International Perspective-Shift In trends of Approaches of Interpretation

An international perspective

The dominant approaches in the European Court of Justice (ECJ) have been the contextual and the teleological.[ Natalie Lee, ‘A Purposive Approach to the Interpretation of Tax Statutes?’ (1999) 20(2) Statute Law Review 131, this was the conclusion reached by L Neville Brown and T Kennedy in The Court of Justice of the European Communities (4th Ed 1994) 321.]The contextual approach requires the judiciary to take the provision in question in its context and interpret it in relation to its parallel provision in the Community Law. The teleological approach requires the judiciary to base a decision ‘on the purpose or object of the legislation appropriate for Community legislation where the reasons for the adoption of a particular provision, along with its objectives, are to be found in the legislation itself.’ Both approaches clearly sway towards a more purposive approach than the literal approach.

New Zealand  and Australia

In New Zealand the trend in statutory interpretation has been similar to that of Australia. There have been shifts in the old presumptions that prescribed that certain Acts, in particular criminal and tax Acts, must be strictly construed in favour of the individual. Thus in one New Zealand case where compensation paid by the Crown was treated as income, Cook J said [Duff v Commissioner of Inland Revenue [1982] 2 NZLR 710, 716.] :

if this be alleged to be too bold an approach to statutory interpretation, I can only say that it seems to me manifestly in accord with the intention of Parliament evinced by the subsection as a whole.

 Canada

In the civil jurisdictions of Canada the use of the purposive approach is not novel. It has been applied for quite some time, with Nathan Boidman CA and Bruno Ducharme30 noting that the Supreme Court of Canada has not expressly resorted to the literal approach since 1955. Moreover, a method of construction is expressed by EA Driedger in ‘The Construction of Statutes’ which would serve to oust entirely the literal rule. The use of the purposive approach in Canada has been seen in numerous cases. See Allied Farm Equipment v MNR 73 DTC 5036; Harel v The Deputy Minister of the Province of Quebec 77 DTC 5438; No 473 v MNR 57 DTC 559; McMahon v MNR 59 DTC 1109; Sunbeam Corporation (Canada) Ltd v MNR 63 DTC 1390; Home Oil Company Ltd v MNR 55 DTC 1148.]

In the United States however, such an approach is not as evident.[ See City Council of Augusta v Mangelly, 254 SE2d 315, 322 (1979) (‘[w]e have here…overly strict contructionalism resulting in constitutional amendments upon constitutional amendments for which this court is famous.’)].With specific reference to Europe, New Zealand and especially Canada, it can be generally concluded that most tax jurisdictions are either heading towards a pure purposive interpretation system or have been there for quite some time (as is the case of Canada). But is this a wise move? Is the purposive approach effective and appropriate in the tax sphere?

The appropriateness of the purposive approach

Various technical difficulties arise when attempting to apply the purposive approach to statutory interpretation. Here, the question arises, how does one know what the   intention of parliament is? This question, as suggested by Natalie Lee, raises difficulties at two levels – theoretical and practical. First, on a more theoretical level is whether such a thing as ‘parliamentary intention’ can exist. Natalie Lee points out that parliament is made up of more than one person, and it is questionable whether two or more people, with differing opinions, can share the same mental state of mind. Moreover, she recognises that not all of these people will have voted in favour of the Bill to be enacted; it may not have been their intention that the Act in its present form should have even been passed appearing on the statute book. It is therefore apparent that we cannot possibly know precisely whose intention is being sought.

Further, even if parliamentary intention did exist, who is to say that one could determine such an intention, or that different people would agree upon such an apparent intention or purpose? If one studies the nature of human communication it is clear that different people, however honestly and reasonably they attempt to find the meaning of the same document, can reach different interpretations. [Such a difficulty was declared in BP Oil Development Ltd v CIR (1991) 64 TC 498, 532 and was also evident in Frankland v IRC.

