The Secretary, Department of External Affairs, has forwarded the following memorandum asking for advice:

I forward herewith papers in regard to a question which has been raised as to whether the Eastern Extension Telegraph Company are liable to taxation in connection with an area of freehold land held by them in Darwin and utilised in connection with their cable business.

1. Enclosed is copy of an agreement made on 29 August 1871 between the South Australian Government and the British Australasian Telegraph Company. Under article 3 of this agreement the Company is exempted from the payment of rates, taxes, charges and assessments, and the Government of South Australia undertook that any law imposing taxes should contain an expressed exemption of the Company's land referred to.
2. The South Australian Government passed the District Councils Act of 1887, which did not however include such exemption.
3. The Company has not been assessed in respect of this land until recently, when the local Council assessed their land. Against this the Company has appealed unsuccessfully.
4. I shall be glad if you will be good enough to advise me on the following points:
1. Do the terms of the agreement apply to the present Company as successors of the British Australasian Telegraph Company?
2. If so, are the Company's lands exempt from taxation and if not, and they pay the rates and taxes, are they entitled to reimbursement from the Government of South Australia in consequence of that Government's failure to arrange for exemption as provided in the agreement?
3. If so, is that liability of South Australia one that devolves upon the Commonwealth Government?
5. In this connection attention is invited to section 10 of the Northern Territory Acceptance Act.
6. In the event of the Commonwealth Government being liable it is suggested that the best course would be to pass a fresh Ordinance to amend the recently passed District Council Ordinance 1915, which does not contain the exemption contracted for.

My opinion, upon the points raised, is as follows:

As to question (a): The Agreement in question, a copy of which is attached to the file, is made between the Governor of the Province of South Australia of the one part and the British Australasian Company Limited of the other part. By the Agreement the Governor for and on behalf of the Executive Government of the Province agrees with the Company and their assigns and the Company for themselves and their assigns agree with the Governor and his successors and (separately) with the Government to perform the acts set out in the Agreement.

Assuming that the Eastern Extension Telegraph Company are the assigns of the British Australasian Telegraph Company, the terms of the Agreement in question, in my opinion, apply to the present Company.

As to question (b): Section 10 of the Northern Territory Acceptance Act 1910 provides that:

All estates and interests, held by any person from the State of South Australia within the Northern Territory at the time of the acceptance, shall continue to be held from the Commonwealth on the same terms and conditions as they were held from the State.

In my opinion, this section, read in conjunction with the terms of the Agreement, renders the Company's lands exempt from rates and taxes. As, however, Darwin Town Council Ordinance 1915, section 4, does not in terms except Company's lands from rates under that Ordinance it appears desirable that an amended Ordinance should be passed for the purpose and a draft is forwarded herewith.⁽¹⁾

As regards the second portion of question (b) and question (c): Seeing that the Company was not assessed by the late District Council and therefore did not presumably pay any rates, the question of their reimbursement by the Government of South Australia, or alternatively by the Commonwealth, does not appear to arise.⁽²⁾

[Vol. 14, p. 172]

(1)Draft Ordinance not found.

(2)Subsequent to the giving of this opinion Mr Garran’s attention was drawn to the fact that ‘ . . .the late Council did assess the Company, and that the Company appealed unsuccessfully, and presumably paid or are liable to pay rates’, and in a later opinion dated 1 December 1915 [Vol.14, p. 130] he reconsidered the question of the liability of the Commonwealth under article 3 of the Agreement referred to, saying: ‘ . . . [I] am of opinion that it opens up such large issues, and raises qu(§tions of such di?iculty, that it would be better not to insert any exemption clauses, but to leave the mpany to its legal remedy, if any, under the Agreement‘.

Mr Garran continued:

‘Article 3 does not, on its face, purport to be an indemnity clause, like the clause in the Eastern Extension Company's agreements with the several States, advised on by the Attorney-General in 1901 and 1902 (Opinion Book, Vol.1, p. 176; Vol.2, p.80) [nor published In Vol.1] under which the Governments undertook to cause all cables, apparatus, etc. of the Company used solely for the cable business to be relieved from customs duties and wharfage rates, and to recoupthe Company any income tax and other rates and taxes imposed on them. It purports to exempt the property of the Company from rates chargeable or thereafter to be charged, and to undertake that the legislature will insert an express exemption in taxing or rating Acts which would otherwise affect the Company's premises.

It is clear that the Agreement does not operate to defeat the liability of the Company to rates; and that the Government of South Australia had no power to bind the legislature to insert an exemption clause. lf read, therefore, in that sense, the article would be unenforceable.

Whether it would be construed as a covenant to indemnify the Company to the extent of any rates and taxes imposed appears to me to be very doubtful, and the scope of the clause is so wide-applying as it does to all provincial, local, and other taxes, imposed or to be imposed, that I think that such a construction, if set up, ought to be contested.

I therefore suggest that no exemption clause should be inserted in the Ordinance‘.

Two years later the Secretary, Department of Home and Territories, asked Sir Robert Garran (as he had become) whether at the time of writing the opinion of 1 December 1915 he had had before him a later agreement, dated 14 April 1900, between the Company and the Province of South Australia, clause 19 of which provided, inter alia, for the repayment to the Company by the Government of the Province of ‘ . . . such sums as will be su?lcient to recoup the Extension Company any income tax and any rates or taxes Parliamentary or otherwise which the Extension Company shall be required to pay . . . ’.

In response Sir Robert Garran, indicating that he had not been aware of the later agreement, stated (11 March 1918)[Vol.1$, p. 396]:

‘At Federation, the Commonwealth took over the control of the postal telegraphic and telephonic services together with such of the obligations imposed on the States under the Agreement of the Company as were applicable to the powers of the Commonwealth.

In my opinion, the Commonwealth is, in view of the terms of clause 19 of the Ageernent,liable to repay to the Company such sum as will be sufficient to recoup it any municipal rates imposed by the David Town Council.

I understand that the Council has actually instituted proceedings for recovery of rates from the Company and that the case is now pending. If the Commonwealth does not desire to pay the amount [Idue to the Company under the Agreement, possibly the best course will be to pass an
amending Ordinance exempting lands of the Company from rating under the Darwin Town Council Ordinance’.