CHIEF COMMISSIONER BUSINESS FRANCHISE LICENCES v ANEK PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER, HANDLEY and COLE JJA 28 February, 28 February 1996 [1996] NSWCA 101 JUDICIAL REVIEW — statutory discretion — constructive failure to exercise. STATUTES — statutory discretion — scope of discretion — relevant factors. TAXES AND DUTIES — State turnover taxes — restoration of licences — fiscal matters govern discretion. The holder of a licence under the Business Franchise Licences (Tobacco) Act 1987 was taken over on 30 November 1995. As a result of mistakes by the former and new owners the licence expired on 27 December 1995 without being renewed. When the mistake was discovered the former licensee promptly applied on 25 January 1996 for the Commissioner to reinstate the licence under s40(2) of the Act. The Commissioner failed to act by 15 February. The former licensee then applied for and obtained an order in the nature of a mandamus based on the Commissioner's constructive refusal to exercise his discretion. He appealed. HELD: dismissing the appeal: (1) That the scope of the statutory discretion under s40(2) must be determined by reference to the statute as a whole. R v Australian Broadcasting Tribunal Ex parte 2HD Pty Ltd (1979) 144 CLR 45 applied. (2) That a reasonable time for the exercise of a discretion depends inter alia upon the information the decision maker needs and the information already known. (3) That as the discretion under s40 (2) was a narrow one and the commissioner had the required information in his possession on 25 January there had been a constructive refusal to exercise the discretion. ORDER Appeal dismissed with costs. Handley JA This appeal, which has been expedited, challenged the order of Dunford J made in the Administrative Law Division seven days ago directing the appellant to exercise his discretion under s40(2) of the Business Franchise Licences (Tobacco) Act 1987 (the 1987 Act) by Spm on 27 February. Time for compliance with this order has been extended by consent until 5pm today. It is common ground that until 27 November 1995 the respondent then known as Springetts Wholesale Pty Ltd held a business franchise licence under the 1987 Act. On 7 November an agreement was entered into between its then shareholders, and its present shareholders, for the sale of those shares for $320.000 to be completed on or before 30 November. The agreement provided that the company's only asset at the date of completion would be its licence under the 1987 Act. On 23 November the respondent applied under s40 (1) for a renewal of that licence tendering payment of the required fee based on its sales during October. Unfortunately there was a mistake in the application which in terms sought a renewal so called, for the month from 28 December 1995 to 27 January 1996. This was clearly a mistake. S40 (1) authorises renewals of a licence in the strict 2 UNREPORTED JUDGMENTS sense on the expiry of a previous licence. It does not authorise a grant taking effect in the future following a time during which the applicant will not be licensed. The renewal application stated the applicant's sales for October, which was the relevant period, as defined by s3 of the 1987 Act for a renewal from 28 November 1995 and licence fees were tendered on this basis. This, and other information on the application form and its statutory context demonstrate that there was an obvious mistake in the period for which renewal was sought of a type which the Court can and should correct as a matter of construction, so that properly understood the form sought renewal for the month commencing on 28 November. The appellant correctly treated the application as seeking such a renewal and treated the respondent as having a renewed licence during the period expiring on 27 December. The respondent under its new owners, possibly misled by the form of the November renewal application, believed that it was licensed until 27 January 1996 and a renewal application was not submitted under s40 (1) on or before 27 December. As a result the respondent's existing licence automatically lapsed at the end of that day. This situation did not come to the respondent's attention until 23 January following a visit from an inspector of the Office of State Revenue to the respondent's new premises the day before. On 4 December 1995 the respondent notified the appellant as required by s37A of the 1987 Act of the changes in its particulars following the takeover. The particulars required were those specified in s37 (1) and it was common ground that the required particulars had been supplied other than those, if any, required by s37 (1) (e). The obligation to supply particulars pursuant to that paragraph was in dispute on the appeal. The respondent had made no taxable sales of tobacco products in New South Wales between completion on 30 November and the visit of the tax inspector on 22 January. When it was informed on 23 January that its licence had expired, it immediately sought legal advice and on 25 January