T D HAULAGE LTD V LAND TRANSPORT SAFETY HC HAM CIV 2006-419-001312

T D HAULAGE LTD V LAND TRANSPORT SAFETY HC HAM CIV 2006-419-001312 8 December 2008IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV 2006-419-001312BETWEEN T D HAULAGE LIMITED Appellant AND THE DIRECTOR OF LAND TRANSPORT SAFETY Respondent Hearing: 10-11 November 2008 Appearances: P Davison QC and R Woods for the Appellant R Burns and A Pollett for the Respondent Judgment: 8 December 2008JUDGMENT OF STEVENS JThis judgment was delivered by me on Monday, 8 December 2008 at 12 noon pursuant to r 540(4) of the High Court Rules. Registrar/Deputy RegistrarSolicitors/Counsel: P Davison QC, PO Box 105513, Auckland 1143 Crown Solicitor, PO Box 2213, Shortland Street, Auckland 1140Introduction[1] The appellant, T D Haulage Limited, has appealed against a decision of Judge R P Wolff dated 17 August 2006 assessing the amount of road user charges that in his opinion the appellant ought to have paid to the Crown over a six-year period. The assessment was in the sum of $1,215,000 and followed an inquiry pursuant to s 18A of the Road User Charges Act 1977 (the RUC Act). [2] The respondent in his present incarnation is the chief executive of the Ministry of Transport, who is responsible for the administration and enforcement of the RUC Act. In particular, the chief executive may make an application to a District Court Judge to hold an inquiry into the number and kind of licences that ought to have been obtained by the operator of heavy motor vehicles to ensure the payment of the proper amount of road user charges. The District Court Judge may then make an assessment under s 18C of the amount of road user charges that ought to have been paid to the Crown. Sections 18A to 18D of the RUC Act govern the inquiry and subsequent assessment by the District Court Judge. [3] The chief executive has filed a cross-appeal as to the appropriate methodology to be used by the District Court Judge in an assessment pursuant to s 18C. [4] When the hearing of the appeal commenced, there were a range of legal and factual issues to be determined, including the methodology used to calculate, and the quantum of, the assessment. As a result of discussions between the parties in the course of the hearing, a confidential settlement has been reached so that all legal and factual issues concerning the quantum of the actual assessment made by the District Court Judge have been resolved. This means that the only matters requiring determination are points of statutory interpretation concerning certain provisions of the RUC Act. [5] Counsel are agreed that it is appropriate to seek a declaratory judgment on the issues of interpretation which have arisen in this case. There is no doubt that the High Court has the power to deal with the appeal in such a manner. Section 76 ofthe District Courts Act 1947 enables the High Court, having heard an appeal, to make any order it thinks fit: see s 76(1)(c). If there were any question as to the jurisdiction of the High Court to make a declaratory judgment, it is removed by s 2 of the Declaratory Judgments Act 1908. Such jurisdiction is discretionary: see s 10 of that Act. [6] The issues in respect of which a declaratory judgment are sought are: a) Whether s 5 of the RUC Act requires an operator to have a distance licence for the relevant motor vehicle specifying a maximum gross weight not less than the gross weight of each individual load carried at all times during the currency of that licence. An ancillary question is whether the failure to have such a licence renders the operator liable to pay the difference between the cost of the licence held and the amount which the licence would have cost had it covered the higher gross weight; and b) Whether the five percent tolerance provided for in the infringement notice procedure in Part 4 of Schedule 2 to the Transport Act 1962 should be applied to the gross weight ascertained for the purpose of a proceeding under ss 18A to 18D of the RUC Act. [7] Counsel for the parties were agreed that, even though all issues of quantum of the assessment made by the District Court Judge had been resolved by the settlement, an opinion by way of declaratory judgment would assist both the chief executive and operators of heavy motor vehicles within the transport industry regarding their obligations and the proper assessment of road user charges. Further, the opinion of the Court may be relevant to the general review into aspects of the statutory regime governing road user charges being planned by the Ministry of Transport. The Road User Charges Review Group is seeking submissions from interested parties by March 2009.Factual background[8] It is convenient to summarise the factual background, which is essentially agreed between the parties, to set the questions for determination in their proper context. The appellant is a road transport