ROYAL & SUN ALLIANCE INSURANCE AUSTRALIA LTD v COMMISSIONER OF STATE REVENUE (VIC)

Judges:
Byrne J

Court:
Supreme Court (Vic)

MEDIA NEUTRAL CITATION: [2002] VSC 345

Judgment date: 23 August 2002

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Byrne J

The principal issue in this appeal is whether insurance premiums received by the appellant, Royal and Sun Alliance Insurance Australia Limited (``Royal''), during the period 1 August 1999 to 31 December 2000 and which were chargeable with stamp duty under s. 97 of the Stamps Act 1958 (``Stamps Act''^[1] References in this judgment to statutory provisions shall be references to this statute unless otherwise indicated. ), include the amounts payable by Royal for goods and services tax on the policies. The appeal is brought under s. 33B(1)(b) pursuant to a request of 17 September 2001 made by Royal as an objector dissatisfied with the decision made on

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23 July 2001 of the respondent, the Commissioner of State Revenue (``the Commissioner'').

The GST Act

2. On 1 July 2000, a Commonwealth statute entitled A New Tax System (Goods and Services Tax) Act 1999 (``GST Act'') came into force. Thereupon, the makers of taxable supplies within the meaning of that statute became liable to pay GST to the Commonwealth at the rate of 10% of the value of the taxable supply.^[2] GST Act ss. 9-40 and 9-70. In its application to the insurance industry, GST is payable by an insurer on insurance cover granted to its insured. The value of the cover for the purposes of calculating GST is ten- elevenths of the price.^[3] Section 9-75. The price in a case such as the present, where the consideration for the cover is payable wholly in money, is the amount paid by the insured in connection with the grant of the cover^[4] Sections 9-75, 9-15. without discount for the amount of GST payable on the supply, but after deduction of any State stamp duty.^[5] Section 78-5.

3. The administrative structure established under the GST Act is extremely complex. Insofar as it relates to this appeal, it is sufficient to note that the insurer, as the person liable to pay GST, must render to its insured a tax invoice which includes a statement to the effect that the total amount payable by the insured includes GST for the supply and which sets out the total amount of GST payable.^[6] Section 29-70; A New Tax System (Goods and Service Tax) Regulations 1999, Reg 29-70.01(4). No such invoice was in evidence in this case nor was there evidence as to when the tax invoice was customarily issued by Royal. I assume this was done at the time when or shortly after the cover was granted.

4. The insurer is then obliged to give a return to the Commissioner of Taxation for each tax period,^[7] Section 31-5. in this case, monthly. The return must be lodged within a certain number of days after the expiry of the tax period^[8] Section 31-10 (1). and payment must be made^[9] Section 33-5 (1). at the same time. According to this statutory regime, this meant in the present case that the return and the payment were to be made by Royal on or before the 21st day of the month following the month of supply.^[10] There was no evidence that the Commissioner allowed further time pursuant to s. 31-10 for giving the return. Again, the evidence of its practice as to this was surprisingly sparse. As will appear,^[11] See [50] below. one of its arguments depended upon a finding that the GST component of the sum paid by the insured to it as the insurer, was held by it separately and perhaps in trust for the Commonwealth. I shall return to this matter.

The Stamps Act

5. Part 2(3)(11) of the Stamps Act requires the payment of duty by companies and firms carrying on certain insurance business in Victoria. The amount of this duty is calculated by reference to premiums received by the insurer. Such insurers are required to be registered^[12] Section 96(1). and to lodge with the Commissioner a monthly return of premiums chargeable with stamp duty received in that month and to pay the applicable duty on the return, both before the 21st day of the month following the month in which the premium was received.^[13] Section 97(2).

``Premiums'' is defined in s. 98 in the following terms:

``98 Premiums

(1) For the purposes of this subdivision-

• (a) a reference to premiums is a reference to the gross premiums including any commissions or any fire service levies paid or payable in connection with insurance by an insurer or any other person; and
• (b) a reference to any amount received by a company, person or firm of persons includes a reference to any amount that is credited or charged in any manner in the books of account of such company, person or firm of persons.''

7. The amount of duty payable is calculated by reference to the amount of ``premiums chargeable with stamp duty'' received by the insurer. This expression is explained for my purposes in s. 99(1):

``99 Premiums on which stamp duty payable

(1) For the purposes of section 97, the premiums chargeable with stamp duty are all premiums for assurance or insurance business that are applicable to-

• (a) property in Victoria; or
• (b) a risk, contingency or event concerning an act or omission that, in the normal course of events, may occur within or partly within Victoria.''

8. It will be seen that in this provision the premiums are described as ``all premiums for assurance or insurance business''. This business is defined in s. 95 as follows:

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```Assurance or insurance business' means-

• (a) the granting or issuing of any assurance or insurance policies other than policies of life assurance and insurance against damage by hail to cereal and fruit crops;
• (b) the acceptance either directly or indirectly of any premium renewal premium or consideration for or in respect of the granting or issuing or keeping alive or in force of any assurance or insurance policy to which paragraph (a) applies;
• (c) the receiving of any letter or declaration of interest attaching to any such policy issued at any time in Victoria or elsewhere; and
• (d) the carrying out by means of assurance or insurance effected out of Victoria of any written verbal or implied contract or undertaking to effect any such assurance or insurance-

but does not include transport assurance or insurance or accident compensation business of assurance or insurance of a hull of a floating vessel which is used primarily for commercial purposes.''

9. I should add, too, that in certain circumstances, including the case where the insurer is not registered, the Stamps Act imposes on the insured the obligation to lodge a return and pay the applicable duty on it.<sup>[14]</sup> Section 110A.

10. A number of arguments were put on behalf of Royal in support of its contention that the GST component of its receipts was not included in dutiable gross premiums received. First, the expression ``gross premiums'' in s. 98(1) is a term of art within the insurance industry and, as there understood, it does not include government transaction charges such as GST. Next, it was put that ``gross premium'' should be given the same meaning as a matter of ordinary construction of plain English words. Finally, reliance was placed upon the insurance documentation in evidence to show that the practice of Royal was that GST was separately on-charged by it to the insured and did not form part of the consideration for the cover. Accordingly, when a payment was received, this GST component was not to be treated as part of the premium received and, a fortiori, did not form part of ``gross premiums'' received in the month. For any or all of these reasons GST received was not to be included in the calculation of stamp duty payable in the following month.

