Fortescue Metals Group Limited and Ors v The Commonwealth of Australia [2013] HCATrans 43 (8 March 2013)

Last Updated: 13 March 2013

[2013] HCATrans 043

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S163 of 2012

B e t w e e n -

FORTESCUE METALS GROUP LIMITED ACN 002 594 872

First Plaintiff

CHICHESTER METALS PTY LIMITED ACN 109 264 262

Second Plaintiff

FMG PILBARA PTY LIMITED ACN 106 943 828

Third Plaintiff

FMG MAGNETITE PTY LIMITED ACN 125 124 405

Fourth Plaintiff

FMG NORTH PILBARA PTY LIMITED ACN 125 154 243

Fifth Plaintiff

and

THE COMMONWEALTH OF AUSTRALIA

Defendant

FRENCH CJ
HAYNE J
CRENNAN J
KIEFEL J
BELL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 8 MARCH 2013, AT 10.00 AM

(Continued from 7/03/13)

Copyright in the High Court of Australia

____________________

FRENCH CJ: Please call the part-heard matter. Yes, Mr Jackson.

MR JACKSON: Thank you, your Honours. Your Honours, may I go immediately to the issue raised by your Honour Justice Hayne at the conclusion of proceedings yesterday? It is at the transcript lines 7005 to 7015, and could I give your Honours first the answer to the question and then the reasons why I make that answer? Your Honours, our answer is that the expression used in section 91 “from granting any aid to or bounty on mining” and the similar expression in the second part of section 91, does not refer only to outlays of money. Your Honours, it includes, we would submit, aid by way of reduction or deferral of payment of moneys which otherwise would be payable.

Now, your Honours, the reasons why that view, in our submission, should be adopted is that, first, there were many forms of monetary aid provided for by the States. One can be seen in Victoria and may I come to it in three stages - in relation to mining? First of all, your Honours, there was the Mining Statute 1865 (Vic), the precursor of Australian mining laws. It should be amongst the papers your Honours have today.

I said it was a precursor of Australian mining laws. That is discussed in a document that is attached to the small bundle by Lang and Crommelin, Australian Mining and Petroleum Laws at page 3, paragraph [105]. All I want to refer to this statute for is to refer particularly to sections 43 and 45. They provided in relatively general terms for the making of regulations as to royalties - that is section 43 – and then for the “Governor in Council notwithstanding any such regulation” to prescribe in relation to a particular lease what the royalties should be, et cetera – that is section 45. Your Honours, that is the starting enactment.

That enactment was replaced by the Mines Act 1890 and your Honours will see provisions to similar effect in section 77 in the second item of the regulation-making power, and also in section 79, the power “for the Governor in Council, notwithstanding” the regulations, to act differently.

Now, your Honours, that Act came into force on 1 August 1890 and very shortly after its coming into force, namely, on 25 November 1890, all holders of mineral leases were relieved from payment of the royalties reserved under their leases. Your Honours will see that in the Gazette of 12 December 1890 and on the second page, page numbered at the top 5023 in the left column and just about point 6 on the page, you will see the heading “Mines Act 1890” and then:

WHEREAS it is deemed expedient to relieve persons holding Mineral Leases from payment of the royalty reserved in such leases, the Governor in Council has ordered that, notwithstanding any covenant or condition contained in any Mineral Lease now in force, the holders of such leases shall be henceforth relieved from the payment of royalty.

Now, your Honours, that action taken by government at that point - taken by what was to become the State - in relation to that we would submit there really is not, we would submit, on any ordinary view of language the grant by a colony, as it was then, of aid to mining. Your Honours, if one looks at the various forms of assistance given to mining by the various statutes to which we referred yesterday, in addition to the matter to which I have just referred, we would submit it is apparent that section 91 was intended to cover any of the many forms in which States might choose to grant aid to mining, et cetera.

Your Honours, I mentioned various forms of aid yesterday. They were such things as loans, many of them were in the form of loans, but also they involved the States expending money, of course, but providing things like roads and tracks and sometimes also mining equipment. Could I just give an instance, your Honour? I went to the 1896 Victorian Act yesterday, sections 26 and following in the statute deal with topics of that kind.

