Chief Commissioner of State Revenue v Qantas Airways Ltd

CATCHWORDS: STATUTORY INTERPRETATION - Duties Act 1997, Chapter 8, Part 1 - meaning of "insurer" - whether meaning in Dictionary to the Act applicable - whether contrary intention for the purposes of Interpretation Act, section 6

Duties Act 1997 Insurance Act 1973 (Cth) LEGISLATION CITED: Stamp Duties Act 1920 State Revenue Legislation (Amendment) Act 2006 Taxation Administration Act 1996

Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 25 (2005) 221 CLR 568 Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297 Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd [2002] HCA 43; (2002) 209 CLR 651 Commissioner of Territory Revenue v Alcan (NT) Alumina Pty Ltd (2008) NTCA 14 CASES CITED: Deputy Commissioner of Taxation v Mutton (1998) 12 NSWLR 104 Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Singh v The Commonwealth [2004] HCA 43; (2004) 222 CLR 322 Stingel v Clark [2006] HCA 37; (2006) 226 CLR 442

PARTIES: Chief Commissioner of State Revenue (Appellant) Qantas Airways Ltd (Respondent)

COUNSEL: N J Williams SC/J Hmelnitsky (Appellant) R Hamilton SC/M Richmond (Respondent)

SOLICITORS: Crown Solicitor's Office (Appellant) Blake Dawson (Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT MEDIUM NEUTRAL CITATION: Qantas Airways Ltd v Chief Commissioner of State Revenue [2008] NSWSC 1049

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40366/08 SC 3893/08

IPP JA CAMPBELL JA MACFARLAN JA

WEDNESDAY 15 JULY 2009 CHIEF COMMISSIONER OF STATE REVENUE v QANTAS AIRWAYS LTD Judgment 1 IPP JA: I agree with Macfarlan JA. 2 CAMPBELL JA: I agree with Macfarlan JA. 3 MACFARLAN JA:

Nature of Case and Conclusion 4 The issue on this appeal is whether the provisions of the Duties Act 1997 (the "Act") in force at the relevant time operated to charge duty only on those non-life insurance premiums which were paid to insurers registered under the Insurance Act 1973 (Cth). 5 My view is that they did, as a result of the application to the relevant charging provisions of a definition of "insurer" in the Dictionary to the Act. 6 I do not consider that the Act manifested any intention that the definition not apply to the particular provision under consideration, such as would attract the operation of s 6 of the Interpretation Act 1997.

Factual Background 7 The proceedings at first instance were by way of an appeal pursuant to s 97 of the Taxation Administration Act 1996 against the decision of the appellant ("the Chief Commissioner") to disallow the objection of the respondent ("Qantas") to some 32 assessments issued by the Chief Commissioner. The assessments related to the period 1 August 2001 to 31 March 2006 and were for amounts totalling $5,154,166.12. They were assessments of duty claimed to be payable in respect of the consideration paid by Qantas by way of premiums under global insurance policies. The duty was assessed as payable pursuant to s 236 of the Duties Act 1997. 8 It is common ground that the premiums were paid to insurers who were not registered or authorised general insurers under the Insurance Act (Cth) and who were not registered under Part 3 of the Duties Act 1997 ("the Act"). 9 The assessments related only to the portion of the premiums referrable to New South Wales property or risks. There is no issue in the proceedings as to the correctness of the apportionments.

The Duties Act 1997 10 Except where otherwise indicated, reference to the Act in these reasons for judgment is to the Act in the form in which it existed in the period relevant to the challenged assessments. 11 Chapter 8 of the Act is concerned with insurance. 12 Part 1 of Chapter 8 relates to general insurance. It comprises ss 229 to 238. 13 Section 229 "charges duty on the amount of the premium paid in relation to a contract of insurance that effects general insurance …". General insurance is defined by s 230 to be, in effect, any kind of insurance, other than life insurance, in respect of New South Wales property or risks. 14 Section 231(1) provides as follows: "(1) Premium , in relation to general insurance, means the total consideration given to an insurer by or on behalf of the insured person to effect insurance without deductions for any amounts paid or payable, allowed or allowable, by way of commission or discount to an insurance intermediary". 15 Section 231(4) states that "it is immaterial where the amount is paid or where the insurance is effected". 16 Section 235 places the liability for payment of the duty upon the general insurer, subject to what is provided in s 236. Section 236 requires "a person who obtains, effects or renews any general insurance as an insured person with a person who is not a registered insurer" to lodge a return with, and to pay the relevant duty to, the Chief Commissioner. 17 Part 2 of Chapter 8 is concerned with life insurance and is not presently relevant. Part 3 is headed "How is duty paid by an insurer?" The Part comprises ss 247 to 254. 18 Section 248 requires "an insurer" to be registered under Part 3. An "insurer" is defined by s 247 to be a "life company that writes life insurance or a general insurer". Section 247(2) provides: "(2) A general insurer is a person:

(a) who writes general insurance, and (b) who does so otherwise than as an insurance intermediary, and (c) who is authorised as a general insurer under the Commonwealth Insurance Act 1973". 19 Section 253 requires registered insurers to lodge monthly returns and to pay duty as levied by Chapter 8. 20 The Dictionary forming part of the Act states that "insurer has the meaning given by section 247". Section 6 of the Act states: "Words and expressions used in this Act (or in any particular provision of this Act) that are defined in the Dictionary at the end of this Act have the meanings set out in the Dictionary".

