Vanderstock & Anor v The State of Victoria [2023] HCATrans 11 (16 February 2023)

Last Updated: 16 February 2023

[2023] HCATrans 011

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No. M61 of 2021

B e t w e e n -

CHRISTOPHER VANDERSTOCK

First Plaintiff

KATHLEEN DAVIES

Second Plaintiff

and

THE STATE OF VICTORIA

Defendant

KIEFEL CJ
GAGELER J
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 16 FEBRUARY 2023, AT 9.44 AM

(Continued from 15/2/23)

Copyright in the High Court of Australia
KIEFEL CJ: Ms Solicitor, just before you start, the Court will sit until 1.00 pm, and then resume at 2.00 pm.

MS ORR: Thank you, your Honour.

KIEFEL CJ: Yes, Ms Solicitor.

MS ORR: Your Honour, could I start by returning to a question that your Honour Justice Gageler asked me towards the end of the hearing yesterday about whether the difference between our conception of an excise and the Commonwealth’s conception of an excise was vanishing. I would like to try and do a better job than I did yesterday of explaining why it is not. And, in so doing, I think I will also provide clear examples to some of the questions that your Honours Justice Gordon and Justice Steward gave me in that same exchange at the end of yesterday. I want to be clear that the main difference between us is that we ask different questions.

On our view, for a tax to be an excise, it must be one in substance – and that is a very important part – and that informs the answer I gave to your Honour Justice Edelman about the deferred sales tax yesterday. It must be one in substance on the production, manufacture, sale, or distribution of goods.

We draw the line there because taxes on those steps are an input cost into the ultimate price of the good. In the language that has been used by your Honour Justice Edelman, they are all on the supply side of the market. On the Commonwealth’s view, for a tax to be an excise, this is not necessary, it need only be a tax with a sufficient connection to the goods. Because we ask different questions, we will often get different answers. More frequently, we say, we will get different answers. But, on our conception, a tax on the possession or ownership of goods will never be an excise, because it is not substantively a tax on one of those steps. On the Commonwealth’s view ‑ ‑ ‑

EDELMAN J: But it is very strongly connected to the good.

MS ORR: Yes, but it is not on one of those steps, which are input costs into the price of the good. That is the reason we draw the line where we do. But the Commonwealth’s view is – contrary to decisions, we say, like Logan Downs – such taxes can be an excise, provided this sufficient connection is present.

There may be some overlap between our two conceptions at the very margins – only, we say, at the very margins. Yesterday, the question that your Honour Justice Edelman asked me about a flat tax imposed on a good six months after sale – a deferred sales tax – regardless of the use or consumption of the good in that time. That was how I understood your Honour’s question. As I said yesterday, our position is that a tax of that kind is capable of being an excise. It is capable of being an excise on the basis that it is capable of being properly characterised as a sales tax, not as some form of consumption tax, and that was, I think, where I was not clear enough in my answers to some of the later questions yesterday. It is because, substantively, it is not a consumption tax, it is a sales tax.

The Commonwealth might reach the same result on that example, despite asking their different question. That may be true but, on our view, taxes paid by the consumer will only ever be capable of being an excise in very, very limited circumstances and those circumstances are confined to where the tax is, in substance, not a consumption tax. It is, in substance, a deferred sales tax.

GLEESON J: So, is the distinction – was one way of putting it, you say we are looking for taxes that affect the price of the goods, and the Commonwealth is saying we should be looking for taxes that affect the cost of the goods?

MS ORR: That is certainly – the first part of that question is yes. That is how we say that the question should be framed. I apprehend that the Commonwealth is saying, not so much that affect the cost of the good but affect demand for the good. And I want to come to the Commonwealth’s reliance on demand, because we say there is no foundation for that being the relevant question in the cases.

GORDON J: Can I ask one question about the rationale that underpins your question that you ask. If you accept, as you do it, as I understand it, in substance, something which affects production, manufacture, sale or distribution of goods, and one looks at – which I think I put both to the Solicitor for the Commonwealth yesterday and possibly to you as well – and one looks at the rationale which underpins all of the cases up to and including Capital Duplicators and Ha on one view, it is dealing with articles of commerce, it is dealing with commodities, it is dealing with free trade and the getting of the goods, or the commodities, into the hands of the ultimate consumer. In that idea, picking up again your concept of sales tax, does that underpin you, or is that not at all part of your argument?

MS ORR: No, it is part of our argument, your Honour. That concept of commodities that are being produced for the purpose of trade and then entering into a trading situation does underpin this. That is why they are input costs. Taxes on those steps are input costs that affect the price.

GORDON J: If one is looking not just at the different question, and one is looking at what the distinction is between you and the Commonwealth, as I apprehend it, it is that the rationale is actually different.

MS ORR: Yes, it is, your Honour.

GORDON J: That is, the rationale that has underpinned the jurisprudence so far, as I understand it on your argument, is now something which is to be expanded, altered, changed – I do not know what words you would add to it, but ‑ ‑ ‑

MS ORR: Can I come to deal quite soon with what we understand the rationale for the Commonwealth’s conception to be, as opposed to our rationale.

GORDON J: Thank you.

EDELMAN J: Ms Solicitor, I should say my conception of the Commonwealth’s argument as opposed to the plaintiffs’ argument is slightly different. It is that their framework is one which at a high level is just about connection with goods, and then demand or supply are just ways of establishing a connection with goods, but they might not be the only way.

MS ORR: Yes.

EDELMAN J: One query – and I appreciate this is not your case – but one query might be ownership or possession would seem to be one of the most direct relationships one could ever have with a good. Could there ever be a case where a tax on ownership or possession is not an excise, on that conception?

MS ORR: I think that is a question for our friends to answer. Our position is that, on the Commonwealth’s conception, those taxes would be an excise and the rationale that I have been speaking with your Honour Justice Gordon about does not support that extension. There is no principled basis for extending the concept of an excise. There is an attempt to do that, as we understand it, and I will come to this, by the Commonwealth, in reliance on the concept of a national market and free trade concepts.

But I want to explain why we say that that is not a factor that requires a construction of section 90 as opposed to an overall construction of Chapter IV and section 92 within Chapter IV. It is putting too much work on the free trade objective of that part of the Constitution and packing it all into a construction of section 90 as opposed to a harmonious construction of section 90 and 92 and Chapter IV as a whole.

So, I do want to say a little more about that but there is, I think, in answer to your Honour Justice Edelman’s question on our case, no principled basis for a conception that would necessarily result in taxes on ownership and possession being excises. We say that that is the consequence of the Commonwealth’s conception.

GAGELER J: I would be assisted by the two approaches being teased out in relation to the actual legislation and facts in Logan Downs. I do not need to have passages read to me, but just how that case would be approached on the two conceptions would be useful. I am not asking if you will tell me how the Commonwealth would approach it, but how you would approach it on your conception would be helpful.

MS ORR: On our conception, your Honour, those were taxes on ownership; that is a category of tax that is incapable of becoming an input cost and affecting the price of the good. It is incapable of being translated across into the supply side and affecting the good as a commodity. And, for those reasons, the line needs to be drawn so that those taxes are excluded from the concept; those are not taxes that are taxes on the step of production, manufacture, distribution or sale.

And I have attempted to explain why those four concepts are important. They are not random concepts; they are connected concepts that are all about an impost that has a direct relationship to the price for which a commodity is offered in the market; and those taxes on ownership in Logan Downs could not have had that consequence.

GAGELER J: Thank you.

EDELMAN J: Your answer bears a very, very close resemblance to the words of Justice Stephen in Logan Downs, where he says that it is a tax:

being imposed upon goods in the particular way it is, its incidence will tend to be passed on in the price of the goods, as they flow along the stream of production and distribution to the end user.

MS ORR: Yes. Yes, and that stream of production and distribution is the reason why those four steps have been chosen. That is the chain by which the commodity is created, distributed, and enters the market. That is why those four steps have been fixed upon by the majority in the Ha and Capitals Duplicators conception. They are a coherent and exhaustive set of steps to confine the concept of excise.

JAGOT J: So, does that mean the only – on your conception – it is always the first sale into that primary retail market, even for a durable good, there is no distinction between a non‑durable – or no potential distinction between a non‑durable and a durable good? I mean, a durable good being capable of resale, for example ‑ ‑ ‑

MS ORR: Yes.

JAGOT J: Does the logic of your – that the sale in – everything ends at the first sale, so all second, third‑hand markets, et cetera are out of court.

MS ORR: We think that that is a very difficult question, your Honour, and it is not one that is necessary, of course, to decide in this case, because everyone agrees that this is not a sales tax, let alone a tax on second‑hand or subsequent sales. The reason it is difficult, we say, is that there is obviously a very wide range of circumstances in which second‑hand sales of durable goods can be made.

For example, I might buy a new white good – a new washing machine – and I decide I want to sell my old washing machine to my next‑door neighbour or my aunt for a nominal price. Now, I do that because I just want to get rid of the old washing machine and I am not really interested in how much money I am going to receive for it. Because I did not make the washing machine, I was not involved at all in the process of bringing the washing machine to market in the first place, I have not been involved in that chain of commerce, the matters that will inform the way I fix the price for my sale of the washing machine to my aunt are matters that are very different to the matters that will inform the fixing of the price of the washing machine as it enters the market for the first time – which will be informed by things that have affected the producer and the manufacturer and the distributor.

So, the identification of the particular second‑hand market, we say, and the consequences and economic effect of taxes that will be imposed on that sale are really not straightforward and do not arise for resolution in this case.

Now, as I said, as we understand it, the Commonwealth’s much broader view of an excise is premised on more amorphous concepts than price. It is premised on conceptions of demand and capacity to affect markets in some way. It is not clear to us whether demand is the only matter that is being referred to when references are being made to effects on the market, but it seems to be the primary way at least. In pressing those sorts of concepts for acceptance by the Court, the Commonwealth appears to rely on statements in Capital Duplicators and Ha in which they say the Court expanded the purpose of section 90 by reference to notions of free trade and national markets.

For that reason, they say that any tax on goods which depresses demand, even on the buyer side of the market, is capable of distorting the market and therefore being an excise. We say that that submission should not be accepted. The first point is that, as questions that were put to the Commonwealth Solicitor during the hearing teased out, it cannot be assumed that taxes on the buyer side will have the same effect on the market as taxes on the supply side. It is an assumption of natural tendency that a majority of this Court has never embraced.

The second point is that the concept of demand and its relevance to this whole exercise of understanding the concept of an excise has only appeared in the authorities very recently. For the first time, on our review, in Hematite Petroleum at page 632 – that was in the judgment of Justice Mason – and then in the judgments in which his Honour also took part in Philip Morris at page 436 and Capital Duplicators at 586, similar language of “demand” appeared. But we say, when your Honours look at those references to demand made by Justice Mason in each of those cases, in each instance what the Court was referring to was notions of demand in the context of the effect on demand paused by a direct increase in the purchase price on the supply side of the market. On our research, the language of demand is not used at all in Ha – is not a concept that is embraced in any form in Ha – certainly by the majority.

There may be some references to it in the minority judgment, but our third point, and perhaps our most fundamental point, is that the Commonwealth seeks to couple that concept of demand divorced from the price context in which the references actually appeared. So, they strip it of the price context and then they couple it with references to free trade in Capital Duplicators and Ha so as to say that any tax on goods which depresses demand might distort the market and therefore be an excise. In our submission, there is no case on section 90 that supports that style of analysis.

To the extent that the Commonwealth seek to submit that that inquiry is required by two paragraphs in Betfair, that should not be accepted. Betfair – of course, a section 92 case – and the two paragraphs that have been relied on refer to the fostering of national markets to further the plan of the Constitution – not the plan of section 90, the plan of the Constitution for a new federal nation. Those references were not stating a new test in relation to section 90. They were purely descriptive of the plan at Chapter IV of the Constitution and, specifically, the harmonious working of sections 90 and 92 within Chapter IV.

When I come to our fourth pathway, I will say a little more about how we say sections 90 and 92 work in tandem for that purpose. But section 90 itself goes no further than prohibiting State Parliaments from imposing quite specific types of taxes and its construction, we accept, has to work together with section 92 and not undermine section 92, but it is not to be construed as doing the work of section 92 – which is the consequence of the Commonwealth’s conception.

So, that is my longer and, I hope, more useful answer to your Honour’s question yesterday of the difference between our two conceptions and why it is that, while there might be a convergence in the result on the margins, they remain very different conceptions that will yield different answers in almost every case. Overall, our submission is that that Commonwealth conception is not a view that could be said to be supported by economic theory. It is not a view that could be said to be supported by natural tendencies and it is not a view that is supported by any decision of this Court.

GAGELER J: Thank you.

MS ORR: Hopefully, having clarified that position, can I return to the second reason why we say that a consumption tax at the level of principle is not an excise, and that reason is that a tax on consumption cannot be said to have the same economic effect on the price of goods as taxes which have been recognised as excises. So, as I have said, in Capital Duplicators and Ha, the majority observed that a tax on distribution, like a tax on production or manufacture, has a natural tendency to be passed on to purchasers down the line of distribution and, thus, to increase the price of – and to depress the demand for – the goods on which the tax is imposed. It was for that reason that the majority rejected the submission that excises should be limited to taxes on the steps of production and manufacture.

But in the same way the natural tendency for the tax to be passed on to purchases by way of an increase in the purchase price of the good explains why we would include sales and distribution taxes in the meaning of excise. It also explains why we should exclude consumption taxes from the meaning of excise. The economic effect of a consumption tax is, on price, far more attenuated than the economic effect of a tax that is imposed prior to a good’s entry into the market.

A tax on production, manufacture, sale or distribution – or at the point of entry into the market, I should say, in relation to a tax on sale – a tax imposed on those stages of the chain of commerce can be directly factored into the price at which the good enters the market. And, consistently with some of the observations made by your Honour Justice Edelman in the course of the hearing, we submit that the long standing focus of the section 90 authorities has been on the capacity of excises to factor into the initial purchase price of a goods. And I do not propose to take your Honours through the authorities in any detail, but can I provide some references for where we say that proposition emerges: Peterswald, at 511 to 512; Commonwealth Oil Refineries, at 435; Matthews, at 301; Parton, at 259; and Dennis Hotels, at 539 to 540.

As I have said, in our submission, consideration of the effect on demand really only began to be discussed quite recently and only in connection with price. When that lens is adopted, we submit that it is very easy to understand why consumption taxes are distinct from taxes on production, manufacture, sale or distribution of a good. Consumption taxes are not an input cost. We accept that they are capable of affecting the broader economic burden of owning a good.

And it is possible that they might impact demand for the good. Possible, but not inevitable. Those impacts, in the case of a consumption tax, are necessarily speculative, in a way that they are not when one is considering the economic effects of taxes on production, manufacture, distribution and sale. And that is in large part because the good has already entered and exited the market at a particular price by the time any consumption tax is imposed.

That is especially the case for a charge like the ZLEV charge, which, as I have already said, is imposed firstly on the consumption of a single non-perishable good; secondly, at different points in the lifecycle of the good, which is likely to span many years; and thirdly, by reference to how much the good is used in a particular way over a particular period. As I said yesterday, in order to predict the likely total cost of the ZLEV charge at the point of sale, a consumer would need to know at least two likely unknowable things; namely how long they will end up owning the vehicle, and how much they are going to drive it on specified roads in that time.