Admissibility of expert evidence

11. In support of its primary submission, counsel for Royal sought to lead evidence from persons experienced in the insurance industry to show that the expression ``gross premiums'' had an industry meaning and what was that meaning. Counsel for the Commissioner objected to my receiving this evidence. They contended that these were ordinary English words and that their interpretation is a question of fact upon which I should not receive expert evidence.<sup>[15]</sup> The Australian Gas Light Co v The Valuer-General (1940) 40 SR (NSW) 126 at 137 , per Jordan CJ. I heard argument and directed that, subject to one matter, I would receive the evidence subject to objection and include in this judgment my decision as to admissibility. The exception was the evidence of Stuart Bridges, whose expertise was that of an experienced underwriter in the London market. His evidence was to be as to the meaning of the word ``premium'' in the insurance industry in the UK. I held that this evidence could on no basis be of assistance in construing the expression in the Australian industry.

12. I am satisfied that I should receive the evidence of the other expert witnesses. The word ``premium'' has a well-known meaning in ordinary English: the price paid by an insured for insurance cover. Nevertheless, the addition of the word ``gross'' creates an expression which is not familiar in ordinary English usage. It suggests that the premium is without deduction, that is, it is inclusive of an item or component which might otherwise be excluded. ``Gross premiums'', like its counterpart ``net premiums'' invites an answer to the question: inclusive or exclusive of what? Moreover, as an expression used in the Stamps Act, that is a revenue statute directed to a particular industry, it may be supposed to have been employed in the sense understood in that industry.<sup>[16]</sup> Herbert Adams Pty Ltd v FC of T (1932) 2 ATD 31 at 32-33; (1932) 47 CLR 222 at 227 , per Dixon J. In these circumstances, I will receive the evidence to determine whether the expression ``gross premiums'' has a particular meaning in the insurance industry and, if so, what this meaning is.

``Gross Premiums'' - an expression in the industry

13. Evidence as to the meaning of the expression was led from a number of

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experienced insurance actuaries. The first, Brett Ward, explained how a typical premium was built up by an actuary from the risk premium, which represents the actuarial assessment of the risk of a claim under the cover. To this is added various loadings which include the expenses of the broker, the insurer's administrative costs, any reinsurance costs and, finally, a loading for profit. This produces what Mr Ward called the ``gross premium''. This is the figure which the actuary provides to the underwriter and which constitutes the basic premium which is inserted in the renewal advice or the invoice to the insured. When challenged in cross-examination about his use of the expression ``basic premium'' as the equivalent of ``gross premium'' for this figure, Mr Ward gave this surprising answer:

``Q. So in this here you equate gross premium with basic premium, do you? A. That is correct, because in the preparation of this affidavit I was privy to an invoice statement where that particular phrase was used. So in order to correct the linkage between the two I pointed out which were the parallel items in my affidavit versus the invoice statement.''

14. No invoice statement was put in evidence at the trial. There were, however, three Royal renewal notices which were said to be typical of those in use at the relevant time.<sup>[17]</sup> In fact, the notices invite renewals for policies expiring prior to 1 August 2000, so that they ante-date the period with which I am concerned. They were, however, accepted as typical of those in the relevant period. These were a renewal notice for a householders policy, one for a motor policy and one for a secure business policy. None of these notices uses the expression ``basic premium''. If the invoices issued upon renewal were in the terms of these notices, Mr Ward's answer is very puzzling.

15. The renewal notices advise the prospective insured of the amounts payable in the following format:

                        Householders    Motor   Business
Premium                   $216.66      $337.61   $248.33
Fire Services Levy        $31.34         N/A       N/A
Goods & Services Tax      $24.80        $33.76    $24.84
Stamp Duty                $24.80        $27.01    $28.56
                         -------       -------   -------
Annual Amount Payable    $297.60       $398.38   $301.73
          

16. It will be seen that the amounts for the premium and fire services levy in the householders policy total $248.00. GST is therefore 10% of this total. As to the other policies where a fire services levy is not applicable, GST is 10% of the premium, except in the business policy, where it has been rounded up by one cent.<sup>[18]</sup> Compare GST Act s. 9-90. In each case, stamp duty is later added at differing rates. The total of all these items is described as ``Annual Amount Payable'' in the householders renewal notice. In the motor car renewal notice, the expression ``Annual Premium Payable'' is used in preference to ``Annual Amount Payable''. Elsewhere in the renewal notices for these two policies, this aggregate item is described as the ``Premium Payable''. In the business renewal notice, the total is described simply as ``Amount Payable''.

17. I mention these renewal notices at this stage because they show that in their communications with the insured, Royal does not use the expression ``gross premium'' in the sense used by Mr Ward as meaning ``basic premium''. Indeed, the word ``premium'' alone is there used to denote this concept and ``premium payable'' is used to refer to the total amount payable by the insured for the cover.

18. Mr Ward agreed with Clive Ernest Amery, the expert actuary called on behalf of the Commissioner, that the word ``premium'' alone, from an actuarial perspective, has no specific meaning; it is usually used in conjunction with a clarifying adjective or other expression.

19. Notwithstanding this, other insurance experts called on behalf of Royal spoke of the word ``premium'' as having a specific meaning in the industry. Ronald John Farrell and Robert Andrew Buchanan were of opinion that this word includes what Mr Ward called ``the basic premium'', as well as the fire services levy where applicable. They would not in the expression ``premium'' include statutory charges such as stamp duty and GST.

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20. Mr Farrell, in a supplementary statement which he confirmed in evidence, opined that the expression ``gross premium'' referred to ``the amount of premium (revenue) charged by an insurer for a policy of insurance to which is added Stamp Duty and GST. Gross premium includes any commissions &/or fire service levies''. When asked about the same matter, Mr Buchanan said that the term ``is commonly used, in the insurance industry, to indicate the gross amount of premiums before deduction of reinsurance premiums and charges which are not accounted for as expenses, but not including GST and stamp duty, which are not regarded as either part of premium revenue or as expenses for accounting purposes.''

21. It was apparent that these witnesses derived some support for their conclusions from Accounting Standard AASB 1023-1996 - ``Financial Reporting of General Insurance Activities''. The definition clause in that standard includes the following definition of ``premium'':

``premium means the amount charged in relation to accepting risk from the insured, but does not include amounts collected on behalf of third parties.''

22. In this standard, which pre-dates the GST Act, the exclusion in the definition is discussed in clauses 4.1.2 and 4.1.3:

``4.1.2 For certain classes of general insurance business, government authorities may require the payment of levies and charges. For example, workers' compensation insurance levies, annual licence fees and fire brigade charges may apply. Such levies and charges are expenses of the insurer, rather than government charges directly upon those insured. The insurer is not acting simply as a collector of these levies and charges. Although not compelled to collect these amounts from those insured, the insurer is entitled to include in premiums an amount to cover the estimated amount of the levies and charges. The insurer is usually responsible for paying the levies and charges at a later date. The amount paid by the insurer does not depend on the amounts collected from those insured in relation to the levies and charges. Therefore, the amounts collected to meet levies and charges are revenue of the insurer.