The Issue for Determination 21 The only issue for determination on this appeal is whether Part 1 of Chapter 8 of the Act operates in relation to all general insurers or only those defined in s 247. If applicable, the definition of "insurer" contained in the Dictionary to the Act indicates that the latter is the case. That view would lead to the upholding of Qantas' objections to the assessments because the insurers with whom Qantas insured were not authorised as general insurers under the Insurance Act 1973 (Cth), with the result that (c) of the definition in s 247(2) of a general insurer was not satisfied. 22 The Chief Commissioner however contends that on the proper construction of the Act the definition of "insurer" in the Dictionary does not apply to Part 1 of Chapter 8 and that Part 1 applies to all general insurers, whether authorised under the Insurance Act 1973 (Cth) or not. He says that the exception stated in s 6 of the Interpretation Act 1987 is applicable. That section states that "definitions that occur in an Act or instrument apply to the construction of the Act or instrument except in so far as the context or subject-matter otherwise indicates or requires" (emphasis added).

The Decision of the Primary Judge 23 The primary judge, Handley AJ, took the view that the decision of the Chief Commissioner to disallow Qantas' objections to the assessments was incorrect and that the assessments should be revoked: [2008] NSWSC 1049. 24 He rejected the contention that the Dictionary definition of "insurer" was inapplicable to Part 1 of Chapter 8 and said that: "33 The provisions of Ch 8, other than s 236, operated in a rational and coherent manner with the defined meanings of premium, insurer and general insurer. The Commissioner obtains no support from these sections or the general scheme of the Chapter."