Even if the total cost of the charge could be predicted by the consumer with some accuracy, which we say it cannot – but even if it could be predicted with some degree of precision at the point of sale, it still could not have the same natural tendency to affect price, let alone demand, as a tax on production, manufacture, distribution or sale. Indeed, the ZLEV charge may not affect the demand for ZLEVs at all. For example, if consumers’ purchasing behaviour is not motivate solely by cost, then it would not affect demand, or if purchasers who are motivated by cost are capable of making other choices which liberate additional funds to cover the cost of the tax.

GAGELER J: Ms Solicitor, within your conceptual framework, do you simply leave out any market for second‑hand goods?

MS ORR: Leave out in what sense, your Honour? I cannot ignore the potential for there to be a market in second‑hand goods, but ‑ ‑ ‑

GAGELER J: Does it enter into your analysis in any way? I am just trying to understand. I am not challenging you.

MS ORR: No, I do not think it does, your Honour. I do not think it does because it introduces a whole lot of other speculative matters. We are already in a realm of so much speculation about the implications on price, the existence of a second‑hand market for a durable good, I think, increases the layers of uncertainty about the relationship between the tax and the purchase price.

STEWARD J: Just to add another uncertainty, in relation to the two features you mentioned, you would have to add the fact that the dealer would have no idea what the answer to those questions are, and the dealer has to fix their price in order to ensure that they get a return for their business.

MS ORR: Yes. The dealer is, as your Honour says ‑ ‑ ‑

STEWARD J: It is unrealistic to think ‑ ‑ ‑

MS ORR: ‑ ‑ ‑ far less well‑placed than the consumer to estimate ‑ ‑ ‑

STEWARD J: My personal experience of buying new cars is that, as a consumer, you do not get a lot of wriggle room.

MS ORR: Yes. The dealer, we say, would have no idea, and the consumer would have next to no idea about the answers to those questions. The point I was trying to make is that, even if the consumer happened to be able in a particular circumstance to predict those matters, there is still no natural tendency for that to then affect the price at which the good is sold to the consumer. There is still a gap that cannot be plugged, we say, on the Commonwealth and the plaintiffs’ conception.

EDELMAN J: There may be a different way of looking at it, which is that you start with your market. So, if your market is a market for second‑hand goods – cars, books or whatever that particular market is – then the process of production, distribution, would include the first sale and everything leading right up to the sales within the market for second‑hand goods. So, it is not really that it is a subsequent transaction. It is still a first transaction, but it is a first transaction within that market.

MS ORR: Yes, that is so. That is an available way of looking at it, your Honour, which we think is entirely consistent with our conception. So, that second reason that I have given relates to economic effect, and that has now been the subject of discussions at multiple points over the course of the hearing, and I will move then to – but I should say, it is the central reason that we rely on as to why, on a principled basis, consumption taxes are different to taxes on production, manufacture, sale or distribution.

Can I add briefly two other reasons that we advance. The first is that it is inherent in the etymological meaning of the word “excise” that the cost of the tax is known at the point of sale. In our written submissions, we have quoted at paragraph 31 a passage from Palgrave’s Dictionary of Political Economy (1894), and the original extract of that definition I will not take the Court to, but it is at volume 9, tab 64. Instead, I will just take the Court to the extract in our written submissions, which I will read. The definition is:

The word excise (Latin, excido) signifies, etymologically, something cut off; as an excise duty may in effect be considered something cut off or deducted, for the benefit of the state, from the price of the article as paid by the consumer –

Then, in a later sentence:

The price in fact is divided into two parts, one part being subtracted from the whole for the benefit of the state, the remainder going to the vendor.

Other 19th century dictionaries also refer to the same etymological origins. We have provided references to those in paragraph 31, footnote 46 of our submissions.

That submission, we say, reinforces the points that we have already made, that while a tax imposed on consumption may affect the overall financial burden of owning a good and using a good, it cannot be conceptualised as a component of the purchase price. And, using the language of the etymological accounts, it is not capable of being deducted or subtracted or excised from the price that is paid to obtain the good. So, we rely on those etymological accounts as supporting and providing another principled reason why a consumption tax should be excluded.

The final reason that we have referred to in our written submissions as to why a tax on consumption is not an excise, derives from the constitutional context of section 90 and, in particular, section 93 of the Constitution, and we just wish to rely on our written submissions in that respect.

So, if the Court pleases, I would like to move to our final and fourth pathway to validity. And, as I said at the outset, our submissions in this part of our case only need be considered if the Court rejects all of our submissions. If the Court rejects both the first, second, and the third pathways, then these submissions will need to be considered. If that point is reached, our submission is that it is appropriate for the Court to reconsider the reinterpretation of the phrase duties of excise in section 90 more fundamentally. We submit that, properly interpreted, a tax will only be a duty of excise for the purposes of section 90 if it falls selectively upon locally produced goods. And that is, we submit, that the Court should embrace the interpretation adopted by Justices Dawson, Toohey and Gaudron in Capital Duplicators and Ha.

Before turning to the substance of our submissions on why, we say, that interpretation – if your Honours reach this part of the case – is the correct one, and why we should be given leave to have Capital Duplicators and Ha reopened, can I make three preliminary points in response to some arguments that have been put against us orally. The first is that we do not accept that we need leave to reopen the entire Parton line of cases, as the plaintiffs suggest – only Capital Duplicators and Ha; and, I will explain why that is so. As your Honours are, of course, aware, the majority in those cases held that a duty of excise is a tax on the four steps we have been discussing – manufacture, production, distribution or sale – whether the good is of domestic or foreign origin. That was the last part of the formulation given at page 499 in Ha; and also within Capital Duplicators at 589 to 590.

The principle that we seek leave to reopen in Capital Duplicators and Ha, is confined to that latter part of the statement of principle; namely, that a tax can be a duty of excise, even if it applies in a non-discriminatory fashion to locally produced and imported goods. The reason we have sought leave only to reopen Capital Duplicators and Ha is because they were the first occasions on which a majority of this Court decided that discrimination against locally produced goods was not an essential feature of an excise.

Parton did not decide this question, because it simply did not arise for determination in that case. Parton concerned a tax on the sale and distribution of milk that was imposed in the context of a Milk Board scheme that was designed to regulate the local production and distribution of milk within Victoria. The taxing issue in that case was only applicable to the sale and distribution of a locally produced good, and it, therefore, necessarily fell selectively on locally produced milk. And in the several decisions between Parton and Capital Duplicators, members of the Court had expressly noted that the discrimination question was not settled. Can I give your Honours the references to that: Dennis Hotels at 572 to 574, Western Australia v Chamberlain at 12 to 13, and Dickenson’s Arcade at 228.

In several of those earlier decisions, the view for which we advocate – namely, that a duty of excise is a tax that falls selectively on locally produced goods – maintained a voice in the Court. And, again, could I just give your Honours the references: Dennis Hotels at 551 to 552, and 555 to 556, and 589 to 590; Anderson’s at 373 to 374, and 376 and 379; Western Australia v Hamersley Iron at 62; Western Australia v Chamberlain Industries at 36; Dickenson’s Arcade at 210; and Logan Downs at 84. So, in those circumstances, we submit that we require leave to reopen only Capital Duplicators and Ha.

The second preliminary point that we wish to make is that we accept that the arguments that we make as to why the proper interpretation of section 90 is that preferred by the minority in Capital Duplicators and Ha are not materially different to the arguments that were advanced in those cases. We accept that. But we say that should not preclude their receipt in this case. We are not making the arguments – as seemed to be suggested – because 25 years have passed and it is time to give them another run. We are making the arguments because of the case that is put against us by our opponents.

Our opponents press your Honours to engage in a fundamental re‑consideration of the concept of excise. The way that the Court is being asked to re‑conceive of the concept of excise, as I said in my opening, exposes the extent to which the term has now become disconnected from its text, context, and purpose. In those circumstances we ask the Court for an opportunity to advance a different conception that we say is more consistent with those considerations of text, context, and purpose.

KIEFEL CJ: Just on the question of purpose, Ms Solicitor, your approach to purpose is not the same – as I understand it – as the majority held in Capital Duplicators and Ha. Your approach to purpose is a narrower one, limiting it to a purpose in relation to tariff policy as distinct from the wider national view that the Commonwealth takes.

MS ORR: Yes.

KIEFEL CJ: Which wider view was expressed in those two cases.

MS ORR: That is so, and I appreciate that there is some mental gymnastics involved but my answer is yes in this part of our case. That is not a submission that we make in the other pathways of our case, where we adopt and embrace the purpose ‑ ‑ ‑

KIEFEL CJ: But you want a holding that Capital Duplicators and Ha were wrong in that respect.

MS ORR: Yes. That underpins the conception of an excise. It is inconsistent with the conception of excise that we are advancing in this part of our case because it is premised on a fundamentally different purpose, which is the purpose articulated by the minority judges in those cases.

EDELMAN J: And consistently with that purpose, is “local” Australian‑produced?

MS ORR: Yes. Your Honour, we have in our submissions – I am sorry, if your Honours would give me a moment – we have in our submissions said that if it is necessary for the Court to decide that question in this case that we think the correct view of “local” is produced in Australia, but can I make very clear that we say that that is not a question that arises for determination in this case. There is no dispute in this case that the ZLEV charge does not discriminate in any way between goods based on where they are produced – that is an agreed fact at paragraph 58 of the special case. At this stage, there are no ZLEVs produced anywhere in Australia.

The same question of whether “local” should be interpreted as within Australia or within the taxing State, was expressly left for determination on another day in Ha. At 513 the minority left it for determination on another day. We say for the same reason that it should be left here – it did not arise there, because the tobacco license fee in Ha did not discriminate on the basis of where the tobacco was produced, and so the judges who did invoke the concept that I am advancing of a tax on locally produced goods, said that they did not need to express a concluded view on whether ‑ ‑ ‑

EDELMAN J: Well, they expressed different views previously.

MS ORR: They had expressed different views, and perhaps a reflection of that was that when the three judges merged together in a single judgment, no view was expressed. But for the same reason, essentially, that it was unnecessary to determine in Ha, we say it is unnecessary to determine in this case.

GAGELER J: Would the word “excise” have the same meaning in section 55 of the Constitution as in section 90, in your submission?

MS ORR: Yes.

GAGELER J: So, there might be a problem with the GST Act, on your submission?

MS ORR: I am sorry?

GAGELER J: There might be a problem with the GST Acts, on your submission?

MS ORR: Can I consider that, your Honour? Can I press forward for now though, your Honour, because I am quite conscious of the time constraints, and could I just mention that there have been some discussions between the interveners, and it is agreed between us that my submissions could go until the morning break, and that there would be adjustments made to the estimates of a number of the interveners in terms of the duration of their submissions.

Now, the remainder of the submissions that we want to put in this part of the case can be divided into three parts, the first is I want to explain in a bit more detail the concept that we are advancing in this part of our case – the concept of a tax that falls selectively upon locally produced goods, and how it would work in different scenarios. And then I want to explain why we say that this is the proper construction of section 90 by reference to text, context and purpose. Finally, I want to explain why we say we ought be given leave to reopen Capital Duplicators and Ha so that that proper construction can be affirmed.

So, starting with a bit more detail about the conception that we advance in this part of our case, to explain that conception it is necessary to start with purpose, and, as I said to your Honour, in this part of our case we advance a different purpose of section 90 than that embraced by the majority in Capital Duplicators and Ha. The purpose of section 90 that we advance is the purpose of giving the Commonwealth effective control over tariff policy, and by tariff policy we mean the extent to which the Commonwealth chooses either to adopt protectionist measures to protect local industry within the Commonwealth from foreign markets, or to adopt a free trade approach, and section 90 most obviously achieves that purpose by giving the Commonwealth the exclusive power to levy duties of customs. A duty of customs, being a tax on the import or export of goods, can obviously be used to increase the price of imported goods relative to locally produced goods and thereby operate to protect local industry.

But to ensure that the Commonwealth’s tariff policy could not be frustrated by State taxes that increased the price of local goods relative to imported goods, section 90 simultaneously gave the Commonwealth exclusive power to levy duties of excise. Duties of excise, we say, are the converse of duties of customs – duties of customs being imposed only in relation to goods that are imported or exported – and a duty of excise, we say, is a tax falling only on locally produced goods.

So, by removing from the States and Territories the capacity to impose both duties of custom and duties of excise, section 90 took away the ability of States to use taxes to affect the relative prices of imported and locally produced goods and in so doing ensuring that it was the Commonwealth alone that had control over these particular levers of tariff policy. Against that background, can I come to explain the concept – which is, at its essence, that a tax will fall selectively on locally produced goods if it applies only to locally produced goods.

Can I come to explain that, and how it works, in some different scenarios with different taxes? So, a tax on manufacture or production will be a tax that falls selectively on locally produced goods. It is, perhaps, the clearest example of a tax that falls selectively on locally produced goods. So, for example, assume that a State imposed a tax of $5,000 per vehicle on local production of vehicles and because that tax only applies to production within the State, it is, necessarily, a tax that falls on locally produced goods and it cannot – absent some express legislative intention to the contrary – apply to imported cars. But that example – it shows why removing the State’s power to levy taxes that fall selectively on locally produced goods was essential to ensuring that the Commonwealth had effective control over tariff policy.

Assume that the Commonwealth’s policy, in my example, was to try to protect the local car manufacturing industry by imposing a customs duty of $5,000 on each imported car. Such a tax would be expected – in the absence of any equivalent tax on locally produced cars – to increase the cost of imported cars relative to locally produced cars. So, a State tax on locally produced cars would be expected to cancel out the relative price difference and, in that way, frustrate the Commonwealth’s policy.

But a State tax of that kind would also frustrate Commonwealth tariff policy in circumstances where the Commonwealth had decided to adopt a free trade policy in respect of the car market and, therefore, had decided not to impose any customs duty on imported cars. If that was the scenario, a State tax of $5,000 per vehicle on locally produced cars would still undermine the Commonwealth’s policy by increasing the price of locally produced cars relative to imported cars.

On our conception, a tax levied on the sale or distribution of goods will also fall within the conception of excise but only so long as it applies selectively to locally produced goods. So, to adapt my car example, assume that the State imposes a tax of $5,000 on the sale of cars that applies only to cars that are manufactured in the State. Such a tax would be an excise because it applies to locally produced goods but not to imported goods of the same kind. As with the earlier example that I have given, it is clear that that tax has the capacity to frustrate the Commonwealth’s tariff policy by altering the price of local goods relative to imported goods.

By contrast, a sales tax will not fall selectively on locally produced goods if it applies to all goods of a particular kind that are sold in the State regardless of their place of origin. And that sort of tax will not impact the price of locally produced goods relative to imported goods of the same kind, and therefore does not have the same capacity to frustrate the Commonwealth’s tariff policy.

And that might be a point, an appropriate point, to respond to a hypothetical given to the Court by the Commonwealth Solicitor-General in which the Solicitor-General suggested that the ZLEV charge would have the capacity to frustrate any protectionist tariff policy adopted by the Commonwealth to protect the local car manufacturing industry. And as we understood it, the Solicitor-General posited the hypothetical situation of a Commonwealth tariff imposed on the import of hydrogen-powered vehicles in order to protect a local market for hydrogen-powered vehicles, the production of hydrogen-powered vehicles.

