Asciano Services Pty Ltd (formerly Pacific National (ACT) Limited) v Commissioner of Taxation

STATUTORY INTERPRETATION 6 As in any statutory interpretation case, one begins with the plain language before moving to considerations of context, purpose and legislative history: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355. 7 In favour of the Commissioner's construction there are two points. First, there is the parallelism of the two "for" subclauses. The most natural reading of a series of subclauses each beginning with the same word is that each is co-equal and each attaches to the full predicate preceding the first item in the list. An alternative way of putting the point (and this is the second point on the Commissioner's side) is to realise that the subsequent repetition or omission, as the case may be, of the preposition "for" is a matter of style and emphasis that does not change the meaning. 8 This is the case with s 38(5). The second use of "for" in the opening words of the provision was not intended to set up an independent subclause not limited or modified by "in or on a rail vehicle". That is made clear by the absence of the conjunction "or" between heating and lighting and the presence instead of a comma. If the "for air-conditioning, heating, lighting" subclause was really independent of the "for any purpose" subclause, it would read: "Use in equipment in or on a rail vehicle for air-conditioning, heating [or] lighting or for any purpose incidental to using the rail vehicle." To put it another way, the sentence would stand on its own even if everything from "or for any purpose" through to the end of sub-clause (c) were deleted. Here, however, the lack of the additional "or" demonstrates that "any purpose," rather than being the first item in a new list untethered to the "air-conditioning, heating, lighting" list, is in fact item number four in a list of objects of the first "for" and the repetition of "for" is for rhetorical purposes only. Moreover, in modern legislative drafting, a comma is generally not used to separate the penultimate and ultimate items in a list: see e.g. s 33 of the Act (containing no commas between the penultimate and ultimate items in any of the three lists). Thus, the presence of the comma between heating and lighting indicates that heating is not the penultimate item and that in fact lighting, which is not followed by a comma, is the penultimate item and "any purpose" is the ultimate item. 9 In other words, the language of s 38(5) is to be read as follows: "Use in equipment in or on a rail vehicle for [(1)] air-conditioning, [(2)] heating, [(3)] lighting or for [(4)] any purpose incidental to using the rail vehicle[.]" The contrary reading advanced by Asciano - "Use in equipment [A] in or on a rail vehicle for [(1)] air-conditioning, [(2)] heating, [(3)] lighting or [B] for any purpose incidental to using the rail vehicle" - must be rejected. Once it is accepted that there is really only one preposition "for" - the first one - followed by a list of four objects, the whole of Asciano's argument falls away. As noted earlier, Asciano accepts that the first three items - air-conditioning, heating and lighting - are constrained by the phrase "in or on a rail vehicle"; if "any purpose" is merely the fourth item in that same list, it follows that it must also be so constrained. 10 For those reasons, I do not consider the language of s 38(5) to be ambiguous when considered on its own.