So, your Honours, the point I would seek to make is that, in our submission, the words of section 91 are apt to describe any form of financial aid which a State might choose to grant and that is why, in our submission, section 91 uses the expression “any aid to” whichever of the two aspects is involved. It is intending, your Honours, if I could perhaps refer to an expression of your Honour Justice Hayne yesterday, to cover a universe which includes bounties on the one hand, but any form of financial aid which a State might choose to give otherwise.

FRENCH CJ: It is not confined by historical examples?

MR JACKSON: No, your Honour. I was just going to say that, if I may, with respect, your Honour. It is a provision for the future. Your Honours, we would submit, it is erroneous to give it a narrow meaning and, really, why should one when it is part of the Charter, in effect, of the States for the future and limitations on their powers, but grants of powers as well, and particularly, your Honours, when it does commence with the words I think I have used perhaps once or twice already, “Nothing in this Constitution”.

KEANE J: Mr Jackson, is there any contemporary usage where relief from royalties is referred to as an aid as opposed to relief from royalties?

MR JACKSON: Your Honour, I cannot point to one immediately, although, no doubt, one could seek to look up historical works to discuss events that took place at the time of the financial difficulties that occurred in Victoria, particularly, I think, in the 1890s but, your Honour, I think the answer is, immediately, no. If one looks at the various statutes that there were dealing with circumstances in which the States are granted assistance – could I use a neutral term for the moment – to mining, one sees that they involved assistance of various kinds.

Now, one sees also that things like the matter to which your Honour referred, and that is to exempt from a payment of royalties or not to require the payment of royalties, does in our submission fall on one side of the coin – the coin has two sides, we would say. That is why one sees in section 91 the technical expression “bounty”, but one also sees the more general expression “any aid to”. Now, your Honour, one sees the expression “any aid to” because it is covering (a) a wide field and, (b) a field for the future. It is using a general term, your Honour, rather than one having a specific meaning, whether it be that of Colonel Durell or someone else.

HAYNE J: I wonder whether after the hearing is completed your side might be good enough to back behind the 1890 Act because the 1890 Act is a consolidating Act, part of the general consolidation of the time, the gazettal may - I do not say it must - but may reflect something that had been done before the consolidation and if we are to look at the history of the matter it would be, I think, valuable to know what had occurred between the 1865 Act and the consolidation that occurs in 1890, and perhaps with particular reference to the matter, the subject of the gazettal to which you have directed our attention.

MR JACKSON: Thank you. Yes, I will. Your Honours, could I move then to section 51(ii)? Now, your Honours it does seem to be the position that the Commonwealth acknowledges, as one might think it must, that the MRRT legislation does operate unequally in the different States and that, amongst other things perhaps, and I will come to that aspect a little later, arises certainly because of the dependency of MRRT liabilities on what are State royalties.

Your Honours, that is not something that is an unintended consequence. It was, indeed, the object of the Act to equalise the total taxing burden by, in effect, charging more to miners in higher royalty States than to those in lower royalty States. We have taken your Honours to the several provisions setting that out. Your Honours, the Commonwealth’s argument on section 51(ii), in our submission, really amounts in the end to an assertion that the MRRT Act is, in the words of Justice Isaacs in Barger 6 CLR at 110 – if I can go to that for a moment, a rule which:

is a general one, applicable to all parts of the Commonwealth alike, and the fact that it operates unequally in different localities arises, not from anything done by the Parliament –

Your Honours, that is towards the bottom of page 110. But, your Honours, we would say by the MRRT Act the Parliament has picked up the State laws as the basis for levying the Commonwealth tax and has done so, by first of all, making the basic rule of liability to MRRT arise at the mining project interest level, which is defined by the existence of a production right necessarily granted by a State law, and secondly, by making the loyalty credits – and I refer to section 60-20 - arise only where there is a mining royalty, which is also defined by reference to the existence of a production right, again, necessarily granted by a State law. Your Honours, in our submission, the Commonwealth has thus relevantly selected locality – and I mean by that locality within State boundaries – as the discrimen on which the law operates.

