PERMANENT TRUSTEE AUSTRALIA LIMITED v COMMISSIONER OF STATE REVENUE (VIC)

Members: Gleeson CJ

McHugh J
Gummow J
Kirby J
Hayne J
Callinan J
Heydon J

Tribunal:
Full High Court

MEDIA NEUTRAL CITATION: [2004] HCA 53

Decision date: 12 November 2004

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McHugh J

101. The first issue in this case stated by a Justice of the Court under s 18 of the Judiciary Act 1903 (Cth) is whether the Stamps Act 1958 (Vic), or an assessment made under it, is invalid to the extent that that Act, or the assessment, purports to charge stamp duty on an agreement for lease of land situated within Tullamarine Airport. The second issue assumes that the Stamps Act is invalid in its application to the agreement for lease; it is whether the Commonwealth Places (Mirror Taxes) Act 1998 (Cth) is invalid or ineffective to permit the assessment of duty by applying the terms of the Stamps Act to the extent that Act is invalid.

Summary of reasons

102. In my opinion, the Stamps Act and the assessment made under it are invalid to the extent that that Act and assessment purport to charge stamp duty on the agreement for lease of land situated within Tullamarine Airport. That is because Tullamarine Airport is a Commonwealth place for the purposes of s 52(i) of the Constitution. Under that paragraph of the Constitution, the Commonwealth has the exclusive power to make laws with respect to Commonwealth Places. A Victorian law cannot apply of its own force in such places. The Commonwealth Places (Mirror Taxes) Act

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(``the Mirror Taxes Act'') is also invalid or ineffective to permit the assessment of duty on the agreement because that Act is a revenue law of the federal Parliament that prefers various States or parts of States over other States or parts thereof, contrary to s 99 of the Constitution.

103. The Mirror Taxes Act applies the taxing laws of each State as federal law in Commonwealth Places in that State. As a result, at the relevant time, the duty rate on agreements for leases varied from 0.35% in New South Wales, Queensland and Western Australia to 0.6% in Victoria and 1% in South Australia and Tasmania. The rate of duty on what is claimed to be a premium in this agreement for lease varies from 0.35% in New South Wales to 1.2% in Victoria and 4.85% in Western Australia. Thus the total duty that is estimated to be payable on the present agreement for lease in Victoria varies significantly from what would be payable if Tullamarine Airport was in another State. The amount of the disputed assessment in Victoria is $762,583.20, whereas in New South Wales it would be $254,265.20. In Queensland, South Australia, Western Australia and Tasmania it would exceed $2m, the highest being in Western Australia where the estimated duty would be $2,699,320.20.

104. Having regard to these different rules for assessing duties in each State, I have the greatest difficulty in understanding how the Commissioner of State Revenue for Victoria and the Commonwealth can maintain that the Mirror Taxes Act does not breach s 99 of the Constitution which declares:

``The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof.''

105. I think the Mirror Taxes Act involves multiple breaches of s 99 of the Constitution. It is a federal law that applies different rules for different parts of Australia. I do not think that it has ever been doubted that a federal law concerned with trade, commerce or revenue that gives an advantage or immunity or imposes a prejudice or burden in one State as the result of applying different rules based on State boundaries or localities gives preference to one or more States or parts thereof over other States or parts thereof.

106. Section 99 prohibits a federal law concerning trade, commerce or revenue from treating States or parts of States differently when such treatment prefers a State or one of its parts over other States or their parts. By reason of the circumstances that exist in various States or parts of States, a uniform federal law may produce effects which vary from State to State. The jurisprudence of this Court shows that such effects do not constitute preferences within the meaning of s 99 of the Constitution. However, the vice of the Mirror Taxes Act is not so much its effect - although that also breaches s 99 because it enables some States to raise more revenue than other States - but in laying down different rules for different States. Surely, no one would seek to say that s 99 would not be breached by a federal income tax law that imposed a tax of 20% on income in New South Wales, 10% in Queensland and 40% in Western Australia or a federal law that imposed different rates of excise duty on the same classes of goods depending on the State of manufacture. Yet, mutatis mutandis , that is what the Mirror Taxes Act does in applying stamp duty legislation. As a federal law, it applies different rates of tax to transactions and agreements in different States. For the purpose of s 99 of the Constitution, it is irrelevant that the object of the Mirror Taxes Act is to ensure that State residents pay the same stamp duties whether the subject of the duty concerns a Commonwealth place or some other place in the State. Consequently, it breaches s 99 of the Constitution.

The material facts

107. In March 2001, the Commissioner of State Revenue for Victoria assessed an instrument of lease that is identified in the case stated as ``the Development Agreement'' as liable to stamp duty in the sum of $762,583.20. The Commissioner assessed the Agreement as liable to stamp duty on the basis that it was an agreement for lease within s 77 of the Stamps Act and the Third Schedule of that Act. The Development Agreement relates to ``the development of a Four Star Hotel'' at Tullamarine Airport on land that at all material times has been vested in the Commonwealth and leased by it to Australia Pacific Airports (Melbourne) Pty Ltd for a period of 50 years. It is a term and condition of the lease that the land be used as an airport. However, other uses not inconsistent with use as an airport may be

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permitted on the land but any sub-lease has to be consistent with regulations made under the Airports Act 1996 (Cth).

108. Permanent Trustee Australia Limited (``Permanent'') and Australia Pacific Airports (Melbourne) Pty Ltd (``Australia Pacific Airports'') are two of the three parties to the Development Agreement. Subject to certain conditions, Australia Pacific Airports and Permanent agreed to enter into a lease on the completion of the development with the intention ``that Permanent will procure [ Hilton International Co] to conduct a Four Star Hotel'' on the land.

109. Permanent objected to the Commissioner's assessment. After the objection was set down for hearing before the Supreme Court of Victoria, this Court ordered that that part of the objection concerning the validity of the Mirror Taxes Act be removed into this Court under s 40 of the Judiciary Act .

