Qantas Airways Ltd v Chief Commissioner of State Revenue

Duties Act 1997 Interpretation Act (NSW) 1987 LEGISLATION CITED : Pearce & Geddes "Statutory Interpretation in Australia" 6th ed. Stamp Duties Act 1920 Taxation Administration Act 1996 (NSW)

Bennett v Minister for Public Works (NSW) (1908) 7 CLR 372 Cameron Brae Pty Limited v FCT (2007) 161 FCR 468 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 Commissioner of Stamp Duties v Simpson (1917) 24 CLR 209 CASES CITED : Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Limited (2002) 209 CLR 651 Cooper Brookes (Wollongong) Pty Limited v FCT (1981) 147 CLR 297 Grain Elevators Board v Dunmunkle Corporation (1946) 73 CLR 70 Network Ten Pty Ltd v TCN Channel Nine Pty Ltd (2004) 218 CLR 273 Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 R v Young (1999) 46 NSWLR 681

PARTIES : Qantas Airways Limited - Plaintiff Chief Commissioner of State Revenue - Defendant

COUNSEL : R Hamilton SC and M Richmond - Plaintiff N J Williams SC and J Hmelnitsky - Defendant

SOLICITORS : Blake Dawson Waldron - Plaintiff I V Knight, Crown Solicitor - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3893/07 QANTAS AIRWAYS LTD v CHIEF COMMISSIONER OF STATE REVENUE

STAMP DUTY - Duties Act 1997 - insurance duty - premiums paid to London underwriters - underwriters not registered or authorised under the Insurance Act 1973 (Cth) - restrictive definitions of premium and insurer in Duties Act - no contrary intention disclosed - duty not payable. HEADNOTE

Qantas placed its aviation risks insurance with underwriters outside Australia who were not registered or authorised general insurers under the Commonwealth Insurance Act 1973. It sought a review of assessments of insurance duty totalling $5,154,166.12 imposed on premiums paid for its aviation risks. Because the underwriters were not registered as insurers under the Duties Act s 236(1) applied. Section 236(2) required persons such as Qantas who paid premiums to an "insurer" which was not registered under the State Act, to make returns and pay duty on the "premiums. The overseas underwriters were not within the restrictive definition of insurer in s 247(2) and the premium paid to them were not within the definition of premiums in s 231(1). The Commissioner contended that insurer and premium, as used in s 236(2), did not have their defined meanings and wider meanings were required by the context and subject matter within the meaning of s 6 of the Interpretation Act 1987. Duty would have been payable on the premiums if the Act repealed by the Duties Act 1997 had remained in force. HELD: (1) The gap in the tax base created by the restrictive definitions introduced in the 1997 Act was not sufficient, without more, to establish a contrary intention which excluded the statutory definitions; (2) The application for review of the assessments succeeded and the assessments should be revoked. ORDERS