PURPOSIVE CONSTRUCTION AND EXTRINSIC MATERIALS 11 In Kelly v The Queen (2004) 218 CLR 216, 253, McHugh J said that "[n]othing is more likely to defeat the intention of the legislature than to give a definition a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of a substantive enactment." Indeed, it is now well established that there is no need for ambiguity in the statutory text before resort is had to purpose, context, and the legislative history: White v Designated Manager of IP Australia (No. 2) [2008] FCA 816 at [18]-[20]. 12 As will be seen, however, regard to those materials does not alter the conclusion that Parliament in s 53 did not intend to include in its credit scheme purchases of diesel fuel for off-rail activity, regardless of how integral, incidental or adjacent to rail transport. 13 Asciano relies on both the broader context of s 38 as well as that of s 53 itself in support of its construction. As to s 38, Asciano submits that if the Commissioner's reading of s 38(5) is adopted, then s 38(3)(g) will become superfluous, contrary to the well-known maxim of statutory construction that every effort should be made to give all the words of a statute some work to do: Project Blue Sky, 194 CLR at 382. This argument depends on the premise that "in connection with" in s 38(3)(g) and "incidental to" in s 38(5) have the effectively the same meaning. When pressed, the Commissioner was not able to identify any relevant difference in meaning; however, as will be seen below, I do not consider it necessary to make a definitive finding in that regard. 14 With respect to s 53, Asciano focuses on the parenthetical clause "(otherwise than for the purpose of propelling a road vehicle on a public road)," arguing that if all purchases for off-rail activities were already excluded by the s 38 definitions, there would be no need for the exclusion in the substantive provision. Asciano reinforces the point by noting that there is no equivalent parenthetical exception for "use in marine transport" (see s 53(3)), while the parenthetical exceptions for use in mining operations and use in primary production carve out "any vehicle" in the former but only "road vehicles" in the latter. These contrasts are emphasised to make the point that Parliament must have carefully considered and tailored the exceptions in each case. 15 The Commissioner attempts to meet this concern by speculating that the legislature may have been concerned in the rail context with hybrid vehicles such as "hi-rails," which are capable of travelling both on roads and on rail: see Queensland Rail v Commissioner of Taxation (2006) 153 FCR 524 at [19], [23]-[24] for a description of these vehicles. Quite correctly, counsel for Asciano noted in oral argument that this speculation, even if correct, did not meet the point, because s 38 would already cover purchases for hi-rail use - when the fuel is purchased for on-rail use, it would be eligible for credit, but when the fuel is purchased for use in off-rail activities, whether on public roads or otherwise, it would be ineligible. Moreover, as Asciano submitted, the argument that the parenthetical language was included by inadvertence or out of an abundance of caution in the predecessor to s 53, (s 164(1)(ab) of the Customs Act 1901 (Cth) and s 78A(1)(ab) of the Excise Act 1901 (Cth)), was rejected by Dowsett J in Queensland Rail 153 FCR 524 at [40] for the reasons identified by Asciano above. 16 In short, the submissions of Asciano on ss 38(3)(g) and 53(3) are not without force. However, that force, along with the vitality of Dowsett J's reasons in Queensland Rail, is diminished for at least two reasons. First, Dowsett J reached his view based in part on the premise that the rebate scheme found in s 164(1)(ab) of the Customs Actand s 78A(1)(ab) of the Excise Act was beneficial legislation and should be given a broad construction: Queensland Rail at [39]. Asciano argues that the same premise should be adopted in this case - the Court should take a commonsense and commercial approach in order to encourage the activities to which the Act applies. However, the Full Court of this Court recently rejected that premise in Commissioner of Taxation v Ostwald Bros Civil Pty Ltd (2008) 167 FCR 588, relying on the legislative history for the proposition that the Act is to be construed narrowly in order to balance the beneficial purpose of encouraging the use of cleaner fuels with the important government interest of protecting the revenue: at [33]-[37]. 17 Secondly, at the time of the decision in Queensland Rail, the relevant language in the substantive provision, "use in rail transport," was not defined in the Customs Act. Dowsett J was thus led to consult the dictionary and a variety of other sources before reaching the view (at [44]) that: [T]he words "in rail transport" mean 'in a system or means of transportation or conveyance of people or goods by rail'. Such a system must inevitably involve loading and unloading activities and maintenance activities. The use of diesel fuel in the course of such activities is necessarily "in" that system, regardless of whether such use occurs on- or off-rail. 18 Given such an expansive definition of "in rail transport" (one which, I should add, I might have been inclined to embrace myself in the absence of any legislative guidance), it is not surprising that his Honour concluded that off-rail activities fell within the credit scheme. However, the Court now has the benefit of s 38 of the Act in which it is made clear that, however plausible Dowsett J's judicial definition of "in rail transport" as a "system" might be in the abstract, the legislature has chosen to define the term more narrowly as a subset of that whole system. As can be seen, the common thread in each of the s 38 subparagraphs is the limitation or linking of "in or on a rail vehicle" to "in rail transport". 