Thistle Investment Pty Limited v British American Tobacco Australia Limited [2003] ACTSC 76 (26 September 2003)

Last Updated: 14 October 2003

THISTLE INVESTMENTS PTY LIMITED v BRITISH AMERICAN TOBACCO AUSTRALIA LIMITED and BRITISH AMERICAN TOBACCO AUSTRALIA SERVICES LIMITED

[2003] ACTSC 76 (26 September 2003)

PROCEDURE - summary judgment - recovery of revenue amount - limitation period - exercise of federal jurisdiction.

Business Franchise Licences (Tobacco and Petroleum Products) Act 1984 (ACT)

Business Franchise Licences (Tobacco) Act 1987 (NSW)

Limitation Act 1985 (ACT), s. 21A

Recovery of Imposts Act 1963 (NSW), s. 2

Supreme Court Rules (ACT), O.17

Crown Suits Act 1947 (WA)

Limitation Act 1935 (WA), s. 47A

Judiciary Act 190 (Cth), s. 79

Ha v New South Wales [1997] HCA 34; (1997) 189 CLR 465

Capital Duplicators Pty Limited v Australian Capital Territory [1992] HCA 51; (1992) 177 CLR 248

Commissioner of State Revenue (Victoria) v Royal Insurance Australia Limited [1994] HCA 61; (1994) 182 CLR 51

Callinan v West Australian Newspapers Limited [1988] WAR 212

Doundoulakis v Antony Sdrinis and Co [1989] VR 781

Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62

Bayne v Riggall [1908] HCA 39; (1908) 6 CLR 382

Roxborough v Rothmans of Pall Mall Australia Limited [2001] HCA 68; (2001) 208 CLR 516

Cauvin v Philip Morris Limited [2002] NSWSC 736

British American Tobacco Australia Ltd v Western Australia [2003] HCA 47

Kruger v The Commonwealth [1997] HCA 27; (1996) 190 CLR 1

Commonwealth v Mewett [1997] HCA 29; (1997) 191 CLR 471

No SC 253 of 2003

Coram: Master Harper

Supreme Court of the ACT

Date: 26 September 2003

IN THE SUPREME COURT OF THE )

) No SC 793 of 2001

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: THISTLE INVESTMENTS

Plaintiff

AND: BRITISH AMERICAN TOBACCO AUSTRALIA LIMITED

First Defendant

AND BRITISH AMERICAN TOBACCO AUSTRALIA SERVICES LIMITED

Second Defendant

ORDER

Coram: Master Harper

Date: 26 September 2003

Place: Canberra

THE COURT ORDERS THAT:

1. The application by the defendants be dismissed.1. The defendants make application for summary judgment in this action on the basis that they have a defence which must succeed.

2. The action was commenced by originating application on 16 May 2003, seeking recovery of $15,319.02, an amount paid by the plaintiff to the defendant companies by way of what are described in the statement of claim as periodic payments of tobacco licence tax. The statement of claim asserts that the plaintiff made the payments because of the Business Franchise Licences (Tobacco and Petroleum Products) Ordinance 1984 of the Territory, which on 5 August 1997, was declared invalid by the High Court. Whilst not spelt out in detail, the plaintiff's case as I understand it is that the defendants were, by reason of the High Court decision (Ha v New South Wales [1997] HCA 34; (1997) 189 CLR 465) released from an obligation imposed by the Ordinance to pay a tax or fee equal to the claimed amount to the Territory. The claim for a refund of the amount is grounded upon unjust enrichment, mistake and failure of consideration.

3. The defendants have entered an appearance jointly but have delivered separate defences. They each concede that at the relevant time they were licenced wholesalers of tobacco products, and that the plaintiff carried on business as a retailer of tobacco products. It appears that part of the claimed amount was paid to one defendant and part to the other, the total being equal to the amount claimed by the plaintiff.

