HIGH COURT OF AUSTRALIA
5 OCTOBER 2011
French CJ, Gummow J, Hayne J, Crennan J, Kiefel J & Bell J
These appeals from the Full Court of the Federal Court (Keane CJ, Stone and Perram JJ: Australian Capital Territory v Queanbeyan City Council  FCAFC 124
Queanbeyan City Council
By force of s 220 of the Local Government Act 1993
Section 24 of the Local Government Act
The Self-Government Act
In Berwick Ltd v Gray (1976) 133 CLR 603 at 607 Mason J, with whom Barwick CJ, McTiernan J and Murphy J agreed, said of the power conferred upon the Parliament by s 122 that it was wide enough to enable the Parliament "to endow a [t]erritory with separate political, representative and administrative institutions, having control of its own fiscus." Thereafter, s 7
Sections 90 and 122 of the Constitution
In Berwick Ltd v Gray at 607, the power conferred upon the Parliament by s 122
The genesis of the present dispute is a proposition founded in another of these authorities, Capital Duplicators Pty Ltd v Australian Capital Territory (1992) 177 CLR 248. This decision (at 277-279, 289-290) established that, while the endowment upon the Legislative Assembly of the Territory by s 22
The Territory water supply
Something now should be said respecting the Territory water supply. At the time of the Seat of Government Acceptance Act 1909 (Cth) ("the Acceptance Act"), s 4 of the Water Rights Act 1902 (NSW) vested in the Crown the right to the use and flow and to the control of the water in all rivers and lakes flowing through or past or situated within the land of two or more occupiers. The effect of s 6 of the Acceptance Act was that the New South Wales law continued in force in the Territory until other provision was made. Section 13 of the Water Resources Act 1998 (ACT) ("the 1998 Water Act
The primary judge (Buchanan J) said (see Queanbeyan City Council v ACTEW Corporation Ltd  FCA 943; (2009) 178 FCR 510 at 514 ) of the present situation that all of the water abstracted by ACTEW lies or flows in areas under the direct control of the Territory, and continued:
The [Territory] controls two water catchment areas, one in the [Territory], known as the Cotter Catchment, and one in New South Wales. The New South Wales catchment is the Googong Dam Area which was acquired by the Commonwealth in October 1973 for the purpose of the provision of facilities for the storage of water and its supply for use in the [Territory]. The Canberra Water Supply (Googong Dam) Act 1974 (Cth) vested the rights to use and dispose of all waters in the Googong Dam Area in [the Commonwealth] but gave the [Territory] Executive the power to exercise such rights (s 11(2)). Recently the [Territory] has been granted a 150 year lease by the Commonwealth over the Googong Dam Area. Water is also taken from the Murrumbidgee River within the [Territory].
Nothing in this litigation involves the use and flow of the water in Lake Burley Griffin.
Something now should be said of the provenance of ACTEW. The Electricity and Water Ordinance 1988 was made under s 12 of the Seat of Government (Administration) Act 1910 (Cth), and established as a body corporate the Australian Capital Territory Electricity and Water Authority ("the Authority") (s 4). The functions of the Authority included the supply of electricity and water (s 5). The capital of the Authority was payable to the Commonwealth in accordance with s 39(2), and provision was made by s 41 for the payment of dividends to the Commonwealth.
Thereafter, s 4 of the Electricity and Water (Corporatisation) (Consequential Provisions) Act 1995 (ACT) vested the rights and liabilities of the Authority primarily in ACTEW. On 30 May 1995, the Australian Securities Commission issued a certificate of registration of ACTEW under the provisions of Pt 2.2, Div 1 of the Corporations Act 1989 (Cth), providing for its incorporation by registration as a public company limited by shares. Section 6(1)
The 1998 Water Act
ACTEW supplies water not only to residents and businesses within the Territory but also to those within the City of Queanbeyan. ACTEW charges Queanbeyan for that water pursuant to a set of principles agreed between them and based in part upon the premise that ACTEW will recover from Queanbeyan its costs of supplying that water. The costs to ACTEW include imposts placed upon it by Territory legislation.
The water licence fees and the utilities tax
Argument in the litigation has fixed upon two determinations, the first made by the responsible Minister under s 78 of the 1998 Water Act
Commencing on 1 January 2007, the Territory also imposed upon ACTEW a liability to pay a charge imposed by reference to the route length of the infrastructure network for the supply and delivery of water to its customers. Section 8(1)
Buchanan J held ( FCA 943
By its Notices of Contention, ACTEW supports the outcome in the Full Court on an additional ground. This is that the imposts were but an aspect of the internal financial arrangements between ACTEW and the Territory. At the hearing of the appeals, Queanbeyan dealt first with this submission. The submission then was elaborated by ACTEW in its oral submissions, with the support of the Territory. Among the interveners, the principal support for ACTEW came from Queensland.
