Department of Trade, Labour and Transport v South Seas International Ltd [1991] CKHC 1; CR 823.1990 (20 September 1991)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CRIMINAL DIVISION)
CR NO. 823/90

IN THE MATTER
of the Business Development Fund Act 1984

BETWEEN

DEPARTMENT OF TRADE, LABOUR AND TRANSPORT
Informant

AND

SOUTH SEAS INTERNATIONAL LIMITED
Defendant

Counsel: D. Sceats for Informant
M.C. Mitchell for Defendant

Hearing: 22 August 1991
Judgment: 20 September 1991

JUDGMENT OF ROPER, C.J.

The Defendant has been charged, pursuant to ss 6 and 18 of the Business Development Fund Act 1984, "that between the 1^st January and the 4^th September 1990 it did engage in retail store business without a licence issued by the Secretary of Trade, Labour and Transport, pursuant to the Business Development Fund Act 1984."

I now have before me an application by way of Case Stated to determine questions of law before trial.

The Case, so far as is relevant, reads:

4. The validity of the Act is challenged by the defendant on the following grounds-

(i) If the Act is a taxing statute, it is ineffective because:

(a) A tax can only be imposed by Parliament;

(b) There is no charging provision in the Act;

(c) Taxation can only be imposed by clear and unambiguous language;

(d) The Act confers upon the Minister an unlimited power to make the impost, and raise or lower it without reference to Parliament;

(e) The tax is arbitrary, and geographically discriminatory;

(f) Article 43 of the Constitution was not complied with.

(ii) If the Act is not a taxing statute, it is ultra vires the Constitution, in particular Articles 40 and 64(1)(c).

5. The questions for the Court to determine therefore are: Is the Act a taxing statute? If the answer is yes, then:

(a) Is the Act effective?

If the answer is no, then:

(a) Is the Act ultra vires Articles 40 and 64 of the Constitution?

Before dealing with Counsel’s submissions it will be helpful to consider the scheme of the Act.

It is referred to as an Act "to provide for the licensing and the promotion of business" although it gives no clue as to how, or in what regard fulfilment of the latter aim is to be met. Section 3 provides that the Act shall apply to Rarotonga and Aitutaki but the Minister may extend its jurisdiction to other islands by notice in the Gazette. Sections 5 and 6 read:

"5. Designation of business - The Minister may, by notification in the Gazette, designate any business as being one in respect of which a licence is required by the provisions of this Act.

6. General provisions - (1) No person shall engage in any business designated under the provisions of section 5 without a licence issued by a licensing authority in respect of each place in which such business is carried on or, in the case of a hawker or other person carrying on business from or at no fixed address, in respect of such businesses.

(2) Any person who acts in contravention of the provisions of subsection (1) shall be guilty of an offence."

The licence is an annual one.

Sections 7 to 15 relate to applications for licences, their grant, custody, display and transfer and ss 16 and 17 read:

"16. Revenue from licence fees - All fees collected under the provisions of this Act shall be paid to and form part of the Public Account of the Government of the Cook Islands.

17. Regulations - The Minister may make regulations-

(a) in respect of any business, prescribing the fees to be charged, the basis upon which they are charged and the manner in which they shall be paid under the provisions of this Act. Provided that the Minister in regulations made by him under this paragraph may differentiate in respect of such fees between different types of classes of business;

(b) generally for carrying the provisions of this Act into effect including the production of any records relating to a business."

Section 18 provides for penalties for offences. The maximum fine is $1,000 but the Court may also order the offender to pay the unpaid licence fees.

Regulations have been duly made under s17 of the Act and they came into force on the 1^st January 1986. They provide for specified fees to be paid depending on gross income and the principal activity of the business. For example, hotels pay an annual fee of $50 per room and businesses not otherwise specified fees varying from $50 to $750 depending on gross income.

The first question for determination by the Court is - "Is the Act a taxing statute?" That poses no problem. Mr Sceats quite properly accepted that the Act is a taxing statute and that the licence fee is a tax. It certainly has all the ear-marks of a tax in that it amounts to a compulsory exaction of money by the State for public purposes.

I turn now to the question of whether the Act is effective as a taxing statute.

Mr Mitchell’s first submission was that taxation may only be imposed by Parliament, whereas in the present case the fees were not fixed by the Act itself, that task being delegated to the Minister. It does not require authority to support the proposition that no pecuniary burden can be imposed on the public whether it be called a tax or a fee except on clear legal or statutory authority but that is a far cry from saying that Parliament itself must fix the quantum of the tax or fee. Mr Mitchell relied on the decision of the House of Lords in Attorney-General v Wilts United Dairies [1922] All ER Ext 845 where the Food Controller in the Ministry of Food levied what was held to be a tax on milk purchased in certain named areas. At p.847 Lord Buckmaster said:

"The question before this House is not whether or not that was a wise and necessary step to take having regard to the difficulties by which the whole question of the milk supply was surrounded; the only question which we have to decide is whether there was any power conferred upon the Food Controller to do what he did. The Attorney-General has urged your Lordships to consider the extreme difficulty of the situation in which this country found itself owing to the war, and the importance of all the officials who had charge of our vital supplies being enabled to act under the powers conferred upon them without fear of technical and vexatious objections being taken to the powers which they used. All that may be readily accepted, but it cannot possibly give to any official a right to act outside the law; nor can the law be unreasonably strained in order to legalise that which it might be perfectly reasonable should be done if, in fact, it was unauthorized."