The Solicitor-General submitted that such a policy could be undermined by the ZLEV charge. We say that is not the case. The ZLEV charge does not discriminate between locally produced and imported ZLEVs, given the charge would be incurred at the same rate by a registered operator of a ZLEV, whether they buy an imported ZLEV or one that is locally produced. The ZLEV charge would not have any effect on the relative difference in the price of locally produced ZLEVs as opposed to imported ZLEVs. And would therefore, we say, have no impact on the tariff policy of the Commonwealth in that scenario.

So, having explained that conception of an excise in terms of a tax that falls on locally produced goods in a little more detail, it will be apparent to the Court that it is similar to, but not the same as, the original Peterswald conception articulated by Chief Justice Griffith. Our conception of an excise adopts the essence of the Peterswald conception, which is that a duty of excise is a duty analogous to a customs duty, but which is imposed on locally produced goods rather than imported goods. And, as I will come to explain when I get to the proper construction of section 90, constitutional text, context, and purpose support both the Peterswald view and our conception.

But our conception is not the same as the Peterswald conception because it is qualified by a number of important developments in relation to the meaning of excise that have occurred following Peterswald, which we do not seek to resile from. So, the first of those is that our conception recognises that it can no longer be said than an excise must be imposed in relation to the quantity or value of goods. And the second point is that our conception recognises that the direct and indirect tax distinction is no longer to be treated as the exclusive determinant of whether a tax is an excise.

There are also some aspects of our conception which are not different to the Peterswald view, but which did not arise for determination in Peterswald. So, in Peterswald, the Court was not required to consider the concept of taxes that applied selectively to locally produced goods, nor which discriminated between locally produced goods and imported goods. But we do submit that it was implicit in the Peterswald conception that an excise is a tax that falls selectively on locally produced goods. Peterswald also did not have to consider the position of a tax that falls selectively on locally produced goods in substance, even where that tax is not imposed on manufacture or production.

Could I then turn to why we say our conception should be embraced as the proper construction of section 90 by reference to constitutional text, context and purpose, and in the interests of time, at some points I will do that by reference to our written submissions.

Starting with text, it is generally uncontroversial to observe that the interpretation of the Constitution must begin with text, but we think it is an important observation to make in the context of section 90 because the prevailing view of the proper construction of section 90 is based on the premise that excise had no clearly established meaning at Federation. That premise, which first appeared in Justice Dixon’s judgment in Matthews at 293, has led to the textual meaning of “excise” being largely disregarded in the interpretation of section 90, and section 90 being largely construed by reference to purpose.

But we submit that the proper first step is, as it always is, to consider the established meaning of the word “excise” at the time of Federation, and it is clear from the pre‑Federation materials that when first introduced in England in 1643, excise duties were understood to be taxes on the production and manufacture of articles which could not be taxed through the Customs House. But by 1901 “excise” had come to be used in England in a very enlarged way to describe all kinds of inland revenue taxation including licence fees imposed on persons who were not involved in the production or manufacture of goods at all.

But what clearly emerges, we say, from the Convention Debates is that “excise” was used in a far more restricted sense in our Constitution and it was that restricted meaning of “excise” that was used at the time of Federation that is the meaning embraced in the Constitution and we rely on the relevant passages of the Convention Debates that are set out in footnote 69 of our submissions. I will refer the Court to one passage of the Convention Debates that illustrates, we say, how excise was understood as a concept by the framers, and that passage is at volume 9, tab 60 of the book of authorities.

Can I just summarise that at page 2499 of the joint book of authorities there is an exchange between Sir Isaac Isaacs and Sir Edmund Barton which took place at the 1897 Convention in Sydney, and this is a passage that Mr Lenehan took the Court to on the first day of hearing where there was discussion of a report compiled by an Accountants Committee in Victoria which included a detailed consideration of the meaning of “excise” and we commend the entire passage to the Court and I do not want to go back through it, given that your Honours have already been taking to it.

But what we submit that that passage shows is that both Isaacs and Barton considered that the definition of “excise” that was referred to in the Wollaston Report, namely, that an excise is a:

duty chargeable on the manufacture and production of commodities.

was the intended definition, and of course the word “excise” never came to be defined in the Constitution. But we say, contrary to the submission put by our friends, that that demonstrates that the framers never came to doubt that excise had its intended meaning, namely, the confined meaning that is identified in this exchange between Isaacs and Barton.

GLEESON J: Did Barton say anything more than that he accepted that it did not cover regulation of trade by way of license by the States?

MS ORR: Your Honour, page 2499, halfway down the page, Issacs:

What we intend by excise would be covered by the definition in this report, “a duty chargeable on the manufacture and production of commodities.”

That is the intended meaning that was raised at this time, and which, we say, because excise ‑ ‑ ‑

GLEESON J: That is Issacs speaking, not Barton.

MS ORR: I am sorry, your Honour, and Barton refers to the usage in the Constitution (US), but then, at 2499 at the bottom:

It is quite clear that the word “excises” is used there in the sense of excise on the manufacture of commodities.

Then 2501, at the bottom of the second column:

I am rather of the opinion that the use of the word as it occurs in this bill will be held to carry with it the same meaning; but, if on consideration we find there is any doubt about that, I think it will be a comparatively easy matter to provide for it.

And my submission is that it was decided that there was no doubt about that; that was the meaning, and therefore no definition was required. Barton did that by reference to a discussion of the term in the Constitution (US), and Issacs did that by reference to a definition of the term provided in the Wollaston Report; but they both agreed that that was the intended meaning of the term.

We say it is unsurprising that the framers of the Constitution agreed that excise was to have that confined meaning in the Constitution because at the time of Federation, the term “excise” was used uniformly in the colonial statutes to refer to taxes on the production of goods within the colony levying the excise, other than on goods that were to be exported. And I do not want to take your Honours to any of those statutes, but we have cited them in our written submissions at paragraph 44 and footnote 68.

Contemporaneous commentary and dictionary definitions are also consistent with that confined meaning. We refer to Quick and Garran in our submissions; and we also refer to the dictionary definitions and discussions of the meaning of excise in the first edition of the Oxford English Dictionary; in John Stuart Mill’s Principles of Political Economy, in McCulloch’s commercial dictionary, and Palgrave’s Dictionary of Political Economy; all set out in paragraph 43 of our submissions.

We also say that the conception of an excise that was expressed by Chief Justice Griffith in Peterswald aligned with this clearly established meaning of the term that I have just outlined, being a tax on locally produced or manufactured goods. And in that case, his Honour adopted the same view of textual meaning as Quick and Garran did. Your Honours will see that at page 509 of the judgment, noting as he did that:

that the Constitution was framed in Australia by Australians, and for the use of Australian people, and that the word “excise” had a distinct meaning in the popular mind –

And his Honour also referred as I have to the many laws that were in force in the States dealing with the subject matter of “excise”.

So, our submission is that the word “excise” did in fact have a clearly established meaning in Australia at Federation. Its meaning was a tax on locally produced or manufactured goods, and that established meaning was not obscured by the enlarged use of the term in England, which included all those miscellaneous licence fees, which had no connection whatsoever with goods. On the contrary, the Convention Debates reveal that the framers were aware of the English usage, and they were satisfied that the confined usage of the term in Australia – including its uniform use in colonial statutes – was sufficiently clear.

Now, could I turn to purpose. We submit that our conception of an excise is also supported by the purpose of section 90, properly understood. When regard is had to Chapter IV more broadly in the context of the movement to Federation, we submit that it is apparent that the purpose of section 90 – as I have said – was to give the Commonwealth effective control of tariff policy.

At a high level, two of the key objectives of Federation were firstly, to create a common external tariff, which would lead to a customs union in Australia, and secondly, to establish free trade between the States. The purpose of section 90, we say, aligns with the first of those objectives, including by conferring an exclusive power on the Commonwealth to impose customs duties, and the purpose of section 92 aligns with the second objective by providing that trade, commerce and intercourse among the States should be absolutely free.

I just want to deal a bit more with each objective in turn, because both, we say, shed light on the true purpose of section 90. Much of the history of the first objective, in relation to a common external tariff, is summarised in Cole v Whitfield, where the Court explained that, to create a free‑trade area embracing the Australian colonies, it was necessary for agreement to be reached about a uniform external tariff, but differing fiscal policies between the colonies represented a formidable barrier, as it was described, to reaching that agreement. In particular, Victoria appeared to favour a policy of protection local industry, whereas New South Wales favoured a policy of free trade. Given that there was no consensus on the extent to which the uniform external tariff would be protectionist, it was agreed that exclusive power to set the tariff would just be given to the Commonwealth.

But, as I have explained, it was also necessary to ensure that no State could undermine that policy, particularly given the history of the different fiscal policies in the States – that they could not undermine it by altering the price of locally produced goods relative to imported goods. That was why section 90 conferred exclusive power on the Commonwealth to impose duties of excise. The objective of creating a common external tariff is not jeopardised by State taxes which fall equally on locally and imported produced goods. And the majority in Ha, at page 495, accepted that the original purpose of section 90 was, and I quote:

merely to protect the integrity of the tariff policy of the Commonwealth.

and that this was what the framers had in mind in the 1891 Convention Debates. That is referred to at 495 of Ha. We have given the Court relevant citations to the 1891 Convention Debates in our written submissions, at paragraph 48 and footnote 80.

Instead of saying anything further about the 1891 Convention Debates, because there is agreement that at that time the purpose was – as we say it was – to protect the integrity of the Commonwealth tariff policy, I want to come to the 1897 Convention Debates in Adelaide, because that is what the Ha majority judges rely on to demonstrate that that original purpose of section 90 was abandoned and replaced with the purpose of giving the Commonwealth, in the words of the majority on page 496, “a free-standing power”:

to impose duties of excise –

which was no longer linked in any way to the Commonwealth’s tariff policy. Our submission is that the Ha majority were wrong to view the very limited discussion in the 1897 Convention Debates in Adelaide as revealing such a fundamental shift in the purpose of section 90. To the contrary, we say that the 1897 Convention Debates in Adelaide support the view that the accepted original purpose of section 90 that was discussed in the 1891 debates continued to prevail.

What the majority in Ha rely on, at page 495 of their judgment, is the fact that at the 1891 convention the relevant drafting at that time referred to the Commonwealth’s exclusive power to impose duties of excise upon goods the subject of customs duties. That was the drafting in 1891: duties of excise upon goods the subject of customs duties. At the Adelaide convention it was agreed that that phrase, upon goods the subject of customs duties, should be removed. That is referred to at page 496 of the Ha majority judgment. And according to the majority judges, the reason for that amendment was that there was agreement that, quote:

both by intention and by expression, the exclusive power to impose duties of excise was conferred on the Parliament as a free-standing power.

Which the majority said:

denies any necessary linkage between the exclusivity of the power to impose duties of excise and Commonwealth tariff policy.

In our submission, the Convention Debates in relation to that amendment, which are the Adelaide 1897 Convention Debates, do not support that very significant conclusion that by agreeing to that amendment to delete those words the framers were, in so doing, abandoning their original plan and instead embarking on a new plan of giving the Commonwealth a free‑standing power to impose duties of excise that no longer had any relationship with the Commonwealth’s tariff policy.

The relevant passages of the debates are at tab 62 in volume 9 of the book of authorities, starting at page 2518. The discussion of the amendment commences in the second column of that page in the last paragraph of the page. Your Honours will see, just prior to that, that the amendment that I had been referring to was moved by Sir George Turner, who said that he failed:

to see the necessity of these words –

which were ultimately omitted, as it might be:

advisable to have an excise duty on an article which was not subject to Customs duty.

So, he did not think the words needed to be included, because you might need an excise duty to be on an article that was not subject to a customs duty. Over the page at 2519, the discussion continued, and, importantly, Mr McMillan, about halfway down the page – Mr McMillan was also present at the 1891 debates. Mr McMillan said:

It seems to me that under almost every conceivable circumstance an excise duty would be a sort of counterpoise to an import duty.

But he nonetheless went on to acknowledge that:

you may have an excise –

a counterpoise:

upon an article which is not the subject of Customs duty –

And in that context, he said the words that the majority in Ha fixed upon:

perhaps in a Bill of this sort it would be as well not to do anything that would restrict the power of the Federal Parliament.

We would make these observations about that passage. The first observation, as your Honours will appreciate, is that the discussion that is relied upon by the majority is very brief. If the framers had intended Mr Turner’s amendment to signal a fundamental shift in the purpose of a provision that had been the subject of extensive debate in 1891, one might have expected that to have been the subject of greater discussion. But, more importantly, your Honours will appreciate from the comments of Mr McMillan, that the framers never resiled from the view that an excise duty was a counterpoise of an import duty, and the maintenance of that view is entirely consistent with the amendment that was passed at the 1897 Convention.

If the Commonwealth chooses to impose no customs duty on the importation of a particular good, that is just as much a manifestation of tariff policy because the Commonwealth has chosen to favour free competition between local and imported producers of the good. In those circumstances, a State excise imposed upon locally produced goods would undermine that policy to determinant of local production.

So, we say that this – moving of this amendment and discussion about this amendment in this short section of the 1897 Convention Debates relied on by the Ha majority judgments does not provide a sufficient foundation for the majority’s conclusion that the original accepted purpose of section 90 was abandoned.

GAGELER J: To put this in an historical context, between 1891 and 1897, there was a huge economic upheaval which saw much more government intervention, and these discussions are in the context of ensuring a large power to this newly‑created federal government.

MS ORR: Yes.

GAGELER J: That is really the thrust of what was being taken by the majority in Ha, rather than the fine‑grained analysis.

MS ORR: The point that we make, your Honour, is that having accepted the original purpose, their Honours were concluding that these debates reflected a decision to abandon that purpose and embrace a different purpose. That is what their Honours relied on – these passages in this set of debates – as supporting that fundamental shift. Our point is that they do not. These passages of the Convention Debates do not support that shift. Their Honours did not appear to rely on other external matters. They are very clear about what they relied on – it was these debates.

GAGELER J: All I am suggesting is, one way of looking at it is not so much a chain from one purpose to another but a broadening of the original purpose acknowledging to the Commonwealth a larger capacity to act economically.

MS ORR: Yes, and I suppose what we would say, your Honour, is that it is not a broadening of the purpose, it is an inconsistent purpose – it is an entirely different purpose. The first purpose being about protecting the integrity of the Commonwealth’s tariff policy, and the Ha majority said that that evaporated – that linkage with the Commonwealth’s tariff policy evaporated in these Convention Debates.

EDELMAN J: You have to get rid of that purpose because you cannot define a tariff without referring to discrimination in some sense. It has to be a different purpose, according to the majority in Ha. They could not have reached their conclusion that they did ‑ ‑ ‑

MS ORR: No, that is right.

EDELMAN J: ‑ ‑ ‑ unless the purpose is radically different.

MS ORR: I am sorry, your Honour, that is why I am taking some time in seeking to undermine that plank because it the plank in the Ha majority’s reasons for their conception of the purpose of section 90. With respect, we say this is a flimsy foundation for that.

STEWARD J: You can accept the broadening of the excise power in the way Justice Gageler suggested as long it is on locally produced goods.

MS ORR: Yes, yes.

STEWARD J: So, Sir George Turner says, in these difficult times we might want to tax locally produced goods that are not imported in any way, unique to Australia – the hills hoist, whatever it might be.

MS ORR: Yes, yes, your Honour. I am conscious of time, and I want to deal with the second broad objective of Federation quite briefly for that reason – that is the objective of establishing free trade between the States. I want to do that by reference to our written submissions at paragraphs 48 to 49.