it submitted renewal applications for December and January and tendered payment of the necessary fees. The previous day the appellant notified the respondent's suppliers that the respondent was unlicensed. When the renewal applications for December and January were lodged the respondent's solicitors wrote to the appellant explaining the circumstances and requesting restoration of the licence through an exercise of the appellant's discretion under s40 (2) of the 1987 Act. Correspondence between the parties followed in which the appellant indicated that he was seeking legal advice. In the meantime of course the respondent was without a licence and unable to conduct any business in tobacco products. On 9 February the respondent's solicitors threatened legal proceedings unless the discretion was exercised by noon on 12 February. Subsequently the respondent's solicitor was advised that the appellant was awaiting counsel's advice but counsel was unable to attend to the matter because she was currently engaged in a two-week trial. On Thursday 15 February, the respondent obtained leave to serve short notice of a summons and notice of motion returnable on 19 February. Following receipt of these documents the appellant sent a fax to the respondent asserting that the material in support of the application in the Administrative Law Division \WRUEF COMMISSIONER BUSINESS FRANCHISE LICENCES v ANEK PTY LTD (Handle$ JA) disclosed a prima facie breach of s37A of the 1987 Act in relation to a failure to supply information required by s37 (1) (e). Dunford J held that the time between the request for the exercise of the appellant's discretion under s40 (2) made on 25 January and commencement of proceedings on 15 February was unreasonable and such as to amount to a constructive refusal to exercise that discretion. The question before this Court is whether that finding can be supported. The reasonable time for the exercise of a statutory discretion depends among other things on the information the decision maker needs in order to be able to properly exercise the discretion and the extent to which that information is already known to him or her at any particular time. This in turn depends on the true scope of the statutory discretion and the factors relevant to its exercise. The Solicitor General's first submission sought to support the appellant's view in his letter of 16 February that there was a prima facie breach of s37A which was relevant to the exercise of the discretion. In my opinion the particulars referred to in s37 (1) (e) namely, "such particulars as are necessary for the purpose of assessing the licence fee', did not have to be supplied by the respondent following the takeover. The Commissioner was not required or authorised to assess any licence fee as a result of the takeover. The Act authorises and requires a process of self assessment on renewals in accordance with s40 (1). An applicant for an initial grant must supply the particulars required under s37 (1) (e) to enable the Commissioner to assess the initial fee under s36 (1) (c) and s43 (1). However, there is no occasion for the exercise of these powers on a routine renewal application. The Commissioner does not assess the fee payable on such a renewal and does not require any information for that purpose. In my opinion therefore, there was no breach of s37A and the information requested was not relevant to the exercise of the Commissioner's discretion. The second submission by the Solicitor General was that the discretion under s49 (2) was a broad one which enabled the Commissioner to take into account matters such as the so called back door method used by those who now own and control the respondent to obtain a licence, the change in the nature and location of the respondent's business and the existence of some interstate but no local sales of tobacco products between the change of control on 30 November and the application for the exercise of the discretion on 25 January. The relevant principles were stated by the High Court in R v Australian Broadcasting Tribunal Ex Parte 2HD Pty Ltd (1979) 144 CLR 45 at 49, where in a joint judgment the Court said: "the problem lies in ascertaining what are the proper limits of the discretion. In the absence of some positive indication of the considerations on which a grant or refusal of consent is to depend, the discretion is unconfined except insofar as the subject matter and the scope and purpose of the statutory enactments may enable the Court to pronounce given reasons to be definitely extraneous to any objects the legislature could have had in view to use the words of Dixon J... his Honour went on to remark on the impossibility when an administrative discretion is undefined of a court's doing more than saying that this or that consideration is extraneous to the power". In the present case the scope of the discretion must be determined in the light of the scheme of the Act as a whole, read in conjunction with the associated Act, the Businesses Licences Act 1990. 