4. The defendants do not concede that the effect of Ha was to invalidate the Ordinance. They say that the High Court held certain provisions of an equivalent NSW Act, the Business Franchise Licences (Tobacco) Act 1987, invalid as imposing a duty or duties of excise within the meaning of section 90 of the Constitution: and this is clearly correct. Ha was an action arising under the NSW Act, not the Territory Ordinance. The governments of the other states and territories took the view that in practical terms the effect of the decision was to invalidate the Australia-wide system then in operation, of imposition and collection of revenue based on wholesale and retail tobacco turnover. The revenue flow was restored in practical terms within five or six weeks by the passing of Commonwealth legislation, following which the Commonwealth has effectively collected the revenue and distributed it to the States and Territories.

5. Both defendants plead that the plaintiff's claim is an action for recovery of a revenue amount and is statute-barred pursuant to Section 21A of the Limitation Act 1985. It is solely this limitation point upon which the defendants rely in bringing this application. Their contention is that, the limitation point having being taken, the plaintiff cannot succeed.

6. Section 21A was inserted in the Limitation Act in November 1993, in response to an earlier High Court decision, Capital Duplicators Pty Limited v Australian Capital Territory [1992] HCA 51; (1992) 177 CLR 248, in which it was held that the Territory, following self-government, had no power to impose duties of excise. The ACT Government of the day was concerned that the High Court might in the future determine that a number of existing ACT taxes fell into the excise category. With a view to protecting the revenue, the Government proposed to the Assembly a reduction in the limitation period for an action for recovery of a revenue amount to six months. In his second reading speech, the then Attorney-General, Mr Connolly, (now Connolly J of this Court) drew attention to the fact that in the normal course of business, the impact of such taxes would have been passed on to the consumer, so that refund by government would result in a windfall gain to the taxpayer.

7. The new section was in the following terms.

21A Tax, licence fee or duty or penalty tax

(1) An action for recovery of a revenue amount is not maintainable unless proceedings in relation to the amount are instituted before the expiration of 6 months after the date the amount was paid.

(2) Subsection 1 does not apply to an action for recovery of an amount that would have been recoverable as an overpayment if the purported tax, licence fee or duty had been valid.

(3) Subsection 1 is part of the substantive law of the Territory.

(4) In subsection 1;

revenue amount means an amount of money paid voluntarily or under compulsion as -

(a) a tax, licence fee or duty imposed, or purportedly imposed, under an Act; or

(b) penalty tax in relation to such a tax, licence fee or duty;

being an amount that would have been legally due if the provision under which it was paid had been valid.

8. The Limitation Act does not make any provision for postponement of this bar. If the present action is an action for recovery of a revenue amount as defined, the defence must succeed. The payments sought to be recovered were made, on the plaintiff's case, no later that 5 August 1997. Action was not commenced until 16 May 2003, nearly six years later. The issue to be determined on this application is whether it is incontrovertible that the amount sued for is a revenue amount as defined in Section 21A.

9. The defendant relies upon the fact that the plaintiff in its statement of claim has characterised the payments made to the defendant as tobacco licence tax. The plaintiff submits that an amount can be characterised as a tax, licence fee or duty only if it was paid to a levying authority, that is to say a government instrumentality; the defendant companies were not in that category, nor were they acting as agents for such an authority. There was nothing, it is submitted, in the Ordinance which required a retailer to pay an amount, whether by way of a tax, licence fee, duty or otherwise, to the wholesaler. The retailer had the option of paying an amount equal to the tax or licence fee which would otherwise have been payable to the Territory, to the wholesaler. The retailer's liability to the Territory would have been reduced by the amount of any such payment.

