land in Perth after 10 o’clock, that might be regarded as giving a preference by a law or regulation of trade or commerce. But again, if it is done under section 52(i), in my respectful submission, it is simply a matter of controlling what takes place in Commonwealth places.

KIRBY J: I am not sure that you are biting on the submission of the appellant which was not to do with a number of Commonwealth places, but you pick up as part of federal law differential provisions of taxation in the statutes of different States, that that is what causes the discrimination, that what purports to be a federal tax applicable throughout the nation, is in fact discriminating because of the way you have done it.

MR BENNETT: We have a different answer to that, your Honour. Our answer to that is set out in paragraphs 64 and following and that is that where one merely treats the law in a particular State as the basis for the application of a Commonwealth law, of its nature that is not to impose a preference. In that sense the word “mirror”, in the title to the legislation, accurately describes what it does and, of course, a mirror does not discriminate or impose a preference merely because it reflects different things. There are many cases in which this Court has said words to that effect. It is said in Leeth [1992] HCA 29; 174 CLR 455 at 468, a case I do not frequently rely on in this court, but it is said in the course of Leeth it arises very clearly in relation to the Judiciary Act in the provisions there which pick up State laws. It has been referred to recently by this court in Putland v The Queen where the differences which may occur between States in sentencing due to differences in the applicable State or Territory laws - - -

KIRBY J: But these are not taxing laws.

MR BENNETT: No, they are not taxing laws. No, your Honour.

KIRBY J: That is the point that 99 is addressed to, is it not? You can do what you like in other areas perhaps, but subject to any grand constitutional theory not yet embraced, but you cannot do it in taxing - - -

MR BENNETT: Leeth was an attempt to introduce such a theory and one gets it - - -

KIRBY J: Yes. It may one day live to see another day. Despair not, Mr Solicitor.

MR BENNETT: I know what your Honour says would make me despair but - - -

GLEESON CJ: Do not hold your breath either.

MR BENNETT: Yes.

KIRBY J: We are but short journeymen here.

HAYNE J: Just on this question of preference, Mr Solicitor, at 64 of your submissions you quote from Elliott but you omit the introductory words which are, I think, significant. The quotation from Justice Dixon begins:

In Crowe v The Commonwealth I said that in relation to trade and commerce, as distinguished from revenue, the preference referred to –

et cetera, and it then goes on with your quotation. Now, his Honour was careful to distinguish “revenue” from “trade and commerce”. What follows from that may be a separate question, but I think the quotation there needs to be read in full, rather than in the extract you have.

MR BENNETT: What we submit, your Honour, is that it does not discriminate between States to take their laws as they are and regulate conduct by reference to those laws. A very good example is the conferral of a deduction against Commonwealth income tax for State taxes paid by a commercial enterprise or, indeed, by a taxpayer in the course of earning assessable income under section 51. That may operate very differently in a State with high local taxes and a State which does not have high local taxes, but that would not offend against section 99.

The example that was put in argument this morning is a rather different example which might offend. That was the example, assuming one had State income taxes and one had a general federal law bringing them all up to the same percentage, so assuming they all had a percentage under say 50, a federal taxation law which said, “You pay the difference between the percentage in the State and 50 per cent”, might be on the other side of the line, but even there there would be room for some argument about whether that discriminated or merely acted upon circumstances.

Your Honours recall the remarks that were made by this Court in Austin where it was said that discrimination consisted in treating equals unequally or in treating unequals equally. What is sought to be done here is to create, to use the cliché we have used in our submissions, a level playing field and to say that in each State, where that State imposes laws of a certain kind those laws, those taxation laws will apply within Commonwealth places as Commonwealth taxes, because that is the only constitutional way they can apply and certain further consequences about appropriation and payment to the States.

That, in our respectful submission, is not discriminating, it is doing the very opposite. It is saying, “We will take what the States have or have attempted to do, or are doing, to the surrounding populations and bring the Commonwealth places to the same level as the surrounding States”. In my respectful submission, to describe the removal of a preference or discrimination as a preference or discrimination is not an appropriate use of language. It is not a preference to remove an effect of Commonwealth power which would otherwise cause a preference, any more than it is a discrimination to remove something which would otherwise cause discrimination.