4.1.3 In most States, stamp duty is charged on individual insurance policies and is separately identified by insurers on policy documents. The insurer normally is required to collect and pass on to the government an equivalent amount. Because such stamp duty is a tax collected on behalf of a third party and there is no choice on the part of the insurer but to collect the duty from the insured, it is not revenue of the insurer.''

It would seem, therefore, that in terms of this accountancy standard, fire service levies, where applicable, would fall within the definition of ``premium'' and are part of the revenue of the insurer.<sup>[19]</sup> See too [34] below. To this extent, the accountancy standard differs from the opinion of the Royal expert witnesses.

23. In response to the expected imposition of GST, the Australian Accounting Research Foundation Urgent Issues Group in January 2000 issued a statement, Abstract 31 (``UIG 31''), expressing a view as to how the new tax should be treated for accounting purposes. In paragraph 2 of UIG 31, the following appears:

``The GST legislation provides that the price quoted for the supply of goods and services and the price paid by the purchaser must include the amount of the GST where applicable. As such, the gross proceeds collected by the supplier includes the amount of GST. The GST is collected on behalf of the taxation authority.''

24. This is not, in principle, a correct summary of the legal position. Like fire service levies,<sup>[20]</sup> See [34] below. GST is imposed upon the insurer as supplier and not on the insured as consumer.<sup>[21]</sup> See GS Cooper and RJ Vann, ``A few myths about the GST'' (2000) 23 UN8WLJ 252. Whether the insurer collects all or part of this tax by increasing the premium charged to its insured is a matter for it to determine, having regard to its ability to sell its cover at an increased price in the market in which it operates. It is certainly not collected on behalf of the taxing authority. The insurer must pay GST to the taxing authority whether or not it has added it to the insurer's invoice and, indeed, whether or not the insured's payment has been received in any event. Whether it is appropriate for accounting purposes to treat GST as forming no part of premium revenue, I express no view. That is a matter for the accountancy profession. I shall return to the question whether in a given case this may be modified by the terms of the supply contract.

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25. Although much reference was made by Royal's insurance expert witnesses to the accountancy standards and to accountancy practices, no witness with particular accounting expertise was called by that party, and no person familiar with its treatment of GST in its accounts. The only accountancy expert called was Clive Graham Peirson. Professor Peirson holds the chair of accounting in the Faculty of Business and Economics at Monash University. It seems to me that this witness brought some rigour to the discussion of the meaning of ``premium'' and ``gross premium'' from an accounting perspective.

26. Professor Peirson displayed considerable familiarity with AASB 1023 which was issued in December 1990 and re-issued in 1996. He became a member of the then Accounting Standards Board in 1984 but he did not claim any active involvement in the development of this standard. He was, however, involved in the preparation of AASB 1004 - ``Revenue''. He referred to the Australian Accounting Research Foundation Discussion Paper No. 11 first published in 1987 as part of the process which led to the issue of AASB 1023 in 1990.

27. The witness pointed out that ``premium'' was generally understood in the lay community to mean the amount paid to the insurer to secure protection against a risk. Nevertheless, among accountants concerned to identify the premium revenue of an insurer for financial reporting purposes, there were differences as to what components should and were customarily included. Discussion Paper No. 11 identified these differences and discussed an acceptable standard. AASB 1023 formulated such a standard and UIG 31 discussed the place of GST in this standard. The witness pointed out that these standards and papers were concerned, not with premiums, but with premium revenue. Premium revenue is a concept affected by the definition of revenues in cl. 14 of AASB 1023, a definition which has been adopted from the work of the US Financial Accounting Standards Board.<sup>[22]</sup> Discussion Paper No. 11, para 3.04. Professor Peirson pointed out that the references to the Australian Standards by the actuarial experts called by Royal confused the essential distinction between premiums and premium revenues. To my mind, this criticism is well founded.

28. I conclude from this and from the evidence of these witnesses generally, that there is in the insurance industry no accepted industry meaning of the word ``premium'', nor of the expressions ``gross premium'' or ``gross premiums''. In each case, the meaning will depend upon the particular interest of the person using the word or expression and the context in which it is used.

``Gross Premiums'' - a term in the Stamps Act

29. I turn now to consider the meaning of the expression ``gross premiums'' as it is used in s. 98(1)(a) of the Stamps Act as a matter of construction of the statute. As I have mentioned, the addition of the word ``gross'' requires an answer to the question: what is included in ``premiums'' so as to give due weight to the adjective ``gross''. The starting point must be the ordinary use of the word premium in the context in which it is found.

30. The Stamps Act imposes duty which is calculated by reference to the amounts of premiums received by an insurer from an insured. It is, in this sense, a tax based on receipts rather than accruals. The focus of attention, therefore, is on the sums which the insurer receives as premiums or which are credited as such in its books; it is not so much on the build-up of the premium which is charged to the insured. I shall return to this.<sup>[23]</sup> See [45] below.

31. A premium is the price paid for insurance cover. This is certainly the meaning in ordinary popular usage.<sup>[24]</sup> See Commr of State Taxation (WA) v Wesfarmers Insurance Ltd 89 ATC 4806 at 4807 , per Wallace J and the dictionary definitions there referred to. In principle, this is also the meaning of the term within the insurance industry although, as to its components, uncertainty may arise unless a qualifying expression is used or unless the context suggests a refinement.<sup>[25]</sup> See Discussion Paper No. 11, para 3.01. To my mind, the addition of the adjective ``gross'' has been made by parliament not to introduce a term of art or a term which can be construed in vacuo, but in an attempt to overcome aspects of this industry uncertainty. It is for this reason that s. 98(1)(a) specifies, by way of example, certain components which might otherwise be a matter of debate. In the current statute these are commissions and fire service levies paid by the insurer. Other uncertainties such as reinsurance<sup>[26]</sup> Section 98(3). and stamp duty,<sup>[27]</sup> Section 98(2). are dealt with elsewhere.<sup>[28]</sup> A different solution to the same problem of identifying the components of ``premium'' is found in s. 32 of the Insurance Act 1973 (C'th). This conclusion may be demonstrated by a brief examination of the antecedents of the Stamps Act presently under consideration.

