Case: Woodside Energy Ltd v Commissioner of Taxation [2006] FCA 1303 ; (2006) 155 FCR 357
Outcome: cited
Professor Ross Garnaut is Professor of Economics at the Australian National University. By a letter dated 7 October 2005 he was requested by the solicitors for Woodside Energy to provide his expert opinion in relation to a dispute concerning the appropriate treatment of hedge expenses under the PRRTAA. He produced a report, responsive to a number of questions put to him by the solicitors. The report was exhibited to his affidavit of 28 March 2006. Professor Garnaut's evidence was the subject of a ruling as to admissibility in an interlocutory decision published on 4 October 2006: Woodside Energy Ltd v Commissioner of Taxation (2006)155 FCR 357. Under the terms of that ruling it was received subject to relevance. 184 Professor Garnaut served as Principal Economic Advisor to the Prime Minister, Mr RJL Hawke, from 1983 to 1985. From 1985 to 1988 he was Australian Ambassador to the People's Republic of China. He did not occupy any economic advisory role with respect to government when the PRRTAA was enacted in 1987. It appears also that he had no part in the preparation of drafting instructions in relation to the legislation. 185 The questions posed for consideration by Professor Garnaut began by asking for an 'economic perspective' on what is conveyed by the description of a tax as a 'resource rent tax'. He was asked to identify 'from an economic perspective' the features and objectives of such a tax distinguishing it from royalty or excise regimes. He was asked about the relationship between the term 'economic rent' and the profit of a particular resource project in respect of which RRT is payable. Against the background of those questions there were then five specific questions put relating to the hedging losses claimed by Woodside Energy. They were as follows: 5. On the assumption that PRRT is intended to be a tax on "economic rent", would an economist make allowance for amounts received and expenses incurred on the hedging activities undertaken by Woodside in relation to the Laminaria project (as described in the Woodside affidavits) in measuring the amount upon which PRRT is to be levied in relation to the Laminaria project? 6. Would an economist regard the expenses incurred by Woodside in relation to the hedging transactions described in the Woodside affidavits as expenses payable in relation to the sale of petroleum produced from the Laminaria project? 7. Is there any reason why an economist would treat hedging expenses differently from interest paid in respect of monies borrowed for the purposes of assessing economic rent or the amount upon which to levy PRRT? 8. In your opinion, can the hedge expenses incurred by Woodside in relation to the Laminaria project (as described in the Woodside affidavits) be described from an economic point of view as marginal costs associated with the Laminaria project? You should explain what is meant by the description of a cost as a "marginal cost". 9. If one failed to take into account the hedge expenses incurred by Woodside in relation to the Laminaria project (as described in the Woodside affidavits) in measuring the economic rent or the amount upon which to levy PRRT, what would be the consequences of such a failure in terms of meeting or failing to meet the objectives of a resource rent tax? 270 As I said in the interlocutory decision in Woodside Energy [2006] FCA 1303 ; 155 FCR 357 at 374, the words "in relation to" and similar terms such as "in respect of" or "in connection with" or just "in" have been considered in many cases and many contexts. All of them indicate a necessary connection between two subject matters which may be activities, events, persons or things. The nature and closeness or remoteness of the connection sufficient to answer the statutory description depends upon its context. The term "in respect of" was said to "[gather] meaning from the context in which it appears ...": Workers' Compensation Board (Qld) v Technical Products Pty Ltd [1988] HCA 49 ; (1988) 165 CLR 642 at 653-4 per Deane, Dawson and Toohey JJ. The term "in relation to" has been called a "prepositional phrase" which is "indefinite" and which "subject to any contrary indication derived from its context or drafting history ... requires no more than a relationship whether direct or indirect between two subject matters": O'Grady v Northern Queensland Co Ltd [1990] HCA 16 ; (1990) 169 CLR 356 at 376 (McHugh J). As the present case illustrates the extent of the relationship required depends upon the context in which the words are used. See also Australian Competition and Consumer Commission v Maritime Union of Australia [2001] FCA 1549 ; (2001) 114 FCR 472 at 482. Context and purpose are everything in the construction of such indefinite phrases as "in relation to". The citation of authorities, a number of which were canvassed in argument, is of limited assistance where they relate to different statutory settings.