110. Subsequently, a Justice of the Court reserved four questions for consideration by the Full Court of this Court. In the view I take of the case, it is only necessary to set out Question 1, part of Question 2 and Question 3. Those questions are as follows:

``QUESTION 1:

Is the Stamps Act 1958 (Vic), or the Assessment, invalid to the extent that the Act or the Assessment purports to charge the Development Agreement with stamp duty as a lease or an agreement for lease, on the basis that:

• (a) the Stamps Act is invalid to the extent that it purports to charge a lease or an agreement for lease of land or tenements situated within a Commonwealth place with stamp duty, on the basis that section 52(i) of the Constitution gives to the Commonwealth exclusive legislative power with respect to Commonwealth Places; and
• (b) any agreement to lease contained in the Development Agreement is an agreement for lease of land or tenements situated within a Commonwealth place.

QUESTION 2:

If Yes to 1, is the Commonwealth Places (Mirror Taxes) Act 1998 (Cth) invalid or ineffective to permit the assessment of duty under the Assessment:

• ...
• (d) on the ground that, by a law of trade, commerce or revenue, it gives a preference to one State or any part thereof over another State or any part thereof, contrary to section 99 of the Constitution?
• ...

QUESTION 3:

• (a) If Yes to 1, is the notice given by the Treasurer of the State of Victoria on or about 23 January 2001, referred to in paragraph 9 above, ineffective to make any duty payable under the Commonwealth Places (Mirror Taxes) Act payable to the Crown in right of the Commonwealth?
• (b) If Yes to (a), is the Commonwealth Places (Mirror Taxes) Act ineffective to impose and permit an assessment of duty in respect of the Development Agreement?''

Question 1

111. Given the decision of this Court in Allders International Pty Ltd v Commr of State Revenue (Vic) , ^[118] 96 ATC 5135 ; (1996) 186 CLR 630. Question 1 must be answered, ``Yes''. In Allders , the Court held that the Stamps Act could not validly make a lease of shop premises on land at Tullamarine Airport liable to ad valorem duty under the Act. That was because Tullamarine was a Commonwealth place, and s 52(i) of the Constitution precludes a State law from operating in respect of a Commonwealth place.

112. The decision in Allders applied the seminal decision of this Court in Worthing v Rowell and Muston Pty Ltd . ^[119] (1970) 123 CLR 89. In Worthing , the Court held that s 52(i) of the Constitution precluded State laws from operating in Commonwealth Places. Section 52(i) of the Constitution provides:

``The Parliament shall, subject to this Constitution, have exclusive power to make laws for the peace, order, and good government of the Commonwealth with respect to:

• (i) the seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes...''

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113. After the decision in Worthing , the Parliament of the Commonwealth enacted the Commonwealth Places (Application of Laws) Act 1970 (Cth) which applied State laws to Commonwealth Places. However, that Act contained an important exception in s 4(5) with the result that that Act does not apply a State law if it would have the effect of imposing ``any tax''. Because the Stamps Act imposed a tax, it was not a law applied by the Commonwealth Places (Application of Laws) Act . Accordingly, s 52 of the Constitution precluded the Stamps Act from operating in a Commonwealth place such as Tullamarine Airport.

114. In every relevant respect, the assessment made in the present case cannot be distinguished from the assessment made in Allders . Because that is so, the decision in Allders is indistinguishable and Question 1 must be answered, ``Yes''.

Question 2

115. In response to the decision in Allders , the Parliament of the Commonwealth enacted the Mirror Taxes Act for the purpose of putting the States in the same position in respect of State taxing laws as they would have been if s 52 was not in the Constitution. This has had the practical result that State taxing laws operating in relation to Commonwealth Places differ from State to State. Those who drafted the Mirror Taxes Act obviously took the view that s 99 of the Constitution had no application to laws enacted under s 52 of the Constitution. In this they were mistaken. Probably they relied on the statement of four members of this Court in Morgan v The Commonwealth ^[120] (1947) 74 CLR 421 at 455. who said that s 99 only applied to laws made under s 51 of the Constitution. As a result, the Mirror Taxes Act is invalid because it breaches s 99 of the Constitution. Although a majority of this Court hold that s 99 does not invalidate the legislation, the Explanatory Memorandum suggests that those who were responsible for advising the Commonwealth were under no illusion that the Mirror Taxes Act was valid if s 99 applied to laws made under s 52. ^[121] House of Representatives, Explanatory Memorandum to the Commonwealth Places (Mirror Tax) Bill 1998 (and cognate Bills) at 7.

The Mirror Taxes Act

116. Section 4 of the Mirror Taxes Act declares:

``This Act has effect only to the extent that it is an exercise of the legislative powers of the Parliament under the following provisions of the Constitution:

• (a) paragraph 52(i);
• (b) section 73;
• (c) paragraph 77(iii);
• (d) paragraph 51(xxxix), so far as it relates to paragraph 52(i), section 73 or paragraph 77(iii).''

117. The key provision of the Mirror Taxes Act is s 6(2) which enacts:

``Subject to this Act, the excluded provisions of a State taxing law, as in force at any time before or after the commencement of this Act, apply, or are taken to have applied, according to their tenor, at that time, in relation to each place in the State that is or was a Commonwealth place at that time.''

118. Section 6(1) defines ``excluded provisions'' of a State taxing law to mean:

``provisions of that law to the extent that they are excluded by paragraph 52(i) of the Constitution.''

119. And s 3 defines ``excluded by paragraph 52(i) of the Constitution'' to mean:

``inapplicable by reason only of the operation of section 52 of the Constitution in relation to Commonwealth Places.''

120. Section 3 also defines a ``State taxing law''. It declares:

``State taxing law , in relation to a State, means the following, as in force from time to time:

• (a) a scheduled law of the State;
• (b) a State law that imposes tax and is prescribed by the regulations for the purposes of this paragraph;
• (c) any other State law of the State, to the extent that it is relevant to the operation of a law covered by paragraph (a) or (b).''