Can I say, just briefly, in addition to the points we have made in those submissions, that our submission is that, on a proper reading of the majority judgments in Ha and Capital Duplicators, while it is true that the majority judges saw sections 90 and 92 as being related, they did not go so far as to say that section 90 had been included in the Constitution so as to achieve the free trade purpose of Federation. Their concern was to ensure that the Court did not adopt a construction of section 90 that would interfere with the achievement of that purpose by section 92. That is, we say, the proper reading of the passages in Ha about that broader free trade purpose. They are all referrable to that being a purpose of the Constitution and Chapter IV of the Constitution, not to that being the purpose of section 90.

EDELMAN J: In light of the interpretation of section 92 that has prevailed since Cole v Whitfield, would there be any difference between the different approaches to “local” in section 90? In other words, on the broader approach where “local” would include production in one particular State, that might just be covering some of the territory that section 92 would cover.

MS ORR: Yes, that is so, your Honour. Can I say, finally, on purpose, that we acknowledge that the current view of “purpose” in section 90 is the one that was originally articulated by Justice Dixon in Parton, namely, to give the Commonwealth:

Parliament a real control of the taxation of commodities –

We have dealt with this in our written submissions, but can I make two brief observations, and the first is to state the obvious. Justice Dixon’s articulation contained an express acknowledgement that his Honour was making an assumption about the purpose of section 90 and, as in Matthews, his Honour was of course not able to have regard to the Convention Debates and so he did not have the benefit of the drafting history that I have just taken your Honours to.

The next point is that Parton was obviously decided well before Cole v Whitfield and so before the proper meaning of section 92 of the Constitution had been settled and, for the reasons that I have just taken the Court to, we say that the settled interpretation of section 92 and what it is intended to achieve is important context in understanding the purpose and proper scope of section 90. So, our submission is that, having regard to those circumstances, Justice Dixon’s assumption as to the purpose of section 90 is not supported by the history of that provision or its place in Chapter IV of the Constitution.

In the interests of time, could I, in relation to context, the third limb of our approach to the proper construction of section 90, rely on our written submissions at paragraph 50 where we emphasise matters such as the significance of the co‑location of “excise” and “customs” where each of those words appear in the Constitution, the existence section 92 and the reference in section 93(i) to “duties of excise paid on goods produced or manufactured in a State”.

Our submission, in sum, is that the text, context and purpose of section 90 all support our submission that “excise” means a tax that falls selectively on locally produced good. That is the meaning that ensures that the Commonwealth’s exclusive power to control tariff policy cannot be undermined by State taxes and it reflects the close relationship between customs and excise in the Constitution.

Could I move then to the final part of our submissions, which is why we say the Court should grant leave to us to reopen Capital Duplicators and Ha, so that that construction that I have just outlined can be affirmed. I want to develop that submission by reference to the John factors. The first John factor, we say, should not be a barrier to this Court granting leave to reopen the principle that I focused on in Capital Duplicators and Ha, that a duty of excise is a tax that falls on goods whether of domestic or foreign origin, for two reasons.

The first is that, although the principle that a duty of excise is a tax on production, manufacture, sale or distribution is a long‑established principle in section 90 jurisprudence, as I have already said, Capital Duplicators and Ha were the first occasion on which a majority of this Court held that that was regardless of whether the good was taxed was of foreign or domestic origin.

The second reason, we say, why the first John factor should not be a bar to our reopening application is that the majority view in Ha and Capital Duplicators is, we say, at its core based on two flawed premises. The first is that excise had no clearly established meaning at Federation – I have made my submissions about why we say that premise is flawed. The second is that the Ha majority embraced, we say, an erroneous understanding of the purpose of section 90 being to give the Commonwealth the real control of the taxation of commodities.

The first premise originated in Justice Dixon’s judgment in Matthews, and the second premise originated in Justice Dixon’s judgment in Parton, and I have already explained to your Honours why, in our view, neither of those premises are sound. The fact that both of those premises have long underpinned section 90 jurisprudence, we say, does not make them sound.

As to the second John factor, we accept that the reasoning of the majority judges in Capital Duplicators and Ha was reflected in two four‑judge majority judgments, and there are no material differences between the majority reasoning in both of those cases. But, as against that, we emphasise that there was only a slim majority in both of those cases, with strong dissenting judgments written – including a unified three‑judge minority judgment in Ha. We also emphasise in relation to that factor our point that an orthodox analysis of text, context and purpose suggests that those dissenting judgments contain the correct view.

As to the third John factor, our submission is that Capital Duplicators and Ha have led to considerable inconvenience for the States and Territories. The specific inconvenience caused is that, by reason of those decisions, the States and Territories have largely lost their autonomy to decide how they raise revenue through taxation. To explain what I mean by that, we note that it is agreed in the special case that immediately following the Ha decision, the States and Territories lost a considerable source of revenue – that case having decided that they no longer could levy certain taxes on petrol, tobacco and liquor – that is an agreed fact at paragraph 64 of the special case.

It is also agreed that in response, safety net arrangements were introduced, whereby the Commonwealth would tax those products and pass the revenue collected back to the States and Territories. And our submission, therefore, it is not that that States and Territories have suffered inconvenience because they have lost specific revenue. That is not the submission that I make. Instead, our submission on inconvenience that has been suffered by the States and Territories is that they have become dependent, much more dependent, upon the Commonwealth for revenue that could previously have been raised through their own laws. And the extent of that dependence is dealt with in the special case, and could I ask your Honours to page 286 in the special case.

At 286, your Honours will see one of a series of tables that were prepared by the Australian Bureau of Statistics at the request of the parties for the purposes of this proceeding. The table compiles data about the amount of revenue that the States and Territories have been able to source through taxation and other sources on their own, as well as the amount of revenue that they have received by way of Commonwealth payments between 1991 and 2021. There is one table for each State and Territory and the table I have taken to your Honours to at 286 is the table for Victoria.

The relevant column in this table is column (G), which sets out the ratio of Commonwealth payments to State own source taxation revenue. It has been calculated, as your Honours will see, by dividing the figure in column (C), which is the amount of Commonwealth payments received by Victoria, including GST payments, by column (A), which is the amount of revenue that Victoria raises through its own taxation laws. And your Honours will see that in the 1996 to 1997 financial year, being the last financial year before the Ha decision was handed down in August 1997, the ratio, in column (G), of Commonwealth payments to Victoria’s own source taxation revenue was 0.72. Do your Honours see that reference?

If your Honours then follow that column down, you will see that the ratio steadily increases over time. And although there is some fluctuation, the general trend is, plainly, that the ratio is increasing, reaching 1.31 in the 2020 to 2021 financial year. So, to put that in context, immediately before the Ha decision was handed down, Victoria received 72 cents from the Commonwealth for every dollar of revenue that it raised on its own through taxation. And in 2021 it received $1.31 for every dollar of revenue raised on its own through taxation. And so, its own source taxation revenue has become an increasingly smaller proportion of its overall revenue, and Commonwealth payments have become an increasingly larger proportion of that revenue.

I will not take your Honours to the other tables, but I will say that the same general trend of increased financial dependence on the Commonwealth in the years following Ha appears for all of the States and Territories except Western Australia. And that trend of dependence, we say, causes substantial inconvenience in two ways. The first is that it denies the States and Territories the power to use indiscriminate taxes; taxes that fall indiscriminately on goods in the sense that that they apply equally to locally produced goods and imported goods of the same kind. It denies the State power to do that as a behavioural lever to effect policy goals. An example of what I mean by that is set out in the special case book at paragraph 63 on page 45. Your Honours will see there that:

prior to Ha, the Northern Territory imposed a volumetric tax on alcohol . . .

A 2017 report of the Northern Territory Government recorded –

that that tax had:

been effective in reducing alcohol‑related harm in the Territory to a marked degree –

and in reducing the overall consumption of alcohol. Alcohol-related debts were also reduced between 1992 and 1997. That report, the relevant pages of that report, are annexure SC6 to the special case, at page 149 of the special case.

I will not take your Honours to that report, but the critical point, we say, that following Ha, that tax had to be discontinued. It is agreed that it was discontinued as a result of Ha. And even assuming the Northern Territory recovers the revenue – the lost revenue – from that tax by GST revenue grants or in some other way, the point we wish to emphasise is that they, and the other States, are no longer able to influence alcohol consumption and alcohol related harm and alcohol deaths by taxing alcohol, at least not without the cooperation of the Commonwealth Government of the day.

The second way that the increased dependence on the Commonwealth funding causes inconvenience is that it limits the options that are open to the States and Territories for tax reform. And that was a matter that was recognised by Chief Justice Gibbs in Hematite Petroleum at 617, who observed there that the ever-creeping scope of section 90:

narrows, artificially, the field of taxation open to –

the States, while leaving the Commonwealth’s taxation power under 51(ii) unaffected, and in his Honour’s view, one result of that trend must surely be:

that the States will impose some forms of taxation which, although constitutionally permissible, are less economically desirable than taxes that are now characterized as duties of excise.

Finally, as to the fourth John factor, the matter that is relied on against us to demonstrate that Ha and Capital Duplicators have been independently acted on in a manner which militates against reconsideration is the GST settlement between the Commonwealth and the States and Territories. And we say that there is no reason to think that affirming the proper construction of section 90 would have any impact on that settlement. I want to explain that a little further, and to answer to your Honour’s question about that. That is the final thing other than coming back to some miscellaneous questions that were asked of me yesterday that I wish to do.

I have received a message that one of the interveners is happy for me to have a little more time, but I think I could deal with all of those residual topics in about five minutes. I wonder if it might be appropriate to take the break and I can return to those matters and deal with them immediately after the break?

KIEFEL CJ: Yes. Thank you, Ms Solicitor, the Court will adjourn for 15 minutes.

AT 11.15 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.30 AM:

KIEFEL CJ: Yes, Ms Solicitor.

MS ORR: If the Court pleases, could I deal with the questions that I have not otherwise addressed so far, commencing with your Honour Justice Gageler’s question about the GST position this morning.

Our submission is that the Court adopting our conception of GST in the final pathway of our case would not cause any difficulties for the GST legislation from a section 55 perspective. And that is because, as your Honour would know, the GST is imposed by a suite of statutes which are broken up according to whether the tax is an excise, is a customs duty or is something else.

So, insofar as the GST is a duty of excise for the purpose of section 55, it is imposed by section 3 of A New Tax System (Goods and Services Tax Imposition – Excise) Act 1999 and insofar as it is imposed in relation to a tax that is neither a duty of excise nor a duty of customs, it is imposed by section 3 of the A New Tax System (Goods and Services Tax Imposition – General) Act 1999. So, altering the Court’s conception of an excise might alter which of the statutes operates to impose it, but it would continue to be imposed.

And then the other questions that I wanted to return to were, again, another question from your Honour Justice Gageler yesterday about the earliest case to hold that a retail sale could be an excise. We think that that is probably Dennis Hotels, insofar as that case related to the temporary licence fee, which was calculated as a fee of £1 per day plus six per cent of the gross amount paid or payable for all liquor purchased for sale under the licence. That was section 19(1)(b) of the Licencing Act. And of course, Dickenson’s Arcade is another example.

And your Honour Justice Gageler also asked me yesterday about taxes on ownership, and whether there were any examples of State taxes on ownership. We have not identified a tax on ownership that could not also, arguably, be characterised as a tax on the use of goods. So, there are the examples that we have identified in paragraph 28 of our written submissions that are levied on the owners of goods but, arguably, by reference to the use of those goods. And it would be a question, we think, of how the charge is properly characterised in each case as to whether they are, in fact, a tax on ownership or a tax on use of the goods.

And then, I think finally, your Honour Justice Steward left me with a project overnight about a duty to be paid on the sale of certain animals and I can confirm for your Honour that Parts I to III of Chapter 10 of the Duties Act (Vic) require duty to be paid on the sale of certain animals – cattle, sheep, goats and pigs, as well as certain carcasses.

Unless I can assist the Court further, those are our submissions.

KIEFEL CJ: Thank you, Ms Solicitor. The Solicitor‑General for New South Wales.

MR SEXTON: If the Court pleases, we are happy to adopt the submissions of my Victorian colleague. I will just add a couple of additional matters, if I may. We would characterise the tax here as one on the owner for the time being of the motor vehicle, calculated by the mileage covered by the vehicle during the relevant period of ownership. But we would say that even if it were to be categorised as a tax on use or on consumption, then it would not be, still, a tax on goods as commodities or items of trade as it is not sufficiently proximate to, or connected with, the notion of goods of those kinds and for the reasons that I will give shortly for that proposition.

I wanted to quote, however, before doing that, from the judgment of Justice Stephen in Logan Downs. Your Honour, the citations to these cases are set out in the oral outline, including their location, but I do not suggest that your Honours need to go to the joint book. Justice Edelman has already referred, in part, to this passage this morning, but I quote it because it really encapsulates in many ways what our position would be, where his Honour said that:

However, it is not every tax upon goods which will be an excise. It is not simply the taxing of goods that distinguishes the incidence of an excise duty from that of other taxes; it is rather the taxing of goods during the process by which they are first brought into existence and then ultimately pass to the consumer or user. A tax upon the ownership of goods after that process is at an end, the goods having come to the hands of the ultimate user, is no duty of excise. Once out of the stream of production and distribution, goods cease to be apt subject‑matter for duties of excise and it is this that accounts for the character of an excise as an indirect tax; being imposed upon goods in the particular way it is, its incidence will tend to be passed on in the price of the goods, as they flow along the stream of production and distribution to the end user. But a tax upon goods which have reached the hands of the ultimate consumer will, on the contrary, impose a quite direct form of taxation upon their owner. The goods will not pass out of his hands, bearing with them, as a component of their price, the tax imposed upon them; instead the tax will lie where it falls, upon the owner. It will thus lack the quality of a duty of excise and be a direct upon the owner, the goods only providing the means of identifying the person to be taxed.

Sorry about the length of the quote, your Honours, but it does, as I say, really sum up our position. One point about that position is, I think, that there is a question of certainty for the States in levying tax in legislation and that formulation – which says that the notion of excise does not, in effect, go beyond the point of sale – would provide some certainty for the States in formulating their legislation because if one, we would say, goes beyond the point of sale, there then become difficult questions of evaluation that have to be considered and would have to be considered in advance of legislation being drafted, or in relation to legislation that is already in existence.

GAGELER J: Mr Solicitor, we would look only then to the taxing point.

MR SEXTON: I am sorry, your Honour?

GAGELER J: You were suggesting that we look only to the taxing point? Or would you acknowledge that there might be circumstances in which a taxing point after the retail sale will, in substance, be a tax on goods in the process that leads to the retail sale? Are you talking about certainty? I am trying to understand what you are saying.

MR SEXTON: Well, that is why I say about the point of sale – the point of sale – and whether something is, in effect, substance and effect a sales tax. Does that answer your Honour’s question?

GAGELER J: I think so.

MR SEXTON: Well, it provides a level of certainty.

GAGELER J: Yes.

MR SEXTON: Whether ‑ ‑ ‑

GAGELER J: Some, yes.

MR SEXTON: Yes. And we – I would just make a reference to a very short reference on this occasion in Browns Transport where the Court said that the tax in question was not one on goods because:

The person taxed is not taxed by reference to, or by reason of, any relation between himself and any commodity as producer, manufacturer processor, seller or purchaser.

Can I just refer, very briefly, to Dickenson’s Arcade, just ‑ ‑ ‑

STEWARD J: Mr Solicitor, what page was that from?

