Bank of Queensland Ltd, Re [1996] QSC 21 (1996)135 A.L.R. 747

IN THE SUPREME COURT OF QUEENSLAND OS No 741 of 1995 Before Mr Justice Dowsett IN THE MATTER of the Rules of the Supreme Court of Queensland - and - IN THE MATTER of the Debits Tax Act 1990 (Queensland), the Debits Tax Act 1982 (Commonwealth), the Debits Tax Administration Act 1982 (Commonwealth), the Bank Integration (Bank of Queensland) Act 1993 (Queensland) and the Bank Integration Act 1991 (Commonwealth) - and - IN THE MATTER of Bank of Queensland Limited REASONS FOR JUDGMENT - DOWSETT J. Judgment delivered 01/03/1996 CATCHWORDS: Debits Tax Administration Act; Debits Tax Act 1990 (Queensland) - Amalgamation of banks - Transfer Accounts - meaning of "taxable accounts" - construction of contract. Counsel: Mr Callinan QC for applicant Mr Dutney QC and Mrs Mullins for respondent Solicitors: Minter Ellison for applicant Crown Solicitor for respondent Date of Hearing: 21 November, 1995. IN THE SUPREME COURT -- 1 of 10 -- 2 OF QUEENSLAND OS No 741 of 1995 Before Mr Justice Dowsett IN THE MATTER of the Rules of the Supreme Court of Queensland - and - IN THE MATTER of the Debits Tax Act 1990 (Queensland), the Debits Tax Act 1982 (Commonwealth), the Debits Tax Administration Act 1982 (Commonwealth), the Bank Integration (Bank of Queensland) Act 1993 (Queensland) and the Bank Integration Act 1991 (Commonwealth) - and - IN THE MATTER of Bank of Queensland Limited REASONS FOR JUDGMENT - DOWSETT J. Judgment delivered 01/03/1996 Prior to 31 August, 1994 Bank of Queensland Limited, the present applicant, and Bank of Queensland Savings Bank Limited (BQSBL) carried on business separately. On that date, they amalgamated, which amalgamation was facilitated by State and Federal legislation. Prior to amalgamation, the two companies were already operating in close conjunction, presumably upon the basis that BQSBL conducted traditional savings bank business, whilst other banking business was left to the applicant. In any event, prior to amalgamation, there was an arrangement in place -- 2 of 10 -- 3 pursuant to which a customer who had a savings account with BQSBL could draw cheques on an account with the applicant which was called a "transfer account". Broadly, the customer's funds were kept in the savings account with BQSBL, and when a customer's cheque was presented to the applicant, funds were transferred from the savings account to the transfer account. The transfer was effected after the cheque was honoured, although it is possible that the arrangements between the customer and each bank contemplated the transfer occurring first. Since amalgamation, a similar arrangement has been in force, although of course, both the savings accounts and the transfer accounts are now with the applicant. In 1982, the Commonwealth imposed a debits tax upon debits to cheque accounts. The relevant legislation is the Debits Tax Administration Act 1982. In 1990, as a result of arrangements made between the Commonwealth and the various States, the Queensland government imposed a tax in lieu of the Commonwealth tax. The respondent named in the summons is the Commissioner of Stamp Duties, although the correspondence suggests that there is a person called the Commissioner of Debits Tax who may, perhaps, be the same person. No point was made about this, and I assume that it is of no relevance for present purposes. Difficulties have arisen because the Commissioner asserts the entitlement to levy the debits tax upon both the transaction by which each cheque is paid from the relevant transfer account and the "reimbursing" transaction from the corresponding savings account. Prior to the transfer of this tax to the States, the Commonwealth had taken the view that such double taxation was not justified by the Commonwealth Act. The State Act largely adopts and relies upon the Commonwealth Act and initially, the Commissioner accepted the view previously held by the Commonwealth. However on 14 September, -- 3 of 10 -- 4 1995 the Commissioner advised the applicant that a contrary view was now held. Relevantly, the Debits Tax Act 1990 (Queensland) provides:- "Tax is imposed in respect of each taxable debit of not less than $1.00 made to a taxable account ..." (See section 2.1(1)(a).) Section 3.1 provides that the bank and the account holder or holders are jointly and severally liable to pay the tax. Section 3.2 provides: "The Commonwealth Act (other than ss. 1, 2, 6 and 8) applies as law of Queensland and so applies as if amended as set out in Schedule 2." It was common ground that the various definitions contained in the Commonwealth Act apply for the purposes of the State Act. The former Act defines "account" relevantly to mean: "An account kept with a bank, being an account to which payments by the bank in respect of cheques drawn on the bank by the account holder, or by any one or more of the account holders, may be debited ..." . (See s.3(1)(a).) The term "taxable account" means, "an account (other than an exempt account) kept in Australia". "Taxable debit" means, "a debit (other than an exempt debit) made to an account". The Commissioner considers that when a debit is made to a savings account in the circumstances discussed above, that account is a taxable account, and the debit is a taxable debit. The question for resolution is whether such a savings account is an account to which