Financial arrangements internal to the Territory government?
The description by Latham CJ (in Matthews v Chicory Marketing Board (Vict) (1938) 60 CLR 263 at 276) of a tax as a compulsory exaction of money by a public authority for public purposes, enforceable by law, which is not a payment for services rendered, in some respects requires further analysis (Roy Morgan Research Pty Ltd v Commissioner of Taxation  HCA 35
When it is said that a tax is a compulsory exaction by a public authority for public purposes, what is in contemplation is an exercise of the power of the government lawfully to take from the governed, as opposed to the internal financial arrangements of the government. On this view, the imposition of the [water licence fees] upon ACTEW is not a tax because it is a governmental financial arrangement.
In this Court, Queensland submits, with respect particularly to the Territory, that, of its nature, the exaction of money by a polity for receipt into its fisc cannot be a tax if the exaction is imposed upon an entity which, properly characterised, is indistinct from the polity itself. Further, Queensland submits that ACTEW is so closely identified with the Territory that the exaction of money from ACTEW by the water licence fees and the utilities tax cannot be of the character of taxes as understood in the Constitution
The result is said to be that there is no constraint placed by s 90
Nor could Queanbeyan resist the cross-claim against it by ACTEW to recover unpaid amounts in respect of the utilities tax.
For the reasons which follow, these submissions upon what might be called the threshold issue should be accepted. On that ground, the appeals should be dismissed.
In The Federated Amalgamated Government Railway and Tramway Service Association v The New South Wales Railway Traffic Employes Association (1906) 4 CLR 488 at 535, when delivering the judgment of the Court, Griffith CJ said:
[T]he ability of the Colonies to meet their financial obligations in respect of loans was largely dependent upon the successful and profitable employment of the railways. It cannot, in our opinion, be disputed that the State railways were in their inception instrumentalities of the Colonial Governments, and we do not know of any authority for saying that this position was affected by the incorporation of the Railway Commissioners, which, in our opinion, was a matter of purely domestic legislation for the convenience as well of management as of the assertion and enforcement of contractual rights in respect of the commercial transactions involved in the transport of goods and passengers.
More generally, in Deputy Commissioner of Taxation v State Bank (NSW) (1992) 174 CLR 219 at 230-231, the whole Court observed:
Once it is accepted that the Constitution refers to the Commonwealth and the States as organizations or institutions of government in accordance with the conceptions of ordinary life, it must follow that these references are wide enough to denote a corporation which is an agency or instrumentality of the Commonwealth or a State as the case may be. The activities of government are carried on not only through the departments of government but also through corporations which are agencies or instrumentalities of government. Such activities have, since the nineteenth century, included the supply on commercial terms of certain types of goods and services by government owned and controlled instrumentalities with independent corporate personalities.
Further consideration of the submissions which seek to identify ACTEW with the Territory is assisted by regard to what was held in several recent decisions of the Court. They are SGH Ltd v Federal Commissioner of Taxation (2002) 210 CLR 51, NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90, and McNamara v Consumer Trader and Tenancy Tribunal (2005) 221 CLR 646. These authorities indicate that much depends upon the particular issue to which the matter of identity between the polity and an instrumentality is directed, and upon the terms by which their alleged identity is expressed by the legislation in question.
McNamara concerned the position of the Roads and Traffic Authority of New South Wales ("the RTA"). This was constituted as a corporation by a statute which also stated that for the purpose of any other statute it was "a statutory body representing the Crown". The RTA was the landlord of certain leased premises to which the tenant contended there applied the protective provisions of the Landlord and Tenant (Amendment) Act 1948 (NSW); that statute stated that it did not bind "the Crown" in right of New South Wales. It was held that the mere statement that the RTA was a statutory body representing the Crown did not have the effect of attracting rights and privileges otherwise conferred upon the executive branch of government identified as "the Crown" (at 665-666 
An issue in NT Power Generation was whether Gasgo Pty Ltd, in which the Power and Water Authority ("PAWA") (a body corporate constituted under a statute of the Northern Territory) beneficially owned all the shares, was not bound by s 46
SGH concerned the application of that branch of s 114
Gleeson CJ, Gaudron, McHugh and Hayne JJ (at 71 
the absence or otherwise of corporators; an explicit obligation of the corporation to conduct its affairs to the greatest advantage of the relevant polity; the participation of the executive government in the process of formulating policy and making decisions; the right or otherwise of the government to appoint directors, and the source of, and responsibility for their remuneration; the destination of profits; and, the obligation or otherwise of the Auditor-General to audit the accounts of the corporation.
The Territory-owned Corporations Act
What was said in these decisions assists in the characterisation of ACTEW. The Territory-owned Corporations Act
The main objectives of ACTEW are spelled out in s 7.