GLEESON CJ: It may not be an easy concept to apply in this context, but suppose the Commonwealth law in question had dealt only with stamp duty, to get rid of the section 55 problem, and suppose the way it approached the problem about stamp duty flowing from the decision in Allders was to say that a fixed rate of stamp duty will be applied to all leasing transactions, agreements for lease or leases in relation to all Commonwealth places in all States, and then the amounts they collected will be paid to the States. Would that be more or less discriminatory than the present system?

MR BENNETT: Your Honour, in its operative effect, it would probably be more discriminatory, but, again, that would be something which would be permitted to the Commonwealth. It would not be an invalid discrimination or preference. One always has, I suppose, a range of choice when one sets out to avoid discrimination in deciding - - -

GLEESON CJ: What it would necessarily mean would be that taxpayers in some States would be paying more or less tax than their neighbours who were carrying on the same enterprises on non-Commonwealth land.

MR BENNETT: Yes.

KIRBY J: There is nothing in the section to prevent States imposing different taxes. What is in the section is to prevent the one polity of the whole nation imposing differential taxes. You have to look at - - -

GLEESON CJ: More accurately, taxes that give a preference to one State over another.

KIRBY J: Quite.

GLEESON CJ: It does not use the word “differential”.

MR BENNETT: It is open to any State, of course, to increase its taxes to the level of any other State and thus avoid the preference.

GLEESON CJ: But presumably the preference, if one exists here, is in the reimbursement or the payment. Section 23.

MR BENNETT: That is where it would be suggested as being, your Honour. If a Commonwealth law said, “The Commonwealth will pay to any State compensation for any damage done by Commonwealth vehicles in that State” that would not be invalid because there were more Commonwealth vehicles operating in one State than another, doing damage, giving rise to claims. The law is entitled to operate on unequals unequally, as long as it operates on equals equally.

What this law does is say to every State, “Whatever your laws are of a type which are struck down under section 52(i) in relation to Commonwealth places, we will reimburse you”. That is done on a overall basis and the amount is ultimately in the control of the State. The State can decide whether to enter into an arrangement and the State can decide whether to have the relevant tax and at what level to have it.

GLEESON CJ: Is the question whether this law gives a preference to New South Wales over Victoria, or is it whether it gives a preference to New South Wales taxpayers over Victorian taxpayers, or both?

MR BENNETT: Your Honour, the reference to part of a State suggests it has to be both because part of a State may not be a legal polity in its own right.

KIRBY J: That phrase rather suggests you concentrate on the practical operation. In practice part of a State is not looking at it solely as the State as a polity; it is looking at its operation in the grassroots.

MR BENNETT: Your Honour, it is an unusual concept that one gives a preference where the person who is said to have been disadvantaged by the preference has the ability to avoid the preference operating. If the Commonwealth were to say, “We will make a grant to each State of an amount up to $100 per resident of that State, the figure up to 100 to be determined by that State”, that would not create a preference because one State chose to take 100 and another State, altruistically, chose to take 50. In this case it is in the control of the States to enter into arrangements and to pass the relevant legislation. In my respectful submission, that is not the type of preference which is being talked about by section 99.

GUMMOW J: Are there any decisions, Mr Solicitor, construing the phrase “any law of revenue give preference”? I know there are lots of cases on 51(ii), but it is rather differently expressed.

MR BENNETT: We have dealt with that in paragraphs 57 to 60. What we have said in paragraph 59 – I am not aware of any case which specifically decides - - -

GUMMOW J: The 99 cases are all trade or commerce cases, are they not?

MR BENNETT: They are, your Honour.

McHUGH J: No, there is one, Moran’s Case. Moran held that section 99 did not apply to section 96.

MR BENNETT: Yes. All of the reasons which have led this Court to hold that the reference to trade and commerce refers to laws under section 51(i) apply with equal force to revenue being limited to taxation under section 51(ii), particularly when, as I have stressed a number of times, the plenary and geographic nature of section 52(i) makes it totally inapplicable to concepts of discrimination or preference.

HAYNE J: Mr Solicitor, just reverting to this point of law of trade, commerce or Revenue, Quick and Garran seem to suggest, particularly at pages 876 to 877 in section 413, that the reference to revenue was intended to encompass taxation, but see 51(ii), plus fees for service, say, for example, postal charges and matters of that kind.