(1) The decision of the defendant of 6 June 2007 to disallow the plaintiff's objections to the assessments under review is revoked. (2) The assessments under review are revoked. (3) The defendant is to refund the duty assessed under the assessments and interest thereon pursuant to ss 104 and 105 of the Taxation Administration Act . (4) The defendant is to pay the plaintiff's costs of the summons.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3893/07 QANTAS AIRWAYS LTD v CHIEF COMMISSIONER OF STATE REVENUE JUDGMENT 1 HIS HONOUR: This is an application under s 97 of the Taxation Administration Act 1996 (NSW) for a review of the Chief Commissioner's disallowance on 6 June 2007 of the taxpayer's objections to 32 assessments of insurance duty totalling $5,154,166.12 made under Pt 1 of Ch 8 of the Duties Act 1997 (the Act). Each assessment covered a monthly period between 1 August 2001 and 31 March 2006. The Act was relevantly amended with effect from 20 June 2006 and the issue in this case can no longer arise. 2 Insurance duty is imposed by s 229(1) on the amount of the premium paid in relation to a contract of insurance that effects general insurance. General insurance is defined in s 230(1) as any kind of insurance applicable to property in New South Wales or, "a risk, contingency or event concerning an act or omission that … may occur within, or partly within, New South Wales". Section 235 makes the general insurer liable to pay the duty except as provided in s 236. This relevantly provided: "(1) This section applies to a person who obtains, effects, or renews any general insurance as an insured person with a person who is not a registered insurer. (2) A person to whom this section applies must, within 21 days after the end of the month in which the premium relating to the insurance is paid to an insurer (not being a registered insurer) … : (a) lodge with the Chief Commissioner a return in the approved form containing such particulars and information as to the premium and the insurance as the Chief Commissioner may require, and (b) pay to the Chief Commissioner as duty the amount calculated in accordance with section 234." 3 This case concerns the liability to duty of a proportion of the premiums paid by Qantas to insurers outside Australia in respect of its aviation risks. Part 4 of Ch 8 authorises the apportionment of the premium so that duty is only payable on the proportion properly referable to property and risks in the State. The insurers at risk under the relevant policies were not "registered insurers" because they were not registered with the Chief Commissioner under Pt 3. If insurance duty was payable on the relevant proportion of the premiums for these aviation policies, it was payable by Qantas under s 236. 4 The issue for the Court turns on the definitions of premium in s 231 and insurer in s 247. Qantas contends that the underwriters at risk under its aviation policies were not insurers within s 247 and the premiums paid to them were not premiums within s 231. It is common ground that the review should succeed if these contentions are upheld, and it should fail if they are rejected. 5 The other grounds taken in the taxpayer's objections have not been pressed. There is no dispute as to the apportionment of the premiums, or the amounts of duty that have been assessed if duty is properly assessable. The only issue is whether s 236 applied and that turns on the meaning of subs (1) and (2), and in particular the meaning of premium and insurer in subs (2). 6 Premium is defined in s 231(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 the insurance …" 7 Section 231(4) makes it immaterial where the premium is paid or where the insurance is effected. 8 A premium is therefore a consideration given to an "insurer". This is defined in the Dictionary of the Act as having the meaning given by s 247. This relevantly provided, until amended by Act No 51 of 2005: "(1) An insurer is … a general insurer. (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 registered as a general insurer under the Commonwealth Insurance Act 1973." 9 Act No 51 of 2005 substituted "authorised" for "registered" to reflect changes in the Commonwealth Act. It was not suggested that this change was material. 10 The relevant insurers were not registered or authorised as general insurers under the Commonwealth Act and it was common ground that they were not insurers or general insurers as defined in s 247. 11 Section 6 of the Interpretation Act (NSW) 1987 relevantly provides that definitions in an Act "apply to the construction of the Act … except in so far as the context or subject-matter otherwise indicates or requires." 12 The principal submission of Mr Williams SC for the Commissioner was that a contrary intention, excluding the defined meaning of insurer, was disclosed by the text of ss 236(1) and (2), understood in the light of the structure and history of the legislation imposing insurance duty. These matters justified a wider meaning of the words "premium" and "insurer" in s 236 which would bring within the tax base premiums paid to insurers who were not registered or authorised under the Commonwealth Act. 13 Mr Williams relied on the scheme of the corresponding provisions in the Stamp Duties Act 1920, as amended, which were repealed and replaced by the Act. Section 88D(1) of the repealed Act, which broadly corresponds with s236 of the current Act, provided: "(1) A person (other than a registered person) who obtains, effects or renews any insurance in New South Wales or elsewhere as an insured person with a person who is not a registered person … must, within 21 days after the end of the month in which the premium relating to the insurance is paid … lodge with the Chief Commissioner a return in the approved form containing such particulars and information as to the premium and the insurance as the Chief Commissioner may require." 14 The duty was payable on the lodgement of the return (s 88D(3)). 15 The repealed Act did not contain definitions of insurance or insurer, but defined premium widely in s 86(1) as meaning: "… the total amount paid in New South Wales or elsewhere to an insurer in respect of insurance effected in New South Wales or elsewhere by the insurer without any deduction …" 16 If s 88D(1) had remained in force it would have supported the assessments under review. In terms of that section Qantas was an insured person which had effected or renewed insurance with a person who was not registered under the Stamp Duties Act. 17 Mr Williams submitted that the Act did not disclose an intention to narrow the tax base and the word "insurer" in s 236(2) was not limited by the definition to insurers registered or authorised under the Commonwealth Act. If the definition was not incorporated into s 236, and insurer had its ordinary meaning, the assessments would be correct. 18 The relevant Parliamentary material does not disclose an intention of narrowing the tax base for this duty. 19 The context to which reference should be made in interpreting a statute includes the existing state of the law when the Act was passed. In CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408 the plurality said: "… the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity may be thought to arise and (b) uses context in its widest sense to include such things as the existing state of the law and the mischief which … one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous … if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the Court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent." 20 See also Newcastle City Council v GIO General Ltd (1997) 191 CLR 85, 112; Network Ten Pty Ltd v TCN Channel Nine Pty Ltd (2004) 218 CLR 273, 280-1. In the former McHugh J said: " a court is permitted to have regard to the words used … in their legal and historical context and, in appropriate cases, to give them a meaning that will give effect to any purpose of the legislation that can be deduced from that context. The context includes … the provision's legislative history." 21 The Parliamentary material is not of great assistance. The second reading speech of the Minister who moved the Bill in the Legislative Assembly said (Hansard 12 November 1997 page 1612): "The primary purpose of the bill is to replace the current Stamp Duties Act with simple, clear and equitable legislation drafted in contemporary language and modern style." 22 It was not suggested that the relevant statutory context extended beyond Ch 8 which imposes insurance duty, and the relevant definitions in the Dictionary. 23 The critical difference between s 88D(1) of the former Act, and s 236(1) and (2) of the relevant Act, is that in the former insurer was not defined and had its ordinary meaning whereas at the relevant times the Act had a definition which limited its ordinary meaning 24 The Commissioner's argument requires "insurer" in the definition of premium and "insurer" in s 236(2) to be given its ordinary meaning, without the restriction introduced by the definition in s 247(2)(c). 25 Section 235 made the general insurer liable for the duty unless s 236 applied. It imposed liability for payment of the duty on every general insurer whether or not it was registered under the Act.