Now, your Honours, the Commonwealth then seeks to introduce in this Court – and I suppose if one is going to do it, this is the place one would – a further inquiry as to discrimination and that is whether Parliament has done what it has done by reason of a so-called “neutral factor”. I am referring to our learned friend’s submissions page 137, line 6070. Now, your Honours, according to those contentions if it be that a tax differentiates by reason of locality, but chooses some other neutral factor as a reason for having a different rule of liability, then the tax is said to be valid.

Your Honours, this does seem to stand, in our submission, at odds with the Court’s decision in Cameron, and Cameron – and I will come to that a little later – but nowhere in the section 51(ii) cases has one seen such a proposition accepted. It seeks in a way to introduce a version of an appropriate and adapted test into section 51(ii) by reference to nothing more than that the Commonwealth takes the view that what it is seeking to achieve is – I do not want to create an expression – it is a good thing or a good thing on the day, as it were.

Your Honours, the Commonwealth seeks to establish this in a sense by reference to the passage in Barger – to Justice Isaacs in Barger, to which I referred, but we would submit that a close reading of the whole of that judgment does not support that conclusion. Our learned friends – and I am referring to page 141, line 6255 – claimed by reference to Justice Evatt’s judgment in Moran 61 CLR 781 that it ought to be accepted that the view of the majority in Barger should be regarded as “overruled”.

It is not necessary, in our submission, for that course to be adopted because there does not appear to be any difference between the plurality in Barger and what Justice Isaacs said - and this was referred to by Justice Higgins, who had been in the case, in Cameron 32 CLR at 78, point 8. In our submission, what Chief Justice Griffith said at pages 69 to 70 in Barger was right and was not affected in any way by the reserved powers so-called heresy and in particular what their Honours said in the e converso sentence is correct.

KIEFEL J: Is it correct, though, to say that their Honours, the majority were there directing attention to the question under section 51(ii) or to the general question of whether or not the taxation power was properly implemented, particularly having regard to what they had said about reserved powers in the preceding page on page 69?

MR JACKSON: Your Honour will see that if one goes to page 69 and the third-last line is where one sees the end of the discussion about “directly” regulating “domestic affairs of the States, which was denied to the Parliament” and then there commences at the bottom of that page the discussion of “indirect consequences”. Then one sees the discussion by their Honours through most of, I think, page 70 of the - - -

KIEFEL J: I have in mind, though, Mr Jackson, that the attention is more specifically directed to the question of “discrimination” and “preference” at page 78 and following – at about point 5 on page 78, “We pass to the objection that the Act - - -

MR JACKSON: Yes, your Honour.

KIEFEL J: I am just wondering, is there a separation or is the earlier reasoning flowing over into it. It is not apparently evident. It is not quite easy to follow.

MR JACKSON: Your Honour, could I just say that their Honours then say, as your Honour has pointed out, at page 78:

We pass to the objection that the Act, if otherwise valid, is invalid on the ground that it discriminates between States and part of States.

Your Honour will see a reference to section 99 also and then the reference in the next paragraph to “physical conditions”. Your Honours will see about line 6 - about the fourth line from the bottom of page 78 the observation that:

The existing limits of the States are arbitrary, and it would be a strange thing if the Commonwealth Parliament could discriminate in a taxing Act between one locality and another, merely because such localities were not coterminous with States or with parts of the same State.

It is really when one goes to the application of the discussion on page 79 that one sees the view that they arrive at. Now, that is a view that fundamentally I think is the second last paragraph on page 79. Your Honours, that application, as one might or might not agree with, but the point I am seeking to make about it is that in discussing the power in the earlier passage at pages 69, 70 and 71, in our submission, that is the correct statements of principles set out there.