GUMMOW J: Which would fall within the second sentence of section 53, which talks about licence fees and - - -

MR BENNETT: Yes. The second sentence of section 53 rather seems to assume that fines, licence fees and fees for service might otherwise have been thought to be taxation. They seem words that are very much put there for more abundant caution. It is a fear which is unlikely to have been realised in the constitutional history of this Court and in a sense it was almost certainly an unnecessary fear.

HAYNE J: But Quick and Garran instance if there were Commonwealth railways charging differentially between the States or parts of States, may be to prefer one State to another by a law or regulation of revenue.

MR BENNETT: It is hard to see, your Honour, why that would not be trade and commerce.

HAYNE J: True, but Commonwealth railway charges charging differentially, et cetera – perhaps so.

MR BENNETT: Yes. It is difficult in a modern context to see how revenue could be given that sort of wide meaning and, in my respectful submission, in the Constitution it should not be taken as having it merely because the drafters chose in section 53 for more abundant caution to make absolutely clear that that section did not apply to fines, licences, fees for service and so - - -

HAYNE J: Quick and Garran go on – and I do not want to prolong this – by saying that “To one State or any Part thereof” finds an analogue in the US Constitution in the words “to the ports of one State over those of another”, that it is concerned with this notion of trade or commerce in that aspect that was the central thrust of the provision.

MR BENNETT: Yes. One can, of course, have duties imposed on the movement of goods, which are subject to section 92, port fees and matters
of that sort which might – there might in some cases be a very real question as to whether a port fee was a fee for service or a - - -

HAYNE J: But that those were matters of high controversy at the time of Federation - - -

MR BENNETT: Your Honour, we came close to it in the Landing Fees Case where – Cathay Pacific, I think it was – where there was a great deal of discussion about whether landing fees were fees for service or something else. It may be that was one of the reasons “revenue” was inserted there in juxtaposition to “trade and commerce”.

If that is so, of course, it has an even more limited meaning, but we would submit, in the same way as trade and commerce has been limited to 51(i), it is appropriate to limit revenue to the immediately succeeding power, that of taxation, and to legislation passed under that power.

We have pointed out in Part IX of our submissions the effect of the modification. If the modification is ineffective, it has very little effect as we have pointed out, because the Mirror Taxes Act itself provides for the relevant consequences, and the modification made by the treasurer merely makes that a bit clearer.

We have prepared a bundle, for the convenience of your Honours, of extracts from cases which discuss the first paragraph in section 55. There are quite a number of them, and it is convenient to have them all in one place when one wishes to refer to arguments. I have provided copies to my learned friends. Now, your Honours, subject to anything the Solicitor for Western Australia wants to submit to the effect that this is not a Commonwealth place because a lease has been granted - - -

HAYNE J: One would not want to think you are sensitive about the point, Mr Solicitor.

MR BENNETT: No, your Honour, but I am always sensitive when a State Solicitor says it should merely be pointed out to the Court that – and goes no further.

GLEESON CJ: Yes, thank you, Mr Solicitor. Mr Solicitor for Western Australia.

MR MEADOWS: May it please the Court. I venture to say that my learned friend’s fears are unfounded. We have drawn that matter to the attention of the Court, but I do not propose to address any submissions to it. Perhaps it is a matter for another day.

GLEESON CJ: Just in case we had not noticed it.

MR MEADOWS: We would adopt the submissions that have been made by my learned friend, Mr Hanks, and the Solicitor-General for the Commonwealth, which we see as being in harmony with each other, and we would rely on our written submissions.

GLEESON CJ: Thank you, Mr Solicitor. Mr Solicitor for New South Wales.

MR SEXTON: If the Court pleases. There is only one short matter that we would say in addition to our written submissions and that concerns the notion of preference under section 99 and discrimination under section 51(ii), which are not dealt with in detail in those submissions. It is simply to say that it would seem to us to be a very unusual and unlikely result that this legislation would contravene either of those two provisions when what it does is, firstly, to ensure that the same level of taxation operates in all parts of any given State, and, secondly, that that level is one chosen by the legislature of that State to apply generally within its borders.