Shares in ACTEW are held on trust for the Territory (s 13(5))
The Auditor-General must be appointed auditor of ACTEW (s 18(1)).
ACTEW is relieved by s 29
Taken together, these provisions of the Territory-owned Corporations Act
In response, Queanbeyan submitted that these considerations, drawn from the range of provisions in the Territory-owned Corporations Act
The effect of par (a) of s 8(1)
The following points are to be made concerning the significance of s 8.
The result is that the threshold issue should be answered adversely to Queanbeyan and each appeal should be dismissed.
Upon that contingency, Queanbeyan submitted that there should be no order for costs of the appeals in this Court and that the costs orders in the Full Court should be varied. The Full Court ordered that Queanbeyan pay the costs of the proceeding before the primary judge. Queanbeyan does not seek a change to that order. However, the Full Court also ordered that the costs of the two appeals before it, including a cross-appeal by ACTEW in the appeal concerning the utilities tax, be borne by Queanbeyan. Queanbeyan now seeks a variation so that there be no Full Court costs order in that regard. The result would be that Queanbeyan, ACTEW and the Territory bear their costs of the appeals to this Court and of the proceedings in the Full Court.
There was some debate as to whether the issue upon which the respondents have now succeeded had been before the Full Court. An extract from lengthy written submissions by ACTEW to the Full Court was provided to this Court in the course of argument. The extract appears not to be directed squarely to what has become the decisive issue. Further, both Keane CJ (at 554 ) and Perram J (at 590 
In all the circumstances, the position as to costs should be that sought by Queanbeyan.
This appeal turns on what may be called the "water licence fees" and "utilities taxes" which the Government of the Australian Capital Territory requires ACTEW Corporation Limited ("ACTEW") to pay. Are they taxes in the nature of excises? The ensuing discussion concentrates on the water licence fees, but the legal position is the same for the utilities taxes.
The case against Queanbeyan City Council
The primary case made against Queanbeyan City Council ("Queanbeyan"), highlighted particularly by the submissions of the Attorney-General of the State of Queensland, was that a charge imposed by one organ of government upon another organ of government is not a tax and hence not an excise. A tax involves a government taking money from the governed, as distinct from merely being an incident of the internal financial arrangements of government.
The structure of ACTEW is regulated by the Territory-owned Corporations Act 1990
Hence the Attorney-General of the State of Queensland submitted that ACTEW is intimately connected to the Australian Capital Territory and cannot properly be described as independent of it. In similar fashion ACTEW argued that, while the Australian Capital Territory had legal personality distinct from that of ACTEW, the will of the Australian Capital Territory was the will of ACTEW. It argued that if ACTEW acted within the authority created by the provisions of the Act
To the provisions assembled by the Attorney-General of the State of Queensland may be added several others. Sub-sections (1) and (2) of s 11
Central to Queanbeyan's submissions was s 8
A territory-owned corporation or subsidiary is not, only because of its status as a territory-owned corporation or subsidiary –
Accordingly, a territory-owned corporation or subsidiary is not, only because of its status as a territory-owned corporation or subsidiary –
Queanbeyan accepted the analysis of the Act
First, Queanbeyan submitted that since s 8(2)
This did not answer the submission of the Attorney-General of the State of Queensland that the water licence fees were no more than the removal of money from one of the pockets of the Australian Capital Territory to another. It does not establish any independence of will.
Then Queanbeyan in effect submitted that in enacting the Water Resources Act 2007
Even if they are, which is questionable, that means only that qua natural persons, or corporations which are not creatures of the Australian Capital Territory, the fees may be taxes; it does not follow that qua corporations which are its creatures they are taxes.
Queanbeyan then submitted that if a tax was something taken by a government from the governed, s 8(2) of the Act revealed that the Australian Capital Territory Government had decided to place ACTEW in the position of the governed. While other provisions in the Act might reveal an intention on the part of the Australian Capital Territory Government to act through ACTEW in relation to the supply of water, s 8 denied that intention and revealed an intention that ACTEW need not be part of itself, but separate from it and subordinate to it so far as taxation obligations were concerned. Section 8 directed ACTEW to be as subject to taxation obligations as anyone else, and the direction could not be ignored.
Putting aside the perhaps misleading reliance on "intention", this submission exposes a tension between s 8 and the subordinating provisions. If s 8 stood alone, Queanbeyan's argument would have force. But it does not stand alone. Which provisions, then, prevail? The subordinating provisions are not subject to s 8, and s 8 does not compel them to be read down. They are detailed. There is no reason not to give them full force. They support the conclusion that ACTEW has no will independent of the Australian Capital Territory Government's.
Queanbeyan submitted that if the argument of the Attorney-General of the State of Queensland succeeded, governments across Australia would not be able to subject their "corporatised" entities to taxation.