Your Honours, may I move to Moran in this Court? Some reliance was placed by our learned friends on the observations of Justice Evatt in that case. It is [1939] HCA 27; (1939) 61 CLR 735. The passage that was referred to, your Honours, is at page 804 and the passage commencing I think in the second new paragraph on the page. Your Honours, one does need to look at the whole of Justice Evatt’s observations in that case. Could I go back to his Honour’s reasoning at page 782? At about point 6 on that page his Honour refers to in the paragraph commencing “It is clear from these principles” - he sets out what are in his Honour’s view simple instances of discrimination.

At page 783, the first new paragraph on the page, he then goes on to say that “It is hardly likely that” so obvious a discrimination or so plain a discrimination would be illustrated. He then goes on about point 2 on the page to refer to a second type of discrimination which your Honours will see referred to as being one:

where the tax is imposed without discrimination, but provision is made in the assessment Act for refunding the tax or a portion thereof to those taxpayers who –

for example –

are resident in New South Wales, or to those taxpayers who manufacture the excisable commodity in Victoria or to those taxpayers who sell the commodity in South Australia.

Now, your Honours will see that he said that would:

clearly infringe the injunction of sec. 51(ii). True, the Commonwealth would collect from all taxpayers alike; but it would refund the tax solely because of considerations applicable to a single State.

Your Honours will also see the next paragraph in those reasons. Now, your Honours, I do not say that is exactly the same as this case because it is not a case where you pay the Commonwealth the tax and it gives you some of it back. What the law is doing is to say that the amount that you have to pay as the tax is calculated by taking off the amount you have already paid.

Your Honours, Justice Evatt at page 795, about point 6, refers to the material – I am sorry, your Honours, page 795, I should have said about point 2 on the page - refers to material that in his Honour’s view could be taken into account in deciding matters of this kind and you will see “the operation and effect of the impugned legislation”. Your Honours, I will not read it out, but one sees it goes through to the top of the next page. Could I refer your Honours to - - -

FRENCH CJ: It refers to purpose. What is the relevance of a non-discriminatory purpose or objective?

MR JACKSON: Well, your Honour, if one is talking first of all about non-discriminatory purpose one is speaking, I suspect, really about the purpose to be derived from the Act and that is something that one might find as here stated in the Act itself - - -

FRENCH CJ: Section 1-10?

MR JACKSON: Yes, your Honour, 1-10 and also, of course, the two provisions in Division 60. Now, your Honours, having said that, if one is looking to see whether it is a law which in terms of 51(ii) discriminates between States, a starting point at helping one to a conclusion would be to see what the Act says it is intended to do – “purpose” in that sense. Your Honours, I think if one is talking about – and that seems to be really not relevantly different from “effect”. If one is looking at material dehors the statute and perhaps the material that can properly be taken into account in determining what the statute does and what it is intended, in the sense to which I referred earlier, to do, one can look at material to identify the same matters.

In the end the question is whether the statute, the law made pursuant to, if I can use the first words of section 51(ii), whether that law is one which discriminates. Now, your Honours, as in a lot of areas of the law such as fraud, contravention of section 52 of what was the Trade Practices Act and matters of that kind, if there is an intention, and I use that in a particular sense, an intention to achieve an aim, to achieve something, the conclusion that the aim has been achieved when events happen that are of that kind is easier to arrive at. Your Honour, I am sorry that is a long answer, but that is what one is looking at.

FRENCH CJ: It feeds back into this concept of proper objective and I think the Solicitor-General for the Commonwealth accepted the proposition that a non-discriminatory, as it were, proper objective using mechanisms which have a differential operation from one State to another does not offend against section 51(ii). If one wants to identify an objective I suppose one goes to 1-10 with a specific reference to royalties as part of the integers that go to define what is an adequate return to the Australian community for its taxable resources.

MR JACKSON: Yes, that is so, your Honour. When it speaks of what the objective is – I am sorry, it speaks of what the object of the Act is and one goes then to – it is obvious that is what it is seeking to do. Of course it contains within itself value judgments by the Parliament about what is an adequate return and what are above normal profits and matters of that kind, but having made those assumptions it then goes on to seek to do that.