MR SEXTON: That was at page 129 of the report, your Honour. I am sorry about.

STEWARD J: No, thank you.

MR SEXTON: It is just to be noted that in Dickenson’s Arcade Chief Justice Barwick – I will not go to the passages, but effectively – the question in the case was whether it was a sales tax or a tax on consumption. Chief Justice Barwick effectively, we would say, although not in terms, held that it was a sales tax. That is at page 193 of the report. And Justice Mason effectively came to the same conclusion on the basis of the regulations. Of course, five members of the six members of the Court agreed that a tax would not fall within section 90 if it was actually one on consumption. Justice Mason suggested at 239 that that would be a rare occurrence, as a tax on consumption would normally also be a tax at the point of sale.

Unlike a sales tax, and really any taxes prior to that point, this tax here is not added to the price of the product to the purchaser. Moreover, we would say that there is no direct, or perhaps, likely, any effect on the demand for vehicles in question in circumstances where the amount of the tax ultimately paid will vary widely, because of the substantial differences in mileage travelled as between owners. It might be doubted, in our submission, that the purchasers of motor vehicles take the running costs into account, including fuel costs, when they make that purchase. It seems, at the moment in Australia, that the greatest demand for vehicles is for those with the greatest fuel consumption. And, to that extent, it does not seem to be something that is taken into account when the purchase is actually made.

Nor, we would say, is there any real correlation between the price of the vehicle in this instance – which will also vary widely from model to model – and the tax, which is the same for all models, and the tax is the same for new and used vehicles, again, despite the differences here in price for even, initially, the same model. So, all that might be contrasted with the statement of the Court in Peterswald v Bartley. The citation is there in the oral outline, your Honours, that the term “excise” was:

intended to mean a duty analogous to a customs duty imposed upon goods either in relation to quantity or value when produced or manufactured, and not in the sense of a direct tax or personal tax.

The statement that was adopted by Chief Justice Latham and Justice McTiernan in Matthews at 277.

Unless there are any other matters, your Honours, those are our submissions.

KIEFEL CJ: Thank you, Mr Solicitor. The Solicitor‑General for the Australian Capital Territory.

MR GARRISSON: May it please your Honours, the Attorney‑General of the Australian Capital Territory intervenes in support of Victoria’s position on the question of law as stated in the special case. We rely on our written submissions that were filed on 7 November, but I wish to briefly address one issue of constitutional principle in support of Victoria’s submissions.

The issue is, we believe, both critical and also common, as a common thread in the authorities, starting with Matthews through to Ha. That thread is the proposition that, properly construed, the concept of duties of excise within the meaning of section 90 is limited to inland taxes imposed on goods as the subjects of manufacture or production or as articles of commerce – Justice Dixon’s now well‑repeated refrain from Matthews at tab 29.

As it appears, at least the Commonwealth and Victoria agree a tax on use or consumption of goods is not necessarily excluded from constituting a duty of excise. The term “consumption” comprises a range of conduct by the consumer of the goods and so may denote a number of acts, including passive ones such as mere possession. As we have acknowledged in our written submissions at paragraph 33, once the goods pass from the chain of supply into the hands of the consumer, one must still examine the substantial operation of the tax and to ask the question whether the tax is imposed on goods.

Properly understood, that question is whether the tax is imposed on goods as articles of commerce. That means that the tax is imposed on the goods in the course of business or trade. This is in contradistinction to a tax imposed on goods as articles of personal use. The reference to taxes imposed on goods as articles of commerce or in commercial dealing necessarily implies that it is possible to have a tax imposed on goods otherwise than as articles of commerce or on non‑commercial dealings such as those descriptors then had work to do. The plaintiffs define “articles of commerce” as:

Anything that would have a market –

that is in the transcript page 11, line 415. The Commonwealth defines “articles of commerce” as:

articles that are able to be bought or sold in a market –

page 90 of the transcript, line 4069. On that basis, it would be difficult to envisage a circumstance in which goods are not articles of commerce. We say the Court should not accept those propositions of articles of commerce as they both rob the qualification of any substantive operation.

We accept that it is more difficult to demonstrate that the relevant tax is a tax on goods as articles of commerce once those goods pass into the hands of a consumer. This is because of the issue of proximity of the tax to the production or manufacture of the goods. But we do not say that the last retail sale of the goods – or first point of home consumption of the goods – is a finite point at which the tax on those goods can no longer be characterised as a duty of excise.

As with the now discarded or perhaps disused dichotomy of direct and indirect taxes, it is not useful, in our respectful submission, to approach the matter as one of typology or category of consumption. It remains necessary – even after the last retail sale of the goods – or first point of home consumption – to examine the relationship of the tax with goods.

Hematite Petroleum at tab 25 demonstrates this and the case has already been brought to your Honours’ attention. I would only refer to his Honour Justice Mason at page 634 – the last paragraph of his Honour’s judgment. Victoria has taken your Honours to a number of authorities that have embraced the notion of a tax on goods as articles of commerce. We refer to those authorities and others at paragraphs 23 to 32, and paragraph 34 of our written submissions. I do not propose to take your Honours to those authorities – they are listed in our outline of oral argument and are discussed in some detail in those paragraphs of our written submissions. The only authority not noted in our written submissions is that of Ha, which Victoria took you to yesterday.

On our analysis, it is not necessary to consider the broader and hypothetical question of whether a consumption tax is an excise of duty within the meaning of section 90. That question is stated at a level of generality that goes beyond the parameters of the stated question that the Court has to decide.

A consumption tax is not a defined term, nor a constitutional concept. In our respectful submission, it is a distraction from the question stated, because the answer to the question of whether a tax on the consumption of goods imposes a duty of excise does not avoid or obviate
the need to examine at a more fundamental level whether the tax is imposed on goods as articles of commerce.

In conclusion, your Honours, we submit that duties of excise are imposed on goods as the subjects of manufacture or production or as articles of commerce; and this ZLEV charge is plainly not such a tax. We submit the features of the ZLEV charge – which we outlined at 40 of our written submissions – suggest that it operates as a charge on the personal use of the ZLEV, and not in respect of any sale, supply or other commercial dealing with the ZLEV. In other words, the burden of the tax is borne, periodically, by the consumer of the ZLEV, but not as a static part of the purchase price of the ZLEV, whether at the first or subsequent point of sale.

Unless the Court has any questions, that concludes my submissions.

GAGELER J: What do you mean by “static”?

MR GARRISSON: A point in time, your Honour. As the Court pleases.

KIEFEL CJ: Thank you, Mr Solicitor. The Solicitor‑General for Western Australia.

MR THOMSON: May it please the Court. Can I begin by drawing a distinction between different types of consumption. The reason for that is because there is a difference in the taxing effect in relation to the different types of consumption, in our submission. On the one hand, there might be destructive consumption of goods, and that is exemplified by smoking tobacco or drinking wine. On the other hand, there might be the repetitive usage of goods, and a tax on that is a little bit different.

When you have taxation of a destructive consumption, it will only be a tax which is imposed once, because the goods no longer exist after they have been consumed. It will relate to an ascertainable quantity or value of goods that have been destroyed. The amount of the tax will be readily capable of calculation at the point of sale and in advance of the destructive use, and the tax may be collected by a retailer on behalf of a consumer simply by adding a calculable amount to the price of the goods at the point of the consumer sale.

By contrast, where you are talking about repetitive use of goods, the amount that the tax will be dependent upon what the consumer does with the goods after they have been purchased. If that may not be known at the time of the purchase in terms of how the consumer will use them – it is a predictive thing – such a tax is not readily incorporated into the retail sale price of the goods in any simple and calculable fashion. And it will depend on the consumer’s use of the goods; and the consumer may choose not to use the goods at all.

In relation to previous authority, there is no previous authority that deals with the specific question of an excise in relation to the repetitive use of goods. Having said that, Dickenson’s Arcade says that a tax on inland consumption is not an excise. And, because inland consumption can take the two forms that I have just mentioned, we would regard that as authority that is in favour of consumption by repetitive use not being, if it is tax, not being an excise. Nevertheless, we would try and justify that outcome as a matter of principle. We also rely upon submissions made by Victoria in relation to not overruling Dickenson’s Arcade, insofar as it precludes the finding that a tax upon a repetitive consumption cannot be an excise.

EDELMAN J: But Dickenson’s Arcade was concerned with cigarettes.

MR THOMSON: Yes. It is a case of destructive consumption ‑ ‑ ‑

EDELMAN J: And on the distinction that you are seeking to draw, presumably for the purposes of arguing that destructive consumption could fall within the concept of an excise, that would be the approach of Chief Justice Barwick, would it?

MR THOMSON: Well, interestingly, Chief Justice Barwick – yes, that is correct. But we would say that the authority of Dickenson’s Arcade and the comments made by five of the judges just relate generally to an inland consumption tax. Of course, they were made in the context of a destructive usage as opposed to a repetitive usage. If you want the particular quotes, they are in footnote 37 of our primary submissions. It is because the quotes relate generally to an inland consumption tax, without distinguishing between the two different forms, that we would say that it applies to both forms. But if we are wrong about that we can justify as a matter of principle the fact that a tax upon repetitive usage is not an excise, and that is what I will propose to do now.

The first point I will come to is to say the particular conditions for the existence of an excise were referred to in Bolton v Madsen, and in that case the Court said that duties of excise are taxes which are, one:

directly related to goods –

and, two:

imposed at some step in their production or distribution before they reach the hands of consumers.

Now, the way in which those two matters are altered by the plaintiffs’ submissions is worth considering. What the plaintiffs now say is that those two things should be expanded so that there must be a sufficient relation between the tax and goods – not just a direct relationship, but a sufficient relationship – and that the sufficiency of the relationship requires that an inland consumption tax imposed upon – sorry, that an inland consumption tax may be imposed upon the repetitive use of goods because such a tax will have a natural and general tendency to affect the level of demand for the goods. That is the way they put it yesterday, or the day before.

In our submission, the expansion that is proposed to those two matters is unjustified. Can I start with the purpose of section 90 as it was expressed in Capital Duplicators by the majority. That purpose is to prevent taxes on goods from affecting the market for those goods by discouraging trade and distorting competition. Now, the focus is upon the price effect of a tax in the whole of the market because it is price that is the mechanism by which you can prevent trade being discouraged or competition being affected because, as the majority says at pages 586 to 587 in Capital Duplicators, the price is the means by which home production may be stimulated, or, alternatively, exposed to greater competition. So, the critical thing is to consider the effect of the tax upon price, not in relation to the particular goods but to the market for the goods. The whole of the market for the goods.

Now, where a tax is imposed prior to the point of sale, the effect upon the price of goods may be easily ascertained. If the tax is directly upon a step of production, manufacture, distribution or sale, the natural and general tendency is that the tax will be incorporated into the price of the goods. However, even then, not all taxes affecting goods, prior to the point of sale, will be sufficiently direct to constitute a tax upon the goods, and therefore qualifies an excise. Kropp and Bolton are good examples of that. Their taxes were based upon the usage of a vehicle, or the usage of roads, to transport goods prior to sale, but they were not, in the words of the criteria, directly related to the goods, and consequently there was no excise.

Since Bolton, the purpose of section 90 has been clarified by the majority in Capital Duplicators; however, the majority affirmed – specifically on two occasions at pages 582 and 583 – that the requirement that an excise tax be directly related to goods was still a fundamental proposition. So, whether a tax is directly related to goods should now be measured by reference to the clarified purpose; that is, the price effect of the tax upon the market for the goods.

In other words, for the tax to be directly related to the goods, the tax must have a direct effect upon the price of the goods in that market. Another way of putting that is the imposition of the tax must, in a substantive or practical way – not applying the criterion of liability – mean that the price of the goods is likely to increase and to affect the market for those goods.

So, adopting that approach, the result in Kropp and in Bolton would be the same. The price effect of the tax in those cases was at least two stages removed from the price consequence. The tax was imposed upon the carrier of goods, who might then charge an equivalent amount to the owner of the goods, and the owner of the goods might then recover an amount equivalent to the tax upon sale. So, it was not directly related.

GAGELER J: Why do you confine it to increasing the price of the goods?

MR THOMSON: It is not necessarily an increase, it is just a price effect upon, but ‑ ‑ ‑

GAGELER J: Which would be a decrease in the price.

MR THOMSON: Absolutely, because if ‑ ‑ ‑

GAGELER J: Because it is more expensive to own it.

MR THOMSON: That is right. Because you might want to stimulate competition. Where a tax is based upon the repetitive use of goods after sale – that is, in a situation where the goods are being used for an activity – it is our submission that it will be generally difficult to determine the price effect of a tax upon the market for the sale of the goods. That is because, the extent of taxable use for each particular consumer is both unique and unpredictable. I will just expand on that. At the point of sale, the extent of the taxable use will depend on each particular consumer and their requirements. So, a consumer might choose not to use the goods at all, or might choose not to use them within the relevant market area.

So, to take this case, a person might purchase a ZLEV vehicle in Victoria and register and use it in New South Wales. Not only that, but the consumption by repetitive use may well be unpredictable for each consumer.

GAGELER J: Mr Solicitor, that is so for any market.

MR THOMSON: Yes.

GAGELER J: Markets are made up a lot of different people with lots of different motivations, but there are general tendencies. There are market effects that can be spoken about meaningfully.

MR THOMSON: And we accept that. The market effect of a tax prior to the point of sale can be readily understood, but it is the market effect of the tax after the point of sale in this case which is the focus of consideration. So, we would say that it depends upon anticipated and predicted taxation, not actual taxation, which is a difference from prior to the point of sale. As a result, it is not possible as a matter of constitutional fact to say that the natural and general tendency of the anticipated taxation upon repetitive usage is to alter or distort the price of goods because the tax is not an inherent part of the cost base of the goods compared to the situation where it is prior to the point of sale.

EDELMAN J: Perhaps more importantly, when one is dealing with the demand side – effects on the price by potentially affecting demand – economists talk about a difference between an income effect and a substitution effect. The income effect would be where they just bear the loss as part of their general income and maybe purchase less goods or earn less income.

MR THOMSON: Precisely.

EDELMAN J: I just do not know how income and substitution effects work in particular markets and we do not have any economic evidence about that at all.

MR THOMSON: Precisely. So that leads to two further propositions, that first, as a matter of law, we would suggest that the Court cannot conclude that the connection between the ZLEV charge and the ZLEV vehicle is sufficiently direct to constitute a tax on goods and to be an excise, because you could not be satisfied as a matter of constitutional fact about the relevant connection in the same way that you could be satisfied where you have a tax imposed prior to the point of sale. But even separately from that, in this case there is no evidence which is economic or otherwise of any substantial price effect upon ZLEVs or upon the market in which they are sold and, even for that reason by itself, the Court could not conclude in this case that there was any excise.

But, of course, we would make our submission on the more general basis that you would have to look at this as a matter of constitutional fact, and the reason for that is because economic evidence change be changing and it can lead to different results, and it would be an unfortunate situation if the question of whether there was an excise or not depended upon economic evidence upon which opinions might vary quite considerably. So, we would suggest that the consideration of whether it actually is an excise will depend on a question of constitutional fact, which will depend upon the Court being satisfied structurally that there would be an effect
upon the price, if you like, retrospectively from the taxation upon repetitive usage.

So that is why, as a matter of principle, we say that a tax upon repetitive usage will never been an excise, and, at least in this case, you could not conclude that it is an excise.

Those are our submissions, unless there is anything further.