121. The Stamps Act is a scheduled law of the State and is therefore within the definition of ``State taxing law''.

122. Section 6(4) of the Mirror Taxes Act declares that an ``applied law has effect subject to any modifications under section 8''. That section, inter alia, authorises the Treasurer of a State to prescribe modifications of the applied laws of the State ``other than modifications for the purpose of overcoming a difficulty that

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arises from the requirements of the Constitution'' (s 8(2)). In January 2001, the Treasurer of Victoria declared modifications to the Stamps Act with effect from 6 October 1997 or the date of the commencement of the provision to which the modification related. Among the sections modified were ss 17, 17A and 24. Section 17A of the Stamps Act makes duties payable under that Act a debt due to the Crown payable to the Commissioner of State Revenue. In ss 17, 17A and 24, the term ``Her Majesty'' is omitted and the phrase ``the Crown in right of the Commonwealth'' is inserted in its place. As a result, the duty charged under s 17 of the Stamps Act now becomes under s 17A a debt due to the Crown in right of the Commonwealth but payable to the Commissioner of State Revenue. However, s 23 of the Mirror Taxes Act declares:

``(1) Notwithstanding anything in the terms of an applied law, there must be credited to the Consolidated Revenue Fund all amounts received under an applied law that are required by section 81 of the Constitution to be so credited.

(2) The Commonwealth is liable to pay to a State amounts equal to amounts that are credited to the Consolidated Revenue Fund as mentioned in subsection (1) in relation to an applied law of the State.

(3) Amounts payable by the Commonwealth under subsection (2) are to be reduced by amounts paid by the Commonwealth under any applied law of the State concerned. For this purpose, amounts paid by the Commonwealth does not include amounts paid by way of tax.

(4) The Consolidated Revenue Fund is appropriated for the purpose of:

• (a) payments under this section; and
• (b) payments by the Commonwealth under an applied law.

(5) The Financial Management and Accountability Act 1997 does not apply to amounts received under an applied law.''

123. By force of s 6(6) of the Mirror Taxes Act, the excluded provisions of the State taxing law do not have effect in a State unless the Governor-General and the Governor of the State have arranged under s 9 for ``the exercise or performance of a power, duty or function... by an authority of the State under the applied laws of the State'' (s 9(1)). In December 2000, the Governor-General of the Commonwealth of Australia and the Governor of the State of Victoria made such an arrangement. Section 7 of the Commonwealth Places (Mirror Taxes Administration) Act 1999 (Vic) gives a State authority ``any power, duty or function that the [ Mirror Taxes] Act authorises or requires the authority to exercise or perform''.

124. Although the Mirror Taxes Act relies on four legislative powers for its validity, s 52 of the Constitution is its chief support. No doubt the reason that the Commonwealth did not seek to rely on the taxing power or other provisions of s 51 is that it would have to show that the Mirror Taxes Act complied with ss 55 and 99 of the Constitution. For my purposes, it is unnecessary to decide whether s 55 applies to laws made under s 52 and, if so, whether the Mirror Taxes Act infringes the requirements of s 55 of the Constitution. That is because, in my opinion, the Mirror Taxes Act is invalid because it breaches s 99 of the Constitution.

Section 99

125. The exclusive power of the Parliament to make laws with respect to ``all places acquired by the Commonwealth for public purposes'' is conferred ``subject to this Constitution''. Section 99 of the Constitution must therefore apply to s 52. That is to say, it must apply to laws made with respect to places acquired by the Commonwealth for public purposes. Nothing in s 99 or in s 52(i) itself indicates that s 99 is not intended to apply or is incapable of applying to places acquired by the Commonwealth. The majority of places acquired for such purposes are in the various States of the Commonwealth. Because that is so, the federal nature of the Constitution as well as the language of ss 52 and 99 show that s 99 applies to places acquired by the Commonwealth for public purposes. If that were not so, the Parliament of the Commonwealth could enact laws that gave State residents in such Commonwealth Places preferences over residents in other States. The purpose of s 99 is to protect each State or any part of it from being disadvantaged by another State or part of a State receiving a preference in trade, commerce or revenue. Regions of States, including Commonwealth Places in those States, are parts of States. If a law of the Commonwealth concerning trade, commerce or revenue prefers one region in the State to

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another State or one of its regions, s 99 is breached. There is no federal reason for confining the protection given by s 99 to those regions that are defined on State lines. In Elliott v The Commonwealth , ^[122] (1936) 54 CLR 657 at 691. Evatt J said that ``it is preposterous to suggest that, before the prohibitions of s 51(ii) or s 99 of the Constitution can apply, the name of one or more States must be branded upon the face of the offending legislation''.

The case law

126. Despite the apparent simplicity of s 99, it has given rise to significant differences of judicial opinion. After almost a century of judicial interpretation, its meaning cannot be regarded as settled. Nevertheless, decisions and reasons of this Court directly support, and in other cases are consistent with, the view that the Mirror Taxes Act is invalid because it imposes different rates of stamp duty based on State locality.

127. The first reported case dealing with s 99 is Colonial Sugar Refining Company v Irving , ^[123] [ 1906] AC 360. a decision of the Judicial Committee of the Privy Council. In Irving, the Judicial Committee examined a law of the Parliament that allowed an exemption from excise duty for goods on which customs or excise duty had been paid under State legislation before the imposition of Commonwealth duties. The Judicial Committee held that the law did not breach s 99 of the Constitution. Lord Davey, who delivered the advice of the Judicial Committee, said: ^[124] [ 1906] AC 360 at 367.

``The rule laid down by the Act is a general one, applicable to all the States alike, and the fact that it operates unequally in the several States arises not from anything done by the Parliament, but from the inequality of the duties imposed by the States themselves.''

128. Irving laid down the rule, which has not been doubted since, that, as long as the legal rule contained in the law of the federal Parliament is uniformly applicable to persons irrespective of their State, it will not offend s 99 simply because the effect of applying the rule may differ from State to State, including by operation of State law.

129. The first reported case in this Court dealing with a law giving preference to a State or part of a State within the meaning of s 99 is R v Barger . ^[125] (1908) 6 CLR 41. In Barger , a majority of the Court held that the Excise Tariff 1906 (No 16) was invalid on a number of grounds. One of them was that the Act offended s 99 of the Constitution. A proviso to a section of the Excise Tariff exempted from taxation goods that were manufactured by any person in any part of the Commonwealth under certain conditions relating to the remuneration of labour. Those conditions could be fixed by industrial tribunals or a resolution of both federal Houses of Parliament and could vary according to local circumstances, agreements and judicial opinion. The majority found that the Parliament intended, and indeed prescribed, ``that discrimination according to locality might be made''. <sup>[126]</sup> (1908) 6 CLR 41 at 80. They held that Parliament could not, by delegation to the tribunals or the Houses of Parliament, do that which it was forbidden to do directly. Consequently, the Act transgressed s 51(ii) and s 99 of the Constitution. In so far as Barger was an authority that the Constitution contains implied prohibitions against federal laws operating in the areas ``reserved'' for the States, it has long been overruled. However, in so far as it dealt with s 99, the reasoning of the majority Justices is in my opinion correct. Griffith CJ, Barton and O'Connor JJ said: ^[127] (1908) 6 CLR 41 at 78.