The second difficulty Natalie Lee raises, which is more practical, is that it may well be that the words used in the statute do not enable an interpreter to detect any purpose.[Such a difficulty was declared in BP Oil Development Ltd v CIR (1991) 64 TC 498, 532 and was also evident in Frankland v IRC [1997] STC 1450 and Pepper v Hart (above n 15) ]

A further impracticality lies in the fact that common-law judges will, under the guise or even the delusion of pursuing unexpressed legislative intents, pursue their own objectives and desires, extending their lawmaking activities from the common law to the statutory field. If judges are told to decide on the basis of what the legislature meant, rather than what is said, and there is no necessary connection between the

two, then surely there is the potential of the judge favouring his own intention, as it suits. The criteria for evaluating a taxation system include those of equity and fairness[ See the Ralph Committee, Discussion Paper, Review of Business Taxation, A Strong Foundation – Establishing objectives, principles and processes, November 1998, Overview, para 3.9]and the observance of taxpayer rights. Surely, then, we must consider the equity and fairness of the purposive approach to interpreting the tax statutes. In the past, equity, used in assessing a tax system, has referred to ‘horizontal’ and ‘vertical’ equity. used in assessing a tax system, has referred to ‘horizontal’and ‘vertical’ equity.

Equity or fairness also depends on or encompasses clarity and certainty. For the reasons given above, in relation to the difficulty in determining parliamentary intention, it is most probable that the adoption of a pure purposive interpretation system would result in inconsistency. Furthermore, accountants, lawyers and individual taxpayers would be expected to guess what meaning a judge will read into a provision when completing a tax return. A purposive regime militates against clarity or consistency.  Equity or fairness also depends on or encompasses clarity and certainty. For the reasons given above, in relation to the difficulty in determining parliamentary intention, it is most probable that the adoption of a pure purposive interpretation

system would result in inconsistency. Furthermore, accountants, lawyers and individual taxpayers would be expected to guess what meaning a judge will read into a provision when completing a tax return. A purposive regime militates against clarity or consistency.

Furthermore, while taxes are arguably a necessity in any modern society, the status of income tax has long been accepted as a punitive measure. Taxes have the effect of confiscating one’s right to property and hence liberty. The revenue statutes constitute penalties imposed by the state which encroach on a citizen’s liberty, that is, their right to prosper from free enterprise. Given that there exists no doctrine in the courts to

support the notion that there is a duty to contribute to the upkeep of the state through tax, and given there exists a right to avoid but no duty to pay taxes, it seems most appropriate that before the state confiscates a taxpayer’s liberty it should make its grounds for doing so crystal clear. For this very reason tax laws should be construed in highly technical terms, without regard for the purpose they were designed to serve, just as criminal penalties, which similarly impose a restriction on one’s liberty, are construed.

This change from literal to purposive approaches has had significant effect on our legal system. So much so that the powers of the legislative and judicial arms are beginning to converge. Parliament has enacted laws telling the judicial branch how they must interpret legislation, and the judicial arm can read words into legislation (as suggested by Kirby J) to promote what they believe is the apparent purpose of the legislature, when, in fact, unrestrained by obedience to the specific words of the statute, they could be promoting their own policy agenda. As stated by Bryson J, in relation to statutory interpretation and the purposive approach, ‘what is at stake is the separation of powers and respect by the judicial branch of government for the powers of the legislative branch.’ More so it must be realised that ‘[w]e are to be governed not by Parliament’s intentions but by Parliament enactments’. It is clear that although the purposive approach may result in some benefits, its application brings with it significant difficulties and problems. The greatest threat is to the taxpayer’s rights. Contrary to recent cases, the practice that should be adopted by a judge when a tax provision is absurd or does not make sense is to read the provision strictly and in favour of the taxpayer, and the responsibility should rest with the legislature to amend the provision.45 It can work injustice to adopt a pure purposive approach to the interpretation of the revenue statutes in the manner suggested by Kirby J and some others. Such a practice brings with it a greater threat – to basic human rights. The approach that should be adopted is the literal approach – the approach that will enable the taxpayers to protect what is rightfully theirs. 