KIRBY J: Yes, but, as I pointed out, 99 is not addressed to intrastate arrangements, it is addressed to the relationships throughout the nation – at least arguably – and therefore you can equalise as much as you like between the States, but if that has the consequence of offending section 99 of the Constitution, well, that is the result.

MR SEXTON: Yes, that is so, your Honour, but what we say is that one would not lightly give the notion of preference a meaning that would achieve what seems like a very curious result. It is not a legislative scheme here.

KIRBY J: It is not curious if you take the view that one of the purposes of the Constitution is to build nationhood and build commonalities and to impose upon the Federal Parliament obligations to respect commonalities. Whilst States go their own funny ways, so far as the federal taxing power is concerned, it will not discriminate. That is not unusual at all.

MR SEXTON: But what we are saying here is that this legislation is not inconsistent with any of that, your Honour. That is our point. It is not a scheme that could be used to disadvantage any State, because it is premised on the application of the State’s own law, still.

KIRBY J: Yes. I know that, as a Solicitor-General for a State, you will be seeing the State’s own laws as sacrosanct, but it must be subject to section 99 of the Constitution.

MR SEXTON: But it is a joint scheme here, your Honour. The relevant legislation before the Court is the federal Act. In our submission, this point is highlighted by the fact that, as we understood the appellant’s argument, it was that there was a preference here to, for example, New South Wales, because if this transaction was entered into in New South Wales, the person concerned, who might or might not be a resident, would pay lower stamp duties.

KIRBY J: New South Wales is a low taxing State.

MR SEXTON: It would pay lower stamp duty, your Honour. But my learned friend also seemed to agree – I think with Justice Callinan – that there would be a preference to Victoria because they would be able to, under this system, charge higher stamp duty. It seems to indicate to us that the notion of preference under section 99 is really not apposite to this particular situation.

GLEESON CJ: In relation to this legislation you get the opposite result, depending on whether you ask is there a preference to the State or is there a preference to taxpayers of a State.

MR SEXTON: Sometimes we would say that you may get the same result, but if there is a difference, in our submission, it is really - and the terms of the Constitution say this – that it is the State rather than - - -

GLEESON CJ: When I say you get the opposite result, I mean you get the opposite result if you ask who is being preferred.

MR SEXTON: Yes. Well, there are simply two ways of looking at that transaction in relation to New South Wales and Victoria, which is why we say that that is not the way that it would be looked at.

KIRBY J: But the section does not only refer to State. It refers to part of a State and, therefore, appears to be addressing the actual operation and consequence of the federal law.

MR SEXTON: Quite so. The practical operation, your Honour, but not individual transactions. Unless there are any other matters, your Honour, those are what we wanted to add.

GLEESON CJ: Thank you, Mr Solicitor. Mr Solicitor for South Australia.

MR KOURAKIS: If the Court pleases, can I just address the question, the scope of the phrase “laws regulating revenue” in section 99. His Honour Justice Starke in Morgan did apply the reasoning which he applied in that case to laws regulating intrastate trade or commerce to limit the scope of the expression or the words “laws regulating revenue” in section 99, and that can be seen in the report of Morgan’s Case [1947] HCA 6; 74 CLR 421, from the foot of page 458 over to page 459. Your Honours, it was the unanimous decision of the Court in Morgan that the words “trade or commerce” within section 99 referred only to interstate trade or commerce. The defence rationing regulations in that case regulated only intrastate trade or commerce and so it was held that any preference created was not invalidated by section 99.

GUMMOW J: Is this referred to in the Dams Case?

MR KOURAKIS: I do not know, if your Honour pleases, but his Honour Justice Starke clearly was of the view, reading just at the top of page 459, that the “preference contemplated by s 99”, whether as to trade or commerce or revenue, was “in relation to inter-State trade and foreign trade”. In my submission, that construction can be supported by the considerations noted by their Honours in the majority, the joint judgment at page 454, in their paragraph 4, essentially reading section 99 by reference to the surrounding sections.

Your Honours, incidentally to that, in my submission, the word “revenue” in section 99 is wide enough and is to be directed at fees and charges. Given the protection against discrimination as to taxation, one would expect that the reason for including the word “revenue” in 99 is to give a similar, although different, protection with respect to fees and charges so that if fees and charges were charged for railways or postal and telecommunication differently within one State, then section 99 would give some level of protection.