The legislative history

32. The expression ``gross premiums'' in the present context is one of some antiquity in

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Victorian stamp duty legislation. It appeared at least as early as the Stamp Duties Act 1879 where duty was payable by insurers upon their annual licence to conduct insurance business<sup>[29]</sup> Section 72(1), First Schedule item IV. and calculated by reference to the amount of business transacted in the preceding year. In its application for the licence the insurer was required by s. 75 to set out the amount of all premiums received or credited in the preceding 12 months. The section went on in these terms:

``Such premiums shall be the gross premiums and shall be counted so as to include any commission or discount but to exclude any portion of such gross premiums actually paid away by way of re-insurance effected in Victoria with any other such company person or firm;''

Since the premiums to be returned excluded reinsurance, they were not basic premiums or gross premiums as those expressions were explained by Mr Ward and the other Royal expert witnesses. This was the form of the section as it passed through the successive consolidations of the nineteenth and twentieth centuries. By that of 1958 it was found in s. 100(3) and item XI of the third schedule to the Stamps Act.

33. It may be, also, that the amount of gross premiums upon which duty was calculated under the 1879 Act and thereafter included that part of the premium paid to the insurer, which represented the stamp duty which the insurer itself would have to pay in the next licence renewal. This, too, would represent a departure from the evidence of those expert witnesses as to the meaning of ``gross premiums''. This statutory imposition of a duty upon a duty was not removed until the Stamps (Amendment) Act 1958.<sup>[30]</sup> Section 2(6). This amendment permitted an insurer to designate in its invoice as a separate amount to be paid by the insured, an amount representing the insured's ``contribution to the [insurer] in respect of the liability to pay stamp duty on the annual licence''. Subject to a specified limit, then, this amount ``shall not for the purposes of this Act be regarded as part of the premium''. If it were not separately designated, the duty component would presumably continue to be regarded as part of the premium. It will be recalled that the insurance witnesses said that, from an actuarial point of view, stamp duty was not part of basic or gross premiums and that, from an accounting point of view, it was, likewise, not part of premium revenue. As a matter of statutory construction of the Stamps Act as it stood after the 1958 amendment, the expression ``gross premiums'' in s. 99(3) of itself did not exclude this duty. This provides another reason to reject one or other or both of the submissions put on behalf of Royal that, in the industry use of the expression, stamp duty was excluded from ``gross premiums'' and that parliament was using the expression in its industry use.

34. In one other respect the expression ``gross premiums'' in the legislation of this time may have differed from that given by the insurance witnesses. These witnesses would all exclude from the expression what was called ``fire service levy''. The relevant provisions of the Stamps Act then made no mention of this levy. As at 1958, insurers were required to submit annually<sup>[31]</sup> To the Country Fire Authority in respect of country properties: Country Fire Authority Act 1958 s. 77, and to the Metropolitan Fire Brigades Board in respect of properties within the Metropolitan district: Metropolitan Fire Brigades Act 1958 s. 40. a return of gross premiums received in the preceding year in respect of fire insurance. Each insurer was then required to pay by quarterly instalments its rateable share of the estimated annual expenditure of the Country Fire Authority and the Metropolitan Fire and Emergency Services Board, as the case may be. It should be noted that the statutory terms defining ``gross premiums'' in these statutes resembled those of the Stamps Act prior to the 1978 amendment.<sup>[32]</sup> See Stamps Act 1958 s. 100(3). This section was renumbered from s. 99 by Act No. 6489 Schedule (14). Like the then Stamps Act regime, the amount of gross premiums for fire insurance received in the preceding year was used to calculate the levies. The levies, however, were not calculated as a stipulated percentage of these premiums, but as a rateable share of expected expenditure. It could not, therefore, be said with strict accuracy that a specified proportion of these gross premiums when received could be earmarked for fire service levies and collected on behalf of third parties, the Authority, or the Board, as the case may be.<sup>[33]</sup> See, also, [24] above. It was an expense imposed upon an insurer granting fire insurance cover which, like any expense, had to be covered by its revenue if it were to make a profit.

35. From 1 January 1979, the Stamps Act 1978 altered in a fundamental way the manner of imposition of stamp duties on insurance transactions. Returns by insurers were required to be made on a monthly rather than annual basis and duty was imposed, not upon the annual licence, but on the monthly return.

36. I interrupt myself to observe that I reject the submission put on behalf of Royal that the 1978 statute imposed for the first time a duty on

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individual insurance transactions. It remained a stamp duty upon a document; henceforth this document is the monthly return. I reject also the submissions put on behalf of Royal in reliance upon a dictum of Tamberlin J in Dick Smith Electronics Pty Limited v FC of T,<sup>[34]</sup> 97 ATC 5089 at 5097. that the amendments to the Stamps Act made in 1978 were of such a fundamental nature that the statute should be taken to speak from that time. The terminology of the statute which is under consideration in this proceeding reflects its antecedents.

37. As before, the amount of duty payable was calculated by reference to premiums received - now in the preceding month. By a new s. 98(1)(a) ``premium'' is defined anew:

``a reference to premiums shall be a reference to the gross premiums including any commissions or discounts but shall not include the gross amount of premiums including commissions and discounts in respect of re-insurance effected in Victoria with any company, person or firm of persons if such re-insurance was not made pursuant to any prior obligatory agreement in writing between the insurer and re-insurer for the acceptance of risks by way of re- insurance;''

<sup>[35]</sup> See also s. 98(3) which excludes from dutiable premiums certain other receipts.

As before, duty upon stamp duty was removed but only where it was separately designated in the invoice.<sup>[36]</sup> Section 98(2). I pass over the amendment effected by the Stamps (Amendment) Act 1980 which substituted a new s. 98(2) with the consequence that the duty was not chargeable upon stamp duty whether that duty was separately designated or not.

38. By the Taxation Acts Amendment Act 1987, s. 98(1)(a) was amended to delete from dutiable gross premiums the exception of the cost of reinsurance. But this cost did not become part of dutiable premiums because of the effect of s. 98(3).

39. I also pass over the amendments effected by the State Taxation (Further Amendment) Act 1998 as not being relevant for my present purposes. I come now to the Stamps (Amendment) Act 1999. This amended s. 98(1)(a) by deleting ``discounts'' from gross premiums and including fire services levies. The section then took the form<sup>[37]</sup> Set out in [6] above. which applies in the period August 1999 to December 2000 with which I am concerned.

40. This, the final specific inclusion of fire service levy as a component of premiums in respect of which duty is to be calculated, represents another departure from the concept of ``gross premiums'' espoused by the Royal expert insurance witnesses. I infer that the amendment was made to clarify an uncertainty rather than to introduce a change in the components of ``gross premiums''.

