CRM Gunsports Pty Ltd v Commissioner of the Police Service [2000] QSC 473

SUPREME COURT OF QUEENSLAND CITATION: CRM Gunsports Pty Ltd v Commissioner of the Police Service [2000] QSC 473 PARTIES: CRM GUNSPORTS PTY LTD (ACN 560 623 369) (applicant) v COMMISSIONER OF THE POLICE SERVICE (respondent) FILE NO: SC No 4312 of 1999 DIVISION: Trial Division DELIVERED ON: 15 December 2000 DELIVERED AT: Brisbane HEARING DATE: 4 December 2000 JUDGE: Chesterman J ORDER: Application for judicial review dismissed with costs CATCHWORDS: ADMINISTRATIVE LAW – JUDICIAL REVIEW LEGISLATION – COMMONWEALTH, QUEENSLAND AND AUSTRALIAN CAPITAL TERRITORY – GROUNDS FOR REVIEW OF DECISION – ERROR OF LAW – assessment of compensation for firearm dealer affected by gun laws - necessary for dealers to show business unviable as result of gun laws – guidelines deemed business unviable if certain criteria met – whether “deeming” provision in guidelines exclusively defined unviability of businesses or whether decision - maker could consider other factors Brack v Wills [1977] 1 NSWLR 456, referred Butler Rains Menzies and Co v Devine [1994] 1 Qd R 1, considered Firearm Distributors Pty Ltd v Carson [2000] QSC 159, considered Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149, referred Hunter Douglas Australia Pty Ltd v Perma Blinds (1970) 122 CLR 49, considered R v Criminal Injuries Compensation Board ex parte Lain [1967] 2 QB 286, considered R v Norfolk County Council [1891] 60 LJQB 379, referred R v Wadley ex parte Burton [1976] Qd R 286, referred Shepheard v Broome [1904] AC 342, considered -- 1 of 9 -- 2 Corporations Law, s 589 Weapons Act 1990 (Qld), s 154 Weapons Regulation 1996 (Qld), r 71 COUNSEL: SC Williams QC with AJ Kimmins for the applicant MD Hinson SC for the respondent SOLICITORS: Marino Moller Lawyers for the applicant Queensland Police Service Solicitors for the respondent [1] CHESTERMAN J: In October 1993 the applicant commenced business selling, servicing and repairing firearms and associated goods. As well it conducted an indoor target firing range which was located in its retail premises at 293 Draper Street, Cairns. [2] On 10 May 1996 in response to the many murders committed at Port Arthur in April of that year the Australasian Police Ministers’ Council (“the Council”) resolved that the manufacture, importation, sale, possession or use of automatic or semi-automatic long arm firearms should be banned (“the resolutions”). On 16 July 1996 the Council further resolved that compensation should be payable to firearms dealers who suffered a loss of business by reason of the prohibitions. Amendments made to the Weapons Act 1990 by amending Act number 41 of 1996 inserted Part 7 which included s 154. (In reprint number 3 the Part and section have been respectively renumbered 8 and 179). The section provided for payment of compensation to persons obliged to surrender certain types of firearms by reason of the Council’s resolutions. Subsection 6 provided that compensation for loss of business was payable in accordance with a regulation made for that purpose. [3] Section 71 of the Regulation provides: “Compensation for loss of business (1) This section applies to a person who . . . was a licensed dealer . . . between 10 May 1996 and 30 September 1997. (2) The person is entitled to compensation for loss of business to the extent the loss is attributable to resolutions of the . . . Council . . . (3) The Commissioner (of Police) is to decide the amount of compensation payable to the person under this section. (4) A claim for compensation under the section must be given to the Commissioner no later than 31 March 1998.” I pointed out in an earlier judgment concerned with the same legislation and scheme for compensation (Firearm Distributors Pty Ltd v Carson [2000] QSC 159) that neither the Weapons Act nor Regulation specifies who should pay compensation, nor do they offer any criteria by which the entitlement to compensation or its -- 2 of 9 -- 3 amount may be ascertained. The latter deficiency was overcome by the Council at its meeting on 16 July 1997 approving Guidelines for the assessment of compensation. The first omission has not proved troublesome in practice. By imposing a levy on tax payers the Commonwealth Government raised funds which it made available to the States in order to pay amounts of compensation assessed by the Commissioner of Police in each State. [4] On 31 March 1998 the applicant claimed compensation for loss of business it attributed to the resolutions of the Council made on 10 May 1996. The claim was for $774,149.00 comprising a claim for loss of business in the sum of $50,000.00: a claim to be paid $466,354.00 for stock and $228,490.00 for plant and equipment on the basis that its business had become unviable; accounting costs totalling $15,507.00: valuation costs of $1,498.00 and a redundancy