Shift in trend..Contd..III

The trend towards purposive statutory interpretation

The move away from literalism began over three decades ago. In 1969, the Law Commission of England and Wales, together with the Scottish Law Commission, recommended the adoption of a purposive approach to the construction of statutes.[ The Interpretation of Statutes, Law Com. No. 21 (1969).] The literal approach to revenue statutes had reached its height in Australia in the late 1970s and early 80s under the courts of Barwick CJ, an advocate for liberalism and commercial enterprise. The Whitlam government, at that time, was becoming weary of the tax evasion schemes that were becoming widely practised as a result of the strict approach to interpreting the legislation and therefore strengthened the movement towards a more purposive approach.

By 1981 the move towards the purposive approach in Australia was quite apparent after the commonwealth government introduced section 15AA of the Acts Interpretation Act (Cth). This section effectively set in concrete the purposive approach. It provides:

In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would

not promote that purpose or object.

Similar provisions have been enacted for individual State Acts Interpretation statutes. It is important to note that this section does not require that the purposive approach always be adopted. It is merely stating that if more than one construction is available, then the one which would promote the purpose of the act would be preferred to any other. Another important fact, which was pointed out in Mills v Meeking, [, when Dawson J, in speaking of a provision in terms almost identical to s 15AA: ‘The approach required by [s 15AA] needs no ambiguity or inconsistency; it allows a court to consider the purposes of an Act in determining whether there is more than one possible construction’. This point was presented by Robert Allerdice in ‘The Swinging Pendulum: Judicial trends in the interpretation of revenue statutes’ (1996) 19(1) University of NSW Law Journal 171] is that the provision does not require any ambiguity or inconsistency for its operation, and in this respect it can be differentiated from the mischief rule. It is clear then that the drafting of this provision was a considerable step towards a ‘pure’ purposive approach.

As stated by Kirby J, the last decade has seen numerous cases in which the purposive approach has been favoured, and indeed stated as the method that should be preferred. In Pepper (Inspector of Taxes) v Hart,[ [1993] AC 593.]  the result of which was to impact all areas of statute law, Lord Griffiths stated:

The days have long passed when the courts adopted a strict constructionist view of interpretation which required them to adopt the literal meaning of the language. The courts now adopt a purposive approach which seeks to give effect to the true purpose of the legislation and are prepared to look at much extraneous material that bears upon the background against which the legislation was enacted.[ Pepper Ibid 617. 17 [1997] 1 WLR]

Then four years later, Lord Cooke of Thorndon, in IRC v McGuckian[[1997] 1 WLR 991, 1005.], stated:

‘in determining the natural meaning of particular expressions in their context, weight is given to the purpose and spirit of the legislation … If the ultimate question is always the true bearing of a particular taxing provision on a particular set of facts, the limitations cannot be universals. Always one must go back to the discernable intent of the taxing Act.

There have been numerous other cases in which the judiciary has promoted the use of purposive interpretation in preference to the literal approach, both related and non-related to revenue,[ See Cooper Brookes (Woollongong) Pty Ltd v FC of T 81 ATC 4292; Cole v Director-General of Department of Youth and Community Services (1987) 7 NSWLR 541, 549 per McHugh JA; KP Welding Construction Ltd v Herbert (1995) 102 NTR 20, 40-41].18 and this despite the common adoption of the literal approach throughout the 1970s and early 80s. Today’s legal system has clearly adopted the purposive approach to statutory interpretation, that is, an approach that ‘advances and does not frustrate or defeat the ascertained purpose of the legislature’, as suggested by Kirby J.