The Stamps Act

41. The provision in the Stamps Act which imposes the obligation to pay stamp duty is s. 97(2)(b) which requires payment to the Commissioner of a specified percentage of ``the amount of premiums... chargeable with stamp duty... received by the company during the last preceding calendar month''. On behalf of Royal it was submitted that, if I found that the expression ``gross premiums'' had no accepted meaning in the insurance industry, I should, even so, construe this and the other provisions of this part of the Stamps Act in the light of accepted terminology and usage in that industry.<sup>[38]</sup> See Freight Rail Corporation v Chief Executive Officer of Customs (2000) 107 FCR 15 at 26 per Hill J. This usage excepts from the concept of premium, those sums received by insurers, not for covering the risk, but for on-payment in due course to the Commissioner of Taxation. This, in summary, was the second argument put on behalf of Royal. I should emphasise that it did not depend upon the structure of the particular policies issued by Royal under which GST and stamp duty and fire service levies were separately designated. The argument was supported by the terminology of s. 98(2) of the Stamps Act which speaks of ``the amount required to be paid'' in a document relating to premium due or to be paid. This expression is to be contrasted with the word ``premium'' used in the same sub-section which may represent part only of the amount required to be paid. So, it was said, the legislation contemplated that premium was or might be something less than the total amount which an insured was required to pay in consideration for the cover. The difference between the two was or might be the sums collected on behalf of third parties, including GST.

42. Finally, it was put that this construction of the statute as it stood in 2000 was confirmed by the terms of s. 177 of the Duties Act 2000 which came into force on 1 July 2001. This section contains a definition of premium which counsel for Royal accepted as including the GST component. I was referred to a number of

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cases which stood for the proposition that subsequent amending legislation may be used as an aid to construction.<sup>[39]</sup> Cape Brandy Syndicate v Inland Revenue Commissioners (1921) 2 KB 403 at 414 , per Lord Sterndale MR; DFC of T v Elder's Trustee and Executor Co Ltd (1936) 4 ATD 135 at 143; (1936) 57 CLR 610 at 625-626 , per Dixon, Evatt and McTiernan JJ; Wilcox Mofflin Limited v Commr of Stamp Duties 78 ATC 4191 at 4196; (1978) 1 NSWLR 341 at 347 ; FC of T v Consolidated Press Holdings Limited 99 ATC 4988 at 5001 [61]; (1999) 91 FCR 574 at 588 [61] . The difficulty which I raised in argument, and which was never satisfactorily resolved, was what use I should make of it. Should I infer from the later Act that Parliament intended to change the effect of its antecedent, that it intended to clear up an uncertainty or that it intended to achieve the same result but in different language?<sup>[40]</sup> Hepples v FC of T 91 ATC 4808 at 4835; (1991-1992) 173 CLR 492 at 539 , per McHugh J. When pressed with this, counsel for Royal responded only that the subsequent legislation was ``available as an aid''. What, however, is clear is that it is necessary to exercise great care in using this aid.<sup>[41]</sup> Allina Pty Ltd v FC of T 91 ATC 4195 at 4202-4203 ; Morvic Pty Ltd & Anor v Commr of State Revenue (Vic) 2002 ATC 4459 at 4464 [11]; [2002] VSC 171 at [11] , per Pagone J.

43. For a number of reasons, I do not accept the submission of Royal that, as a matter of construction, the expression ``gross premiums received'' does not include that part of the payment by the insured received by the insurer for payment of its liability for GST. First, the legislative history of the Stamps Act since 1958 shows that parliament has consistently sought to avoid the imposition of duty upon duty. Section 98(2) represents a particular solution to this difficulty. That part of the amount required to be paid which is designated as stamp duty or, where it is not so designated, a stipulated part of the ``amount of the premium shall not be regarded as part of the premium chargeable with duty'' under the statute. This use of the word ``premium'' first appearing in this quoted passage shows that the legislature did not intend the suggested distinction between ``amount required to be paid'' and ``premium''. The argument based on the terminology of s. 98(2) is rejected.

44. Second, the argument in principle<sup>[42]</sup> I put to one side for the moment, the question whether this point of demarcation might be provided by agreement or convention between the insured and the insurer. fails to provide an acceptable point of demarcation between payments received for the grant of cover, that is true premiums, and other payments received, so that GST falls in the latter group. I have concluded<sup>[43]</sup> See [24] above. that, as a matter of legal analysis, this cannot be achieved by treating receipts such as GST, fire service levy and stamp duty as having been collected on behalf of third parties, for an insurer in a competitive market might well bear all or part of these exactions itself so that the total cost to the insured of insurance cover remains competitive. In a less competitive market it may, as in the case of the typical householders policy in this case, make the commercial judgement that it will increase its charge to the insured by a sum greater than the GST.<sup>[44]</sup> I forebear from comment about the propriety of such practice. It is sufficient that it is a possible course of action.

45. Third, the focus for the purposes of the Stamps Act is upon premiums received; that of the GST is upon the price charged for services supplied. A submission which would remove the latter from the former must address this essential point of difference.

46. Fourth, it is clear that the use of the expression ``gross premiums'' and its meaning in s. 98(1)(a) and its antecedents predates the introduction of GST. As a matter of construction, therefore, it is necessary to consider whether the legislature has used terminology which has the consequence that it should be taken to have intended to exclude this tax which it could not have foreseen. There is, to my mind, no such indication to be found in the Statute.

47. Fifth, the Stamps Act, as it stood in the months with which this proceeding is concerned, made, in s. 97(2), specific provision for excluding the stamp duty component of premiums received whether this be designated or not. It is difficult, as a matter of construction, to infer a comparable provision in respect of GST. This is particularly the case where GST, unlike stamp duty, is imposed by the Commonwealth and not by the State.

48. Sixth, insofar as this construction argument depends upon the difference between sums received by an insurer for its own use and those collected on behalf of third parties, the GST Act does not address this distinction with respect to receipts by a supplier of GST from its customer. Indeed, the supplier must pay GST whether or not the customer has made or ever makes payment for the services supplied.

49. Seventh, I am unable to derive any assistance in my present task from the Duties Act 2000.

GST separately charged

50. The next submission put on behalf of Royal depended upon its having charged its insured a separate amount for GST. At a factual level, this depends upon a finding that, in its invoices, Royal charged its insureds a sum for premium and a separate sum for GST and that it received the GST component from its insured, not as premium, but as a sum to be passed on to the Commissioner of Taxation. As I have mentioned, the evidence of this is sparse. There was no invoice tendered. I shall assume,

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ATC 4969

however, that the invoices adopted the form and terminology of the renewal notices which were in evidence. The accounting evidence led to show the GST received was dealt with by Royal as a separate sum held, not for its own purposes, but for the taxing authority, was insubstantial; no accounting records of Royal were produced. This deficiency was sought to be overcome by bald statements by non- accountant witnesses as to how they thought these receipts might or ought be dealt with in the accounts. I have not derived very much assistance from such evidence.