payment by the applicant, in respect of cheques drawn on the applicant, may be debited. This question can only be answered by reference to the contractual arrangements between the applicant and its customers. Exhibit DHJ3 is an application for a savings account with the applicant. The -- 4 of 10 -- 5 potential customer is required to provide certain personal information by filling in blank spaces. The application then proceeds: "Where this savings account has a Savers check (sic) facility, I/we, having established a transfer account with the Bank of Queensland Limited hereby indemnify you against all suits, claims, demands or losses of whatever nature and howsoever arising in relation to the debiting of my/our savings account with the value of cheques drawn against the said account and in the event of misuse of cheques or cheque forms issued in pursuance of this arrangement. This indemnity shall continue in force in perpetuity notwithstanding the cessation of the facility for whatever reason or any change without notification to the Bank in the constitution of its customer(s). " Attached to the application is a standard form of letter addressed to the manager of the applicant, to be signed by the potential customer, which recites relevantly as follows:- "I/We the party(ies) mentioned on the face of this form, wish to establish a transfer account with you on the following basis:- 1. ... 2. ... 3. The only cheques with the Bank shall be obliged to honour shall be those which have been signed by any of the persons who are authorised from time to time to operate on the abovementioned savings account and which are encoded with the account number (number specified). 4. The bank shall not be under any obligation to pay any such cheque which is technically incorrect or for which funds are not provided in my/our transfer account with the Bank by way of transfer from my/our savings account or which may be estopped for any reason. 5. The persons authorised to draw such cheques shall be any of the persons who are authorised from time to time to operate my/our savings account with the Bank. 6. The Bank will honour such cheques so drawn if, when such cheques are presented to it for payment I am/we are recorded in the Bank's records as depositors with a -- 5 of 10 -- 6 balance in an account bearing the account number specified in 3 above of an amount which equals or exceeds the amount of such cheque in accordance with any operating authority lodged with the bank and provided funds are transferred by the bank to my/our transfer account." ... 7. ... 8. ... 9. ... 10. ..." Exhibit DHJ4 is described as a "Request to Establish a Savers Check (sic) Facility". The form makes provision for the insertion of an account number and then proceeds:- "I/We ..... request that you establish a Savers Check facility on the above savings account in my/our name(s)." There is then an indemnity similar to that prescribed in ex.DHJ3. The same ten conditions are then prescribed. Clearly, the cheque facility is very closely associated with the savings account. The indemnity referred to in DHJ3 operates, "Where this savings account has a Savers check facility ...". The customer requests that the applicant, "establish a Saver's Check facility on the above savings account in my/our name(s)." The applicant is not obliged to honour a cheque, "for which funds are not provided in my/our transfer account with the Bank by way of transfer from my/our savings account ...". Similarly the bank will only honour such cheques if the customer has an appropriate balance in his or her savings account. Although it is not entirely clear, clauses 4 and 6 seem to provide that the obligation to honour a cheque is dependent, not only upon there being sufficient funds in the savings account, but also upon those funds having been transferred to the -- 6 of 10 -- 7 transfer account. In other words, the transfer is to precede payment of the cheque. The form of indemnity mentioned above also suggests that sequence. It is in respect of cheques drawn, not drawn and honoured. As I have said, the practice is otherwise. A debit is first raised in the transfer account when the cheque is honoured, and the transfer account is then reimbursed from the savings account. Although I prefer the view expressed above, there is an arguable construction of clauses 4 and 6 which would support the practice. The respondent points out that presentation of a cheque to the applicant results in a debit of the amount of that cheque to the savings account and asserts that:- "The fact that for its internal purposes the bank sets up an intermediate account to which the money debited to the savings account is first paid before being applied to the cheque is neither here nor there. The bank can set up as many intermediate accounts as it likes. From the customer's point of view the only statement received shows the cheque being debited to the savings account ..." This submission overlooks the fact that the definition of "account" focuses on the authority of the bank to debit the payment to the customer's account, which authority must arise out of the arrangements between the customer and the bank. Although the transfer account receives only passing mention in the documentation to which I have referred, it is nonetheless contemplated in that documentation as part of the arrangements between the customer