And further at p. 848:

"There are only two sources from which those powers can possibly be derived. One is the Act creating the Ministry, and the other the Regulations under the Defence of the Realm Act. Neither of these either directly or, in my opinion, by inference, enabled the Food Controller to levy the payment of any sums of money from any of His Majesty’s subjects. The statute of 1916 confines his duties to regulating the supply and consumption of food and taking the necessary steps for maintaining a proper supply of food. The powers so given are no doubt very extensive and very drastic, but they do not include the power of levying upon any man payment of money which the Food Controller must receive as part of a national fund and can only apply under proper sanction for national purposes."

That case does not support Mr Mitchell’s submission that only Parliament can prescribe the amount to be charged and the mode of payment. Mr Sceats referred to two cases where the imposition of a tax was challenged but not the circumstance that the tax had in each case been fixed by delegated authority of Parliament. They were Air Caledonie International and others v Commonwealth of Australia [1988] HCA 61; (1988) 82 ALR 385 and Congreve v Home Office [1976] 1 All ER 697. In the latter case, which involved a challenge to television licence fees, which the Court regarded as a tax, the Wireless Telegraphy Act 1949 provided in s2:

"On the issue of renewal of a wireless telegraphy licence, and, where the regulations under this section so provide, at such times thereafter as may be prescribed by the regulations, there shall be paid to the Postmaster General by the person to whom the licence is issued such sums as may be prescribed by regulations to be made by the Postmaster General with the consent of the Treasury, and different provision may be made in relation to different licences, according to the nature, terms, provisions, limitations and duration thereof ..."

The relevant regulation reads:

"(1) On the issue of a broadcast receiving licence of the type and description specified in Schedule I the licensee shall pay an issue fee of the amount specified in relation to that type and description of the licence in Schedule I, whatever may be the duration of the licence ..."

I therefore reject Mr Mitchell’s first submission.

He next argued that the Act contains no "charging" provision and that s17 by use of the phrase "may make regulations" was permissive only. I prefer Mr Sceats’ reasoning. He submitted that the real issue before the Court was whether there was statutory authority to levy a fee and that while it may not be mandatory for fees to be charged, if they are charged then s17 provides the relevant statutory authority. Apart from that, there is good reason to conclude that this is one of the cases where "may" is equivalent to "shall". In R v Bishop of Oxford [1879] UKLawRpKQB 18; (1879) 4 QBD 245 at 258, Cockburn, CJ said:

"So long ago as the year 1693 it was decided in the case of R v Barlow (1693) 2 Salk 609 that when a statute authorizes the doing of a thing for the sake of justice or the public good, the word ‘may’ means ‘shall’, and that rule has been acted upon to the present time..."

Although there may be differences of opinion on the matter, an increase in the country’s finances could be said to be in the public good. Furthermore, until the fees were prescribed the Act was a brutum fulmen.

Mr Mitchell next submitted that the imposition of the charge was not in clear and unambiguous language. In my opinion, the intention is clear enough and Mr Mitchell did not indicate where the ambiguity lies. Neither do I accept his argument that the Act is ineffective because it gives the Minister a wide discretion in fixing the fees and the basis on which they will be charged. As Mr Sceats said, an improper exercise by the Minister of his discretion would leave his actions open to judicial review, but it is not suggested here that the Minister improperly exercised a lawfully given discretion.

Mr Mitchell’s final point was that the Act was discriminatory in that it applied only to Rarotonga and Aitutaki and was therefore ineffective. The only authority he could point to in support of this ground was Cameron v The Deputy Federal Commissioner of Taxation for Tasmania [1923] HCA 4; [1923] 32 CLR 68. The decision in that case was based entirely on a specific provision of the Australian Constitution which empowered the Commonwealth Parliament to make laws with respect to taxation "but so as not to discriminate between States or parts of States". No broader rule or common law principle against discrimination was propounded in the case. There is no similar Constitutional or other statutory provision in the Cook Islands.

The ground referred to in the Case concerning non-compliance with Article 43 of the Constitution was abandoned as that Article was, in fact, complied with, as Mr Mitchell accepted.

I therefore answer the questions posed in the Case as follows:

Is the Act a taxing statute? - Yes

Is the Act effective? - Yes.

ROPER CJ