But they would be able to subject them to charges having the same financial effect. Indeed Queanbeyan accepted that this would be "a bit of bookkeeping – compulsory bookkeeping, but that is what it would be." The water licence fees are in truth a matter of bookkeeping internal to the Australian Capital Territory Government.
Queanbeyan argued that there was a legally enforceable obligation on ACTEW, if it took water, to pay licence fees for it. That was said to demonstrate that the will of the Australian Capital Territory was not identical with the will of ACTEW.
This second step does not follow. The existence of a legally enforceable obligation resting on a corporation and the existence of a corresponding right in favour of a government are consistent with distinct legal personality, but do not by themselves demonstrate any independence of will in the corporation. It may be assumed for the sake of considering ACTEW's argument that the Australian Capital Territory Government has created a legal obligation on ACTEW to pay the water licence fees, even though the precise source of the legal obligation was never clearly demonstrated, and if there were no legal obligation, there could be no legal compulsion, and the water licence fees could not be taxes.
A further difficulty in the argument that ACTEW is independent from the Australian Capital Territory Government flows from the assumption that ACTEW had a legal obligation to pay the water licence fees. It was submitted that s 106
Queanbeyan argued that s 8(2)(b) was critical in providing that ACTEW is not, only because of its status as a territory-owned corporation, entitled to any immunity of the Australian Capital Territory.
But the absence of immunity from having to pay the water licence fees says nothing about whether those fees are taxes, and it does not demonstrate any separation of wills between the Australian Capital Territory Government and ACTEW. Section 8(1)(a) provides that a territory-owned corporation "is not, only because of its status as a territory-owned corporation", the Territory. ACTEW has the status of a territory-owned corporation. It has that status not only because of the subordinating provisions of the Act. Indeed it does not have that status because of the subordinating provisions of the Act at all. It has that status for one reason only. That reason is s 6(1): a company specified in Sched 1 is a territory-owned corporation, and ACTEW is a company specified in Sched 1. Hence the effect of s 8(1)(a) is that ACTEW is not the Australian Capital Territory only because of its status as a territory-owned corporation. It is, however, the Australian Capital Territory by reason of the subordinating provisions of the Act.
Section 8(2)(b) provides that ACTEW is "not, only because of its status as a territory-owned corporation", exempt from "a tax, duty, fee or charge payable under an Act." There is no other provision exempting ACTEW from the water licence fees. But the current issue is not whether ACTEW is exempt from a charge: it is whether the charge from which it may or may not be exempt is a tax. Nothing in s 8 immunises or exempts the water licence fees from being characterised as something other than taxes. The subordinating provisions do have the consequence that they are not to be characterised as taxes.
Queanbeyan submitted that acceptance of the Attorney-General of the State of Queensland's argument would lead to evasion of s 55
This is not so. If the Commonwealth chooses to bring into being a creature which it wholly controls, legislation obliging it to pay the Commonwealth money might be outside s 55
A Commonwealth argument
The Attorney-General of the Commonwealth argued that the water licence fees were not taxes because ACTEW was a corporation created under the general law.
That argument has already been put to and rejected by this Court: See SGH Ltd v Federal Commissioner of Taxation (2002) 210 CLR 51.
The criminal liability of ACTEW
Some arguments were put in relation to the potential criminal liability of ACTEW in the event that it took water without a licence. The Australian Capital Territory specifically requested that these arguments not be dealt with in view of the fact that the legislation had changed and in view of the fact that they were not decisive arguments in the present controversy either way. In truth they are not decisive, and for that reason it is not necessary and not desirable to deal with them.
For those reasons the appeals should be dismissed. In all the circumstances, it is just that the costs orders sought by Queanbeyan be made.
 See also General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 131-134.
 However, s 8(2)(b) must be read with the relief given ACTEW by s 29 from the imposts identified in s 29.
 The circumstances are described in the plurality judgment.
 The following authorities were referred to: Cooley, A Treatise on the Law of Taxation, including the Law of Local Assessments, (1881) at 1; Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 550; People v McCreery 34 Cal Rptr 432 at 456 (1868); People v Austin 47 Cal Rptr 353 at 361 (1874); Van Brocklin v Tennessee  USSC 81; 117 US 151 at 166 (1886).
 The argument was put at 62 and rejected at 66-68 - and 75-80 -.
Constitution: s.90, s.122
Australian Capital Territory (Self-Government) Act 1988 (Cth), Pts III, IV, VII.
Territory-owned Corporations Act 1990 (ACT), Pts 2, 3, 4, s.6, s.7, s.8, Sched 4.
P J Hanks QC with J K Kirk and P D Keyzer (instructed by Williams Love & Nicol) for the appellant in both matters.
B W Walker SC with C L Lenehan (instructed by HWL Ebsworth Lawyers) for the first respondent in both matters.
J T Gleeson SC with C C Spruce (instructed by ACT Government Solicitor) for the second respondent in both matters.
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