KIEFEL CJ: Thank you, Mr Solicitor. The Solicitor General for South Australia.

MR WAIT: If the Court pleases. South Australia submits that both authority and principle stand against the expansion of a notion of excise contended for by the plaintiffs and the Commonwealth. As to authority, the principle that an excise does not include a tax on goods after they are passed into consumption or into the hands of the consumer has been the doctrine of this Court for 60 years since unanimous judgment in Bolton v Madsen. At footnote 11 of our written submissions, we have collected no less than 40 endorsements of this limitation since its articulation by Justice Dixon in Parton. As a principle, we embrace the trading tax rationale that has provided a principal basis for the into the hands of the consumer limitation. And we adopt Victoria’s submissions about why, if Dickenson’s Arcade is reopened, it should be confirmed.

In light of the detailed submissions regarding the authorities of the Solicitor General for Victoria which we adopt, I can now confine myself to only points 5 and 11 of the oral outline. I propose to do so by reference to some short materials that I hope have been made available to the Court from Quick and Garran and the 1891 Convention Debates. If I can start with the Convention Debates, and those debates commence – the Quick and Garran passages are first in the short bundle, and the Convention Debate passages that I want to commence with start at about six pages into that short bundle.

The debates have been referenced by the parties in this matter for and against the narrow view that the notion of an excise is limited to taxes on manufacture or production; however, the passages that I will take the Court to provide some support for an understanding of the Bolton v Madsen limitation drawn by reference to trading or indirect taxes. If I could ask your Honours to turn to page 670 of the 1861 Debate, your Honours will note on the right hand column, the discussion commences at sub-clause 3, which is the precursor to section 51(ii). Your Honours will see the first contribution of Sir Harry Atkinson which sets the tone for the discussion about the revenue raising powers of the Commonwealth.

EDELMAN J: Sorry, which page?

MR WAIT: I am on page 670 of the 1891 Debate, which is about six pages into the short bundle that has been provided, and I am on the right hand column and the opening contribution of Sir Harry Atkinson to that discussion. We can see there that the concern is raised about the powers of the Commonwealth – the tax – in circumstances where the Commonwealth may not take over colonial debt. A question is posed which is: if you take away the power from our State Parliament to levy customs duties, how can the State raise sufficient revenue? And then we see the immediate response of Mr McMillan, which is direct taxation.

If I could then turn to over to page 674, we find Mr Deakin entering the discussion, and he does so at about point 5 of the right hand column on page 674, where he rises to correct a misapprehension by the delegates that the conferral of Commonwealth power would take away concurrent State powers. Then, 14 lines from the bottom, Mr Deakin, who had in the March sessions of the 1891 Debates identified the need for there to be correlative Commonwealth control over excises to go hand in hand with that control over customs. He said:

Suppose this clause is passed, the same unlimited power of taxation as is possessed at the present time by the colonies will be retained by them in every respect, except as regards duties of customs or excise. With regard to direct taxation, which we are more particularly discussing, the colonies will possess in future every power which they now possess. Consequently, no power is taken away except the power of imposing duties of customs or excise.

I do not propose to labour through the various passages, but I will note that the distinction drawn between customs and excise on the one hand, and notions of direct taxation on the other, is drawn, again, at page 675 – the top left column – and page 678 at the bottom right column. Now, I do not pretend that I can say that these references exhaust any references to notions of trading and direct or indirect taxation in the Convention Debates. In fact, I am aware of – I think there at least a couple more. But the only thing that I seek to draw from these passages is that the notion of direct and indirect taxation was something that was not foreign to the delegates at the time that they were considering the notions of excise and custom.

If I can then turn to the pages from Quick and Garran’s text, there is a further short point to be made about section 93. Now, the text of section 93 is set out at page 860, which is the second page of the bundle that I have handed up. Now, it is well known, of course, that reliance is placed on those who seek to justify the narrow meaning of excise from the terms of section 93. In particular, the words:

goods produced or manufactured –

However, it is also immediately apparent that the provision also contains a reference to:

passing into another State for consumption –

and it appears that Quick and Garran have considered that the notion of “passing into another State for consumption” draws distinctions of the kind that underpin notions of trading and indirect taxation. They do so at page 862, and under the heading of “For Consumption” they say:

“Consumption” is a term of Economics, applied to denote the absorption, by use, of all kinds of wealth. It is the converse of production; production having reference to the creation of wealth, and consumption to its utilisation.

Skipping a few lines:

The process of consumption, in the case of many articles, may be a very prolonged one. The consumption of food or fuel is immediate; but consumption of a wagon or a steam‑engine, or a work of art, or a jewel, may extend over many years, or indefinitely. The expression “passing into another State for consumption” is not intended to imply that complete consumption within the State should be contemplated, but merely that distribution to consumers within the State is contemplated. Goods are “for consumption” in a State if it is intended that they shall be retailed in that State.

Pausing there for a moment, that concept seems similar to the limits that are drawn from the notions of trading and indirect taxes. Then that notion is then called on, perhaps even more strongly, in the following paragraph, where the authors consider the operation of the accounting mechanism that lies behind section 93. Halfway through it is noted:

but with regard to crediting revenue one further adjustment is needed . . . the State in which imports pay customs duty, or products pay excise duty, is not necessary the State in which the goods are retailed or consumed; and, on the assumption that these duties are paid by the consumer . . . it is necessary to make an adjustment in respect of goods which have paid duty in one State, but which afterwards pass into another State for consumption.

So, it can be seen from that passage that Quick and Garran do not regard the accounting mechanism in section 93 as some arbitrary one under which simply a line needs to be drawn for the purposes of distributing the custom
and excise revenue for which the Commonwealth, at this point in time, has become responsible. Instead, they said there is a reason for that, and the reason is that, although the custom or the excise may be imposed in one State, it is, ultimately, the consumer who will pay that duty in purchasing the good, and that may occur in another State.

Unless the Court had any questions, they are the submissions for South Australia.

KIEFEL CJ: Yes, thank you, Mr Solicitor. The Solicitor‑General for the Northern Territory.

MR CHRISTRUP: If the Court pleases. Your Honours, I intended to only address your Honours on one topic this morning in light of what has been said by the Solicitors‑General for the States of Victoria and Western Australia. The need for me to address your Honours on anything orally has fallen away. In those circumstances, we just propose to rely on our written submission.

Unless your Honours have any questions for me.

KIEFEL CJ: Thank you, Mr Solicitor.

MR CHRISTRUP: May it please the Court.

KIEFEL CJ: Solicitor‑General for Tasmania.

MS KAY: If it pleases the Court. I aim to be brief. As your Honours will see from our outline, we adopt and support the submissions of the defendant. We submit that this case is capable of being, and should be, resolved on the basis of the authority of Dickenson’s Arcade. In relation to the finding in that case that a consumption tax is not a duty of excise, we say that the authority remains undisturbed by developments in the Court’s section 90 jurisprudence in Capital Duplicators (No 2) and in Ha.

Having regard to the statement of the majority in Capital Duplicators (No 2) at page 583 – I need not ask you to look it up, but it is in the joint book of authorities, volume 4, tab 17, in our submission, the fundamental proposition for which Bolton v Madsen stands as authority, namely:

that a tax in respect of goods at any step in the production or distribution to the point of consumption is an excise.

is left entirely intact. Your Honours have been taken to that statement already, but you will recall that the majority there said that:

The rejection of the criterion of liability as an exclusive test has not disturbed the general acceptance of the proposition that a tax in respect of goods at any step in the production –

or manufacture:

to the point of consumption is an excise.

They went on immediately to say:

That is the fundamental proposition for which Bolton v. Madsen stands as authority –

We say, that is the proposition upon which the authority in Dickenson’s Arcade rests and that proposition remains good. Based on that proposition, this Court has stopped short of extending the concept of duty of excise past the point of receipt by the consumer – particularly in Dickenson’s Arcade.

We say that the logic underpinning that proposition is reflected in the submissions of the Australian Capital Territory, which we adopt – and that being that duty of excise is concerned with dealings with goods as commodities or articles of commerce, rather than with the use of items in private possession or ownership for private purposes. In our submission, that is why we say, in effect, that section 90 is not concerned with consumption taxes as there is no constitutional reason or purpose for the Commonwealth to have an exclusive taxation power over the private use by Australians of their private possessions.

Those are my submissions, unless there are any questions.

KIEFEL CJ: Thank you, Ms Solicitor. The Solicitor-General of Queensland.

MR DEL VILLAR: Your Honours have our oral outline, and I do not propose to speak to all of the points in the oral outline in detail; however, I did want to indicate a couple of the points which I propose to expand upon.

Your Honour, in my submission, I will deal first with the proposition that indirect taxation is irrelevant or largely irrelevant to the concept of excise. That will feed into the next submission that I will make, which is to the effect that when one applies the relevant factors which are indicated in Capital Duplicators and Ha, one still results in this tax not being characterised as an excise. I will then deal with a couple of other points, including the Commonwealth’s suggestion that an effect on demand is sufficient. Finally, I will deal with the issues about reopening.

Can I deal with the first point, your Honour, and that is indirect taxation and the concept of an excise. Your Honours will see in our oral outline at paragraph 3, where we have stated that it has been long recognised that duties of excise is a tax on goods as articles of commerce. That proposition, in my submission, cannot be denied. It was not denied by the Commonwealth. It does, however, appear to be denied by the plaintiffs. I will give your Honour the reference to their written submissions where they do appear to deny that, and that is at their reply at footnote 22. That footnote concludes:

In any event, Ha does not suggest those notions –

that is, commercial dealing and articles of commerce:

have any role to play –

Now, in my submission, that is not the case. The reference to integers of commerce in Ha page 490 makes it quite clear that that has a continuing role. Your Honours, can I simply give your Honours reference to our submissions. At paragraph 11, we set out a list of cases or quotes from a number of cases which make it quite clear that the concept of an excise is tied to the notion of some sort of tax on a step in a commercial dealing; namely, a dealing in bringing a good to the market.

Your Honours, can I now deal with the issue of indirect taxation. Our submission is that, at least from Parton v Milk Board onward – and perhaps even earlier from Matthews v Chicory Marketing Board – the concept of indirect taxation has been regarded as at least relevant in determining what an excise is. Your Honours have been taken to Parton in great detail and I am not going to take your Honours to that, other than to give your Honours the references.

At page 259 of Parton, in his Honour Justice Dixon’s judgment, his Honour in fact uses the word “indirect” – and this is before coming to the discussion of Atlantic Smoke Shops, which your Honours will find. In judgment of the other members of the majority – Justices Rich and Williams – they refer to the impact – or burden – on production and manufacture by a subsequent tax on sale or distribution. Again, at page 253, their Honours talk about an “indirect impact”.

The relevance of indirect impacts are indicated in Capital Duplicators (No 2). Could I ask your Honours just to turn to that case briefly. If I could ask your Honours to turn to 583 of the report. I should have indicated, your Honours, that that case is at tab 17 of the joint bundle of authorities and starts at page 575 of that bundle. If I could ask your Honours just to look about two‑thirds of the way down the page, at footnote (99), where their Honours endorse a substantive approach to determining what is an excise. Footnote (99) is a reference to the judgment of Chief Justice Barwick in Anderson’s. The first factor in that footnote is:

“The ‘indirectness’ of the tax –

The other factors are also relevant to this case, and they are:

its immediate entry into the cost of the goods, the proximity of the transaction . . . to the manufacture or production –

and so on. Now, if one accepts, in my submission, as one must, that indirectness and the articles of commerce point are relevant, then it follows that when applies it to this tax, one reaches the conclusion that this is not an excise. This is not a tax on articles of commerce before they reach the hands of the consumer, it is not imposed on trade in these vehicles or commercial transactions involving these vehicles. It does not depend on the quantity or value of these vehicles.

It is suggested by the Commonwealth and the plaintiffs that there is some kind of analogy with the amount of use of the vehicle and quantity or value, but, in my submission, that analogy just does not hold. There is no relationship between them. The charge is not imposed on a trader; it is not passed on to the consumer – at least there is no way of working out what is being passed on – and it is not an indirect tax because it is borne by the person directly. In my submission, for the reasons we set out in paragraph 6 of our oral outline, this is not an excise.

Can I deal briefly now with the Commonwealth’s multifactorial list and its relationship to these matters. The first point the Commonwealth indicates is a factor is whether or not there is a connection between a tax and goods, such as to affect the class of goods as articles of commerce. So, unlike the plaintiffs, the Commonwealth seem to regard the articles of commerce requirement as necessary, or at least relevant. Can I make the submission about that. This cannot simply be a relevant factor, because if it does not affect the class of goods as articles of commerce, then, in my submission, it is not an excise.

The next point is that the Commonwealth’s conception of what articles of commerce are, as the earlier interveners have indicated and as the defendant has indicated, is extraordinarily wide, to the point where practically any good is affected as an article of commerce. It is always conceivable that one can imagine some commercial dealing down the track with the good that might conceivably be affected. That, in my submission, is not the appropriate test.

The next point is that the Commonwealth says, well, one can have a look at the criterion of liability – that is 5(b) of their oral outline – but the Commonwealth also accepts that not all taxes on use are going to be excise duties – or at least that is how we apprehend the Commonwealth’s submission. And if that is the case, it is difficult to understand how the criterion of liability of use can actually point one way or the other. I have already made the point about a tax on the amount of use not being analogous to a tax on the quantity or value of a good. And, finally, the revenue raising purpose we deal with paragraph 7(d) of our oral outline, and I will say no more about that.

Can I turn, then, to demand. The Commonwealth seeks to uncouple an effect on price at the input or supply end from the effect of demand on the other end. In response to that, in my submission, the possible effect of a tax on demand just does not serve to distinguish an excise from other taxes or, indeed, any other financial impost that may be borne by a particular person.

Your Honours, we have given references there. Can I correct one of those. Capital Duplicators (No 2), the reference should be page 610 in the judgment of his Honour Justice Dawson. We make the point in paragraph 9 about the lack of evidence. In the absence of evidence about what is, in my submission, a controversial empirical claim about an economic effect, the Court should not accept that evidence or the assertion without some solid basis for it, and none has been provided.

The difficulties with the Commonwealth’s position were indicated in the exchanges between your Honour Justice Steward and my learned friend the Solicitor‑General for the Commonwealth where the learned Solicitor‑General indicated that one was looking at the effect on a market but one was not looking at outliers, but at the same time the submission seemed to be, well, one does not actually need to look at the characteristics of the market in any detail. That, in my submission, reveals the difficulty with this kind of analysis. One cannot speak about markets in the ether or in the abstract and reach essentially what is an unfalsifiable assertion that something is going to have an effect on demand because some people might treat it like that.

Can I deal and move on to the next part of my submission, which is the last part, and that is with the applications to reopen. Can I make clear that we adopt the defendant’s submission regarding the difficulties that would be imposed on States if they had to identify all of the legislation enacted in reliance upon a principle which is being impugned in the Court. I simply wanted to make that position clear. That deals with the reopening of Dickenson’s Arcade point in one of the John factors.

In relation to Capital Duplicators and Ha and reopening those, we adopt the submissions of Victoria in relation to reopening but we submit – and this is indicated at paragraph 65 of our written submissions – that if one is to reopen those cases they should be overruled and that the Court should hold that an excise is in substance a tax on production and manufacture.