51. The submission relied upon the analysis of Wallace J in the Wesfarmers' case.<sup>[45]</sup> Commr of State Taxation (WA) v Wesfarmers Insurance Limited 89 ATC 4806 . This was a case in which the State stamp duty imposed upon an insurer was calculated by reference to gross premiums received. The issue was whether these premiums included payments received by the insurer from the insured and separately identified for stamp duty. His Honour found that the practice of the insurer in that case was to invoice the insured separately for premium and stamp duty. The policy was expressed to provide the insurance cover in consideration for the payment of premium component only. Accordingly, only that portion of the payment received by the insurer referable to premium was to be treated as gross premiums upon which duty was calculated.

52. It should be noted that there exists an important factual point of distinction between the Wesfarmers' case and the present. Unlike the WA policy, the policies in use by Royal all oblige the insured to pay not only the premium but also the government charges including GST. The Royal motor policy and secure business policy each contain the following provisions under the heading ``Our contract with you''

``OUR CONTRACT WITH YOU

The contract

In the insurance contract between you (the insured) and us (Royal & Sun Alliance Insurance Australia Limited):

• § we agree to provide you with the insurance you select, which is shown in your schedule, and in return
• § you agree to pay us:
  • * your premium, and
  • * any relevant government charges.

These two amounts add up to the total amount you must pay.

You must pay this total amount:

• § when you first take out your policy, and
• § each year when you accept any offer we may make to renew your policy with us.

This is because a renewal is a new contract with us.

Please note, your insurance only starts when you pay this total amount unless we agree you can pay by instalments. If you have not paid, you have no insurance.''

The householders policy, which is in different terms, is to the same effect.

53. The terms of the policies in evidence show that if an insured paid only the premium component and not the government charges, Royal might refuse cover. In legal terms, payment of these charges was part of the consideration for the insurance cover.

54. This still leaves the question whether all components of this consideration should be characterised as premiums. In FC of T v Century Yuasa Batteries Pty Ltd<sup>[46]</sup> 98 ATC 4380 ; (1998) 82 FCR 288. the Full Court of the Federal Court was faced with the question whether a payment received by a non- resident lender from a borrower was ``an amount in the nature of interest''. Under the facility agreement, the borrower was to pay interest at a stipulated rate together with certain other payments. One such payment was a sum equal to any withholding tax which the borrower was obliged to deduct from interest so that the amount received by the lender, net of this withholding tax, was a sum equal to the gross interest calculated at the stipulated rate. The Full Court held that this further payment should be characterised as an indemnity against the lender's liability for income tax and not as a return or profit to the lender, that is, it was not interest or an amount in the nature of interest. Counsel for Royal urged me to approach their client's policies in much the same way.

55. I was referred also to a recent decision of the High Court in Roxborough v Rothmans of Pall Mall Australia Ltd.<sup>[47]</sup> (2001) 185 ALR 335. This was a claim in restitution brought by tobacco retailers against a wholesaler from whom they had purchased tobacco products. The sales took place at a time when a licence fee had been imposed by the

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ATC 4970

Commonwealth upon both wholesalers and retailers of tobacco products. Like the stamp duty in the present case, this licence fee, payable in a given month, was calculated by reference to the amount of sales in the preceding month. Unlike the present case, the liability to pay the licence fee was imposed on both the wholesaler and the retailer. It had, however, only to be paid once and this was usually by the wholesaler. Like the present case, the wholesaler specified in its sales invoices the licence fee component as a separate item and the retailer paid the aggregate amount. In 1997 the High Court determined that the licence fee legislation was unconstitutional as it was a duty of excise and the fees were refunded by the Commonwealth to the wholesalers. The purchasing retailers then sought to recover in restitution the payments in respect of licence fees which they had paid. This claim was resisted on grounds including that the price for the products was a composite figure and that, since there had been no total failure of consideration for the payment, it was not recoverable.

56. The High Court determined this point in favour of the retailers since the licence fee component of the purchase price was distinct and severable from the remainder of the consideration. Following the determination that the licence fee was unconstitutional, there was a failure of consideration with respect to this severable part of the consideration. For my purposes, the interest of this case lies in the readiness of the court to sever a component of the sale price and to treat the funds represented by this component as earmarked for the payment of the licence fee whether it had then become payable by the wholesaler or not. Gleeson CJ, Gaudron and Hayne JJ expressed themselves this way:

``[13] The amounts paid by the [retailers] to the [wholesaler] in respect of the tax represented a distinct part of the consideration for the tobacco products purchased by the [retailers]. They were treated by both parties to each relevant contract as separate from the wholesale price of the goods sold, that price constituting the value by reference to which the amount of the tax was determined. And the tax, being a tax on goods, was of such a nature that it was not intended to be borne ultimately by either the [retailers] or the [wholesaler]. The tax increased the exchange value of the tobacco products in the hands of the retailers, but the initial value by reference to which the minister's determination as to the basis of the tax operated was a wholesale price exclusive of the tax component. While the wholesale price, exclusive of the tax, was arrived at by the operation of forces of supply and demand in the market for tobacco products, and reflected the negotiated agreement of the parties, the tax was imposed externally by government.''

And later at [17]:

``[17] In a contract for the sale of goods, the total amount which the buyer is required to pay to the seller may be expressed as one indivisible sum, even though it is possible to identify components which were taken into account by the parties in arriving at a final agreed figure. The final figure itself may have been the result of negotiation, making it impossible to relate a cost component to any particular part of that figure. Or there may be other factors which prevent even a notional apportionment. But there are cases, of which the present is an example, where it is possible, both to identify that part of the final agreed sum which is attributable to a cost component, and to conclude that an alteration in circumstances, perhaps involving a failure to incur an expense, has resulted in a failure of a severable part of the consideration. Here, the buyers, the retailers, were required to bear, as a component of the total cost to them of the tobacco products, a part of the licence fees which the seller, the wholesaler, was expected to incur at a future time, and which was referable to the products being sold. It was in the common interests of the parties that the fees, when so incurred, would be paid to the revenue authorities by the seller, and it was the common intention of the parties (and the revenue authorities) that the cost of the goods would include the fees. In the events that happened, the anticipated licence fees were not incurred by the seller. The state of affairs, which was within the contemplation of the parties as the basis of their dealings, concerning tax liability, altered. And it did so in circumstances which permitted, and required, severance of part of the total amount paid for the goods.''

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ATC 4971

57. Gummow J also rejected the submission put on behalf of the wholesaler that under the sale contract the purchasing retailers undertook to pay the whole amount stipulated in the invoice for the sale of the tobacco products including the licence fee component:

``[56] The better conclusion from the evidence is that, in the contracts made during the dispute period, each [retailer] agreed to pay both the invoiced price of the goods and the licence fee component in exchange for the supply of the goods, but the payment of the licence fee component was the subject of a further term. This was that, if the [retailer] remained in business and renewed its licence for the periods beginning respectively 28 August and 28 September, Rothmans then would so act that the [retailer] would not, under ss 41(1)(c) and 41(3) of the Act, bear the ad valorem components of its renewed licence for those periods. The term ordinarily would be performed by Rothmans paying for the renewal of its licence for those further periods the equivalent amount to that received and identified as `tobacco licence fee'.