One sees then that the statute that seeks to implement that is a statute made pursuant to section 51(ii) and section 51(ii), of course, does carry with it not just a power, but a significant qualification of the power. Your Honours, sometimes things sought to be worthy cannot be attained in the manner in which they are sought to be attained because one is speaking in section 51(ii) of a parliament which does not have powers which are absolute.

Your Honours, I was referring to Justice Evatt in Moran and may I refer to page 805, in the first new paragraph on that page, when his Honour was speaking about section 14 of the Assistance Act, about halfway through. Your Honours will see the approach that his Honour took where he said:

the discrimination established is not constituted by mere unequal operation in the States through casual or accidental features of the laws of those States; the case is one where discrimination is aimed at and achieved by the Commonwealth Act –

Your Honours, one could hardly describe the provisions as to royalties in the present case as being a casual and accidental feature of the law. The discrimination that occurs is, in our submission, something aimed at and achieved by the Commonwealth Act.

Your Honours, may I leave that case and proceed to CSR v Irving [1903] St R Qd 261 in the Full Court in Queensland. Three parts, I think, in the reasons for judgment of Chief Justice Griffith were referred to by our learned friends. The first is page 276, about point 4. Your Honours will see his Honour says:

But it is not a discrimination between States. The difference is accidental. It is not a discrimination made by the statute.

Well, of course, here it is. The second thing, your Honours, is at page 276, about point 9. Your Honours will see his Honour says in the last few lines:

the discrimination must depend upon the geographical position, and not upon the accident of whether things happen to be found in one State or in another.

Your Honours, will see that his Honour is there referring, as is apparent from 277 point 1, to natural occurrences. The third passage, your Honours, is at page 277, about point 6, and your Honours will see at point 6 the passage commencing “I do not think that we can have regard to the fact that” et cetera. Your Honours, that passage gives rise to what really is the core issue in this case. What if the intended operation of the taxing Act is to arrive at different taxation being payable because, as the statute says, the object is – and I have taken your Honours to that already?

Your Honours, could I just say something in relation to Permanent 220 CLR 388? Our learned friend’s appropriate and adapted argument does appear to have its base in that case, but could we just say these things? Permanent was not a section 51(ii) case and although the appellant had sought to present a 51(ii) case that case failed at the threshold because the Court would not reopen Allders International v Commissioner of State Revenue [1996] HCA 58; 186 CLR 630. The decision in Permanent concerned section 99 and, with respect, what was said about appropriate and adapted should be taken in that context. If there is room for that concept to be applied in that context it could only be, we would submit, at the stage of determining whether a law grants an unfair preference to one State over another.

Your Honours, in the present case it may well be unnecessary to decide whether Permanent should be followed. If it is necessary to determine that issue your Honours will see our submissions at paragraphs 74 to 84 of our written submissions. Your Honours, the case on section 51(ii) which, in our submission, is closest to this case was Cameron [1923] HCA 4; 32 CLR 68. I have taken your Honours to that, of course, but could I just say this? What all the justices in that case understood was that differentiation can occur at really what are quite subtle, in a way, levels within the formation of the ultimate calculation of a Commonwealth tax, but they did not adopt an appropriate and adapted test; differentiation was thought to be sufficient.

Your Honours, could I just say this? In Cameron [1923] HCA 4; 32 CLR 68 at the bottom of page 79, going over to page 80, Justice Starke had said that a law does not infringe section 51(ii) where it operates unequally because of inequality in conditions obtaining in the States. His Honour had no difficulty in rejecting the argument of Sir Edward Mitchell for the Commonwealth that the regulation was one that in the good sense for the Commonwealth it did operate on unequal conditions in that sense because it gave effect to different values that had been ascertained, in fact, in the States. Your Honours will see that at page 80 his Honour said, at about the fifth or sixth line, “even if it did” - the construction of the regulation did – “the regulation would be equally bad”.

We would submit it is apparent that his Honour considered there to be a real difference between a tax which fell unequally and one which picked up and selected, as the basis for its impost, differences, perceived or actual, in States. Your Honours, we would submit that it just cannot be the case that the term “local circumstances” used in some of the cases has an ambit as wide as that for which the Commonwealth contends. Your Honours, if one goes to Conroy, why was not the fact in that case that some States had entered into the set-off arrangement with the Commonwealth and others had not, yet a circumstance existing in one or other States, yet the law was held invalid.