Your Honour Justice Hayne referred to the link between section 99 and the provision in the United States. I am grateful to my friend the Solicitor-General for the Commonwealth who shows me that your Honour Justice Gummow was right. It was discussed at page 153 of the report – that is at 158 CLR - and that again refers to a construction of section 99 by reference to the surrounding sections.

On the comparison between section 99 and the provision in the United States Constitution to which your Honour Justice Hayne referred, that matter was considered by Justice Isaacs in R v Barger [1908] HCA 43; (1908) 6 CLR 41 at 106 and the following two pages - - -

GLEESON CJ: How could a law with respect to Commonwealth places fail to give preference to one part of a State over another part of a State unless it equalised the position in Commonwealth places and in non-Commonwealth places?

MR KOURAKIS: Other than adopting a sophisticated construction of preference which took into account the concept that it simply mirrored States and for that reason mirrored State taxing regimes and for that reason there was not a preference, it would be difficult to see how it could, but submissions as to that have been put by our learned friends and we rely on those.

Your Honours, finally, on the question of section 55 and the second paragraph, in my respectful submission, the authorities that have been read to you on this show that the Court ought to start with a presumption, if you like, that Parliament has appropriately chosen one subject of taxation but that ultimately can be rebutted and it is for this Court to determine the application of section 55, obviously.

In my submission, to rebut the presumption that one subject matter of taxation and an appropriate subject of taxation has been chosen one would need to demonstrate that there is an absence of any rational connection between the subjects covered within a particular law or perhaps to show that there are obvious and very significant policy considerations that would require or demand a separate political consideration by the Houses. But absent a demonstration of that lack of any rational connection or obvious policy reasons to differentiate, one would act, as a matter of deference to the Parliament, on the presumption that they have chosen one subject matter. Certainly, the choice of subject matter is not limited to a taxonomy of taxation chosen by economists, that much is clear.

KIRBY J: But the difficulty of that is that judges may not be the best people to see the so-called very significant policy considerations. That is a reason why the Parliament appears in its practice to have erred on the side of particularity, and the suggestion in answer to your point about onus is look at the statute. There are different forms of taxing law dealt with on its face.

MR KOURAKIS: Your Honour, there are clearly different forms, but what economists would say are very different taxes, because they operate differently, economically: stamp duty, debit taxes and the like. But there is no reason why the Parliament and this Court could not accept the fairly sensible observation that there is an obvious connection between those different economic taxes, the connection being their relation to Commonwealth places. People pay taxes. The subject of this taxation war is the relationship of people to Commonwealth places.

Given that it is of narrow application, Commonwealth places only, given that one would find it difficult to see why there should be a distinction as to whether a debit tax should apply according to what applies
in a State as opposed to a stamp duty tax, and given that rational connection, there is no difficulty, in my submission, in this case in saying that this law deals with one subject of taxation.

GUMMOW J: You referred to one passage in the Tasmanian Dam. Justice Deane, also, at page 251, deals with a submission that Morgan should not be followed. But do not take the time up with it now.

MR KOURAKIS: If your Honour pleases, I will not take the Court’s time looking at that now, but if I could have leave, perhaps, to make a written submission on it, if it is appropriate?

GLEESON CJ: Yes.

MR KOURAKIS: If the Court pleases.

GLEESON CJ: Yes, Mr de Wijn.

MR DE WIJN: If the Court pleases. If I could deal with your Honour the Chief Justice’s last question first. We would say that if the Commonwealth enacted a stamp duty, for example, that applied to all activities in Commonwealth places at an equal rate, that clearly would not offend section 99, because the discrimen would not be chosen by reference to a State – unlike the present scheme – and it would not be chosen by reference to a part of the State. The preference would not be a preference which would offend section 99.

GLEESON CJ: Why would it not discriminate between those parts of the State that were Commonwealth places and those parts of the State that were not?

MR DE WIJN: There are two answers to that. First, it would not offend section 99 because the choice of the place is not based on it being a geographical part of a State or being a State. The discrimen is an ambulatory discrimen, that is places acquired by the Commonwealth for public purposes. That is different to saying the eastern half of Victoria or the western half of Victoria or the whole of Victoria.