4 UNREPORTED JUDGMENTS In this regard it is material to note that an applicant for an initial licence is prima facie entitled to the grant and the circumstances under which such an application may be refused are very limited. The relevant provisions are to be found in s36 of the 1987 Act and s15 of the 1990 Act. Reading these provisions together, as one must, it is clear in my view that the Commissioner must authorise the Director of Business Licences to grant an applicant a licence unless the applicant has been convicted of one or more offences of the kind referred to in s36 (2) of the 1987 Act. In that event the Commissioner may refuse to authorise the grant of the relevant licence and in those circumstances and only in those circumstances the Director is bound to refuse the application. In other circumstances it appears evident that the Commissioner must authorise the Director to grant the application and the Director must approve it and issue the necessary licence. In these circumstances the mere presence in s15 (2) of the 1990 Act of the word "may" does not in my view confer any discretion on the Director to refuse a licence which the Commissioner has authorised the Director to grant. The relevant principles are those referred to in Finance Facilities Pty Ltd v Federal Commissioner for Taxation (1971) 127 CLR 106. I conclude therefore that an applicant for a licence who is not disqualified by reason of convictions of the kind referred to in s36 (2) of the 1987 Act has an entitlement to a licence. This is a most material consideration when considering the proper scope of the discretion under s40 (2). The other matter which is relevant to the scope of that discretion concerns the circumstances under which a licence may be cancelled or revoked. This is provided for in s50 of the 1987 Act and again it is significant that the Commissioner has no broad-based discretion to revoke a licence but is only authorised to do so following the conviction of the licensee of an offence under s59 of the Public Health Act 1991 or an offence under the 1987 Act or regulations. Accordingly, but for the miscarriage in the renewal applications made on behalf of the respondent, the Commissioner would have been without any power under the Act to concern himself with the circumstances of the so-called back door acquisition of the licence, the change in the location and nature of the respondent's business or the existence of interstate but no local sales of tobacco since the change of control. Since these matters could not form the basis of any action the Commissioner might take to revoke or suspend the respondent's licence, in my opinion it follows that they are not relevant considerations in the exercise of the discretion under s40 (2) merely because the respondent failed to apply for an automatic renewal of its licence under s40 (1). It would be strange if matters which are not otherwise relevant to the exercise of any of the Commissioner's powers either on granting or cancelling a licence become relevant by a side wind because of accidental circumstances leading to a failure to properly renew a licence under s40 (1). In my opinion the discretion under s40 (2) is a narrow one dependent upon fiscal matters and the circumstances under which a fee was not paid, the period for which it was not paid, and any loss of revenue to the State by reason of the late payment and matters of that kind. I would therefore reject the appellant's submission that the discretion under s40 (2) is broad-based and entitled the Commissioner to concern himself with other matters. \WRUEF COMMISSIONER BUSINESS FRANCHISE LICENCES v ANEK PTY LTD (Meaghes JA) There remains for consideration the final submission of the Solicitor General that the period between the application for the exercise of the discretion and the commencement of proceedings was not long enough to enable the primary judge to find that there had been a constructive failure to exercise the discretion. In my opinion this submission must also fail, having regard to the narrow basis of the discretion under s40 (2). As I interpret the 1987 Act, the Commissioner did not need anything like the time that in fact elapsed in order to exercise the discretion. He was in possession of all relevant information on receipt of the letter of 25 January. While he was entitled to seek legal advice the period in fact taken for that purpose was excessive in all the circumstances, particularly having regard to the action which the Commissioner had quite properly taken in notifying the respondent's suppliers that its licence had lapsed. In all the circumstances I would propose that the appeal should be dismissed and with costs. Meagher JA I agree. Cole JA I also agree. Meagher JA The order of the Court therefore is appeal dismissed with costs. Appeal dismissed with costs. Counsel for the appellant: K Mason QC, AW Street and MSC York Solicitors for the appellant: Crown Solicitor Counsel for the respondent: DF Jackson and SJ Stanton Solicitors for the respondent: Warren F Ball and Co