The Question of Construction 25 The primary submission put on behalf of the Chief Commissioner is encapsulated in the following paragraphs from his written submissions: "21. Part 1 casts a wide net for the purpose of charging duty on insurance contracts and making the insured ordinarily liable to pay that duty. Part 3, on the other hand, is a scheme for collecting that duty from insurers but, importantly, only to the extent that such insurers are registered. 22. Chapter 8 as a whole, and s 236 in particular, therefore contemplate that duty will be imposed by Part 1 in circumstances to which Part 3 does not apply. The provisions expressly contemplate that not all general insurance premiums covering property and risks in New South Wales will be paid to registered insurers. 23. The effect of the decision below is to make Part 1 only as effective as the limited collection regime in Part 3: an insured is, on the trial Judge's decision, not liable for duty on any premiums paid to unregistered insurers." 26 The difficulty with this submission in my view is that there is not in Part 1 any clear indication that it is intended to operate in respect of a wider range of insurers than those the subject of Part 3. The most that could be said from the Chief Commissioner's point of view is that, if one leaves aside the definition of "insurer" in the Dictionary to the Act, its provisions are not inconsistent with that proposition. The Chief Commissioner argued that s 231(4) (see [15] above) suggested such a broader operation, but in my view that provision, as with the other provisions in Part 1, is neutral as to that proposition. That is, it is equally consistent with the insurers which are the subject of Part 1 being confined to insurers registered under the Act as it is with Part 1 applying to all general insurers. 27 This means that the Chief Commissioner is unable to point to any aspect of the text of Part 1 which manifests an intention that the definition of "insurer" in the Dictionary be inapplicable to that Part. Prima facie, it would therefore appear that the Dictionary definition is to apply because s 6 of the Act renders it applicable throughout the Act unless, in accordance with s 6 of the Interpretation Act, "the context or subject-matter otherwise indicates or requires". 28 The Chief Commissioner contended that the Act would operate in a surprising fashion if his argument were not correct. He referred to the fact that to be a general insurer within the meaning of s 247 it was necessary that an insurer be authorised as a general insurer under the Insurance Act 1973 (Cth) (see s 247(2)(c)). Under that Commonwealth legislation, a general insurer is a body corporate that is authorised under that Act to carry on insurance business in Australia (see s 11). The Chief Commissioner submitted that it would be surprising if duty under the New South Wales legislation were only payable in respect of premiums paid to insurers which carried on business in Australia, as it would permit insurance to be written overseas upon a duty free basis. 29 It is not obvious to me that this would be a surprising result. There may be policy reasons why the State legislature might not want to levy duty where the relevant insurer did not carry on business in Australia. Perhaps, for example, the connection with New South Wales might otherwise be thought to be too tenuous. An Exposure Draft issued by the NSW Office of State Revenue in 1995 as a precursor to the enactment of the Act explicitly confined an "insurer" in the relevant context to a person who carried on non-life insurance business "wholly or partly in this jurisdiction" (see s 7 in Chapter 7 of the Exposure Draft). I do not suggest that this provision has any direct utility in the construction of the Act but point to it to indicate that the Court is in no position in this context to form views about what would, or would not, from a policy point of view be a surprising limitation upon the operation of Part 1 of Chapter 8. 30 In any event, at least if s 6 of the Interpretation Act is left aside, it would not in my view assist the Chief Commissioner to establish that the operation of the relevant provisions would be a "surprising" one if his construction were not adopted. This is not an instance of the words of a statute being capable of bearing two meanings. The definition of "insurer" in the Dictionary and the application by s 6 of that definition to the whole of the Act including Part 1 of Chapter 8 is stated plainly and unambiguously. As the words in the Act itself when read literally are not capable of bearing the meaning that the appellant wishes to attribute to them, it would be necessary for the Chief Commissioner to show that application of the ordinary meaning would produce absurdity or at least departure from clear legislative intent. This he has not done. 31 Even putting them at their highest, the Chief Commissioner's arguments do not rise to the level of asserting either that the result of giving the words "their ordinary meaning [is] so irrational that the Court is forced to the conclusion that the draftsman has made a mistake" (Stingel v Clark [2006] HCA 37; (2006) 226 CLR 442 at [65] per Gummow J citing Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297 at 304; see also Singh v The Commonwealth [2004] HCA 43; (2004) 222 CLR 322 at [20] where Gleeson CJ refers to a situation in which the ordinary meaning of the text leads to "manifest absurdity or unreasonableness"). Further, the Chief Commissioner's arguments have not established that adoption of the ordinary meaning would involve a departure from the policy of the statute ascertained from its provisions and any other material to which it is permissible to have regard (Cooper Brookes at 321 per Mason and Wilson JJ; Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 384 per McHugh, Gummow, Kirby and Hayne JJ). 32 In these circumstances, the Chief Commissioner is required to resort to s 6 of the Interpretation Act and point to a legislative intent manifested by the Act that the Dictionary definition not apply (see [22] above). The application of a definition which was said to apply "unless the contrary intention appears" was considered in Deputy Commissioner of Taxation v Mutton (1998) 12 NSWLR 104 where Mahoney JA said the following: "… In my opinion, the definition of "tax" in s 6(1) does not apply to s 209 so as to limit its operation in the manner submitted by the taxpayer. The definition applies "unless the contrary intention appears". In my opinion, the Act in general and s 207 and s 209 in particular disclose such a contrary intention. There is, of course, no simple formula for determining what is a "contrary intention" for this purpose. Such an intention may be displayed where the definition provides that one thing shall be done and the Act or section in question provides that another shall be done: see, eg, Bennett v Minister for Public Works (NSW); R v Brewer. But it is not limited to such a case. A definition section and its application must be considered in the context of the Act as a whole: see Lennon v Gibson & Howes Ltd; Stevens v Colonial Sugar Refining Co Ltd (the "commanding effect to the general scheme of the Act"); Blue Metal Industries Ltd v Dilley . A contrary intention may be inferred from a particular provision if, were the definition to be applied, the provisions of or the procedure established by the section would not appropriately work: see Brown v Brook where, if the definition applied, it would require a lender to take specified steps in respect of his "business of money-lending" where he had no such business. It is, I think, not necessary that what is laid down by the section in question be impossible of operation; it