GLEESON CJ: But suppose the Commonwealth enacted a law that said, “We’re going to impose stamp duty on all transactions relating to estates in land, leases of land in airports, Commonwealth airports, at a rate that happens to be double the rate of stamp duty applied by the State of New South Wales to similar transactions or instruments everywhere else”.

MR DE WIJN: And provided that applied equally to all Commonwealth places throughout Australia, that would not be giving a preference to one State or any part of a State. That arises from the way the High Court has approached this issue in Cameron and James. If I can take your Honours back to Cameron [1923] HCA 4; 32 CLR 68 at 72, the decision of Chief Justice Knox, in the sentence immediately prior to the sentence I read to the Court earlier at the top of page 72, his Honour the Chief Justice refers to Barger’s Case and says:

In that case my brother Isaacs said: “Discrimination between localities in the widest sense means that, because one man or his property is in one locality, then, regardless of any other circumstance, he or it is to be treated differently from the man or similar property in another locality.”

That has been picked up and approved by Chief Justice Latham in Elliott. That case, Cameron, was in fact - - -

GUMMOW J: Not by Sir Owen Dixon.

MR DE WIJN: Not by Sir Owen Dixon, but in fact Cameron was a case which involved section 51(ii) and section 99; your Honours will see that in the decision of Justice Starke at page 79.

GLEESON CJ: So, if, to reverse my example, the rate of stamp duty imposed by the Commonwealth in respect of airports was half the rate of stamp duty that operated in the rest of New South Wales, or in relation to the rest of New South Wales, that would not involve a preference to one part of New South Wales over other parts of New South Wales.

MR DE WIJN: It would not – it may, but the discrimen would not be a particular geographic region of New South Wales. The discrimen would be properties acquired for a certain purpose. An example I gave earlier this morning, mining properties, the same discrimination could be said to apply in relation to a mining property. The reason that the incentives that the Tax Act provides to mining properties and primary production properties do not offend section 99 is because the discrimen is not a State or a part of a State and, with respect, that example in relation to mining properties answers, with respect, you Honour’s question in respect of airports, because it is simply another discrimination. Section 99 does not talk about discrimination between one part of a State and another part of a State. It talks about discrimination between one State and another State - - -

GLEESON CJ: Preference.

MR DE WIJN: - - - preference, sorry – preference between one State and another State, or preference between one part of one State over a part of another State.

The consequences of our submissions in respect of section 99 are not horrendous at all, we say. We say they are normal consequences of reading section 99 in the context of the Constitution and saying what was intended by section 99 is that, insofar as Commonwealth legislation is concerned, the Commonwealth could not choose to discriminate solely based on the location of a particular property or the location of a particular person. If one were to legislate in respect of activities in Commonwealth places, the discrimen would not be a particular part of Victoria or a particular part of Western Australia. The discrimen would be, as with a mining property, a property with a particular characteristic, independent of this location.

GLEESON CJ: That is an interesting and, I think, valid point that you make, that section 99 does not prevent giving preference as between parts of a State.

MR DE WIJN: I am indebted to my learned junior, who has referred me to the decision of Chief Justice Latham in Elliott [1936] HCA 7; (1936) 54 CLR 657 at 667, where the Chief Justice says:

It may be noted that the discrimination which is forbidden by sec. 51 (II) includes discrimination between parts of the same State. In sec. 99 the geographical element in the prohibition is expressed by the prohibition of giving preference “to one State or any part thereof over another State or any part thereof.” There is nothing in sec. 99 which in terms prevents the giving of preference to one part of a State over another part of the same State - - -

GLEESON CJ: Yes, which makes it very difficult to regard section 99 as in support of a general principle of equality.

MR DE WIJN: It requires a general principle of equality where it forbids the choice of States or parts of States as the discrimen - - -

GLEESON CJ: It is equality between States.

MR DE WIJN: Yes, and when one looks at Cameron and James, Cameron in particular, it was the location of the cattle in the particular State which was the discrimen. The cattle had to be in a particular State, they had to be in a particular location, but because the different cost rates applied to cattle in different States, it was held that that discriminated or gave a preference to one State over another and to the taxpayers or to the particular activity in the State. Cameron’s Case, with respect, is on all fours with our case. The criteria here is the location of the real estate, or the location of the leased property, in a particular State. That is the only criteria which gives rise to the preference.