``The words `States or parts of States' must be read as synonymous with `parts of the Commonwealth' or `different localities within the Commonwealth.' The existing limits of the States are arbitrary, and it would be a strange thing if the Commonwealth Parliament could discriminate in a taxing Act between one locality and another, merely because such localities were not coterminous with States or with parts of the same State.''

However, Isaacs J, in his dissenting judgment, rejected the notion that s 99 is infringed because a law of the Parliament ``discriminates between localities as parts of the Commonwealth''. ^[128] (1908) 6 CLR 41 at 109. As will appear, over the years this dissenting view has had the support of a majority of Justices of this Court and the Judicial Committee. ^[129] Cameron v DFC of T (1923) 32 CLR 68 ; WR Moran Pty Ltd v DFC of T (1940) 5 ATD 416 at 422-423; (1940) 63 CLR 338 at 348; [ 1940] AC 838 at 856-857 . But it is a view that was strenuously opposed by Dixon J and Evatt J. ^[130] Elliott v The Commonwealth (1936) 54 CLR 657 at 682, 686 . In FC of T v Clyne , ^[131] (1958) 11 ATD 428 ; (1957-1958) 100 CLR 246. four Justices in addition to Dixon CJ also seem to have disagreed with it. It is not necessary to resolve this question in this appeal. Even if the approach of Isaacs J is adopted, the Mirror Taxes Act would infringe s 99 by applying the different State taxing laws to Commonwealth Places in different States,

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solely by reference to their location in those States.

130. Isaacs J went on to say: ^[132] (1908) 6 CLR 41 at 108.

``If for instance, discrimination were made in favour of one part of a State against the rest of it, the discrimination, though nominally between parts of the same State, might easily and materially benefit an adjoining State. This, I say, may very possibly and reasonably be included within the prohibition. I have not to determine that finally now; but, in any case, the pervading idea is the preference of locality merely because it is locality, and because it is a particular part of a particular State. It does not include a differentiation based on other considerations, which are dependent on natural or business circumstances, and may operate with more or less force in different localities...''

131. In Barger , Higgins J, who also dissented, said: ^[133] (1908) 6 CLR 41 at 130-131.

``Now, there is certainly nothing on the face of this Act which makes any such discrimination. There is not one rate of Excise for Queensland and another for West Australia. Nor is there one set of conditions of exemption for Tasmania and another for Victoria . Each manufacturer is to be treated on his own merits; and all the four bases for exemption are applicable to all manufacturers, wherever they are found in Australia. It is not prescribed in the Constitution that taxation must be uniform - uniform in any of its numerous senses.''

(emphasis in original)

132. The next reported case is Cameron v DFC of T ^[134] (1923) 32 CLR 68. where the Court (Knox CJ, Isaacs, Higgins, Rich and Starke JJ) unanimously held that regs 46 and 46A and Table III of the Income Tax Regulations 1917 discriminated between States and parts of States. In Cameron , the relevant regulation provided that, in determining the profits made on the sale of livestock for income tax purposes, different values should be placed on stock of the same class in different States. In New South Wales, for example, horses were valued at £ 8 and in Victoria at £ 15 a head. ^[135] (1923) 32 CLR 68 at 71. In Cameron , Knox CJ applied ^[136] (1923) 32 CLR 68 at 72. a dictum of Isaacs J in Barger where Isaacs J had said: ^[137] (1908) 6 CLR 41 at 110.

``Discrimination between localities in the widest sense means that, because one man or his property is in one locality, then, regardless of any other circumstance, he or it is to be treated differently from the man or similar property in another locality.''

133. In Cameron , Isaacs J himself said: ^[138] (1923) 32 CLR 68 at 76-77.

``Stock in Queensland and stock in New South Wales are, by reason solely of their State situation, `treated differently', by the mere fact that different standards are applied to them respectively. It does not matter whether those legal standards are arbitrary or measured, whether dictated by a desire to benefit or to injure, the simple fact is they are `different', and those different legal standards being applied simply because the subject of taxation finds itself in one State or the other there arises the discrimination by law between States which is forbidden by the Constitution.''

134. Higgins J said: ^[139] (1923) 32 CLR 68 at 78.

``Two pastoralists may in fact make £ 1,000 net profit - one in New South Wales, the other in Queensland; and yet under these Rules they may be treated as making unequal profit, and be liable to pay unequal income tax. The only reason for this result is that one is in Queensland, the other in New South Wales. This, in my opinion, is clearly a discrimination between States as to taxation.''

135. Higgins J had said in Barger : ^[140] (1908) 6 CLR 41 at 131.

``Parliament does not discriminate between States when it applies the same rule to all the States... Parliament may not discriminate between States; but the facts may, and often must...''

(emphasis omitted)

136. Starke J said: ^[141] (1923) 32 CLR 68 at 79.

``A law with respect to taxation applicable to all States and parts of States alike does not infringe the Constitution merely because it operates unequally in the different States - not from anything done by the law- making authority, but on account of the inequality of conditions obtaining in the respective States. On the contrary, a law with respect to taxation which takes as its line of demarcation the boundaries of States or parts of States necessarily discriminates between them, and gives a preference to one State or part thereof over another State or part thereof...''

137. His Honour went on to say: ^[142] (1923) 32 CLR 68 at 80.

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``And if the law is not applicable to all States alike , then it operates unequally in the States and discriminates as a law between them.''

(emphasis added)

138. So far as discrimination between States or parts of States goes, the ratio decidendi of Cameron fully covers this case. Having regard to the obvious preference given to Commonwealth Places that are subjected to a lower rate of stamp duty by reference to the State in which they are located, I do not see how the Mirror Taxes Act can be held to be valid without overruling Cameron .