[57] That is not to maintain that Rothmans failed to acquire ownership in specie of the funds it was paid;<sup>[48]</sup> cf Daly v The Sydney Stock Exchange Limited (1996) 4 ACLC 283 at 294; (1986) 160 CLR 371 at 390; 65 ALR 193 at 204 ; Ilich v R (1987) 162 CLR 110 at 140-141; 69 ALR 231 at 255-256 . nor does it mean that Rothmans was obliged to earmark and keep those funds separate or otherwise treat them as if they were impressed with trusts in favour of the [retailers].<sup>[49]</sup> cf Cohen v Cohen (1929) 42 CLR 91 at 101 ; Commr of State Revenue (Vic) v Royal Insurance Australia Ltd 94 ATC 4960 at 4970; (1993-1994) 182 CLR 51 at 77-78; 126 ALR 1 at 18 . Nor, given what, it will appear, is the adequacy of the legal remedy available to the [retailers], is there any occasion to consider whether, and, if so, when and on what terms, there arose in their favour a constructive trust of the species discerned by Judge Learned Hand in his dissenting judgment in 123 East Fifty- Fourth Street Inc v United States,<sup>[50]</sup> 157 F 2d 68 (1946). and to which Mason CJ gave qualified acceptance in observations made in Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd.''

<sup>[51]</sup> 94 ATC 4960 at 4969-4970; (1993-1994) 182 CLR 51 at 75-78; 126 ALR 1 at 16-18.

58. Kirby J was prepared to assume that a constructive trust might be imposed on the wholesaler in these circumstances but dissented from the majority on the basis that the retailers who seek equity must themselves be prepared to do equity by passing on to their customers the benefit of the restored licence fee.<sup>[52]</sup> (2001) 185 ALR 335 at [144]-[155]. Callinan J did not need to consider this point.

59. Reference in these judgments is made to the judgment of Mason CJ in Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd,<sup>[53]</sup> 93 ATC 4960 ; (1993-1994) 182 CLR 51. a case where the insurer sought the recovery of stamp duty overpaid under a mistaken view of the Stamps Act. His Honour, after considering the American cases, concluded as follows:

``I would accept so much of Learned Hand J's analysis in 123 East Fifth-Fourth Street as leads to the conclusion that the restaurant owner was a constructive trustee of the amount of the tax received from its patrons if the owner charged the separate amount of the tax to its patrons. The tax so received was received by the owner as a fiduciary on the footing that it would apply the money in payment of the tax. If that purpose failed or could not be effected because the tax was not payable then the owner held the moneys for the benefit of the patrons who paid the moneys. The same result would ensue if the owner recovered payments from the revenue authority made as and for tax which was not payable. And, in my view, the patrons who paid the tax to the owner would have a right of recovery, as Learned Hand J makes clear, against the revenue authority so long as it retained the payments which it was not entitled to retain.''

<sup>[54]</sup> 94 ATC 4960 ; (1993-1994) 182 CLR 51 at 77-78.

60. These are, of course, cases dealing with restitution and associated principles. Nevertheless, the reasoning in them clearly contemplates the possibility that, where the contractual documents so provide, the consideration for a sale or, as in this case, the provision of services, may be dissected so as to identify a tax component and that this may be so notwithstanding that this component is not, in fact or as a matter of law or by any accounting procedure, segregated in the hands of the recipient from its working capital or passed on to the taxing authority in specie. It is but a small step for the recipient to argue that the premium, the consideration received from the insured for the insurance cover, did not include this component.

61. Counsel for Royal invited me to take this step. They pointed to the fact that the Full Court of the Federal Court was prepared to do so in an analogous context in FC of T v Century Yuasa Batteries Pty Ltd.<sup>[55]</sup> 98 ATC 4380 at 4383-4384; (1998) 82 FCR 288 at 291-292. As I read and re-read these cases to which I have referred, it appeared to me that they do point strongly in this direction.

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ATC 4972

62. Nevertheless, the question which I have to consider is essentially one of the construction of s. 98(1) and its application to the facts of this case. Guided by the cases to which I have referred, I conclude that the separate designation of the GST component of the amount payable by the insured for the insurance cover has the consequence that this component, when paid, is not part of the gross premiums received by the insurer. This conclusion reflects the terms of the contract between Royal and its insureds insofar as this is disclosed in the renewal advices. It reflects the intent of the Stamps Act which is directed to the imposing of duty on the value of insurance business carried on by the taxpayer. It is consistent with the spirit of the Stamps Act since 1958 which has shrunk from imposing duty upon duty. Finally, and most importantly, it is not inconsistent with the terminology of s. 98(1) which came into existence when no GST was contemplated.

63. I conclude from this that the separately identified GST component is not part of gross premiums received for the purposes of the calculation of stamp duty.

64. The conclusion I have reached, that the GST component in this case is not part of the gross premium received, carries with it the consequence that there was no non-payment of duty by the insured and, accordingly, that no penalty should be imposed. Nevertheless, in deference to the submissions put and in case this matter might go further, I shall briefly set out my views on the penalty issue.

The penalty issue

65. The submissions put on behalf of the Commissioner on the question of penalty disclosed a remarkable uncertainty about the role of the Court upon an appeal such as this. It was eventually agreed between counsel that, notwithstanding the provisions of s. 33C of the Stamps Act, the appeal was by way of rehearing as to the taxpayer's objection with respect to primary duty and by way of review as to its objection with respect to penalties.

66. As I have mentioned,<sup>[56]</sup> Section 97(2), and see [5] above. the insured is obliged within the time specified both to lodge a return showing the total amount of dutiable premiums received during the last preceding month and to pay in cash the applicable duty. Section 97 then provides for the imposition of a penalty of 10% with a power to remit:

``(3) Where a registered company does not, in respect of a month, in accordance with this section, lodge with the Comptroller of Stamps a return and pay an amount due not later than the 21st day of the succeeding month, an amount of 10 per centum of that amount due is a debt due and payable by that registered company to Her Majesty and may be recovered in accordance with this Act.

(3A) The Comptroller of Stamps may, if he thinks fit, mitigate or remit a debt payable under sub-section (3).''

67. I mention too, for completeness, that s. 17(3) provides for a further penalty equal to double the duty where persons ``neglect evade or attempt to evade payment of any of the several duties specified in [the Stamps Act]''. It does not appear that the penalty in this case is this further penalty.