company based at Mt Maunganui. In 2006, it was operating 47 truck-trailer units. The company's principal operation is bulk cartage of forestry-related by-products such as sawdust, bark, wood shavings and particularly wood chips. Although the company transports other bulk products such as fertiliser, metal, grain, sand and other products, around 80 percent of its cartage is of wood products. The company's truck-trailer units collect wood chips and other forestry-related by-products from sawmills and transport that material either to pulp and paper mills, other customers, or to export facilities at the Port of Tauranga or Marsden Point. [9] Most wood chip products vary in weight because of the moisture content of the particular product being carried. For this reason, the appellant and many other transport operators have moved away from a Plimsoll line (a marking near the top of the relevant bulk bin or trailer unit) as a means of checking approximate weights and have installed meters which provide a guide to the weight of the contents of both truck and trailer units. But although such meters assisted truck drivers considerably, they were not completely accurate in their measurements and could be treated as a guide only. [10] As an operator of motor vehicles falling within the provisions of the RUC Act, the appellant is prohibited from operating its motor vehicles on a road unless the vehicles carry a distance licence and unless the gross weight of the vehicle is not more than the maximum gross weight specified in the licence: see s 5. Section 4 exempts certain motor vehicles including petrol-driven vehicles with a gross laden weight of 3.5 tonnes or less and trailers with a gross laden weight of 3.5 tonnes or less. It is common ground that all of the appellant's trucks and all trailer units were required to have distance licences under s 5 of the RUC Act. Section 9 requires transport operators to pay road user charges as part of the application for the distance licence required by s 5.[11] The truck-trailer units owned and operated by the appellant were designed to carry the maximum permitted load of 44 tonnes in aggregate: 20 tonnes for the truck and 24 tonnes for the trailer. The truck-trailer units were also designed and constructed with high cubic capacity bins built especially for the cartage of bulk products such as wood chips and related products. The bins on both truck and trailer are top-loaded and can be unloaded by hydraulic tipping at the point of delivery. [12] Throughout the six-year period covered by the inquiry, the appellant purchased and operated its truck-trailer units with distance licences specifying a maximum gross weight of 20 tonnes for the trucks and 24 tonnes for the trailers. Distance licences are available for distances in increments of 1,000 kilometres and one tonne. Because it was administratively too time consuming to purchase licences for distances of 1,000 kilometres at a time, and more economic to buy licences for distances in excess of 15,000 kilometres at a time, the appellant typically purchased the 44-tonne distance licences for distances of 15,000 kilometres. [13] The appellant's carriage contracts with pulp mill owners are based on the weight of wood chip or wood products actually carted. The weight of the wood chip product carted is determined by weighing the truck-trailer unit on a weigh-bridge first in an unloaded state and then in a loaded state, either when it departs the sawmill in a loaded state or more usually when it arrives at its destination in a loaded state. The load weights as determined by the weigh-bridges are used to calculate the invoices issued to the appellant's customers. [14] It was accepted at both the inquiry and on appeal that the appellant created and maintained a comprehensive and complete set of records for each of its truck- trailers and for each truck journey charged to a customer. These records were provided to the Land Transport Safety Authority (the name of the Ministry of Transport agency then responsible for the administration of the RUC Act) to enable the respondent to undertake a full audit of the appellant and its compliance with its obligations to pay road user charges. [15] The respondent asked officials to undertake an analysis of the appellant's records. One of those officials, Mr Michael Tebbutt, gave evidence at the inquiry asto his findings. The purpose of his analysis was to determine whether the appellant had obtained all the necessary distance licences and to make an assessment of the amount of road user charges that ought to have been paid to the Crown. Mr Tebbutt based his assessment on the commercial weigh-bridge weights appearing in the appellant's records. Mr Tebbutt proceeded on the basis that "the weights derived from the [appellant's] records and applied are a fair and reasonable assessment of the weights that should have been purchased by the [appellant] for the said truck and trailer units at the time". The methodology he employed was described as follows:These amounts were determined as a result of carrying out a licence by licence assessment, based on the heaviest gross weight per licence. The weights that have been highlighted in the WT@ column on the assessment spreadsheet refer to licences where no records were available. The assessed weight for those licences is based on the average of the heaviest gross weight for each truck and trailer pair.