and the applicant. Indeed, it is also at the root of the respondent's argument that there are two separate debits. If there were only one account, there would also be only one debit upon which the tax could be imposed. The only purpose served by the transfer account is to record the debits arising out of payments of cheques and the credits by way of reimbursement. The respondent submits that the definition of account:- -- 7 of 10 -- 8 "... does not require that it be an account against which the cheque is directly debited but rather that it be an account to which payments in respect of cheques may be debited." It is then submitted that as the customer has authorised the applicant to debit payments in respect of cheques against the savings account from time to time, it is an account for present purposes. Clearly, the customer authorises the applicant to debit the amount or value of each cheque to his or her savings account, but s.3(1)(a) requires that it be payment of the cheque which is so debited. If the proper construction of the arrangements between the applicant and the customer is that funds are to be transferred to the transfer account before the cheque is honoured, then it cannot be the payment of the cheque which is so debited because at that time, there has not yet been a payment. The debit is rather of a transfer in anticipation of such payment. If, on the other hand, the proper construction is that the applicant is to honour the cheque and then recoup the funds from the saving account, then certainly, the debit to the latter account arises as a result of the applicant's payment of the cheque, but it is not a debit of the payment. Clauses. 4 and 6 contemplate that payment being debited to the transfer account. There is no authority to debit it to the savings account. The debit to that account is of the transfer of the amount necessary to discharge the customer's debt to the applicant created by the payment. It might be argued that the applicant pays twice in respect of each cheque:- once to the holder of the cheque from the transfer account and once to the transfer account from the savings account. However, when one speaks of a payment by a bank in respect of a cheque drawn on that bank, one is speaking of the bank paying the holder of the cheque. One is not referring to other transactions designed to -- 8 of 10 -- 9 transfer funds from one account to another to enable that payment to occur or to reimburse the bank for the payment. It is worth observing that the words, "in respect of", govern the relationship between payment by the bank and the cheque, not that between such payment and the corresponding debit. Those words do not justify imposition of the tax upon a debit to any account merely because such debit can be seen as being related in some way to payment of the cheque. To the extent that it is appropriate to consider the parliamentary history of both pieces of legislation, including the explanatory memoranda associated with them, these sources all support the view which I have reached. With respect to the Commonwealth Act, the Treasurer said that the tax was attached to debits, "made to a bank account on which cheques may be drawn", and, "Debits resulting from cheques drawn on an account will be subject to the tax." The emphasis on cheque accounts is indicative of the intention behind the proposal. That the outcome urged by the respondent in this case was not contemplated is also made clear at p.2,071 of the Parliamentary Debates where the Treasurer said, with respect to a series of exemptions granted to inter-bank transfers,:- "This exemption is intended to ensure that as far as possible the tax will fall on customers of banks and not on the banks themselves. This will ensure that the tax can effectively fall only once on particular transactions." Although in one sense, the structure adopted by the applicant involves two transactions, it is fairly clear that the Treasurer expected that consequential transactions would be excluded from the impost. The explanatory memorandum is similarly clear. It states that, "The tax is to -- 9 of 10 -- 10 apply to all debits ... made to a bank account on which cheques may be drawn against the bank." At p.9, it states: "By this scheme, a bank, in determining its liability to pay tax in respect of a debit to a cheque account ...". It is true that the definition of "account" was obviously changed at some later stage. See p.10 of the memorandum. It seems unlikely, however, that this overall policy objective was changed. The Treasurer's statement made at the time of the introduction of the Queensland legislation and the associated explanatory memorandum demonstrate an intention to adopt the Commonwealth tax as it then existed and not to impose any new tax. As I have said, I do not find it necessary to have regard to this extraneous material for the purpose of reaching my conclusion. However, to the extent that my approach might seem unduly narrow and dependent upon banking practice, it can be seen that the relevant parliamentary history supports that approach. The applicant alternatively submits that the legislation facilitating the amalgamation of the applicant and BQSBL protects these transactions from additional taxation arising out of the amalgamation. I need not consider that argument. I will hear submissions as to appropriate orders. -- 10 of 10 --