68. In this case Royal submitted its monthly returns disclosing premiums received net of GST in the months August 1999 to December 2000. Presumably it made the payments of duty at the prescribed rate based on these premiums. During and indeed prior to these months, PricewaterhouseCoopers, on behalf of Royal, engaged in correspondence with the Commissioner in which it asserted that GST should be excluded from dutiable premiums, but the Commissioner maintained the contrary position.

69. It seems that on 25 January 2001 the Commissioner issued Notice of Assessment, No. A112221, for a total amount of $1,927,875.75, representing $1,752,614.32 stamp duty underpaid and a 10% penalty of $175,261,43. This document is not in evidence. It was contended before me on behalf of the Commissioner that this penalty became payable pursuant to s. 97(3) automatically and not by the exercise of any discretionary or other decision of the Commissioner.

70. On 26 March 2001, Royal, pursuant to s. 33A(1), lodged its Notice of Objection dated 23 March 2001. In this notice, Royal contended that it was not liable to pay penalty, setting out a number of bases for this. It was asserted in the alternative that, if the penalty were payable, then the Commissioner ought to have remitted it in full<sup>[57]</sup> Presumably pursuant to s. 97(3A). and to the extent that he has not done so, he has acted unreasonably.

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ATC 4973

71. By notice dated 23 July 2001 the Commissioner published his decision allowing the objection to the extent that duty underpaid was reduced to $895,097.61 and the penalty, accordingly, was reduced to $89,509.76, a total of $984,607.37. This, then, was the assessment to be dealt with on the appeal to this Court.<sup>[58]</sup> Section 33C(2). As to the penalty, the Commissioner provided the following reasons:

``30. It has also been determined that the Commissioner was entitled to impose a 10% penalty on the Assessment as [Royal] failed to lodge proper returns and pay the correct amount of stamp duty during the assessment period. In imposing this rate of penalty, it is considered that the Commissioner has not acted unreasonably, arbitrarily, capriciously or otherwise contrary to law as-

• a) [Royal] failed to lodge a voluntary disclosure even after the [State Revenue Office (SRO)] advised [Royal] of its requirement to pay insurance duty on a GST inclusive basis and granted it two extensions of time to complete and lodge its voluntary disclosure in that regard.
• b) The nature of the issue is not complex and novel and even if it were (which is not admitted), it was clarified by the State Government in the Media Release and the SRO in the General Bulletin well before [Royal] first made contact with the SRO. Further, the SRO gave [Royal] specific advice on the issue, which it failed to adopt in the preparation and lodgement of a voluntary disclosure.
• c) [Royal]does not have a strong case and it is not accepted that it could reasonably believe that its view was a view that was as likely as not to be accepted by a court.
• d) No inaction of the part of the Commissioner or the SRO affected [ Royal's] ability to have lodged a voluntary disclosure without the imposition of penalties. Rather, it was [ Royal's] inaction to lodge a voluntary disclosure that has resulted in the imposition of penalties in this matter.
• e) The decision by [Royal] to pay insurance duty on a GST inclusive basis from November 2000 is irrelevant in determining the level of penalty duty payable by [Royal] in respect of underpayments of duty for past periods. The decision is also irrelevant for level of penalty duty payable for the month of November 2000 as despite the decision, [ Royal] failed to pay the correct amount of duty for that month as well.
• f) The rate at which penalty duty has been imposed in this matter is consistent with, if not more favourable than, the imposition of penalty duty by the Commissioner in respect of similar matters under the insurance provisions of the Act and/or other State taxes.

31. Given the above, there are no reasons to reduce the rate at which penalty duty has been assessed under the Assessment which, in the circumstances of the matter, is considered to be just and reasonable. However, as the amount of stamp duty payable under the Assessment has reduced, the amount of penalty duty payable has also reduced (see attached schedule).''

72. The case, insofar as it concerned penalty, proceeded on the following agreed basis:

• (1) That s. 97(3) operated to impose an automatic 10% penalty.
• (2) That the Commissioner had a discretion to decide to remit the penalty wholly or in part pursuant to s. 97(3A).
• (3) That in the original assessment and in his decision on the objection the Commissioner exercised his discretion adversely to Royal.
• (4) That my task was to review the Commissioner's decision upon ordinary administrative law principles. This involves my enquiring whether he has not addressed the correct question, or that his decision has been affected by some mistake of law or that he has taken into account some extraneous matter or that he has failed to give consideration to some matter which he ought to have had regard to.<sup>[59]</sup> See Avon Downs Pty Ltd v FC of T (1949) 9 ATD 5 at 10; (1949) 78 CLR 353 at 360 , per Dixon J.
• (5) If I am satisfied that the decision of the Commissioner was vitiated by some such error or that I should infer some such error from the inherent unreasonableness of his decision, then I should remit it to him for his consideration.
• (6) I should undertake this review notwithstanding that, as a matter of procedure, this proceeding was not one for review.

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  ATC 4974

73. I should say that I express no view about the correctness or otherwise of any or all of these bases. I will content myself with determining the issue which the parties have placed before me. I should underline, however, that I cannot review the Commissioner's decision which has not been shown to contain such an error solely on the ground that I would not have reached the same decision.

74. It was accepted by counsel for the Commissioner that their client fell into error in the first two sentences of paragraph 30 of his reasons which I have quoted above at [71]. These sentences and, indeed, the whole paragraph, appear to be predicated upon the erroneous assumption that the imposition of the penalty was a matter for decision of the Commissioner and that, in making this decision, he was obliged to act not unreasonably, arbitrarily, capriciously or otherwise contrary to law. His use of this terminology suggests that, in this paragraph 30, he was concerned to respond to paragraph G4 of the notice of objection which uses these terms in addressing the correct question, namely that of the Commissioner's decision to remit penalty. In any event, the Commissioner in paragraph 31 of his decision does address the correct question. Moreover, he provides reasons for rejecting each of the six grounds of suggested unreasonableness asserted on behalf of Royal in paragraph G5 of the notice of objection. Before me, counsel did not attack the legal aspects of the Commissioner's reasons, they simply contended that they were wrong and unreasonably so. I am unable to infer error of the kind required based on unreasonableness, there being no evidence of breach of other administrative law principle. It does not seem to me that the Commissioner came to a wrong conclusion and, even if I were to take the contrary view, this is not a reason for setting aside the Commissioner's decision as to the remission of the penalty and I would not have done so.

Conclusions

75. I have concluded that, as the contracts of insurance used by Royal have been structured, the ``total amount of all premiums chargeable with stamp duty under this subdivision received by that company during the last preceding calendar month'' in s. 97(2) does not include that portion of the premiums received which is designated for payment of GST. The appeal will, therefore, be allowed and the assessment of 23 July 2001 will be set aside.