The practice by judges of ‘reading words into the legislation’ is evident throughout Australian common law.[ Harrison v Nairn Williamson [1976] 1 WLR 1161; Marren v Ingles [1980] 1 WLR 983; FC of T v Ryan (2000) 42 ATR 694; Sweet v Parsley [1970] AC 132.] In Newcastle City Council v GIO General Ltd, [ 1997]it was stated by the High Court that their addition of words was in accordance with the purpose of the Act as expressed in the Act’s preamble. Furthermore, in a Draft Taxation Ruling, the Tax Commissioner ruled it was appropriate to read words into a tax act when failing to do so would result in an ‘incongruous result’. The support of such a practice is expected from the Tax Commissioner. Despite the wide spread practice, the judicial arm is divided as to its use. Gibson LJ, for example, states, ‘the courts function is to interpret the legislation and not legislate under the guise of interpretation’,[ Frankland v IRC [1997] STC 1450, 1455]. and he concludes that it would be ‘impermissible’ for the court to write in words that some may conjecture parliament to have intended. In fairly recent cases, TLC Group LP v Comptroller of Stamps25 and the Federal Court case Australian Tea Tree Oil Research Institute v Industry Research & Development Board,[ [2002] FCA 1127.] the Courts refused to read words into a statute. Before considering why such a practice would be impermissible and the practicality of the purposive approach in interpreting the taxation legislation, what are the approaches of other jurisdictions?.


Go Next Page Contd.

Competence of Legislature-Australian Position-Part-3

Trade marks were first judicially recognized in England in 1838, when the Courts of Chancery gave protection to the rights of property of traders in trade marks used by them in their business to distinguish their goods from those of other traders. In Ransome v. Graham[57] [1]Bacon V.C. thus explains the origin of trade marks:?"A manufacturer who produces an article of merchandise which he announces as one of public utility, and who places upon it a mark, by which it is distinguished from all other articles of a similar kind, with the intention that it may be known to be of his manufacture, becomes the exclusive owner of that which is thenceforth called his trade mark.


Again, Cotton L.J., in delivering judgment in the case of In re Hudson's Trade Marks[58][2] , where a question was raised under the Trade Marks Act of 1875, adverts to the same aspect of the question. He says:?"The mark proposed to be registered had never been used before the application, and accordingly the point, and it is a most important point, which we have to consider is this, whether the Act of 1875 enabled anything to be registered as a trade mark which had not been already used, and there is a very considerable difficulty on that point, because the very essence of a trade mark independently of the Act was user. The right could be gained, and only gained, by use in connection with articles sold by the person claiming to be entitled to the trade mark in such a way as to distinguish those goods as his goods. That was the very essence of a trade mark, and we find that there is a distinction in the Act of 1875 between those things which were used before the Acts as trade marks and those which had not been so used."


Not only was the trader's right to property in his trade mark recognized, but the exclusiveness of his right of user was also recognized. This recognition of the right of one person to use a particular mark to the exclusion of all other persons?a right in the nature of a monopoly?was founded upon public policy. Sebastian on Trade Marks, 4th ed., at p. 5, quoting from the judgment of the Supreme Court of the United States in Manhattan Medicine Co. v. Wood[59] [3], puts the true ground when he says:?"The benefits derivable from the recognition of the exclusive right of a trader to his trade mark are apparent from the consideration that the "trade mark is both a sign of the quality of the article and an assurance to the public that it is the genuine product of his manufacture. It thus often becomes of great value to him, and in its exclusive use the Court will protect him against attempts of others to pass off their products upon the public as his. This protection is afforded, not only as a matter of justice to him, but to prevent imposition upon the public." " The learned author goes on to point out (at p. 9) that on the same ground: "A trade mark cannot exist in gross and unattached to specific articles, for, if that could be so, the mark might come to be an instrument of deception, instead of a guarantee of genuineness." These principles, interwoven with the very origin and growth of the trade mark as recognized by all commercial nations, would seem to indicate those essential characteristics which distinguish it from all other marks used in trade.