26 Section 236 applied (subs (1)) to a person who effected general insurance with "a person who is not a registered insurer". Registered insurer is defined by the Dictionary as meaning an insurer registered under Part 3 of Ch 8. The section applied in two situations. Firstly where the person providing general insurance (s 230) was not a general insurer and not registered, and secondly where that person was a general insurer but not registered. Only the first is relevant in this case. Qantas was a person to whom subs (1) applied because it effected general insurance with persons who were not general insurers. 27 The Commissioner's difficulties flow from subs (2) which commenced "A person to whom this section applies". It obliged such a person to lodge monthly returns of "the premium" relating to "the insurance" "paid to an insurer (not being a registered insurer)," and to pay the duty calculated under s 234. 28 Those were the only obligations imposed by s 236 on persons, such as Qantas, to whom the section applied. They only arose where a "premium" was paid to an "insurer (not being a registered insurer)". The section did not in terms impose obligations on persons such as Qantas who paid amounts for general insurance which were not "premiums" as defined, to persons who were not "insurers" as defined. It only imposed such obligations if insurer in both definitions did not have its defined meaning. 29 There is really only a single question because the definition of premium in s 231(1) included the word "insurer". The Commissioner needs to exclude the statutory meaning of insurer in ss 231(1) and 236(2). 30 A major difficulty with this submission is that the requirement for registration or authorisation under the Commonwealth Act was introduced by the Act into the definition of general insurer in s 247(2)(c) and, by incorporation, into the definition of premium in s 231(1) to replace earlier legislation which did not have such a requirement. The court is invited to find a contrary intention which will effectively reverse Parliament's decision to introduce limiting definitions. 31 The Commissioner did not seek support for his argument from the other provisions in Ch 8. Section s 229 is the charging section which imposed the duty on premiums for general insurance. The payments assessed are not within this section unless "insurer" in the definition of premium does not have its defined meaning. Section 232 identifies the date a premium is treated as paid. Section 233 defines the three types of general insurance which attract the different rates of duty imposed by s 234 on the relevant premiums. 32 Section 237 obliged a person to whom s 236 applies to keep certain records. Section 238 which provides for a refund of duty when a premium or part premium is returned refers to "premium" and "general insurer". Sections 248 to 253 deal with the registration of insurers under the Act and their obligations as such and s 254 enables a registered insurer to recover the duty from the insured. 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. 34 The definition of "premium" is in s 231 in Part 1 of the Chapter, while the definitions of "insurer" and "general insurer" are in s 247 in Part 3 dealing with registered insurers. Section 236 dealing with the payment of duty by an insured is in Part 1. This might have supported an argument that the definitions in s 247 only applied for the purposes of Part 3 but the Dictionary, which is of general application, provides that "insurer" has the meaning given by s 247. 35 In the end the Commissioner's argument depends on s 236(1) and the gap in the tax base which existed if insurer in the definition of premium and in s 236(2) had its defined meaning. 36 I can find no support for the Commissioner's construction in the statutory context of s 236, or in its text other than subs (1). Spigelman CJ said in R v Young (1999) 46 NSWLR 681, 687 that "construction must be text based," and in Cameron Brae Pty Limited v FCT (2007) 161 FCR 468, 471 Allsop and Stone JJ emphasised the need to give "close attention to the text and structure of the relevant provisions." 37 The contrast with Cooper Brookes (Wollongong) Pty Limited v FCT (1981) 147 CLR 297 is marked. There was nothing "incongruous" ( ibid at 305), no "anachronism" (at 311), and nothing "capricious and irrational" (at 321) in s 236 if insurer had its defined meaning.