pay-out of $12,300.00. [5] On 1 March 1999 the respondent determined that the applicant was entitled to the sum of $61,994.00 by way of compensation. The loss of business and valuation costs were allowed in full. Nothing was allowed for the claims in respect of stock, plant and equipment and redundancy. A reduced amount was determined in respect of accounting costs. [6] On 12 May 1999 the applicant sought a statutory order for the review of the respondent’s determination on the grounds that the decision was affected by errors of law. The amounts in dispute are now limited to the claims for stock and plant and equipment. The respondent’s decision with respect to the other items of claim is not challenged. [7] The Guidelines provided: “(6) The following principles will apply to assessing Licensed Firearm Dealers for loss of business valuation compensation: (i) . . . (ii) such a . . . Dealer may lodge a claim for compensation under either the Minimum Model . . . or the Valuation Model . . . (iii) under the Minimum Model the amount of compensation . . . will not exceed $50,000.00. (iv) . . . (v) . . . (vi) if a Licensed Firearm Dealer can prove that its business has become unviable as a direct result of the Resolutions and the dealer wishes to leave the industry, the business will be brought out (see paragraphs 31 to 39 of these guidelines) . . . (vii) any Licensed Firearm Dealer wishing to make a claim for loss of business can only do so once under either the Minimum Model or the Valuation Model . . .” By way of interpolation it may be said that the applicant claimed under the Minimum Model and was paid the maximum amount of $50,000.00. The amount -- 3 of 9 -- 4 in dispute relates to the respondent’s refusal to buy out the applicant’s business because he determined that its business had not become unviable as a direct result of the resolutions. [8] Paragraphs 31 to 39 of the Guidelines are found under the heading “Purchase of Unviable Business”. Paragraph 31 repeats the substance of paragraph 6(vi). It states that a licensed firearm dealer who can prove that his business has become unviable as a direct result of the resolutions and who wishes to exit the industry will have its business bought out. The following paragraphs provide: “32 To be eligible for this compensation the following will apply: (i) the . . . Dealer has to prove that his business was viable prior to the Resolutions and that as a direct consequence of the Resolutions (and for no other reasons), the business was not viable at the date of the final claim. The criteria for unviability is (sic) noted in paragraph 33. (ii) . . . (iii) . . . (iv) . . . (v) . . . 33 A business will be deemed to have become unviable as a direct consequence (and for no other reasons) of the Resolutions: (i) where the business has claimed for loss of business compensation under the Minimum Model, the business’s revenue must have decreased by at least 50% as a direct result of the Resolutions. An application for the purchase of an unviable business with a decrease in revenue below 50% as a direct result of the Resolutions must be justified by appropriate documentation. (ii) where the business has claimed for loss of business compensation under the Valuation Model, if the valuation shows that prior to the Resolutions the business had positive goodwill, but after the Resolutions the business has negative goodwill. 34 . . . 35 . . . 36 The compensation that will be paid to unviable businesses will be the sum of: (i) loss of business compensation as calculated under either the Minimum Model or the Valuation Model (ii) value of stock . . . at cost . . . -- 4 of 9 -- 5 (iii) compensation for plant and equipment . . . determined as follows . . .” [9] The parties’ submissions focus entirely upon the terms of paragraph 33(i) of the Guidelines. The respondent determined that the applicant’s business had not become unviable as a direct result of the resolutions and it was therefore ineligible for compensation under this head. The applicant submits that the decision was based upon a misunderstanding of paragraph 33(i) and the criteria for determining unviability. [10] Before passing to the respective arguments it is necessary to consider whether the application can be decided by reference only to the construction of the Guidelines which have no statutory force or effect. They are not incorporated in any legislation or subordinate legislation, nor are they recognised legislatively. On one view of things the respondent is given by the regulation a completely unfettered discretion to determine the amount of compensation, and that by acting in accordance with the Guidelines the respondent has constrained his discretion and, consequently, acted unlawfully. The parties, as I have mentioned, proceeded on the basis that the respondent was entitled to and, indeed, obliged