139. On the issue of what constitutes a preference, in James v The Commonwealth , ^[143] (1928) 41 CLR 442. this Court unanimously held that regulations made under the Dried Fruits Act 1928 (Cth) infringed s 99 of the Constitution. The Act prohibited the delivery of dried fruits for carriage from State to State unless a licence had been issued under the Act permitting such carriage. Prescribed authorities were the only persons authorised by the Act to issue these licences. However, under the regulations no authority was prescribed for Queensland or Tasmania. The Court held that, because of these omissions, the regulations gave a preference to one State over another. Knox CJ and Powers J said: ^[144] (1928) 41 CLR 442 at 457.

``The mere fact that the dried fruits are held in the State of Queensland or the State of Tasmania prevents the owner from obtaining a licence which he might have obtained had his fruit been held in one of the other four States. In our opinion this affords a clear instance of discrimination between States or of a preference to one State over another State.''

140. Starke J applied what he had said in Cameron , to which I have referred, and said that until Queensland and Tasmania could issue licences ``the Regulations discriminate as a law in the issue of licences between the States of Victoria, New South Wales, South Australia and Western Australia on the one hand, and the States of Queensland and Tasmania on the other hand, and do not as a law treat all the States alike''. ^[145] (1928) 41 CLR 442 at 464-465.

141. A different result was reached in Crowe v The Commonwealth ^[146] (1935) 54 CLR 69. where the Court unanimously held that a law of the Parliament gave no preference when it provided that a Dried Fruits Control Board should consist of two representatives elected by growers in Victoria and one representative elected by growers in New South Wales, South Australia and Western Australia. Rich J said: ^[147] (1935) 54 CLR 69 at 83.

``In this case it appears to me that the constitution of the board does not give to the growers of the States who are entitled to elect members any tangible advantage of a commercial character or any legal means of securing it.''

Starke J said: ^[148] (1935) 54 CLR 69 at 86.

``The preferences prohibited by s 99 are advantages or impediments in connection with commercial dealings based upon distinctions of locality. The selection of the members of a board gives no preference to any State or part of a State in connection with such dealings, and confers no authority upon the board to grant any such preference.''

142. Dixon J said: ^[149] (1935) 54 CLR 69 at 91.

``There can be no doubt that in the election of members of the board a distinction is drawn based on State boundaries. If the distinction amounts to or involves preference within the meaning of s 99, the provision cannot be supported.''

His Honour went on to say: ^[150] (1935) 54 CLR 69 at 92.

``In relation to trade and commerce, as distinguished from revenue, the preference referred to by s 99 is evidently some tangible advantage obtainable in the course of trading or commercial operations, or, at least, some material or sensible benefit of a commercial or trading character. It may consist in a greater tendency to promote trade, in furnishing some incentive or facility, or in relieving from some burden or impediment. In the present instance nothing is given but a voice in the choice of the personnel of a board which itself is governed by the law, a law which does not and could not enable it to give preference to a State or part of a State as such. The seeming inequality of the voice given arises, no doubt, from the fact that dried fruit is grown more largely in Victoria than in the other States and that little or none is grown in Queensland and Tasmania.''

Evatt and McTiernan JJ said: ^[151] (1935) 54 CLR 69 at 96-97.

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``Section 4 neither puts any State in possession of trading advantages over another State nor gives it the power to obtain any such advantages.''

143. The next reported case is Elliott v The Commonwealth ^[152] (1936) 54 CLR 657. which contains the most extensive discussion of the meaning of s 99. It is also authority for the proposition - which I think is wrong - that a law of the Parliament which gives an advantage to a particular city in a State over cities in other States does not breach s 99. Cities are surely parts of States for the purpose of s 99. Morever, in many - maybe most - cases, giving an advantage to a city in a State is to give an advantage to the State itself, as Dixon J thought in Elliott .

144. In Elliott , a majority of the Court (Latham CJ, Rich, Starke and McTiernan JJ, Dixon and Evatt JJ dissenting) held that s 99 of the Constitution was not infringed by a system for licensing seamen which was applicable only at ports in the Commonwealth specified by the Minister as ports in respect of which licensing officers should be appointed. Unlicensed persons were not allowed to engage or be engaged as seamen at ports so specified. The Minister specified ports in four States but not in the other two States.

145. Latham CJ held that the licensing regime did not either ``give preference'' nor operate on ``States or parts of States'' as such. As to the first of these issues, Latham CJ said: ^[153] (1936) 54 CLR 657 at 668-669.

``In the case now before the Court there is no doubt that the law which applies in, for example, Sydney, does not apply in Fremantle. The result of the legislation is to make a difference in the law applicable in these two places. It does not, in my opinion, follow from this fact that the law gives preference to one place over the other place. In the case of a law or regulation of trade and commerce the difference between the two places under consideration (whether they be States or parts of States) must be such as to amount to a trading or commercial preference which is definitely given to one State or part thereof over another State or part thereof.''

Latham CJ went on to say that it was entirely a question of opinion which could not be settled upon legal grounds ``whether all or some only of the seamen of Sydney or the seamen of Fremantle or the employers of seamen in Sydney or the employers of seamen in Fremantle receive an advantage by reason of the legislation in question''. <sup>[154]</sup> (1936) 54 CLR 657 at 670. His Honour said he was unable to hold that there was ``any tangible commercial advantage within the meaning of any of the expressions which I have quoted from Crowe v The Commonwealth ^[155] (1935) 54 CLR 69. ''. Latham CJ also said: ^[156] (1936) 54 CLR 657 at 671.

``With all respect to those who differ from me, I cannot see that the imposition of a licensing system in employment in one State or a part of a State can fairly be described as something `given' to that State or part of a State.''

146. On the second issue, Latham CJ examined the statements of various Justices in Barger , Cameron and James . His Honour adopted the view of Isaacs J in Barger that had been accepted by a majority in Cameron . Latham CJ said: ^[157] (1936) 54 CLR 657 at 675.

``These authorities make it, in my opinion, proper to hold that the discrimen which s 99 forbids the Commonwealth to select is not merely locality as such, but localities which for the purpose of applying the discrimen are taken as States or parts of States. In the regulations in question the application of the regulations depends upon the selection of ports as ports and not of States or parts of States as such. In my opinion, s 99 does not prohibit such differentiation.''