19 It may well be that the introduction of s 38 has in fact made the parenthetical language in s 53(3) superfluous. Asciano submits that to the extent that there is any conflict between the operative s 53 and the definitional s 38, the substantive provision must prevail: Project Blue Sky, 194 CLR at 382. That proposition is of course true, but it does not assist in resolving the present case because there is no conflict. Section 53(3) says only that fuel purchases for use in propelling a road vehicle along a public road are not eligible for credits. As to whether any other purchases for off-rail use are or are not eligible, s 53 is simply silent. In other words, this is not a situation where the substantive provision says X and the definition says "not X"; rather, this is a case where the substantive provision says "not X" (i.e. propelling a road vehicle along a public road) and the definition says "not X" and "not Y" (i.e. other off-rail activities). 20 Asciano then contends that even if there is no direct conflict and the substantive provision is silent, the silence should be construed in Asciano's favour because, had Parliament intended to confine off-road credits to purchases for on-rail use only, it could and would have done so clearly. As an example of clear Parliamentary language to that effect, it points to s 36(6) of the Act which defines "use in equipment" in marine transport and is the parallel provision to s 38(5). Section 36(6) provides: Use: (a) in equipment in or on a vessel; and (b) while the vessel is in or on the sea or fresh water; and (c) for air-conditioning, heating, lighting or for any purpose incidental to use of the vessel: (i) in marine transport; or (ii) for any of the purposes mentioned in subsection (4); or (iii) as mentioned in paragraph (5)(c); is use in marine transport. It is clear in the way that the phrase "in or on a vessel" has been given its own subparagraph 6(a), joined by means of the conjunctive "and", that the constraint applies to both the "air-conditioning, heating, lighting" limb and the "for any purpose" limb. 21 Unsurprisingly, however, there is an equally plausible alternative construction open. In this case, for example, the Commissioner submits that had Parliament wished to include off-rail activities it could and would have done so clearly by breaking the body of s 38(5) into two separate subclauses, such as: Use in equipment: (a) in or on a rail vehicle for air-conditioning, heating, or lighting; or (b) for any purpose incidental to using the rail vehicle: (i) in rail transport; or (ii) for any of the purposes mentioned in paragraphs (3)(a) to (f); or (iii) as mentioned in subsection (4); is use in rail transport. 22 This kind of argument (i.e. "Parliament knew how to draft, and could have drafted, the provision differently if it wished to clearly include (or exclude) something"), regardless of which side advances it, is of little assistance on its own. The problem is that there is almost always a way, when considered in hindsight, that a statute could have been drafted to more clearly address a point in issue. 23 Thus an argument about ambiguity has force only when backed by a presumption of construction that such ambiguity should be resolved in a particular way. For example, if the Act were considered beneficial legislation to be broadly construed, as the pre-2003 legislation was when Dowsett J handed down Queensland Rail, I might be inclined to favour Asciano's view. However, I am now bound to follow the Full Court's decision in Ostwald that the Act is to be construed narrowly, which creates a presumption in favour of the Commissioner. 24 That is to say, if it be "the intent of the diesel fuel rebate scheme to pay rebate only on those activities that are explicitly mentioned in the legislation and not to activities that are said to be integral to, associated with or connected with these activities," (Ostwald at [34] quoting the legislative history) then I consider it is for Parliament, not this Court, to broaden the scope of the scheme. To the extent there is any doubt as to whether off-rail activities are covered, that doubt must be judicially resolved in the Commissioner's favour because on any view it cannot be said that off-rail activities are explicitly included by ss 38 and 53 of the Act. 25 Asciano also raises a policy argument that the result (that whether a purchase for a particular use is credit-eligible turns on whether the use occurs on or off-rail) is anomalous. For example, the evidence disclosed that a train's brakes may be safety-tested by using special on-rail equipment or by using off-rail equipment (in the form of a compressor) next to the track. Asciano submits that to say that diesel fuel purchases in the first case, but not the second, would be credit-eligible is bizarre because the same activity in both cases is integral and incidental to the carrying on of Asciano's rail transport business. 26 The Commissioner's response to this argument was to acknowledge the differing result in each case but note that the legislature had to draw a line somewhere and the line might as well be based on location, which creates a bright-line rule that is easy to administer. In effect, the parties entered into the age-old debate of flexible standards versus bright-line rules. I recently dealt with this debate in White v Designated Manager of IP Australia (No. 2) [2008] FCA 816 at [44]. I do not propose to repeat the discussion in White as to the virtues and vices of each. Instead, I note two points particularly relevant to the choice in this case. 27 First, the imposition of bright-line rules is particularly apt and commonplace in the realm of taxation. Just as it would impose a crushing administrative burden to vet every 17 to 19 year old to see if they were mature enough to vote, the Commissioner would not be able to function effectively if faced with requests for rebates and credits that required application of fuzzy standards. 