All definitions of the term agree on certain essentials founded in the origin and very nature of a trade mark. First, the proprietor of a trade mark must have some trade or business connection with the goods, such as of owner, manufacturer, seller, or as having selected, packed, or performed some other trade or business operation on them, and the mark must be used by him in the course of and in relation to that business connection. Secondly, the mark must be capable of distinguishing the particular goods on which it has been used from other goods of a like character in relation to which other persons have had a business connection of the like kind. These essentials would seem to follow necessarily from the origin of the trade mark, namely, its use by a trader in his business to distinguish his goods from those of other persons. The latter essential is the necessary basis of the right to exclude other persons from the use of the trade mark?the monopoly allowed in the public interest; for it is by virtue of its distinctiveness that the preservation and protection of the trade mark of one person against all the world is in the public interest.


In perhaps the broadest definition to be found in the textbooks, that by a well known American writer on trade marks, Hopkins (Hopkins on Trade Marks, 2nd ed., p. 30), the importance of "distinctiveness" as an essential of a trade mark is emphasized. "A trade mark is a distinctive name, word, mark, emblem, design, symbol, or device used in lawful commerce to indicate or authenticate the source from which has come, or through which has passed the chattel upon and to which it is applied or affixed." In a note on the same page the learned author explains that "distinctive" as used in the definition means that the mark must be something which "shall be capable of distinguishing the particular goods in relation to which it is to be used from other goods of a like character belonging to other people." The part of the explanation in inverted commas is an extract from the judgment of Lord Russell of Killowen C.J. in Rowland v. Mitchell[60][4] .

I take it, therefore, as established that the concept covered by the legal expression "trade mark," as used by the legislature, the Courts, and the commercial community in England and Australia at the time of the passing of the Constitution, necessarily involved the two essentials I have mentioned. It would follow that the power conferred upon the Commonwealth Parliament to make laws in respect of trade marks extends only to trade marks having these essential qualities, and that it cannot extend to any mark used in trade which is wanting in any of those essentials. Nor can the Commonwealth Parliament give itself jurisdiction merely by declaring that a mark created by its authority for use in trade is a trade mark within the meaning of the Constitution. It cannot thus expand its powers by its own legislative act and so assume a larger control over the internal trade of a State than the Constitution has conferred on it.

I come now to the next question, namely, whether the workers' trade mark which is the subject of these proceedings possesses those essential characteristics which the term "trade mark," as used in the Constitution, connotes. In so far as Australia is concerned the mark is entirely the creation of the Commonwealth Trade Marks Act 1905. The Act provides a special register for it, places it in a class by itself, and declares that a large number of the provisions relating to ordinary trade marks in the legal and commercial sense of the term shall not apply to it. Any individual Australian worker, or any association of workers corporate or unincorporate, or any number of associations acting together, may register a worker's trade mark, being a distinctive device, design, symbol or label registered for the purpose of indicating that the articles to which it is applied are the exclusive production of the worker or members of the association or of the association of associations, and then the worker or association or association of associations as the case may be shall be deemed the registered proprietors of the trade mark and may institute legal proceedings to prevent and recover damages for any contravention of the Act in so far as it relates to workers' trade marks. A penalty is imposed on any person who falsely applies the trade mark to any goods for purposes of trade or sale or knowingly exposes for trade or sale goods on which the mark is falsely applied, or who knowingly imports into Australia any goods not produced in Australia to which the mark is falsely applied. The mark shall be deemed to be falsely applied unless the goods to which it is applied are exclusively the products of the workers, or the members of the association of workers, or of the members of the association of associations, and unless it is applied to the goods by the employer for whom they are produced or with his authority by the worker or a member of the association of workers or association of associations.