38 There is a presumption that defined words in a statute have their defined meanings which is not to be displaced without good reason: Pearce & Geddes "Statutory Interpretation in Australia" 6th ed. paras 3.31, 4.3, 6.62. 39 Although s 236(1) made Qantas a person to whom the section applied, it only did so for the purpose of imposing on such persons the obligations in subs (2). If insurer has its defined meaning in the definition of premium and in s 236(2) no obligations were imposed on Qantas but the section still had work to do. Subsection (2) imposed effective obligations on persons to whom the section applied who insured with insurers within the Commonwealth Act which had not registered under the Act. 40 Subsection (1) is a definition clause which did not itself impose any obligation, but defined the persons bound by the obligations imposed by subs (2). 41 Where, on any view, the section still had work to do, it is not clear that such a definition clause can evidence a contrary intention that expands the scope of the obligations imposed on persons within the definition. 42 The point is not without its difficulties but I am unable to discern from the text an intention that subs (2) should impose a wider obligation than that defined by its terms read with the statutory definitions. 43 It is apposite to refer to Commissioner of Stamp Duties v Simpson (1917) 24 CLR 209, 217 where Barton J said: "No doubt, there is great room for speculation as to whether the Legislature wished that the word 'settlement' used in s 49 should bear the restricted meaning assigned to it in s 3. It is conjectured at some length that, because of the concluding words of par (a),the meaning the Legislature attached to the word in that paragraph was more comprehensive. I should think the speculation and conjecture very reasonable as such, and I should also think that the wider use of the term 'settlement' was more than possibly in the mind of the Legislature. But as Griffith CJ said during the argument in … Bennett v Minister for Public Works (NSW) (1908) 7 CLR 372, 374 …'that may be the object of the Legislature, but the question is what have they said'". 44 Gavan Duffy J said at 231-2: "When the then existing law was consolidated in the Stamp Duties Act 1898 the draftsman made the definition of the word 'settlement' applicable throughout the whole of the Act instead of only to the provisions taken from the Stamp Duties Act 1880. Were I at liberty to assume that the intention of the Legislature in enacting the Stamp Duties Act 1898 was to reproduce the existing law and nothing else, I should have no difficulty in coming to the conclusion that this was a slip in drafting, but I am not at liberty to make any such assumption. I must gather the meaning of the Legislature from its language." 45 Isaacs J dissented, in part because of the principles which apply to the construction of consolidating Acts (at 222), which are not relevant here. 46 Modern authorities give greater weight to context and legislative history but speculation as to the intention of Parliament without some basis in the text does not, in my judgment, "indicate or require" the displacement of the definitions. 47 Parliament amended s 236 with effect from 20 June 2006 (Act No 51 of 2006) Sch 1 cll [17] and [18], according to the Explanatory Statement, "to clarify what is meant by the expression 'premium'". The amendments restore the position that obtained prior to the 1997 Act. The plaintiff relied on the amendments to support its argument that the Act before the amendments did not bring the subject premiums to duty. 48 As the High Court said in Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Limited (2002) 209 CLR 651, 669 there are "difficulties involved in using an amending Act to construe earlier legislation." Grain Elevators Board v Dunmunkle Corporation (1946) 73 CLR 70, 85-6 is a case where an amending Act was relevant to the construction of the earlier legislation. Since it conferred a limited exemption from council rates the earlier legislation was not construed as conferring a wider exemption. This situation is not relevant. 49 The fact that Parliament moved to put the law beyond doubt cannot establish either that there was gap in the previous law which needed to be filled, or that the later Act was only passed for more abundant caution. In my judgment the 2006 Act does not assist either party. 50 For these reasons the review succeeds and the following orders are made pursuant to the Taxation Administration Act:

(1) The decision of the defendant of 6 June 2007 to disallow the plaintiff's objections to the assessments under review is revoked.

(3) The defendant is to refund the duty assessed under the assessments and interest thereon pursuant to ss 104 and 105 of the Taxation Administration Act .

(4) The defendant is to pay the plaintiff's costs of the summons.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.