GUMMOW J: Now, section 102 talks about preference or discrimination. Why is it assumed that “preference” in 99 is just another way of talking about “discrimination” in 51(ii)?

MR DE WIJN: I do not think I said that they were identical. I said the cases so far had not identified a significant difference. We are content to say preference means preference and if one looks at the schedule, there is a clear preference to a taxpayer or an organisation that enters into this lease in New South Wales as opposed to Victoria or any other of the other States.

GLEESON CJ: Equally, a clear preference to the State of Victoria as against the State of New South Wales.

MR DE WIJN: What the Court looked at in Cameron was the taxpayer.

GLEESON CJ: Yes, but which way does the preference go here?

MR DE WIJN: We say that the preference goes to the people that do business in New South Wales or one of the lower taxing jurisdictions.

GLEESON CJ: Why are you ignoring the position of the State?

HAYNE J: When 99 is directed to preference of one State over another?

MR DE WIJN: There is, if need be, additional preference there.

GLEESON CJ: But it goes in the opposite direction.

MR DE WIJN: It may go in the opposite way, but that does not mean there is not a preference. The fact that there may be a multitude of preferences just makes it more offensive.

HAYNE J: But what it may do is suggest that 99 is not to be read in isolation from its context. Section 99, 101, 102 – this whole part of the Constitution needs to be taken as a piece.

MR DE WIJN: Your Honour, no one is suggesting that 99 should be read out of context, but it is a section expressly dealing with any laws of revenue, which on any view would incorporate tax laws, and it does require them to be non-preferential in the relevant sense. I will only be a few moments longer.

If I could move to the first part of section 55 and just draw the Court’s attention to Quick and Garran at page 675. During the Melbourne drafting session leading up the Constitution there was, in fact, an amendment proposed to section 55 to have inserted after the words “deal only with the imposition of taxation” the words “and collection” and that was rejected. That may assist in some way as to what was meant.

We would say that the majority view in Dymond is to be preferred. It has been accepted in a number of cases since Dymond, and we have referred to them in our outline. If one were to accept the minority view, it would simply lead to a different type of line-drawing exercise. It is clear that the line has to be drawn somewhere, and all that would happen – at the moment the line is quite clear, if one accepts the majority view and accepts the practice. If one accepts the minority view, one gets to a different sort of line-drawing exercise. In the context of this case, that difficulty is made apparent if we look at the Mirror Taxes Act at section 9 – tab 2 of our materials. Your Honours will see that there is a provision there to make arrangements for the exercise of administrative functions.

Now, one would not suggest, for example, that if a State revenue authority entered into some arrangement with someone to collect the taxes, that that would be a law dealing with the imposition of taxation. We would say that wherever one draws the line, an arrangement under section 9 would be on the wrong side of the line and invalid, and the consequence of that being invalid is that the Mirror Taxes Act itself could never come into operation because section 6(6) says:

This section does not have effect in relation to a State unless an arrangement is in operation –

So the administrative arrangement is a precondition. I think I might have misled the Court – section 9 provides for an arrangement between the Governor-General of the Commonwealth and the Governor of a State, but they are arrangements in respect of administrative arrangements. That section that permits those arrangements would clearly, we would say, on whichever view – minority view or majority view – be not a law dealing with the imposition of taxation. It is dealing with administrative arrangements of staff and things like that. Once that goes, then section 6(6) means that the Mirror Taxes Act simply does not apply, because it is a precondition that such an arrangement be entered into.

KIRBY J: Could I just understand the overall theory of your case. As I understand it, you have three-pronged attack on this. The first is the section 55 attack, the second is the section 99 attack, and the third is the suggestion of delegation.

MR DE WIJN: Yes, your Honour.

KIRBY J: The application of section 55 is adjunct to the first attack, is it not? It is merely a part of the section 55 attack.

MR DE WIJN: It is, but there are two elements to the section 55 attack - - -

KIRBY J: I realise that, but they are all directed at attacking the legislation on the basis of section 55.

MR DE WIJN: Yes. There is the first paragraph attack, and then there is the second paragraph attack which is a subject - - -

KIRBY J: I take the force of your submissions, but the net result of what has been done, is a sensible inter-Commonwealth arrangement that preserves the autonomy and independence of the States in the levying of taxes. The outcome is not, in a sense, one that discriminates against the States, if that is the policy behind section 99, but one which preserves the States’ entitlement to have different taxes and, by federal law, preserves their entitlement to do so and their differentiation as between each other.