It is to be observed that the proprietor of the trade mark is the worker who, or the association of workers or the association of associations, as the case may be, which registers it, but it is not to be placed on the goods by the proprietor of the trade mark, but by the employer for whom they are produced, or by the worker or member of the association with the employer's authority. In so far as the individual Australian worker is concerned, it is quite possible that all the conditions may exist necessary to constitute the workers' mark a trade mark in the sense in which I have pointed out the word is used in the Constitution. But that question does not arise at present. We are concerned with the Act in this case only in its application to workers' trade marks registered by associations of workers. Let us apply the test of the two essentials, as I have explained them, necessary to constitute a trade mark within the meaning of the Constitution. The proprietor of the mark is the association. But the association has no business connection with the goods. Individual members of the union may have such a connection as having taken part in one of the processes of manufacturing or handling them. But the individual members are not proprietors of the trade mark, nor can they apply it to the goods except when authorized to do so by the manufacturer. The latter, however, may apply it to his goods whether the members of the union or association consent or not, so long as the goods have been manufactured by union labour. It may be applied to the goods by the manufacturer, or it may be applied with his authority by the workmen who have assisted in the manufacture. But neither the manufacturer nor the workmen are proprietors of the mark. On the other hand, the proprietor of the mark, the association, has no business connection with the goods, nor has it any right to apply the mark to them. So that the ownership of the trade mark is completely divorced from any business connection with the goods, and from any right to use it on them. The mark, therefore, fails in the first essential.


Again, assuming that the manufacturer or the men, members of the association, who have themselves taken part in the manufacture, place the mark on the goods as the association's agent, they do not do so for the purpose of informing the public that either the manufacturer or any individuals or any corporation have had any business connection with the goods, nor that the association has had any business connection with them, but for the purpose of indicating that the persons unnamed who took part in the different processes of manufacture were all members of the employés' union of the trade in question. There is obviously nothing in such a mark or in its application to distinguish the product of one brewery from that of another.


The different breweries of New South Wales, for instance, each selling its own manufacture, are, it must be assumed, in competition for the favour of the public. But the workers' trade mark in no way aids the public to distinguish one set of goods from another. Every brewer employing union labour may use the mark. Its use distinguishes those who do not from those who do employ union labour. But amongst those who employ union labour there is no distinction of goods or of manufacture. Indeed, it is no part of the object of the mark or its application to make any such distinction. Its object simply is to distinguish the breweries in which union labour is employed from those in which union labour is not employed, just as a mark might be used to distinguish goods made in Australia or by white labour from those made abroad or by coloured labour.


But that is not the kind of "distinctiveness" in a mark which enables the public to distinguish the goods with which one person or corporation has had a business connection, using that phrase in the sense which I have explained, from those with which another person or corporation have had a business connection of a like kind. The mark is wanting, therefore, in the second essential, that of "distinctiveness," which is inseparable from the very nature of a trade mark as known to the law at the time when the Constitution was passed. No doubt, the sections under consideration provide that the "device, design," &c., shall be "distinctive," but in the context that can mean nothing more than "distinctive" within the limits fixed by the Statute. And, as I have pointed out, it is impossible that the mark as created can have any "distinctiveness" in the sense in which the law understands that expression.
It may be argued that the failure of the mark in the first essential might, as far as trade unions are concerned, be remedied by State enactments investing those bodies with fuller powers of carrying on business. As far as the present case is concerned there is nothing to show that the defendant union could carry on a business in connection with which the mark in question could be used. And it is difficult to see how any trade union under the laws of the several States could lawfully carry on such a business. But I do not base my judgment on that ground. It is open to the legislature of any State to create trade unions or any other legal entities and to invest them with such powers of trading and business as it may deem necessary. And a trade union or association might be endowed with powers of business and trading which would enable it to use a trade mark of the ordinary commercial kind. But, whatever its powers might be, it would be impossible to make up for the absence in the workers' trade mark of that characteristic of distinctiveness inherent in the very nature of a trade mark in the recognized legal sense, but which is entirely foreign to the nature and purpose of the mark created by Part VII. of the enactment now under consideration.

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[1] 51 L.J. Ch., 897, at p. 900.

[2] 32 Ch. D., 311, at p. 317.

[3] [1883] USSC 104; 108 U.S., 218.

[4] 1897) 1 Ch. 71, at p. 74.