We have set out in paragraph 12 of our oral outline some of the reasons why we say that. Can I elaborate on one or two of those. The first, which I have already discussed to some extent, is that the effect of these cases is that there is an ever‑expanding notion of excise being made by reference to what is essentially a claim about natural tendencies and effects that is incapable of being falsified. It is referred to by Professor Sawer in the article to which the learned Solicitor‑General took the Court yesterday as a “highly debatable economic theory” and, in my submission, one could go further and say one cannot expand the concept of excise again and again and again by reference to an assertion about effects without actually looking at what the effects are in particular markets.

The second point which I want to elaborate on is that in 12(d) and that is there was a considerable amount of authority indicating that the basis for the expansion of excise duties to taxes on sale and the distribution of goods was because they were regarded as a tax – or a burden, sorry – on local production.

That is apparent from the passages in Justices Rich and Williams, which are referred to there. It is apparent at page 260 of his Honour Justice Dixon’s judgment; it is mostly, perhaps, in the judgment of Justice Kitto in Anderson’s. And it is found in a number of later cases as well, and yet, the effect of Ha, at least, is to break the link with production and manufacture, and to say it does not really matter whether or not the good is produced or manufactured at all. And, in my submission, that error is significant. It has significant impacts on the States, and in addition to the matters that we have set out in our written submissions, those matters would support a reopening of Ha and Capital Duplicators, if need be.

May it please the Court.

KIEFEL CJ: Thank you. The Solicitor‑General of the Commonwealth.

MR DONAGHUE: Your Honours, as I have foreshadowed at the opening of my primary submissions, I had to seek the leave of the Court to reply briefly generally to the defendants and the interveners, and then also on the reopening application.

KIEFEL CJ: You have that leave, Mr Solicitor.

MR DONAGHUE: Thank you, your Honour. If Victoria is given leave to reopen Capital Duplicators and Ha, that is, evidently, a major constitutional step. The Court will be reconsidering the purpose of section 90 that was identified in Ha and endorsed by six justices in Betfair. As an intervener in support of the plaintiff, the Commonwealth filed written submissions in this case immediately following the plaintiff, and thus before anything was filed in writing by Victoria or any of the supporting interveners. We have said nothing in writing in response to the substance of the correct law on section 90, if your Honours take that course.

And at this stage of this hearing, in my submission, it is not realistic for us to attempt to do that. In those circumstances, in the event that your Honours reach that point, or if you would prefer us to do so – whether or not you have decided to reach that point – I would seek the leave of the Court for us to address submissions that are relevant to the written submissions post-hearing to address the issues that your Honours would then confront, if that large constitutional question is placed on the table once again, because otherwise your Honours will be deciding it without having heard anything from us on that point.

Mr Thomas is going to address the substance of the reopening application as opposed to the substance of the correct law. Can I just make one point as to what needs to be reopened, before I go onto other matters in reply, and it is this: the submissions that your Honours heard at the end of Victoria’s oral case and from Queensland just then expressly embraced the proposition that a sales tax on goods can be imposed by the States, provided that sales tax applies equally to foreign and domestic goods without discriminating between them, because it would not discriminate against local production. And your Honours will recall the learned Solicitor for Victoria saying, well, that is consistent with the tariff purpose, because it will be even across the board.

If that is right, the States can impose taxes on the sale of all tobacco and alcohol in Australia without worrying about the pesky business of licence fees or anything like that as was required by Dennis Hotels in that line of authority. They can just tax alcohol and tobacco indiscriminately and recover all of the revenue, plus more, that was available to them under the Dennis Hotels-type formula. They would be utterly unconstrained, and all of those cases went off on a completely unnecessary line of analysis, because, actually, section 90 does not say anything about an indiscriminate sales tax.

So, if that be right, the proposition that your Honours are just looking at the addition of a few words about irrespective of foreign or domestic origin at the end of Ha and Capital Duplicators, is unsustainable. That whole line of case law is incompatible with what is being put to you now. Otherwise, Mr Thomas will address the reopening application. Can I start in, and I am going to take these points as quickly as I can manage, given the timing issues, with this general proposition: Victoria says ‑ ‑ ‑

GORDON J: Sorry, Mr Solicitor, what are we addressing now?

MR DONAGHUE: Sorry?

GORDON J: What are we addressing now?

MR DONAGHUE: We are addressing, principally, the debate about articles of commerce and the proximity issues about sale and consumption. But my starting point is that it is not the Commonwealth that is seeking a radical reconceptualisation of the law on section 90 in this case. We embrace everything that the Court said, the majority of the Court said, in Capital Duplicators and Ha and we say this case is about answering the question that their Honours left unanswered about consumption taxes in both of those cases. That is what we are asking your Honours to do, and we are asking your Honours to do it by reference to matters of substance rather than form. Also, not a radical proposition post-Philip Morris.

We accept, and Victoria and the ACT and Queensland have emphasised this in particular, but we accept that a central consideration in answering the sufficient connection between the tax and the good question, that we say is the question raised by section 90, is whether the tax is of such a nature as to affect goods of the relevant class as articles of commerce.

So, no debate there. The debate – what is in dispute is the claim by Victoria and some of the interveners that that consideration – that articles of commerce consideration – means that a tax on the use of a good cannot be an excise because at the time that tax becomes payable with respect to any particular good, that good is not an article of commerce. Our submission is that just directs attention to completely the wrong issue because it is the tax that must be characterised, and that must occur by reference to the tendency of the tax to affect the class of goods to which it applies.

Our submission is that a tax can affect demand for goods of a class, even if the tax does not become payable until some later point in time after the good is in the hands of the consumer. So, a tax on the overwhelming majority of uses of the ZLEV – and while Victoria prefers to use the word “a subset”, we are talking about the overwhelming majority of uses of the ZLEV, a tax of that kind, in our submission, has a natural tendency to affect the market for ZLEVS.

Indeed, your Honour the Chief Justice asked a question yesterday when you said, well, those thinking of purchasing a ZLEV would be mad not to take it into account, and we submit that that is clearly right as a matter of ordinary human experience. It is no different from taking into account other kinds of costs – the maintenance cost example that I gave, and Justice Stewart put to me, well, that might be taken into account by the manufacturer giving special deals on maintenance, which is designed to make sure that it does not stop people buying the car. That kind of economic behaviour is responding to the ordinary way that people in a market will act based on costs that will be associated with a good after the good is in their hands. That, no doubt – sorry, your Honour, I withdraw that.

EDELMAN J: Just to make it a little clearer for me, could you give me an example of a tax on a good that would not be a tax on a good as an article of commerce?

MR DONAGHUE: Well, your Honour, I would reframe the question as the tendency – the tax as of a nature to affect goods of that class as articles of commerce. So, it is not whether the tax is on the article of commerce. It is the more general effect, and it may be that the more remote the biting of the tax is, and the smaller the amount is, the less your Honours would be satisfied that that kind of charge does have a tendency to affect the demand. But that is the question you are asking. You are not asking is it pre- or post‑sale, you are asking does it have a tendency to affect the market for the goods.

And I do not need, and I do not seek to prove, and I do not ask your Honours to find that the effect on demand will be the same for every individual potential purchaser in the market. That is not the right question. The States have said, well, some people will not mind and some people will buy it anyway, and some people will change their economic behaviour so they can still afford the good.

That may all be so, but the question is not individual by individual. It is the tendency of the tax to affect the market for the class of goods, and no doubt that variation is why South Australia are repealing their version of the ZLEV charge, referred to evidence where seven out of ten people are less likely to buy. So that means three out of ten, perhaps, are equally likely to buy. But the deterring of seven out of ten, if that be the true position, is obviously an effect on demand for goods of the class.

STEWARD J: Is there a distinction here, given the type of goods we are looking at, between accepting it as a tendency to take into account the charge, in your mind as a consumer, versus that having any effect on the ability to change the price of the car?

MR DONAGHUE: Well, your Honour ‑ ‑ ‑

STEWARD J: Because the latter question takes into account things like inequality of buying power, for example. Which you will have, as a consumer, you will have different capacities to buy.

MR DONAGHUE: Well, absolutely, your Honour, I accept that the individual consumer might not be able to change the price of the ZLEV, but the individual consumer will be saying, the price of the ZLEV to me is the sales price plus the ongoing cost that I can see is associated with choosing this kind of car versus a different kind of car.

STEWARD J: But in that case, that may not be enough, though. It has to also have an effect on the price.

MR DONAGHUE: Well, it has a tendency to have an effect on the price, your Honour.

STEWARD J: Well, having bought cars myself, I do not think that is necessarily so. I do not think you could go into the ZLEV dealership and say, well, I want a discount because I am going to have to pay this charge and I am going to use the car a lot.

MR DONAGHUE: That is not what I am putting to your Honour. I am not suggesting it has an effect on the price because an individual purchaser can persuade an individual dealer to reduce the price. I am suggesting it has an effect on the price because some people will say, I cannot afford to buy this ZLEV, which is already quite an expensive car, when it is going to cost me 500 – I drive a lot for work, it is going to cost me $500 or $1,000 every single year that I own it, in addition to the purchase price. I will buy something else. I will buy a Toyota Corolla.

EDELMAN J: Your submission is the effect on price comes through an effect on demand. How can one ever know that in a market without economic evidence? In every market demand elasticity is going to be different.

MR DONAGHUE: I accept that, your Honour. One of the interesting features of this case is that the States and interveners say to your Honour, well, supply side effects – those taxes will all go into the price. Why? Your Honour could put exactly the same proposition to me.

EDELMAN J: It is a natural tendency that has been assumed without economic evidence for a very long time by judges who are not economically trained.

MR DONAGHUE: That, your Honour, may well be so, but it does not provide a basis to distinguish between consumption taxes and other taxes.

STEWARD J: But there is, because you are more likely to draw the inference of a natural tendency when men and women of business are able to at least have the opportunity to pass it on.

MR DONAGHUE: But, your Honour, there will be markets, there will be many markets ‑ ‑ ‑

STEWARD J: Of course there will be markets.

MR DONAGHUE: ‑ ‑ ‑ where people in the supply chain will be squeezed between a large corporate entity at each end ‑ ‑ ‑

STEWARD J: Of course. That is all about probabilities and the probability is greater with a man or woman of business.

MR DONAGHUE: Well, in my submission – all I am asking your Honours to accept as a natural tendency is not, I think, a startling economic proposition that, as the cost of something goes up, the demand goes for it goes down – the natural tendency for the demand. I cannot tell you how much. I cannot tell you what the steepness of the demand and supply curves are, but that is all you need to have the natural tendency effect.

That effect that I am identifying is an effect on the market for ZLEVs that are for sale in Australia at any given time. And, at that point in time, that effect is on ZLEVs when they are clearly articles of commerce – they are for sale on the market and the charge is having an effect on that market for them for sale. It does not matter that after they are sold, the consumer pays the tax upon them – and it might be said they are not articles of commerce, although then one needs to deal with secondary markets – but, for this part of my case, it is enough to point to the effect on the market for the goods when they are being sold – and, I think on any view of an article of commerce, would meet that description.

GAGELER J: Mr Solicitor, can I just understand the structure of your argument here. As I understand it, at the very high level, you say that an excise is a tax on goods.

MR DONAGHUE: Yes.

GAGELER J: You say that there is a purpose behind section 90 ‑ ‑ ‑

MR DONAGHUE: Yes.

GAGELER J: ‑ ‑ ‑ prohibiting the States from levying a tax on goods, but that is what you are looking for ‑ ‑ ‑

MR DONAGHUE: Yes.

GAGELER J: ‑ ‑ ‑ a tax on goods. In looking for a tax on goods, you are seeking to characterise the impost in question.

MR DONAGHUE: Yes.

GAGELER J: As part of that exercise in characterisation, one takes into account the natural tendency of the impost.

MR DONAGHUE: Yes.

GAGELER J: There is quite a bit of difference, I think, between you and at least some of the interveners who will say that the ultimate question is one of constitutional fact, whereas I think you were saying that the question is one of characterisation, in respect of which broad tendencies are relevant.

MR DONAGHUE: That is precisely right. The tax is valid or invalid based on the characterisation of the effect of the tax on the class of goods. One is ultimately looking to give effect in that characterisation exercise to the purpose of section 90, which guides you down this article of commerce path. But it can affect – our friends, in seeking to draw a bright line based on the price at the time of sale are really identifying quite an arbitrary feature, because they accept inputs into price – which they assume will happen on the supply side – but then they deny the relevance of things that might abstract from the price on the demand side because of the ongoing cost.

GORDON J: That is not quite right, is it. It depends where your starting point is and, at the moment – as I think I put to the Solicitor‑General for Victoria, your starting point is different. The starting point is that your tethering is different. The rationale which underpins the purpose of section 90 is – as you have accepted from Justice Gageler – a tax on goods in the general sense, whereas the way it is put against you by the defendant and the interveners is, it is a tax – which is a tax dealing with commodities in relation to getting goods into a market – and into a market which is ultimately into the hands of a consumer.

MR DONAGHUE: But your Honour – sorry, your Honour, I did not mean to cut you off.

GORDON J: That is fine.

MR DONAGHUE: My answer to that, your Honour, is that if Capital Duplicators and Ha are right, and what section 90 is concerned with is taxes that distort the market for goods in Australia, then our starting point is the correct one – that if a tax has that distorting tendency, it does not have to be by increasing the price, it can be by decreasing demand for the good – which one would expect would decrease the price – then that is what you are looking for.

In the end, really, Victoria had to concede that the bright line based at price does not work, and that was the source of the exchange late yesterday afternoon, where – about the six month charge afterwards – and then it was said – ultimately, I think, Victoria’s position is, well that is in substance a sales tax – a deferred sales tax.

But – and I will come to that characterisation in just a moment, but that the effect of the concession to include a deferred sales tax is to recognise that if someone pays an amount of money six months after they buy a good, not to the retailer but to the Government as a tax, that could be an excise. Why? It has not been incorporated into the price. The reason is because it is evidently a cost to the consumer of acquiring the good. And that is only relevant that, because – the effect on price is relevant, and one only asks questions about sales taxes because it is recognised that a tax on sale has this tendency to affect the price of, and therefore demand for, the goods.

EDELMAN J: Something like a payroll tax or a tax on ownership of goods could have an extreme distorting effect in the market. But as I understood you, at least with payroll taxes, to disclaim the suggestion that they would be excises.

MR DONAGHUE: I do, yes, because an effect on the market is not the only relevant point. But certainly, the selected taxing point is also not. So, our friends, I think, said in answer to your Honour Justice Gageler, tax on ownership is out because that is once it is in the hands of the consumer – even applying the narrow view in Logan Downs, the statutory majority of the Court found that a tax on ownership was in with respect to most of the goods in that category. An annual levy on owning cattle and sheep – and this also goes to one of your Honour Justice Steward’s points – Logan Downs is a case where, if you own breeding stock or cattle that you are going to sell for meat, the same tax excise might be levied on the same goods on multiple occasions. Logan Downs holds that.

GLEESON J: But Mr Solicitor, was that not because they were able to characterise the tax as a tax on production ‑ ‑ ‑

MR DONAGHUE: Yes.

GLEESON J: ‑ ‑ ‑ and does not the difficulty, or possible weakness in your argument, is about this bright line and the fact that it really is supported by all that history of trading taxes.