His Honour went on to say: ^[158] (1936) 54 CLR 657 at 675.

``It may be that a preference to Sydney and Newcastle in relation to trade and commerce may have a large effect in giving preference to the State of New South Wales as a whole, but I think that a law giving such preference must nevertheless be construed, according to its terms, as giving a preference to Sydney and Newcastle and not to the whole State.''

147. Justices Rich and Starke took a similar view. Rich J said: ^[159] (1936) 54 CLR 657 at 678.

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``I find it quite easy to say that there is no preference given to a State or a part of a State over another State or part of a State by these regulations or by the action of the Minister under them. There is no discrimination against individuals as denizens of States. The licensing systems may involve a disability in the case of seamen. But the imposition is conditioned upon what is considered the necessity of legislative or executive action in particular localities. No account of State boundaries is taken. No benefit or advantage is given to a State or part of a State to the detriment of another State or part of it.''

Starke J said: ^[160] (1936) 54 CLR 657 at 680.

``Special legislation may be required for some localities and special rules for various occupations. Such discriminations are often desirable, but they are by no means preferences prohibited by s 99. A licensing system applied to some ports in Australia and not to others is but an illustration of this kind of discrimination. In some ports the conditions may be such as to require some local regulation of labour whilst in others regulation may be wholly unnecessary. But this is not a preference of one locality over another, or of one State or part of a State over another...''

148. As I said earlier, Justices Dixon and Evatt dissented and took a view contrary to that of Isaacs J in Barger . Dixon J said: ^[161] (1936) 54 CLR 657 at 682.

``I think that in specifying the chief ports in each of four States a course was taken which must be considered as affecting each of those States as a whole. We are concerned only with sea-borne trade of each State with other States and countries. For the most part that trade is done from the ports prescribed, namely, from the ports of the capital cities of each of these four States, and, in the case of New South Wales, the port second in importance, Newcastle.''

149. Dixon J thought that the difficulty of the case arose from the words in s 99 ``give preference... over''. His Honour said: ^[162] (1936) 54 CLR 657 at 683.

``I repeat that the preference may consist in a greater tendency to promote trade, in furnishing some incentive or facility, or in relieving from some burden or impediment. But it is, perhaps, desirable to notice that the phrase is not `give a preference' but `give preference'. The difference may be slight, but the latter expression seems to bring out the element of priority of treatment, while the former has more suggestion of definite and actual advantage in the treatment. What is forbidden by s 99, is, in a matter of advantage to trade or commerce, the putting of one State or part of a State before another State or part thereof. But the section does not call upon the Court to estimate the total amount of economic or commercial advantage which does or will actually ensue from the law or regulation of trade or commerce. It is enough that the law or regulation is designed to produce some tangible advantage obtainable in the course of trading or commercial operations, or some material or sensible benefit of a commercial or trading character. To give preference to one State over another State discrimination or differentiation is necessary. Without discrimination between States or parts of respective States, it is difficult to see how one could be given preference over the other. But I agree that it does not follow that every discrimination between States is a preference of one over the other. The expressions are not identical in meaning. More nearly, if not exactly, the same in meaning, is the expression `discrimination against'.''

Dixon J went on to hold that the regulations were invalid. He said: ^[163] (1936) 54 CLR 657 at 684.

`` [ Section] 99 does establish a standard of validity which is concerned with the character of the law or regulation of commerce and not with the particular trading or economic consequences which may or may not in fact ensue from it at a particular place and time.''

150. Evatt J rejected the view of Isaacs J in Barger's Case , saying: ^[164] (1936) 54 CLR 657 at 686.

``But s 99 says nothing about the motive animating the Commonwealth law; and it forbids preferences not merely to a State but to a part of it. Further, it would seem impossible to assert that a law preferring Sydney to Melbourne does not give preference to part of one State over part of another. However `considered', Sydney and Melbourne are parts of States and s 99 prohibits a commercial law which gives preference to a part of one State over any part of another State. The `considered as' theory, which I analyse later, is extremely difficult to understand or apply.''

(emphasis in original)

Evatt J deduced six propositions from the text of s 99 and the case law upon it. His Honour said: ^[165] (1936) 54 CLR 657 at 692-693.

``The logical result of the above discussion of principle and authority is that, in relation to s 99, the following propositions should be accepted: -

• (I) [ Section] 99 forbids four types of preferential legislation, viz, ( a ) giving preference to a State over another State; ( b ) giving preference to a State over any part of another State; ( c ) giving

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  ATC 5022

  preference to any part of a State over another State; ( d ) giving preference to any part of a State over any part of another State.
• (II) [ Section] 99 forbids laws or regulations which accord preferential treatment to persons or things as a consequence of local situation in any part of the six States, regardless of all other circumstances ^[166] R v Barger (1908) 6 CLR 41 at 78-81 per Griffith CJ, Barton and O'Connor JJ. .
• (III) The section is not infringed if the preferential treatment is a consequence of a number of circumstances, including the circumstance of locality ^[167] R v Barger (1908) 6 CLR 41 at 107-111 per Isaacs J, 130-133 per Higgins J; Cameron's Case (1923) 32 CLR 68; James v The Commonweath (1928) 41 CLR 442 . .
• (IV) The section operates objectively in the sense that the purpose or motive of the Legislature or Executive in giving preference by a law of commerce or revenue is not a relevant question, eg, it is irrelevant that the Legislature or Executive desires to facilitate or encourage inter- State or overseas trade, or to increase revenue ^[168] Cameron's Case (1923) 32 CLR 68 at 74. .
• (V) [ Section] 99 may apply although the legislation or regulations contain no mention of a State eo nomine , eg the section may be infringed if preference is given to part of a State (eg that part of New South Wales which is represented by the port of Sydney) over another State (eg Western Australia) or any part of another State (eg Fremantle or Brisbane).
• (VI) To prove infringement of s 99 it is not sufficient to show discrimination based on mere locality; it must also be shown that, as a consequence of the discrimination, tangible benefits, advantages, facilities or immunities are given to persons or corporations ^[169] Crowe v The Commonwealth (1935) 54 CLR 69 at 92 per Dixon J. .''

