Is context really everything? Recent cases on context as a tool to interpret statutes

By John Carroll, Alexander Ferguson

08 Jun 2017

Context can play an important role when interpreting a Commonwealth Act, but there are limits, as demonstrated by three recent Federal Court cases.

It is well accepted that when interpreting a statute, the starting point is the natural and ordinary meaning of the text. However, the statutory text cannot be considered in isolation. Regard must also be had to the context, which includes the legislative history and extrinsic materials.

Three recent Federal Court cases have shown that context continues to play a significant role in determining the meaning of statutory text. Each case also demonstrates how an explanatory memorandum can be used when interpreting statutory text.

Look at the overall purpose of reforms…             

The explanatory memorandum to reforms of the Corporations Act 2001 (Cth) was significant in Oreb v ASIC (No 2) [2017] FCAFC 49. In that case, two former company directors sought judicial review of a decision by ASIC to issue them a notice requiring them to show cause why they should not be disqualified from managing corporations for five years.

Under section 206F(1), a person can be disqualified from managing corporations if they were an officer of two or more corporations and

"while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) … about the corporation’s inability to pay its debts."

The former directors argued that the "and" emphasised in the quote above had a conjunctive effect, which meant that the liquidator had to lodge their reports at the same time (or within 12 months) of the former directors being officers of the corporations which were being wound up.

The Full Court did not accept this interpretation, and held that it was not necessary for the liquidators to lodge their report at the same time (or within 12 months) of the directors being officers of the corporations being wound up. The liquidator's report could be lodged at any time. In support of this conclusion, the Court referred to the forerunner of the Corporations Act, the Corporations Law, in which there was no time restriction for the lodgement of the liquidator's report. The reforms to the Corporations Act were not considered to insert a time restriction, in part because the explanatory memorandum to those reforms stated that the overall objective of the reforms was a "plain English rewrite" of the legislation. Having regard to that purpose there was no requirement or warrant to conclude that Parliament intended to introduce a time restriction on the lodgement of the liquidator's report, notwithstanding that the Court made its concerns about the so-called plain English drafting of the Act very clear.

… but also look at the reason for reforming a specific provision

Whilst the broad objects of legislation can help guide the interpretation of statutory text, the intention of reforms to specific provisions should also be considered.

As a result of reforms in 2006 to the Customs Regulations 1926 (Cth), the person entitled to an import duty drawback changed from the "owner of the goods" to the "legal owner of the goods" (a drawback is a repayment of import duties charged at the time of export.).  

In DFS Australia Pty Ltd v Comptroller-General of Customs [2017] FCA 547 the appellant, which unlike most other duty free stores sold to both local and international travellers, argued that little weight should be given to the addition of "legal" to the term "owner of the goods". It preferred this interpretation because it meant it would be able to claim the drawback on the goods it sold.

The argument was in part based on the introduction to the explanatory statement of the amending regulations which stated that the Amending Regulations did "not substantially alter existing arrangements" under the Customs Regulations.

However, the insertion of "legal" to the phrase "owner of the goods" was held by Justice Burley of the Federal Court to have a substantive effect. He referred to the paragraph the explanatory statement of the Amending Regulations on the drawback provision which stated that "the person who may claim drawback is now the legal owner of the goods". Further, contemporaneous amendments to the Customs Act 1901 (Cth) also changed a provision from "owner" to "legal owner". The explanatory memorandum to the Customs Act amendments stated that the term '"legal owner" will override the extended definition of "owner"' in the Customs Act.

To determine the identity of the legal owner in the Customs Regulations, the Court had regard to NSW and Queensland sale of goods legislation. The result of which was that the legal owner changed from the seller (DFS Australia) to the purchaser (traveller) at the point of sale. This meant that DFS Australia could not claim a drawback on goods it sold to international travellers.

Consider a clearly expressed application of well accepted principles of statutory interpretation

In the Federal Court decision of Uber B.V v Commissioner of Taxation [2017] FCA 110, Justice Griffiths considered whether uberX drivers are providers of "taxi travel" as defined in the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act) and therefore need to register for GST, irrespective of their revenue.

The term "taxi travel" is defined in the GST Act as "travel that involves transporting passengers, by taxi or limousine, for fares." Uber, the provider of ridesharing travel services, unsuccessfully argued that its uberX service did not provide "taxi travel".

Uber argued that the way the States and Territories regulated taxis separately to  ridesharing services indicated that they should be treated differently for GST purposes.  However, the Court concluded that there was little to be gained from State and Territory legislation when interpreting the Commonwealth GST Act. The regulatory purposes of the State and Territory legislation were "far removed from the purpose or object of the GST Act". There was no basis to conclude that the Commonwealth Parliament intended that suppliers "affected by the GST Act" would closely analyse "State or Territory legislation governing the provision of taxi services.

The Court considered that "the word 'taxi' is sufficiently broad in its ordinary meaning to encompass the uberX service provided" and that the words "taxi travel" were "common, everyday words … intelligible to ordinary people".

Finally, the Court considered that some limited assistance was obtained from the mischief identified in the explanatory memorandum and that this "supports a broad construction of the relevant provisions, however it does not dictate the resolution of the task of construction".

The ongoing importance of context

The context of words in a statute continues to be significant, but the limits of using context to interpret a statute need to be kept in mind.  As Justice Griffiths stated in Uber, "the consideration of text often requires consideration of context and questions of context should be addressed in the first instance and not merely at a subsequent stage when ambiguity may arise."

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