MR DONAGHUE: So, yes, your Honour. I agree Logan Downs was answered by reference to being the effect on production. But the actual levy fixed upon ownership, so it is not consistent with the idea that one can just rule out an ownership tax – one has to look to the substance, and that is the point I keep coming back to – one has to look to the substance. But the substance is not, in our submission, just a substantive effect on the sale price, because the sale price is only relevant, having regard to the purpose of section 90, because of its market consequences. So, if your Honours can see that a tax on use has the same tendency to affect – or has a tendency to affect demand of the same kind as a tax that increases the price, there is no basis to distinguish between them.

That takes me, your Honours, to Dickenson’s, which is a case where your Honours have had really profoundly different readings of the case advanced to you. But, in our submission, what you did not hear from Victoria – in answer to our case based on Dickenson’s – was any attention to the express statements in the case that the economic substance of the tax – the tax on consumption – did not matter. Five members of the Court in that case accepted that the economic effect of the consumption effect probably could not be distinguished from the economic effect of a sales tax.

Justice Gibbs was the clearest about this, in the middle of 219, but Justice Stephen, at the bottom of 230, Justice Mason at the bottom of 238 – probably in a weaker form, Justice Menzies, at 213 – and the two dissenting judgments. There was not a debate that there was a difference in the economic effect. Dickenson’s said, it does not matter – and it did not matter because the criterion of liability said it did not matter. But once one accepts – post‑Philip Morris, and post‑Ha and Capital Duplicators – that it is the substance that we care about, one cannot read Dickenson’s Arcade as saying anything about the answer to the question of how a tax that has that economic effect should be characterised because it just was not answering the right question. It was answering a criterion of liability question that required the substance to be ignored, and now that your Honours will not ignore the substance, Dickenson’s, in our submission, has nothing to say.

That, we submit, is why when one gets to Ha and Capital Duplicators, the Court did not say, notwithstanding Mr Griffith’s submissions for the Commonwealth, consumption taxes are not excises because we have held that for at least the last 30 years. The Court said, we do not need to decide. The question was open because, the question having changed – Dickenson’s did not answer it. Therefore, it was left to be answered until a case where it did arise.

If I am wrong about that, and your Honours do now hold that Dickenson’s remains good law, in our submission, your Honours will be accepting that, provided the State frames its taxes in such a way as to tax consumption, then it can do that whether or not that tax has a distorting effect on the national market. That will not matter, because your Honours will have said, Dickenson’s is good, consumption taxes and use taxes are out, and so we do not need to care about whether or not the national market is being distorted by taxes in Victoria or anywhere else.

Justice Mason was prepared to apparently accept the anomalous exception in Dickenson’s, because he said, well, there are hardly any taxes of this kind. And there still are not very many. Your Honours have not been shown many examples of taxes of this kind, but there is a concern, held by the Commonwealth – and Victoria seems to agree with us about this – that these taxes may become practicably more feasible because it becomes easier with modern technology to track use, so that what would have been a small exception in Dickenson – and might be a bit bigger now – has the potential to become quite problematic in terms of the capacity of section 90 to achieve its purposes.

We urge your Honours to not depart from the focus on substance that underpins the recent section 90 jurisprudence and therefore to say, well, the fact that you are taxing the use of a good gives us an excise to the good. We still need to ask: is it going to affect the goods of that class as articles of commerce? But if we think the tendency of the tax is to do that and we look at the other evaluative factors that we have identified, then it can be an excise in just the same way as a sales tax can be, because we do not permit States to distort the national market. That is an exclusive power for the Commonwealth to tax goods and to do so in a non-discriminatory way.

Two final very brief points before the Court rises. Your Honour Justice Steward asked a few questions about periodic impositions on the one good and I have given your Honour the Logan Downs example of that. Particularly, your Honour might be assisted by seeing in Justice Gibbs’ reasons at the top of 66 – his Honour is in dissent, but summarising the scheme, he expressly says you could have the tax imposed on the same animals multiple times.

STEWARD J: Thank you.

MR DONAGHUE: And that was held to be an excise, at the top of page 78 and on page 70 – Justice Stephen at page 70 and Justice Mason with Chief Justice Barwick agreeing at 78 and 79. The other example of that – and I have got on quicker than I expected, so we have not already handed it to the Court, but the UK TV licences are licences described by the United Kingdom as excises on the annual use of a television. So that is a good – a durable good – that is repeatedly taxed for its use.

EDELMAN J: It is actually possession. You do not have to turn the television on. You still get taxed.

MR DONAGHUE: That is true, your Honour. I think the taxing Act says “use”. I assume they must assume that people use the televisions that they own. But I accept what your Honour says. If that was set at a level where the Court thought it had a tendency to affect the market for televisions, on our case, that would be a tax – an example of an excise levied repeatedly on the same durable good, and I can give your Honours that statute if that would assist you.

Finally, your Honours – and it is a low point to finish on – etymology of the word excise. Your Honours have heard some submissions about it based on Palgrave and some other matters from the 1850s. Very diligent members of the Commonwealth team have dived into this question and, in our submission, those dictionaries that our friends relied on, which say what they say, preceded the first edition of volume 3 of the Oxford English Dictionary covering the letters D and E, which was published in 1897, and contained the first very detailed examination of the etymology of the word excise.

The publication of the Oxford English Dictionary on that date caused the Encyclopedia Britannica to revise its entry about excise from the version that our friends rely to a different version, which says, actually, there is probably an error in that derivation through – the cut-off language that our friends rely on was probably a mistake, and that it actually came through the middle of Dutch – word “accensare”, the verb “to tax”.

Exciting as all of that is, your Honours, we have given your Honours an extract of – well, I can give your Honours at lunchtime an extract of the relevant materials and also a coversheet that translates them, because you need to read a lot of abbreviations in order to follow through the entries. But, if your Honours get to the etymology, it is not as simple as our friends say. In the end, we submit if one is balancing out do you construe a constitutional word based on confused etymology from the 1890s or based on the identified constitutional purpose of the provision, it is not a difficult choice.

If the Court pleases. After lunch, Mr Thomas will address the reopening application.

KIEFEL CJ: The Court will adjourn until 2.00 pm.

AT 1.01 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 1.59 PM:

KIEFEL CJ: Mr Thomas, regrettably, we will not need to trouble you, or to hear a rejoinder, Mr Solicitor General.

MR THOMAS: If it please the Court.

KIEFEL CJ: The Court is not minded to reopen either Ha or Capital Duplicators. It would, nevertheless, Mr Solicitor, be assisted by the submissions of the Commonwealth as to the operation of section 90 on the basis that they were reopened for a broader consideration of the case, if that could be done.

MR DONAGHUE: I think that can be done. We will put ourselves in a universe where, from first principles, what section 90 means. Can we have a little time, your Honour?

KIEFEL CJ: Yes. How much time would you like?

MR DONAGHUE: A month. March 17?

KIEFEL CJ: Yes, that would be fine. And a reply, I mentioned, Ms Solicitor.

MS ORR: Yes, thank you, and I wonder if the interveners might also like to reply to those submissions. That is a matter for the Court to consider, but we certainly would.

KIEFEL CJ: I think we might limit it to the Commonwealth and Victoria.

MS ORR: As the Court pleases.

KIEFEL CJ: Thank you. How much time would you need to reply?

MS ORR: We would like to have a month as well, if that is possible.

KIEFEL CJ: Yes, very well.

MS ORR: Thank you.

KIEFEL CJ: Thank you. And I think there is the question of Mr Lenehan’s table to be provided at some point.

MR LENEHAN: Your Honour, that may be the cue for my very short reply. So, your Honours should have the table ‑ ‑ ‑

KIEFEL CJ: I was not aware of that. Thank you. We will only have your reply, I think, to deal with this afternoon then, Mr Lenehan.

MR LENEHAN: Yes, thank you, your Honour. So, in terms of the table as we understood it this morning, Ms Orr accepts that there is no material difference. So, when your Honours come to read this, that is what you will see. Otherwise, we adopt the submissions that have been put by Dr Donaghue today and in‑chief, and in that context we thought it would be helpful to identify – you heard the other day that Ms Orr says that there are differences between us. We say that those differences are overstated.

The way to approach this is perhaps to pick up on something your Honour Justice Edelman said; that is, that the majority in Ha accepted that the core concept of an excise is a tax on goods. So, the question for this Court is then whether any limitations should be built into that concept. We say that the reasoning in Ha, as your Honours heard – the reasons we gave – does not support the inclusion of any such limitation. That was, of course, the question left open in that case.

As the Solicitor‑General for the Commonwealth submitted, and as indeed our friend for the ACT accepted, the categorical exclusion of such taxes is, we say, wrong. That is really the crux of our argument. So, when one then comes to aligning the arguments that the Commonwealth presents and the arguments that the plaintiffs present, can I say we have these commonalities.

We agree that section 90 is exhaustive. We agree, therefore, an excise is an inland tax on goods. We agree that to be characterised as a tax on goods there must be a relationship – what Dr Donaghue calls a sufficient connection between the tax and goods. And we agree that the ZLEV charge has that connection. We say that that is because a tax on consumption, in the sense of use – the sense that Mr Merkel explained – necessarily has that connection. Now, as that last point indicates, where we differ is this: our proposition is that consumption, in the sense of use, ought to be included as one of the steps on the relevant process, and it is that that:

constitutes the necessary relation between the tax and the goods to give the tax the character of an excise.

In doing that – just to give your Honours the reference – we have sought to pick up the approach of Chief Justice Mason and Justice Deane in Philip Morris at 434, where their Honours said:

The fact that the tax is imposed upon such a step in the relevant process constitutes the necessary relation between the tax and the goods to give the tax the character of an excise.

We say that is not far at all from the Commonwealth approach. Your Honours have heard Dr Donaghue’s explanation of that approach. But the point there is both involve what your Honour Justice Gageler identified as a question of characterisation as to which – for the reasons that your Honour gave and which Dr Donaghue accepts – broad questions of tendency are relevant.

EDELMAN J: Could you explain to me how it is if it is a question of characterisation, and if your ultimate question is, is it a tax on goods, and if the motivating purpose is to avoid distortions in the market, to put it broadly, how there can be any categories that are excluded? So, for example, payroll tax that we have been told by everyone is excluded. Why would that be excluded as a category if that test is right?

MR LENEHAN: Your Honour, one need to look for it being on goods, and it is difficult to see how a tax of that character has that character.

EDELMAN J: But you accept that excises can be indirect taxes on goods. And, in fact, some of the clearest examples of excise are indirect taxes on goods.

MR LENEHAN: We do, your Honour. And one can imagine circumstances in which a payroll tax may be applied to particular employees engaged in manufacture or production. And it will be that, then, which would give it the necessary connection to goods, but otherwise, one is a long way away from that subject matter. So, that is how we would explain it.

EDELMAN J: Even if it is a payroll tax that is concerned with an industry that produces goods?

MR LENEHAN: Yes. If it is applied across the board then, yes, we say that, your Honour.

EDELMAN J: And the same for taxes on possession or ownership, and so on?

MR LENEHAN: Yes. The Solicitor-General for the Commonwealth accepted, and we likewise accept, that taxes on ownership or possession may involve excises. Logan Downs was mentioned a number of times this morning, but of course that was a case in which there was a three-three decision. And so, it is no authority against the proposition that we are putting.

STEWARD J: Just while you are on that point, could you just remind me, in Logan Downs and in other cases at that time, this Court repeatedly said that not every tax on goods is an excise.

MR LENEHAN: It did.

STEWARD J: And then that changed.

MR LENEHAN: Yes.

STEWARD J: Could you remind me, was that Capital Duplicators?

MR LENEHAN: Capital Duplicators.

STEWARD J: And what was the reason given for the change?

MR LENEHAN: Well, your Honour has two things. The first is to discern the purpose identified in Capital Duplicators; that is, to avoid distortion within the national market and the association of giving Commonwealth-exclusive power to that end.

STEWARD J: What troubles me is that we are repeatedly told that, in Capital Duplicators and in Ha, the Bolton test was reaffirmed except – to use the language of the Solicitor-General of Victoria – albeit with a substance test. How do you reconcile the two propositions?

MR LENEHAN: Well, your Honour, we say that the position that was put yesterday by our friends for Victoria is somewhat more nuanced. So, in cases up to Capital Duplicators and including Capital Duplicators and Ha, one sees the rejection of the criterion of liability approach, so that is – Ms Orr correctly distinguished between these two ideas. The second idea which was key to the application of that test, was that those steps were exhaustive. The point that is reached in Capital Duplicators is that they are only examples, we say, of the point that you get to ‑ ‑ ‑

STEWARD J: Is there somewhere in Capital Duplicators which says that? That the steps are just examples – or Ha?

MR LENEHAN: I was actually going to tell your Honour that you look at Ha and say that the category is inland taxes on goods. Does that answer your Honour’s question?

STEWARD J: I am not sure. Is there a passage in Ha, a page number you can give me?

MR LENEHAN: Page 499.

STEWARD J: Page 499. Okay, thank you.

MR LENEHAN: So, once you get to that point, that is, you have an exhaustive – you have the proposition that customs duties and excise duties exhaust taxes on goods and that that is for the high constitutional purpose identified in Ha, what we say just inexorably follows and we say that is the reason that one then finds, in both Capital Duplicators and Ha, the reservation of consumption taxes.

Now, I just wanted to say two further things. The first was to make three points concerning our reopening application in terms of Dickenson’s and can I make these points. In relation to the questions that were asked yesterday about – and also asked of me as to onus and what material your Honours should act on, can I note that in the past in cases like Evda, that aspect of the John factors has been approached by reference to reliance in the form of legislating in a similar fashion, that is, looking for something which is essentially the same statutory scheme.

Now, Ms Orr said to your Honours yesterday that they engaged with us in relation to that John factor and sought to draw to the Court’s and our attention the sorts of schemes that they say could be affected by the Court’s decision in this case. I think I mentioned this before, but in our reply submissions – which I have left down on the Bar table – we took up that offer of engagement and sought to not only give our answer to those categories but to do what Victoria had not done, and that is, identify the schemes that it seemed to us our friend’s submissions had in mind.

So, you see this again at paragraph 12. So, we have, as best as we are able, sought to meet each of our friend’s categories and to explain that in most cases – and this is a point that your Honour Justice Gageler, took up with our friend for the Commonwealth – there is a question about whether some of these are even in the discourse of excise at all because there may be a more fundamental question about whether they are, in fact, taxes or things like fees for privileges or fees for services. But we have given our answer
there and we say that we have more than discharged whatever burden of persuasion we bear to have your Honours accept our invitation to reopen Dickenson’s.

I said I had three points – the third point is that you will see that some of the examples that we have given – in fact, I think most of them – involve legislation enacted after Ha and Capital Duplicators. Of course, in Ha and Capital Duplicators, the Court specifically sets aside consumption taxes. So, our friends for the States and Territories have been on notice since those decisions, that this Court was leaving open the question of consumption taxes. So, we say – to pick up the point your Honour Justice Gageler said yesterday – at best, this factor is neutral but there is certainly nothing in the path that will provide a strong reason against reopening based on the last John factor.

Can I then just give your Honours a reference to – I think he described as a low note to end on – and perhaps I will end on this equally low note, the question of etymology is also addressed by Justice Deane in a way that adheres entirely with what the learned Solicitor-General said in Hematite at 663. And what is there said bears out the extensive researches of our friends for the Commonwealth.

Unless your Honours have any other questions, those are the submissions the plaintiff makes in reply.

KIEFEL CJ: Yes, thank you. The Court reserves its decision in this matter and adjourns to 9.30 am tomorrow.

AT 2.15 PM THE MATTER WAS ADJOURNED