Evatt J also concluded that the regulations were invalid: ^[170] (1936) 54 CLR 657 at 700-701.

``Whatever the motive may have been for operating the licensing system in this manner, the differential treatment is a clear preference contrary to s 99 of the Constitution, because it gives a tangible advantage and furnishes an incentive or facility limited solely by reference to the locality of the place of engagement. It cannot be denied that one result of such regulations may be to facilitate trade and commerce, inter-State and overseas. But s 99 does not address itself either to the object, or even to the results flowing from, the forbidden regulations of trade, commerce and revenue. It is quite probable that an effective method of promoting inter- State and overseas trade would be to give preference to the States or parts thereof which are most suited to the development of such trade. But s 99 intervenes to forbid such method and to declare that four different means of regulating trade, commerce and revenue shall be absolutely prohibited to the Commonwealth Parliament and Executive, whether they promote or hinder trade and commerce, and whether they promote or hinder the revenue of the Commonwealth.''

151. Notwithstanding the views of Dixon and Evatt JJ, in WR Moran Pty Ltd v DFC of T ^[171] (1940) 5 ATD 416 at 422-423; (1940) 63 CLR 338 at 348; [ 1940] AC 838 at 856-857. the Judicial Committee of the Privy Council approved the following statement of Isaacs J in R v Barger : ^[172] (1908) 6 CLR 41 at 108.

`` [ T]he pervading idea is the preference of locality merely because it is locality, and because it is a particular part of a particular State. It does not include a differentiation based on other considerations, which are dependent on natural or business circumstances, and may operate with more or less force in different localities; and there is nothing, in my opinion, to prevent the Australian Parliament, charged with the welfare of the people as a whole, from doing what every State in the Commonwealth has power to do for its own citizens, that is to say, from basing its taxation measures on considerations of fairness and justice, always observing the constitutional injunction not to prefer States or parts of States.''

In Moran , the Privy Council held that two laws of the Parliament that were part of a complex scheme for assistance to wheat growers did not offend s 99. However, neither the facts nor the legislation considered in that case throw any light on the present matter.

152. The meaning of s 99 again came before this Court in FC of T v Clyne . ^[173] (1958) 11 ATD 428 ; (1957-1958) 100 CLR 246. Dixon CJ, adhering to his previous view, said that in Elliott ``the majority of the Court gave to the words `one State or any part thereof over another State or any part thereof' a restricted meaning''. ^[174] (1958) 11 ATD 428 at 434; (1957-1958) 100 CLR 246 at 265-266. His Honour said: ^[175] (1958) 11 ATD 428 at 434; (1957-1958) 100 CLR 246 at 266.

``... If legislation is attacked as violating that portion of s 99 it would appear that

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according to that interpretation the legislation will be good unless in some way the parts of the State are selected in virtue of their character as parts of a State. This view seems to accord with that expressed by Isaacs J, in relation to s 51(ii) in R v Barger ; The Commonwealth v McKay , a view, however, contrary to that taken by the majority of the Court in that case.. For myself I have the greatest difficulty in grasping what exactly is the requirement that the selection of an area shall be as part of the State. No doubt it may be expressed in various ways, eg `in virtue of its character as part of the State' or ` qua part of the State' or `because it is part of a State' or `as such'. However it may be expressed I find myself unable to appreciate the distinction between the selection by an enactment of an area in fact forming part of a State for the bestowal of a preference upon the area and the selection of the same area for the same purpose `as part of the State'.''

153. His Honour went on to say that it was unnecessary to discuss the matter further because assuming that there was a preference given by the impugned section it did not invalidate the provisions of the legislation that applied to the defendant. McTiernan J agreed with the Chief Justice but affirmed the decision of the majority in Elliott's Case . ^[176] (1958) 11 ATD 428 at 435; (1957-1958) 100 CLR 246 at 268. Williams, Kitto and Taylor JJ said in individual judgments that they agreed with the Chief Justice's reasons. ^[177] (1958) 11 ATD 428 at 435, 437-438; (1957-1958) 100 CLR 246 at 268, 272. Webb J examined the decisions on s 99 at some length but said that in view of what the Privy Council had said in Moran ``it would be useless to carry the discussion further''. ^[178] (1958) 11 ATD 428 at 437; (1957-1958) 100 CLR 246 at 272. He said that the impugned section was not invalid as constituting a preference contrary to s 99.

154. The meaning and application of s 99 came indirectly before the Court in Conroy v Carter ^[179] (1968) 118 CLR 90. where a law of the Parliament imposed a levy on the owners of hens kept for commercial purposes. The law provided that, where the Commonwealth had entered into an arrangement with a State, the State could collect the levy and deduct it from money owed by the State to the owner. A relevant arrangement had been made between the Commonwealth and Victoria, but the evidence did not show whether like arrangements had been made by the Commonwealth with authorities in all States. Barwick CJ, McTiernan and Menzies JJ held that the relevant section discriminated contrary to the proviso in s 51(ii) of the Constitution. Kitto, Taylor and Windeyer JJ held to the contrary. Menzies J, with whose judgment Barwick CJ and McTiernan J agreed, said: ^[180] (1968) 118 CLR 90 at 103.

``What the more elaborate provisions of s 51(ii) forbid is a taxation law which would impose a taxation burden upon a person because of some connexion with a State or a part of a State, which would not fall upon other persons not having that connexion. Furthermore, in determining whether a law imposes such a discriminatory burden, it is to the law itself that attention must be paid, not to the laws of any State or States.''

His Honour said that the relevant section exposed: ^[181] (1968) 118 CLR 90 at 103-104.

``a person liable to pay an amount of levy in respect of hens kept in a State with which the Commonwealth has made an arrangement pursuant to s 5 of the Act, to a particular disadvantage at law to which a person in respect of hens kept in a State which has made no arrangement with the Commonwealth under s 5, is not exposed, namely the retention of the levy out of moneys owing by a State Egg Board to the taxpayer.''

His Honour said he thought that this differentiation amounted to unlawful discrimination. On the other hand, Taylor J, with whose judgment Kitto and Windeyer JJ agreed, said that the provision did not involve discrimination between the States because it merely provided ``for the manner in which a liability for the levy may be discharged''. ^[182] (1968) 118 CLR 90 at 102.