[16] As the appellant was purchasing distance licences for distances of 15,000 kilometres each time, the heaviest load during the period of any distance licence was used to determine the distance licence weight that ought to have been purchased for the entire 15,000-kilometre distance licence. Adopting that methodology, Mr Tebbutt assessed the appellant for unpaid road user charges in the sum of $3,035,580.89 for the six-year period under inquiry. [17] In the decision under appeal, Judge Wolff accepted the basis of the respondent's calculations in terms of vehicle weights (i.e. those based upon the commercial weigh-bridge data), but adopted an alternative method of calculation. The Judge calculated that a notional 1,000-kilometre distance licence should have been purchased to cover each load weight greater than the maximum gross weight specified in the distance licence, which calculation produced a figure of $1,350,099. The Judge then reduced this figure by a further ten percent "to allow for any possible error", thereby assessing the appellant for unpaid road user charges in the sum of $1,215,000. [18] The District Court Judge concluded that he should not apply a five percent tolerance, in other words to tolerate a weight five percent greater than the maximum gross weight specified, in connection with any question arising under s 18C of the RUC Act. The Judge found that such a "tolerance" was not specifically referred toin that part of the legislation, although it was mandated in the infringement notice procedure in Part 4 of Schedule 4 to the Transport Act 1962. [19] The appellant supported the District Court Judge's methodology. The respondent opposed its use and as part of the cross-appeal supported the methodology proposed by Mr Tebbutt. However, as all matters relating to the quantum of such assessment have been settled between the parties, the only issues to be determined on appeal are the two questions set out at [6] above.Relevant statutory provisions[20] The starting point for the interpretation of the RUC Act is its long title, which states that it is:An Act to impose a charge for the use of roads by heavy vehicles and certain other vehicles; and to abolish mileage tax and heavy-traffic licensing.[21] Section 5 of the Act imposes an obligation on operators of heavy motor vehicles to obtain distance licences:5 Certain motor vehicles to have distance licences(1) Subject to section 7 of this Act, no person shall operate a motor vehicle (other than an off-road motor vehicle, as defined in section 2 of this Act) on a road unless— (a) There is [carried] on the motor vehicle in accordance with this Act a distance licence specifying— (i) The number or distinguishing mark shown on the registration plate or plates of the motor vehicle; and (ii) The serial number (if any) of the distance recorder fitted to the motor vehicle; and (iii) The vehicle type number of the motor vehicle; and (iv) Such other information as is required to be specified therein by this Act; and (b) The gross weight of the motor vehicle is not more than the maximum gross weight specified in that licence; and (c) The motor vehicle has attached to it a distance recorder which—(i) Is fitted in accordance with the provisions of any regulations made under this Act; and (ii) Is of a kind defined in any regulations made under this Act; and (iii) Is recording accurately the distance travelled by the vehicle; and (d) The reading of the distance recorder is more than the minimum reading, and not more than the maximum reading, specified in that licence.[22] Section 9 requires transport operators to pay road user charges as part of the application for the distance licence required by s 5. Section 9 provides:9 Road user charges(1) Subject to subsection (3) of this section and to any regulations made under this Act, every application under section 8 of this Act for a licence shall be accompanied by the appropriate road user charge for that licence calculated in accordance with Schedule 3 to this Act together with the prescribed administration fee. (2) Subject to subsection (3) of this section, where a licence is issued under this Act, the amount of the appropriate road user charge for the licence and the prescribed administration fee shall, until paid in full to the Registrar or the chief executive, constitute a debt due to the Crown by the applicant for the licence, and may be recovered accordingly in any Court of competent jurisdiction. (3) Where the chief executive is of the opinion, after considering the road wear that is likely to be caused by the vehicle to which the licence relates, that a road user charge calculated in accordance with Schedule 3 to this Act is excessive in respect of any particular licence, he may, in his absolute discretion, remit part of the charge; and if the full charge has been paid may cause the part remitted to be refunded to the applicant for the licence.