10. It was further submitted on behalf of the plaintiff that at the time of each payment to the defendants for the purchase of tobacco products, there was, with respect to those products, no licence fee payable, imposed or purportedly imposed: and certainly no licence fee paid. The reason for this was that the amount of the licence fee was calculated by reference to the value of tobacco products sold during a prior month. This meant that at the time of each payment by the plaintiff to the defendants for tobacco products purchased, there was no direct relationship between the amount of that payment and any licence fee which might at that time have been imposed, paid or payable: nor was there any direct relationship between the tobacco products purchased and any such licence fee. A licence fee was payable only if the wholesaler wished to renew its licence for the ensuing month. That licence fee would be based on sales during the month two months prior to the month for which the licence fee was payable. If, for example, the wholesaler did not wish to renew its licence for the month, the Ordinance did not require the wholesaler to pay, by way of licence fee or otherwise, any amounts collected from retailers during prior months. Thus the wholesaler might never be required to pay to the Territory an amount equal to the so-called tobacco licence fee amounts which had been invoiced by the wholesaler to the retailer, and paid by the retailers to the wholesaler. For this reason, any such payments could not properly be characterised as revenue amounts so as to be caught by the six-month limitation period imposed by section 21A.

11. Consideration of this argument requires an examination of the provisions of the Business Franchise (Tobacco and Petroleum Products) Act, which I shall continue to refer to as the Ordinance as it is described in the amended statement of claim. The Ordinance makes it an offence to carry on tobacco wholesaling or retailing without a licence. A wholesale tobacco merchant's licence remains in force for a calendar month (s. 35) and may be renewed on payment of a fee (s. 35A). The fee comprises a fixed amount plus a percentage of the value of tobacco sold by the wholesaler during the `relevant period' (s. 28(1)(a)), defined as the calendar month two months before the month for which renewal is sought (s. 3A(1)). Presumably there were few tobacco wholesalers in the market and new entrants or companies abandoning the field were extremely rare. The turnover figure for the `relevant period' would have been readily ascertainable, whereas the renewal application was required to be made before the figures for the following month were available.

12. A retail tobacconist was also obliged to hold a licence; its term was annual, expiring on 31 August (s. 35(1)). The `relevant period' for a retailer was the last preceding period of twelve months ending on 31 August, and the licence fee was a fixed amount plus a percentage of the value of tobacco purchased by the retailer during the relevant period (s. 28(1)(c)). The tobacco purchased was not to include tobacco purchased from the holder of a tobacco licence (s. 28(1A)). Thus assuming that a tobacco retailer sold only tobacco purchased from a wholesaler, the retailer's annual licence fee would be limited to the fixed amount and would contain no ad valorem element.

13. The only evidence before me was an affidavit of Alexander James Murray, a director of the plaintiff company, sworn on 21 August 2003, in which he deposed to having received from the defendants in July 2002 sheets described as Tobacco Licence Fee Claim Forms, which he completed and returned. I infer from the copies of the claim forms annexed to Mr Murray's affidavit that it was the practice of the defendants to send the plaintiff weekly invoices for tobacco products supplied, which identified an amount, described as the TLF (presumably Tobacco Licence Fee) amount, and the total of these amounts for each calendar month was equivalent to the ad valorem component of the licence fee which would become payable by the defendants in respect of the next calendar month but one. The invoices thus made it clear to the retailer how much he was being charged for the tobacco, and how much represented, in simplified terms, the passing on of a government licence fee, tax or duty. The identification of the latter amounts in each invoice has facilitated the plaintiff's task of calculating for the purposes of these proceedings the total amount by which it says the defendants have been unjustly enriched.

14. Reliance was placed by the plaintiff on a decision in which a similar Victorian limitation period was held not to apply: Commissioner of State Revenue (Victoria) v Royal Insurance Australia Limited [1994] HCA 61; (1994) 182 CLR 51. In that case, an insurance company had made substantial overpayments of stamp duty in ignorance of legislative amendments. The Commissioner argued that an action for recovery of the overpayments was barred, proceedings having being commenced outside the twelve-month limitation period which applied to actions to recover from the Crown or State of Victoria amounts paid under the authority or purported authority of any Act. The overpayments were held not to have been paid under the authority or purported authority of the relevant legislation. The decision is distinguishable from the present case: the respondent was unaware of a number of amendments and had continued to pay duty as though the amendments had not been made. Because of the amendments, the duty had not been payable under the authority, or even the purported authority, of the Act. In the present case, there was no amendment to the legislation. The High Court had declared invalid an equivalent, though not identical, piece of interstate legislation. Wholesalers and retailers of tobacco products until 5 August 1997 when judgment was delivered in Ha made any licence fee payments to the Territory under the authority or purported authority of the Ordinance.