155. The purpose of this extended discussion of the cases and reasoning of Justices of this Court concerning s 99 is to show that, apart possibly from a dictum by Starke J in Elliott , ^[183] (1936) 54 CLR 657 at 680. there is nothing in the case law that supports the claim that the Mirror Taxes Act does not contravene s 99. To the contrary, the decisions in Cameron and James show that the Act does breach s 99. And, properly understood, I do not think that Starke J intended any more than that licensing systems do not necessarily constitute preference. Despite the considerable division of judicial opinion in the cases to which I have referred, one proposition appears uncontentious: a law of the Parliament that imposes different rates of taxes by reference to State boundaries breaches s 99 of the Constitution. That view is supported by all

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Justices of the Court including Starke J. My own view is that the construction that Dixon and Evatt JJ have placed on s 99 is the correct construction of that constitutional provision. But even if the view of Isaacs J as expressed in Barger is accepted, the Mirror Taxes Act breaches s 99 of the Constitution. It is a law of the Parliament that imposes differential rates of stamp duty in respect of instruments by reference to their locality in a particular State. In New South Wales, Queensland and Western Australia the lease duty rate is 0.35%. In Victoria it is 0.6% and in South Australia and Tasmania 1%. The rate of duty on any premium also varies from 0.35% in New South Wales and 1.2% in Victoria to 4.85% in Western Australia. Thus by operation of laws of the respective States the lessee of land in New South Wales, Queensland and Western Australia pays less duty than a person who leases land in Victoria, South Australia, Tasmania or in the case of duty on premiums, Western Australia. By the Mirror Taxes Act, the federal Parliament maintains this distinction in respect of Commonwealth Places. The lessee of land in a Commonwealth place in New South Wales pays less duty than the lessee of such a place in Victoria. The federal legislation gives a clear preference to residents of New South Wales who must pay stamp duty on instruments concerned with Commonwealth Places over those who reside in other States and must pay stamp duty on such instruments. This is done by a law of the Parliament by reference to the State in which the land is located.

156. Questions of preference under s 99 of the Constitution are not synonymous with the legal notion of discrimination although no doubt preference involves discrimination in one sense in treating one State or part differently from another State or part. ^[184] Elliott v The Commonwealth (1936) 54 CLR 657 at 668 per Latham CJ, 683 per Dixon J. The correct meaning and application of s 99 is not informed by the jurisprudence that has developed in respect of discrimination in equal opportunity law in the last 50 years. In s 99, ``give preference'' means no more than give advantage or priority. It is not concerned with the objective or motive of the giver. The differential treatment of States or parts of States cannot be justified by saying that the difference is the product of a distinction which is appropriate and adapted to the attainment of some proper objective of the Parliament of the Commonwealth. The mischief to which s 99 is directed is not the fairness or unfairness of the effect of any preference given in a particular case. The section is contravened by the mere giving of a preference referable to the State or part of a State to which the law applies. Under the Mirror Taxes Act, two identical transactions, occurring in Commonwealth Places, may be assessed for different amounts of stamp duty, solely by reference to the State in which the Commonwealth place is located. The relevant ``equals'' to compare for the purpose of identifying a preference in this case are those transacting in Commonwealth Places, not those transacting in each State. That is because s 99 is concerned with preferences given by the federal Parliament . The federal law cannot prefer one Commonwealth place over another by reference to the State in which it is located. And yet that is what the Mirror Taxes Act purports to do. Consistently with s 99, the Parliament of the Commonwealth cannot levy an income tax of 65 cents in the dollar on all residents of Australia except those residing in the Kimberley or Cape York regions although the law has the worthy objective of encouraging development in remote areas of Australia. What s 99 says is that the Commonwealth ``shall not... give preference''. It must not prefer one State or part of a State over another State or any part thereof.

157. Those who made the Constitution were well aware of the distinction between preference and discrimination, as they made plain in enacting s 102. They were also well aware that, in some cases, preference or discrimination might operate unduly, unreasonably or unjustly. That is why in s 102 the Parliament was empowered to make laws forbidding any preference or discrimination as to railways that was ``undue and unreasonable, or unjust to any State; due regard being had to the financial responsibilities incurred by any State in connexion with the construction and maintenance of its railways''. They made no such qualification in s 99.

158. Nor is the application of s 99 determined by reference to whether any benefit or advantage enjoyed in relation to a Commonwealth place is not shared by the remainder of the State in which it is located. According to four Justices of this Court in Morgan v The Commonwealth , s 99 ``does not purport to deal with preferences within a single State''. ^[185] (1947) 74 CLR 421 at 452. The issue is not whether the Mirror

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Taxes Act produces the same revenue outcome as would be the case if the Commonwealth place was not a Commonwealth place. It is whether a law of the Parliament lays down a rule for Victoria that is different from the rule that it lays down in the same Act for other States and that rule benefits Victoria or the other States. If it does, it is invalid whatever its objectives or motives. Section 99 is concerned with the character of the law or regulation raising revenue and not with the objects of that law. ^[186] cf Elliott v The Commonwealth (1936) 54 CLR 657 at 693 (proposition IV) per Evatt J. As Isaacs J pointed out in Cameron : ^[187] (1923) 32 CLR 68 at 76-77.

• ``It does not matter whether those legal standards are arbitrary or measured, whether dictated by a desire to benefit or to injure , the simple fact is they are `different', and those different legal standards being applied simply because the subject of taxation finds itself in one State or the other there arises the discrimination by law between States which is forbidden by the Constitution.'' (emphasis added)

Regardless of the legislative objective, if, from a federal perspective, the application of those different legal standards results in a preference, as it does in this case, the Constitution forbids the federal law.

159. In my opinion Question 2(d) should be answered, ``Yes''. Questions 3(a) and 3(b) should then also be answered, ``Yes''. It is unnecessary to answer the other questions in Question 2.

Orders

160. Questions 1, 2(d), 3(a) and 3(b) should be answered: ``Yes''.

161. Questions 2(a), 2(b), 2(c) and 2(e) should be answered: ``Unnecessary to answer''.

162. Question 4 should be answered: ``The Commissioner of State Revenue of the State of Victoria''.

163. The matter should be remitted to a single Justice for any remaining issues to be dealt with accordingly.