28 Secondly, the result in this case is not so anomalous or absurd as to require or invite judicial redrafting of the legislation: White at [18]. In fact, the legislature was well aware of the anomalies created by the imposition of such a rule but accepted them nevertheless. In the March 2003 Senate Economics Legislation Committee's report on the provisions of the Energy Grants (Credits) Scheme Bill 2003 (Cth), a submission made by Brambles Industrial Services was addressed. Brambles raised the same point now made by Asciano (at (3.27]) that "the Bill would introduced [sic] an anomalous situation [that] 'an activity is eligible or ineligible for an off-road credit based on the location of the equipment performing the function as well as the actual function itself'." The Committee's response (at [3.29]) was that "in any legislation under which eligibility to entitlement depends upon classification, there will inevitably be definitional issues at the borderline." In effect, the Committee's view was that a line must be drawn somewhere and it might as well be the location of the equipment, which creates a simple and easily administrable rule. 29 Finally, much was made by both sides of the Explanatory Memorandum to the Energy Grants (Credits) Scheme Bill 2003 (Cth). At times, the parties made efforts to parse the language of the Explanatory Memorandum as if it were itself a statutory instrument. It suffices to say for present purposes that I do not think so much can be made of the Explanatory Memorandum. At a broader level, the point made by Asciano was that the Explanatory Memorandum demonstrated Parliament's intent to maintain the same level of benefits in the Act as in the pre-2003 credit scheme. I accept that premise. However, the argument then proceeded that because Dowsett J found in Queensland Rail that purchases for off-rail use were credit-eligible prior to 2003, it must be the case that Parliament intended for those benefits to be preserved in the Act. 30 The flaw in this argument is that Queensland Rail was not handed down until 2006. The relevant pre-2003 provisions themselves make no explicit mention of whether purchases for certain off-rail uses are eligible for credit. Thus the knowledge that such benefits were deemed to be available under the old scheme cannot be imputed to Parliament in 2003. (The situation might of course be different had the decision in Queensland Rail been issued prior to passage of the Act, in which case it would be presumed that Parliament had taken that decision into account when passing the new legislation: Pearce DC and Geddes RS, Statutory Interpretation in Australia (5th ed 2001) at para [3.39] and [3.40].) Thus it is perfectly consistent, notwithstanding Queensland Rail, to impute to Parliament the view that purchases for off-rail use were not eligible for credit prior to 2003 and that the Act would indeed maintain the same level of benefits in that purchases for off-rail use would continue to be ineligible. 31 The Commissioner adopted this latter view, submitting that Parliament was likely to be aware that such credits for off-rail activities were not available when drafting the Act. In June 2000, the Commissioner issued Excise Bulletin EB 2000/3, which stated that benefits were not available for off-rail uses of the kind now claimed by Asciano: Queensland Rail at [14]. The Explanatory Memorandum to the Act states that "[t]he [Commissioner] has released administrative guidelines on which activities are eligible for a rebate" under the marine and rail categories, but that there is no further clarification in the Customs Act and continued "uncertainty surrounding which activities are actually eligible": Explanatory Memorandum at [1.39]-[1.40]. It seems tolerably clear that the Explanatory Memorandum was referring to Excise Bulletin EB 2000/3. 32 The Explanatory Memorandum then goes on to state (at [1.41]): In order to remove this uncertainty and align the current administration of the marine transport and rail transport categories with the legislation, the new expressions 'use in marine transport' and 'use in rail transport' have been introduced into the [Act], so as to set out clearly in the legislation which activities in these categories will qualify for the off-road credit. 33 Obviously, Parliament's attempts to achieve clarity in this regard cannot be termed an unqualified success. Two points do, however, emerge from these paragraphs. The first is that Parliament intended to align the regimes for marine and rail transport. It was conceded by Asciano that, with respect to marine transport, the location of the equipment is relevant in all cases - if the equipment is not located on a vessel, purchases for use in that equipment are not credit-eligible. In other words, para [1.41] supports the contention that given that Parliament intended to harmonise the marine and rail transport credit regimes and given that credits are not available under the marine transport regime for off-vessel activities, the better view is that credits are not (unless explicitly stated otherwise) available under the rail transport regime for off-rail activities. 34 The second point is that para [1.41] is consistent with the broader statement in the Explanatory Memorandum (at 3) that the Act was designed to make minor amendments to the existing schemes "to clarify the Government's position on certain activities." It is also consistent with the view, now endorsed by the Full Court in Ostwald, that the benefits conferred by the Act should be construed narrowly. 35 The definitions now found in s 38 of the Act must be given effect according to their terms. Those definitions were not in the rebate scheme legislation under consideration in Queensland Rail and it follows that the decision in Queensland Rail does not govern the present case. The purchase of off-road diesel fuel for use in equipment not located in or on a rail vehicle is not entitled to a credit under s 53 of the Act even if it is used for a purpose incidental to the use of a vehicle in rail transport.

ORDERS 36 Accordingly, I will dismiss the application with costs. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

Associate: Dated: 16 September 2008 Counsel for the Applicant: Mr J de Wijn QC and Mr D McInerney

Solicitor for the Applicant: PricewaterhouseCoopers Legal

Counsel for the Respondent: Mr N Williams SC and Mr S Lloyd

Solicitor for the Respondent: Australian Government Solicitor