Your Honours, would the law in Cameron have been any more valid if table 3 in the schedule to that Act rather than stipulating a sum of money as the value for livestock in each State had stipulated that the value would be as set out in regulations of the several States. In our submission, the answer would still be no, it would be the case that the only test for determining value was that of the State in which the livestock was found. Could I refer your Honours, without going back to the case, to Chief Justice Knox at page 72, Justice Isaacs at 73, Justice Higgins at 78, Justice Rich at 79 and also Justice Starke at 79?

Your Honours, in our submission, on section 51(ii) one must in a sense take a step back and look at the outcome of the argument on behalf of the Commonwealth, and that argument really has the effect of confining the limiting words of section 51(ii) to an area so narrow as to be almost imperceptible, such as facial stipulation of differing rates of tax with the superadded requirement of there being no neutral factor justifying the law, and we would submit that is, your Honours, to rewrite the provision.

May I just say something, your Honours, about the United States cases? First, your Honour, there is, of course, a difference of language between Article 1, section 8, clause 1 of the United States Constitution on the one hand and section 51(ii) on the other. The US provision, the relevant taxes have to be uniform, section 51(ii) does not permit discrimination between States or parts thereof.

Both Chief Justice Dixon in Deputy Commissioner of Taxation (NSW) v Brown [1958] HCA 2; (1958) 100 CLR 32 at 39, point 5, and also Justice Taylor in Conroy v Carter 118 CLR at about point 2 on page 101, recognised that the difference in wording may mean that the ambit of the provisions cannot be assumed to be the same. Your Honours, we would submit that the words chosen in section 51(ii), namely, that a taxation law with respect to taxation cannot “discriminate between States” suggests that the restriction on Commonwealth power is rather more than the simpler and different requirement that the tax law must be uniform.

The second point we make, your Honours, is that the US cases, if one looks at them really, in our submission, are not against the – or are not all against the plaintiff’s submissions. Your Honours have been referred to Knowlton v Moore [1900] USSC 127; (1900) 178 US 41. There it was held, your Honours, that the uniformity clause required the federal tax law to be geographically uniform, that is, that it did not differentiate in its application in the States. Your Honours, our submission is that there is discrimination between the States if the Commonwealth tax is to be applied differently in the States, and that Knowlton v Moore really is not against our contention at all.

Could I just say something about Florida v Mellon [1927] USSC 7; (1927) 273 US 12? In that case, your Honours, it was held that a federal tax that imposed an inheritance tax but gave credit for inheritance tax paid to any state of the United States was valid. The sum total of the Supreme Court’s reasoning on the point is that quoted by the Commonwealth at footnote 30 of its submissions. One can see that in paragraph 4 of the report in [1927] USSC 7; 273 US 12 at 17, paragraph 4. May I take your Honours to that? Your Honours, if one looks at, with respect, that commendably terse reasoning on the issue, what your Honours will see is that his Honour said that:

All that the Constitution . . . requires is that the law shall be uniform in the sense that by its provisions the rule of liability shall be the same in all parts of the United States.

Now, your Honours, the problem, in our submission, with the mineral resources rent Tax is that the rule of liability is not alike. By its structure it differentiates between States Now, your Honours, it is true in speaking of the United States that Congress has to take state laws and local conditions as it finds them, of course. It is entirely different and, we would submit, incorrect to say that if the Congress takes state laws and finds – sorry, it is incorrect, we would submit, to say that the Congress in this sense takes state laws as it finds them if what it does is to choose to impose a federal tax law at different effective rates by altering the federal imposition of tax by reference to the states. Your Honours, in those circumstances we would submit that the outcome arises because of the federal law, not because of how it happens to operate in local conditions.