to act according to the Guidelines. I think Mr Hinson SC, who appeared for the respondent, is correct in his submissions that it was proper for the respondent so to act. He referred to a decision of the English Court of Appeal, R v Criminal Injuries Compensation Board ex parte Lain [1967] 2 QB 286, which, on another point, has been approved by the Full Court of this Court, (R v Wadley ex parte Burton [1976] Qd R 286) by the High Court, (Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149) and by the New South Wales Court of Appeal (Brack v Wills [1977] 1 NSWLR 456.) The Criminal Injuries Compensation Board was established not by statute but by executive government to assess compensation for victims of crime. Awards were met by way of ex gratia payments from funds voted by Parliament for the purpose. The Board was constituted pursuant to a written scheme prepared by the responsible minister. The Court of Appeal held that the Board was amenable to the Court’s supervisory jurisdiction, even though it was not established by statute and its determinations gave rise to no legally enforceable right, because the scheme imposed on Board members a duty to act judicially in the discharge of powers given for a public purpose. In his judgment Diplock LJ said (p 883-4): “ “The scheme” . . . took the form of a statement . . . of how the distribution of compensation . . . would be carried out. . . . That procedure . . . bears all the characteristics of a judicial . . . procedure; and the Board when determining applications . . . is clearly . . . acting as an inferior tribunal. Its authority to do so is derived. . . from instructions by the executive government . . . the appointment of a board and the conferring upon it of jurisdiction to entertain and determine applications, and of authority to make payments in accordance with such determinations, are acts of government, done without statutory authority but nonetheless lawful for that.” -- 5 of 9 -- 6 At p 887 he said: “ “The scheme” not only constituted and defined the authority of the board to make such payments but as published to applicants, was a lawful proclamation stating the conditions required to be satisfied by subjects seeking payment of compensation and requiring them as a condition of precedent to the receipt of any payment to submit their claims . . . it was on the faith of the proclamation that the application to the board with which the present case is concerned was made.” [11] The respondent does not contest the applicant’s right to seek judicial review of his decision to award compensation in the sum of $61,994.00. The immediate question is whether the Guidelines circumscribed the decision making process so that the respondent was obliged to judge the application by reference to the contents of the Guidelines. The parties implicitly accept that the decision had to be made in accordance with the Guidelines and I agree that that is so. The remarks quoted from the judgment of Diplock LJ are, I think, apposite. Section 71 of the Regulation confers a statutory right to compensation, in an amount determined by the respondent, upon firearms dealers who suffered loss by reason of the Council’s resolutions. Public moneys were raised specifically for the purpose of paying compensation. The Guidelines were formally adopted by the Council and promulgated to that section of the public likely to be effected by the resolutions. Firearms dealers were invited to make applications for compensation on the basis of the Guidelines and the respondent (and his counterparts in the other States) decided those applications in accordance with the Guidelines having earlier publicly asserted that that was how the applications would be dealt with. The moneys made available to fund the assessments of compensation were provided on the basis that assessments would be made by reference to the Guidelines. The applicant’s claim for compensation was structured to comply with the requirements of the Guidelines and sought compensation by reference to the heads of claim and methodology (the Minimum Model) of calculation set out therein. By a process akin to that which gives rise to an estoppel by convention the parties have agreed, as a result of their conduct, that the application should have been determined within the framework of the Guidelines. [12] The parties respective contentions can be briefly described. The respondent’s point is that paragraph 33 comprehensively defines unviability for the purposes of the Guidelines. Unless an applicant satisfies one of those criteria (in this case that set out in paragraph 33 (i)) its business will not have become unviable so as to be eligible for compensation. The relevant criterion is that revenue must have fallen below 50% of pre-resolution levels. The applicant argues that the concept is not so circumscribed, and that