MR DE WIJN: It is meant to overcome the decision in Allders and put the States back in the position they are in - - -

KIRBY J: That is true.

MR DE WIJN: - - - but it does that by relying on the Commonwealth to enact Commonwealth legislation, and the legislation which, by its very nature, must be taxing legislation and - - -

KIRBY J: Well, it could not be done by State legislation because these are Commonwealth places.

MR DE WIJN: Exactly. That is why there is the problem, so the Commonwealth has to enact legislation, albeit - - -

KIRBY J: And you say when it does, it just has to comply with section 99 whether it likes it or not - - -

MR DE WIJN: It just has to comply because the whole essence of the Constitution is that in respect of taxing laws, revenue laws and laws of trade, they are to be non-discriminatory and there are special provisions in section 55.

GUMMOW J: Now, that we are clear about what answers you want from us on the stated case. Assume one agreed with you on that part of your section 55 argument which talks about subjects other than imposition of taxation. Looking at page 8 of the application book, it would be question 2(a)(i) that would get a tick, would it?

MR DE WIJN: It would be ineffective if we won on the first paragraph of section 55, the Commonwealth Places (Mirror Taxes) Act would be ineffective to permit the assessment that was issued in this case.

GUMMOW J: Does that carry over into question 3? Question 3(b) would get a tick as well, would it?

MR DE WIJN: Yes, I think that it is correct.

GUMMOW J: It is these words “invalid or ineffective” that may have some further - - -

MR DE WIJN: The reason for that drafting was because there may be an argument that, by operation of section 6(3) of the Mirror Taxes Act, it is simply ineffective, because section 6(3) on one view is a let-out for the Commonwealth because it only applies to a certain extent.

GUMMOW J: Yes, the Act would be valid but ineffective.

MR DE WIJN: Yes, valid but ineffective. That is the reason that alternative drafting was chosen.

GUMMOW J: Thank you.

MR DE WIJN: So if we were to succeed on the first paragraph of 55, the Act is ineffective or invalid to permit the assessment, the same in respect of (a)(ii), and the same answer in respect of (b). My learned friend, Mr Bennett, said, well, it does not matter if the modification is struck down. With respect, that is simply not correct. The modification is essential, because it is the thing that provides that the duty is payable to the Commonwealth, not to the State.

HAYNE J: He says, no effect of modification, the duty is paid to the State, there is no need to have the cross-payments mode.

MR DE WIJN: No, with respect, his argument, as I understood it, was not that. His argument was that the modification provisions were not needed because section 23 of the Mirror Taxes Act provided for an appropriation. The appropriation provisions in section 23 of the Mirror Taxes Act only apply when the money gets into the control of the Commonwealth, and the
Commonwealth cannot impose taxes to be paid to the Crown in the right of the State.

GUMMOW J: That would be in the face of section 81 of the Constitution.

KIRBY J: I saw Mr Hanks looking rather upset during this. If there are going to be different submissions in relation to the answering of the questions, now that we have the problem in mind, I think that should be the subject of supplementary written submissions.

MR DE WIJN: I am happy to do it that way.

KIRBY J: I would think that ought to be done.

MR DE WIJN: I am perfectly happy to do it that way.

KIRBY J: In a sense, if you win on the 55 point, we do not have to answer the 99 point, is that not correct? Or is that something you would want to address in dealing with the questions?

MR DE WIJN: That is correct, but we want to - - -

KIRBY J: The questions.

MR DE WIJN: We want to avoid being here again, I suppose, but your Honour is perfectly correct in, as a matter of strict logic, if we win on section 55, your Honours do not have to answer the remaining questions. It may be that the section 55 problem can be got around, depending on how they do it. If they do it the way we suggest, by having an equal tax, well presumably we will not be back. If they do it by having an unequal tax but just a separate assessing Act and a separate taxing Act, we still have the section 99 problem. If the Court pleases.

GLEESON CJ: We will reserve our decision in this matter and we will adjourn until 10.00 am tomorrow.

AT 4.27 PM THE MATTER WAS ADJOURNED