is sufficient if the result of the application of the definition to a section results in the operation of the section in a way which clearly the legislature did not intend. Thus, in Dealex Properties Ltd v Brooks [1966] 1 QB 542 at 551, Harman LJ referred to the "fearful confusion" that would follow the application of the statutory definition. In the end, what the court does when it decides whether there is a "contrary intention" is to decide whether it was the intention of the legislature that the statutory provision as to the interpretation or definition should apply to the particular section: see Gibb v Federal Commissioner of Taxation. The legislative intention may, perhaps, be more easily seen where the function of the interpretation section is, by providing a simple verbal formula, to avoid the repetition of a "multiplicity of verbiage": or where the statutory definition adds to or subtracts from what, apart from the definition, would be the meaning of the particular word in the statutory command: see, eg, R v Brewer, YZ Finance Co Pty Ltd v Cummings. In the present case, the definition of "tax", if given the effect suggested for the taxpayer, goes further and qualifies the general operation which otherwise would, I think, be given to s 209" (citations omitted). 33 I add in relation to his Honour's comment that "a definition section and its application must be considered in the context of the Act as a whole" a reference to a like proposition in the judgment of McHugh J in Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 at 245. McHugh J was concerned there with a definition clause, although not with one that was expressed to apply unless a contrary intention appeared (see also Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 25; (2005) 221 CLR 568 at [12]). 34 Mahoney JA went on to say: "The Privy Council has formulated and approved a method of determining the legislative intention which has a particular relevance in this case. It has been said the intention was that the statutory provision or definition shall not apply where, in effect, the legislature would had its attention been directed to the question, have made clear that it should not. … In the present case, the reasonable man would think that there is "reason to suppose that the legislature, if offered such amendment to the bill, would" have altered the provision to make clear that s 209 covered both ordinary and s 207 tax: when the question arose, in due course it made the amendment: Act No 123 of 1984, s 114. But it is possible that the conclusions of the reasonable man to the application of the Privy Council's "test" are too simplistic in the context of tax legislation. Against the possibility that this should be so, at least it can be said that where, as here, no plausible reason can be offered for the application of the definition so as to require that the recovery of tax and the recovery of the additional tax imposed under s 207 be in separate proceedings and by different parties, the legislature would, if it had been offered the choice, have made clear that the definition did not have the operation the taxpayer has suggested". 35 From these comments, the following propositions relevant to the present case may be distilled: The provisions of the Act as a whole and the context of the Act must be considered in deciding whether a relevant contrary intention appears A contrary intention may be inferred if "the section would not appropriately work" if the definition were applied or if there is inconsistency between the definition and the substantive provision. To find that the definition is inapplicable it is not necessary to find impossibility or absurdity of operation if the definition applied. It is sufficient if the section would operate in a way which the Court can conclude that the legislature clearly did not intend. It is useful to enquire whether there is any plausible reason why the definition might have been intended to apply (see also Commissioner of Territory Revenue v Alcan (NT) Alumina Pty Ltd (2008) NTCA 14 at [45]; special leave to appeal granted by the High Court on 1 May 2009). 36 Applying these principles, I conclude that no relevant contrary intention appears. It cannot be said that Part 1 of Chapter 8 "would not appropriately work" if the definition of "insurer" in the Dictionary applied and for the reasons given in [28-29] above it cannot be said that application of the definition would result in the operation of the Part "in a way which clearly the legislature did not intend". Further, it is not a case where "no plausible reason can be offered for the application of the definition". Rather, Part 1 operates in an apparently sensible fashion without any disconformity with any apparent policy or intent of the legislature which the Court is in a position to discern. 37 In conclusion, I refer as follows to some other aspects of the argument of the appellant in support of the construction for which he contended. 38 The first matter is the use of the term "insurer" in s 65 of the Act in a context which makes it clear that the term was intended to refer to an insurer licensed under Workers' Compensation legislation rather than an insurer as defined in the Dictionary in the Act. In my view this is simply an instance of a contrary intention being shown in relation to a particular provision and does not assist in the construction of Part 1 of Chapter 8. 39 Secondly, the Commissioner relied upon the legislative history of the Act and its predecessor, the Stamp Duties Act 1920. He contended that duty would clearly have been payable under s 88D of the Stamp Duties Act 1920 in the circumstances which obtained in this case and that s 88D "broadly corresponds" to s 236 of the Act. In the absence of any material demonstrating that the two provisions were intended to have substantially the same operation, I do not derive any assistance from consideration of s 88D of the Stamp Duties Act. The fact that there might be a "broad correspondence" between the two provisions does not mean that the legislature did not intend that s 236 would in some respects have a different operation to s 88D. 40 The Chief Commissioner also relied upon an amendment to s 236 of the Act effective from a date subsequent to those with which these proceedings are concerned. As described by the Chief Commissioner, the State Revenue Legislation (Amendment) Act 2006 (No 51 of 2006), "contained amendments to Chapter 8 which had the effect of ensuring that duty is payable on premiums regardless of whether they are paid to an insurer within the meaning of Part 3". The relevant portion of the Explanatory Memorandum stated that the amendment "clarifies what is meant by the expression 'premium'". 41 Leaving aside (as did the primary judge: Judgment [48]) the "difficulties involved in using an amending Act to construe earlier legislation" (Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd [2002] HCA 43; (2002) 209 CLR 651 at [52]), I nevertheless do not find the amendment of assistance in resolving the question of construction at issue on this appeal. What is said in the Explanatory Memorandum does not indicate that Parliament's view was that the legislation in its previous form had the effect which the Chief Commissioner contends that it had. As the primary judge said: "The fact that Parliament moved to put the law beyond doubt cannot establish either that there was [a] gap in the previous law which needed to be filled or that the later Act was only passed for more abundant caution" (Judgment [49]). 42 For the reasons above, I propose that the appeal be dismissed with costs.

02/11/2009 - Clarification of reference. - Paragraph(s) [29]

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