if a firearms business has become unviable as that term is ordinarily understood in commerce there is an entitlement to compensation. [13] The applicant relies on two features in paragraph 33(i). The first is that it deems a business to be unviable where specified circumstances exist but it does not expressly make those circumstances the exclusive determinant of unviability. The second feature is that the second sentence expressly recognises that a business whose revenue has decreased by less than 50%, may have become unviable so that -- 6 of 9 -- 7 a reduction in revenue of at least that amount cannot be the sole criterion for determining unviability. [14] It is convenient to deal with the second point first. It involves the resolution of an ambiguity. The paragraph relevantly provides:- “Where the business has claimed . . . compensation under the minimum model, the . . . revenue must have decreased by at least 50% . . . an application . . . with a decrease in revenue below 50% . . . must be justified by appropriate documentation.” The ambiguity arises because the adjectival description “below 50%” might apply to the decrease or to revenue. The applicant reads it in the former sense. So understood a decrease of less than 50% in revenue would qualify a business to receive compensation for unviability if justified by appropriate documentation. The respondent reads the second sentence in the latter sense so that it is understood to require that a business suffer a decrease in revenue to below 50% of its former level before it will be entitled to compensation, and then only if the decrease is proved by appropriate documentary records. [15] I consider that the paragraphs should be construed as the respondent does for two reasons. The first reason is that the applicant’s construction produces the result that the paragraphs deals with two possibilities, not one, and the need for documentary proof of a decrease in revenue applies only to the second. To explain the point more fully, the applicant’s construction is that a business will be deemed to have become unviable (i) where its revenue has decreased by at least 50% and (ii) where its revenue has decreased by less than 50% in which case the decrease must be justified by appropriate documentation. It is most unlikely that the requirement of proof of the decrease by proper records was not meant to apply to any claim for compensation arising from unviability. It is, I think, obvious that a decrease in revenue of at least 50% could only be demonstrated by such records and the respondent would be irresponsible to determine a claim for compensation in the absence of such documents. This difficulty disappears if the second sentence is understood to refer to the same decrease as the first sentence. There is no obstacle to reading it this way. The situation where business revenue has decreased by at least 50% is the same as that in which the decrease in revenue has brought it to below 50% of what it was. [16] The second reason is that the structure of the paragraph would be disturbed by the applicant’s construction. The context is that if a specified circumstance is proved (or specified circumstances are proved) a business is deemed to be unviable. The applicant identifies two circumstances (where revenue falls by more than 50% and where it falls by less than 50%) but only the former brings the deeming provision into operation. The second situation, where the decrease is less than 50%, requires a judgment based on appropriate documentary justification. This approach makes the paragraph clumsy in operation and largely erodes its effectiveness. Although the clause appears to deem unviability in a specified circumstance it does so only in one of the two circumstances identified. -- 7 of 9 -- 8 I do not think the paragraph should be given such a meaning. I would read it as referring to one circumstance only, where revenue falls below 50% as a result of the resolutions. [17] The applicant’s second point, that paragraph 33 is not an exclusive definition of unviability, loses force with the resolution of the ambiguity against it. The submission had been that because paragraph 33(i) recognised two circumstances in which unviability might exist, and the deeming provision applied to only one, the definition could not be exhaustive. Businesses, other than those deemed to have become unviable by reason of a decrease in revenue of more than 50%, could also be unviable. This point is now lost to the applicant. Paragraph 33(i) refers to one circumstance only, which if it exists, deems the business exhibiting the circumstance unviable. [18] The applicant’s argument is that the introductory words of paragraph 33 are inappropriate if they were intended as an exclusive definition of unviability. “Deeming”, it is said, is a process by which meanings are extended, not