Your Honours, Florida v Mellon has been criticised for precisely this reason. Your Honours will see in the reference in our reply submissions in paragraph 18 - and our learned friends disposed of that orally in, with respect, a somewhat flippant and amusing observation but, your Honours, may we just say that it is really in this context always better to look, we would submit, at the merit of what is said, to play the ball, as it were, rather than the man.

KEANE J: But the US Supreme Court, Mr Jackson, has not disapproved of Florida v Mellon?

MR JACKSON: Your Honour, I think the answer is no, but there is not much - - -

KEANE J: Has not been called upon to consider the question?

MR JACKSON: No, your Honour. I think that is right. The last case really on this topic appears to be US v Ptasynksi which is 1983, which is a little while ago. Your Honours, in that case the crude oil windfall profit tax was held valid even though it exempted the tax as to domestic crude oil produced from certain geographically identified wells located in Alaska. Now, your Honours, one might have thought that an exemption from tax which was geographically based would, if nothing else, have been regarded as a non-uniform imposition of federal tax, but the US Supreme Court held otherwise. Justice Powell said that the exemption did not apply to wells in Alaska alone and because of that it was not drawn on state political lines. Your Honours will see that referred to at pages 77 to 78.

CRENNAN J: Perhaps there is a distinct approach when the context is one of what you might call “cumulative taxes”.

MR JACKSON: I am sorry, I could not get that.

CRENNAN J: Perhaps, the approach is explained because the context is one in which you have the situation of “cumulative taxes”. I think that was the expression used by Sir Samuel Griffith in Irving’s Case, that is to say, parallel State and federal powers to tax the subject matter of the tax. I realise that is not precisely the position in this case, but I am just venturing a possible rationale for finding there is no discrimination in that context.

MR JACKSON: Your Honour, if one took, for example, income tax where there is power in the Commonwealth and in the States in Australia to impose income tax - States of course have gone out of the field.....over a long time. But it was held, for example, that, I think, in the Second Uniform Tax Case the Commonwealth could not require federal tax to be paid before State tax. So that is a case where one could have, in a sense, cumulative tax – a tax which is calculated by, imposed on the same persons and by reference to similar consideration. In circumstances of that kind that is unlikely perhaps to give rise to a 51(ii) discrimination case, but that is really not because of the fact of cumulative tax. It is just because of the fact that the Commonwealth tax does not, in any relevant respect, calculate itself on the basis of the State tax. This is really a rather different situation.

Could I just say two other things about Ptasynski? The first is, your Honours, if one looks at the Court’s reasoning in that case – pages 84 to 86 - the court reasoned that the uniformity clause gave Congress a wide latitude in deciding what to tax and went on to say at 84 to 85 that if Congress chooses to frame a tax in geographic terms, it will examine the classification closely to see whether there is actual geographic discrimination. They said that there was not geographic discrimination because of the relative costs of exploring and producing crude oil in Alaska.

The court, your Honours will see in the passage from 85 through to 87, was unwilling to second-guess Congress’ handling of an enormously complex problem. But, your Honours, one feature of it is that there would be some difficulty in importing that type of reasoning into section 51(ii) because, first of all, one does have the provision in section 51(ii) that it refers to parts of States, States and parts of States and, your Honours, one sees also that, we would submit, section 51(ii) prevents a tax law being imposed discriminately between States and we would submit overall that the reasoning in Ptasynski does not – and in the American cases - does not relevantly assist the Court.

May I say something, your Honours, about Melbourne Corporation? Your Honours will be pleased to hear I am coming close to the conclusion of the submissions I wish to make. Your Honours, the case that we advance on Melbourne Corporation is somewhat different, but at least in emphasis, if I might put it that way, from the subject of submissions by our learned friends for Western Australia. We do not embrace the notion that the rights of States in respect of their royalties should be regarded as in some way bargaining chips or tools or something of that kind for the purpose of commercial negotiations. We would submit that they are more fundamental and they are provisions which were rooted in State Constitutions which, by sections 106 and 107, were preserved following Federation, subject of course to the operation of the Constitution.