15. Counsel for the plaintiff also submitted that s. 21A can apply only to actions for recovery of amounts paid to, and brought against, bodies politic or statutory revenue authorities. It is firstly put that an amount can be characterised as a tax, licence fee or duty only if it is an amount paid or payable to such a public entity. This is to be contrasted with a similar NSW provision, s. 2 of the Recovery of Imposts Act 1963, which provides that no proceedings shall be brought to recover from the Crown or the Government or the State of New South Wales or any Minister of the Crown, or from any corporation, officer or person, or out of any fund to whom or out of which it was paid... (certain payments after the expiration of a limitation period). I am not persuaded that the different wording of the NSW legislation assists me in construing s. 21A of the Territory Limitation Act.

16. It is also submitted on behalf of the plaintiff that some assistance is to be had from a consideration of the second reading speech on this question. Counsel for the defendant argues that the second reading speech should be looked at only to resolve an ambiguity in the legislation. I think that it is also capable of assisting on the present question. However, I do not find the speech of much assistance. It is clear that Attorney-General was predominantly motivated to protect the revenue of the Territory. There is nothing in the speech to suggest that the Attorney directed his mind to the present issue, that is, whether the new limitation period might have application to a recovery action against a trading corporation entirely independent of government.

17. The application by the defendants is made pursuant to O. 17 of the Supreme Court Rules, which provides that within ten days after appearance, or later by leave, a defendant may apply to the court for summary judgment. There is undoubtedly power to entertain such an application where the defence is that the limitation period has expired - see, for example, Callinan v West Australian Newspapers Limited [1988] WAR 212: Doundoulakis v Antony Sdrinis and Co [1989] VR 781. However, the power should be exercised only where the issue is clear-cut. Dixon J, who dissented in the result but whose observations on this issue have been cited with approval regularly, made it clear in Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 90 and following, that the summary judgment procedure is not appropriate for the determination of disputed and difficult questions of law, and `should be reserved for exercise as to actions that are absolutely hopeless' (at 191, referring also to Bayne v Riggall [1908] HCA 39; (1908) 6 CLR 382).

18. Were it not for the limitation point, the plaintiff's case would appear arguable (see Roxborough v Rothmans of Pall Mall Australia Limited [2001] HCA 68; (2001) 208 CLR 516) by contrast with a claim by an end consumer which would appear to have poor prospects following the decision of Windeyer J in Cauvin v Philip Morris Limited [2002] NSWSC 736. The action would be hopeless only if the limitation defence must succeed.

19. I am not satisfied that the outcome is inevitable. There seems to me a plausible argument that s. 21A has application only to actions against a public revenue-collecting entity. There is also a respectable argument that the amount sought to be recovered is not a revenue amount as defined in the section. It follows that I am of the view that this is not an appropriate matter for summary judgment.

20. After the application was argued, the High Court delivered its decision in British American Tobacco Australia Ltd v Western Australia [2003] HCA 47. Summary judgment had been entered in the Supreme Court of Western Australia in favour of the defendants, by reason of non-compliance with notice requirements imposed by the Crown Suits Act 1947 of that State. The High Court unanimously ordered that the summary judgment be set aside and that the plaintiff, coincidentally the first defendant in the present action, be permitted to proceed with its action against the State for recovery of licence fees following Ha. The High Court held that the notice requirements did not apply because the Supreme Court of Western Australia was exercising federal jurisdiction in dealing with the claim. The judgments made reference to s. 47A of the Limitation Act 1935 of Western Australia, and left open the question of whether the section might not apply to an action involving the exercise of federal jurisdiction (at paragraphs 23-25 per Gleeson CJ, paragraph 161 per Kirby J).