restricted. Things are deemed to be that which in ordinary understanding they are not. Such a provision cannot prevent things which, as a matter of fact and practicality, they are from being what they are not. The argument is that a business which is in truth unviable must be entitled to compensation even though its revenue may not have dropped by 50%. [19] It may be accepted that the use of deeming provisions has been much criticised. A.P. Herbert’s fictitious Lord Mildew commented acerbically that “there is too much of this damned deeming” (Codd’s Last Case 1952 p 80) and the real Lord Cave derided the device more gently by pointing out that to deem something is to admit that it is not what it is said to be. (R v Norfolk County Council [1891] 60 LJQB 379.) The device was, however, made legitimate, and even respectable, by Windeyer J in Hunter Douglas Australia Pty Ltd v Perma Blinds (1970) 122 CLR 49 at 65-67. His Honour said: “. . . the verb ‘deem’ . . . can be used in statutory definitions to extend the denotation of the defined term to things it would not in ordinary parlance denote. This is often a convenient device for reducing the verbiage of an enactment. But that the word can be used in that way and for that purpose does not mean that whenever it is used it has that effect. . . . there is no presumption, still less any rule, that wherever the word ‘deemed’ appears in a statute it demonstrated a ‘fiction’ or some abnormality of terminology. Sometimes it does. Often it does not. Much depends upon the context in which the word appears . . .” [20] It is not unknown for a statute which deems a state of affairs to constitute a specified result to be construed as insisting that the state of affairs is an essential precondition to the existence of the result. An example is afforded by Butler Rains Menzies and Co v Devine [1994] 1 Qd R 1, in which s 589 of the Corporations Law, provided that a company should be deemed to be unable to pay its debts if, and only if, execution was returned unsatisfied. The section was construed as setting out the only means by which insolvency could be proved. It is true that the particular wording there in question more readily gave rise to the construction, but -- 8 of 9 -- 9 the case provides precedent for the use of a deeming clause to constitute an exclusive definition. [21] The Guidelines appear to me to provide a context for construing clause 33 similarly as an exclusive definition. Paragraph 31 states that a dealer who can prove that its business has become unviable will have its business bought out. Paragraph 32 states that the criteria for unviability appear in paragraph 33. That paragraph then sets out two criteria, one relevant to the Minimum Model and the other to the Valuation Model, which if proved, have the result that the business is deemed to have become unviable. If the paragraph does not perform this defining function it would not seem to serve any purpose. It is not to the point that a business may, in fact, be unviable but has not suffered such a drastic reduction in revenue as the paragraph requires. In Shepheard v Broome [1904] AC 342 the House of Lords was compelled to find that a director, who in fact was honest, had been guilty of fraudulent conduct because of a statute which provided that in certain circumstances specified conduct was deemed to be dishonest. [22] The applicant’s complaint is that the respondent refused its application for compensation for the unviability of its business only because it had not demonstrated the requisite fall in revenue. In his statement of reasons of 14 April 1999 the respondent said: “(The applicant) was not unviable as it has only experienced a post- resolutions revenue decrease of 31%, falling well short of the 50% threshold required under paragraph 33(i) of the National Formulae for Compensation of Licensed Firearm Dealers for loss of business valuation. If a business is not unviable, it is not entitled to compensation. . . ., . . .” [23] The applicant complains that its business had in fact become unviable and that the respondent, in refusing compensation, was wrong in law in not looking at the facts of the applicant’s particular situation, and instead considering only whether revenue had dropped by 50%. By way of amplification it is said that the respondent failed to have regard to relevant considerations, the true state of the applicant’s business, and had regard to an irrelevant one, “the 50% threshold”. [24] For the reasons I have given I consider that unviability has a special meaning for the purposes of determining compensation under the Guidelines and that the respondent correctly applied the definition. It follows that the applicant has failed to demonstrate any error of law in the respondent’s determination and the application for judicial review must be dismissed with costs. -- 9 of 9 --