Could we refer your Honours to a note we have provided which sets out the provisions of State Constitutions, or at least four of them, that contain the provisions dealing with constitutional powers in respect of minerals and royalties. Your Honours will see, for example, section 3 of the Western Australia Constitution referred to in paragraph 2, including all royalties in mines - it is the entire management and control - and, your Honours, the other provisions are to the same effect.

The point we would seek to make, your Honours, is that there is a close connection between the land managed and controlled by the States and their mineral resources and the existence of those States and the purposes for which they exist. We submit that Melbourne Corporation is a case not only about how States organise their organs of government and, your Honours, in the end such a doctrine, if adopted, would preserve States formalistically for the sake of existence, not as significant working parts of a federation. We submit that the Acts significantly impair the State’s abilities to reduce royalties by levying the sanction in the form of increased Commonwealth tax.

Your Honours, a question was asked yesterday whether there were instances referred to in I think the materials before the Court where there had been royalty reductions. Could I just refer your Honours to the statement of claim page 16, paragraphs 54B and C, which contain different aspects of it, and they are elaborated upon in paragraphs 54E and 54F. Your Honours, I do not think I need to go to the detail of them, but your Honours will see the references there.

HAYNE J: While in the statement of claim do you wish to say anything about the content that is given to the phrase “sovereign control over its territory”, which appears, for example, in paragraph 56?

MR JACKSON: I appreciate the expression “sovereign control” is one which can be used in a number of ways. One is, in effect, as an enthusiasm for a form of State rights. Another is to describe the areas in respect of which the State has the ability to act, in effect, as a plenary legislature. But the expression used there, your Honours, is “sovereign control” subject, of course, to the Constitution. It does not mean anything more than that, your Honour.

FRENCH CJ: Plenary except insofar as it is not.

MR JACKSON: Your Honour, it is a word of that kind and I do not think I will say any more about that. Your Honours, could I go to Austin 215 CLR 185 and at paragraph 117 - reference was made in relation to paragraph 117 and footnote (145). Our learned friends said that is the end of the plaintiff’s case. Could we just say, your Honours, if one goes to the references in paragraph 145 in support of the proposition at paragraph 117, I just wanted to go to two of them. The reference to Moran 63 CLR at 349 in the Privy Council does include, if one goes to point 7 on page 349, the words:

provided always that the Act imposing taxes does not itself discriminate in any way between States or parts of States –

If one goes to the reference to Justice Taylor in Conroy v Carter [1968] HCA 39; 118 CLR 90 at page 101, may I just say what I wanted to say about that because your Honours have perhaps seen more of it than one might want to. It does include the matters to which we referred earlier and that is the words “in general” and also the words “in the manner of its calculation”.

Your Honours, may I just say something about tax and the royalty and also the other MRRT allowances. We accept that it is not the case, of course, that every reduction of 1 per cent, say, in royalty increases MRRT actually payable by 1 per cent. In the first place there is of course the fact that MRRT does not become payable until one reaches 75 million and is not payable in full until it is 125 million, but thereafter the calculation of MRRT is one which involves first, as section 10-10 makes clear, that royalty allowance which is the ramped-up figure to the actual amount they actually pay is first to be deducted from mining profit. It is the first thing which must be deducted.

Now, that inevitably reduces the amount to which the 22.5 per cent is to be applied and it results, if there are no further mining allowances to be taken into account, in the figure which is the amount of the tax. If the royalty is higher the MRRT will be lower and vice versa. Now, a miner may or may not have any other allowance which can be regarded as an MRRT allowance. If yes, the amount resulting from the MRRT calculations would be less, if no, the reverse, the royalty allowance deduction will be the relevant one and that is what is shown in the tables in our submissions.

But, your Honours, whatever be the position, the royalty has played its part and it diminishes, with respect, the role of royalty to say that it is just one of many factors to be taken into account in arriving at MRRT. It is required and the first factor. Your Honour, those are our submissions.

FRENCH CJ: Thank you, Mr Jackson. The Court will reserve its decision. The Court adjourns until 10.15 am on Tuesday next, 12 March 2013.

AT 10.57 AM THE MATTER WAS ADJOURNED