21. I invited the parties to make further submissions in the light of the Western Australian decision, and both parties took advantage of the opportunity. Counsel for the plaintiff submitted that it was now clear that the decision in Ha had invalidated the ACT Ordinance: each of the judgments accepted that Ha had effectively invalidated the Western Australian tobacco licence fee legislation (per Gleeson CJ at para 1; McHugh, Gummow and Hayne JJ at paras 28-29; Kirby J at paras 89 and 92; Callinan J at para 165). It is unnecessary for me to determine this issue for the purposes of the present application.

22. Counsel for the plaintiffs further submitted that it followed from British American Tobacco v Western Australia that the present claim was one which required this Court to exercise federal rather than local jurisdiction, and that for the same reasons, the Court should not apply the local limitation legislation.

23. Counsel for the defendants analysed the decision in greater detail, and submitted that, by virtue of s. 79 of the Judiciary Act 1903 of the Commonwealth, a statute such as the Limitation Act would bind the Court when exercising federal jurisdiction. Reliance was placed upon Kruger v The Commonwealth [1997] HCA 27; (1996) 190 CLR 1 in which Gaudron J at 140-141 specifically noted that s. 56 of the ACT Limitation Act was capable of being picked up by s. 79 of the Judiciary Act. Counsel submitted that the more general proposition that s. 79 of the Judiciary Act can pick up statutes of limitation is well accepted, drawing attention to Commonwealth v Mewett [1997] HCA 29; (1997) 191 CLR 471 (per Brennan CJ at 492; Dawson J at 506-507, McHugh agreeing; Toohey J at 514; Gaudron J at 521; Gummow and Kirby JJ at 553-556).

24. Counsel for the defendants submitted that there were special reasons in British American Tobacco v Western Australia for the conclusion that specific notice provisions in the local legislation were not picked up by s. 79 of the Judiciary Act: the provisions partially removed Crown immunity, which does not apply in federal jurisdiction in any event; and the State itself was a party.

25. The view I take is that there is an issue as to the applicability in proceedings involving the exercise of federal jurisdiction of s. 21A of the Limitation Act which might properly arise for consideration on the hearing of the action, and which would not necessarily need to be pleaded specifically. This would, I think, fall into the category of a disputed and difficult question of law, for the determination of which it is well accepted that the summary judgment procedure is not appropriate: Dey v Victorian Railways Commissioners (supra). It is thus a further reason why it would be inappropriate to permit the entry of summary judgment.

26. The Notice of Motion sought in the alternative an order under O. 29 r. 4 dismissing the action. It appears to me that this rule applies only where the Statement of Claim discloses no reasonable cause of action. That is not the case here.

27. The Notice of Motion also sought, in the alternative, an order that the limitation issue be heard prior to trial and separately from the rest of the action. This was opposed by counsel for the plaintiff, and it is conceivable that the plaintiff will wish to put some evidence before the Court on the limitation issue. If this is to happen, I am not satisfied that anything will be gained by dividing the hearing.

28. I should add for the sake of completeness that the plaintiff sought to argue that the defendants had invited the claim for a refund of payments claimed in the action, and for that reason were estopped from pleading the limitation defence or in the alternative had waived their right to do so. The plaintiff has not delivered a reply to the defence and thus estoppel and waiver have not been pleaded. In the event, the plaintiff did not pursue this argument.

29. For these reasons, the application by the defendants is dismissed. I will hear the parties as to the costs of the application.

I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Decision herein of Master Harper.

Associate:

Date: 26 September 2003

Counsel for the plaintiff Mr F J Purnell SC and Mr S Hausfeld

Solicitor for the plaintiff Ken Cush and Associates

Counsel for the defendant Mr S A Goodman

Solicitor for the defendant Clayton Utz

Date of hearing 29 August 2003

Date of decision 26 September 2003