[23] Road user charge rates have been determined administratively and prescribed in Schedule 3 to the RUC Act as authorised by s 9(1). Part 1 of Schedule 3 establishes road user charge rates based on a figure calculated in dollars per 1,000 kilometres with reference to the vehicle type and the maximum gross weight (in tonnes) to be specified in the distance licence. The charge rates established in the schedule incorporate the approach referred to at the inquiry, to which reference will be made below.[24] Section 7 enables a transport operator to obtain a supplementary licence to increase the weight limit specified in the distance licence. Charge rates for supplementary licences under s 7 are set out in Part 2 of Schedule 3. These rates are based on a figure calculated in dollars per 50 kilometres with reference again to vehicle type and the maximum gross weight (in tonnes) to be specified in the relevant supplementary licence. The charge rates for supplementary licences assume that the vehicle will be fully laden for the whole of the distance of the licence. [25] Section 14 provides for the refund of the distance licence charge where a supplementary licence is issued:14 Refund of distance licence charge where supplementary licence issued(1) Where a supplementary licence is issued and the maximum gross weight specified in a distance licence is deemed to be increased to the maximum gross weight specified in the supplementary licence by virtue of section 7 of this Act, the [chief executive] shall, as soon as practicable after the issue of the supplementary licence, refund or cause to be refunded to the applicant for the supplementary licence a refund calculated in accordance with subsection (2) of this section. [26] Section 17 provides for the surrender of road user licences in certain circumstances, such as where the vehicle is destroyed in an accident, or is not suitable for haulage use any more, or when the incorrect licence has been applied for and a replacement has been obtained. In such circumstances, the chief executive may refund to the operator the unused portion of the road user charge. [27] Section 23 provides for a range of offences and penalties as part of the enforcement regime. For example, it is an offence to operate a vehicle in contravention of s 5 of the Act. [28] Offences under s 23 of the RUC Act can be prosecuted either summarily or by way of infringement notice: s 23(6). In the latter case, a five percent tolerance will apply as provided for in Part 4 of Schedule 2 to the Transport Act. Section 23(6) provides:Any offence against this Act that is specified in Part 4 of Schedule 2 to the Transport Act 1962 as an excess weight offence or a distance recorder offence [or as an infringement offence under the Land Transport Act 1998] may be proceeded with as an infringement offence in accordance with section 42A of that Act [or the Land Transport Act 1998].[29] Section 18A provides for a District Court Judge to hold an inquiry into the number and kind of licences that ought to have been obtained. Following the inquiry, s 18C provides for the District Court Judge to make an assessment as to the amount of road user charges that should have been paid. Section 18C provides:18C District Court Judge may make assessment(1) Where, after holding an inquiry under section 18A of this Act and considering any reports obtained pursuant to section 18B(7) of this Act, a District Court Judge considers, on the balance of probabilities, that all the appropriate licences that ought to have been obtained for the motor vehicles specified in the [chief executive's] application during the period, and while they were owned by the person, so specified were not obtained, he may make an assessment of the amount of road user charges that in his opinion ought to have been, but were not, paid to the Crown in respect of those motor vehicles while they were owned by that person during that period. (2) In giving reasons for an assessment under this section a District Court Judge need not indicate how the assessment is calculated or what licences he considers ought to have been obtained. (3) Every assessment made by a District Court Judge under this section shall be delivered by him in open Court. (4) A District Court Judge may, when delivering an assessment, state the date from which the amount of the assessment shall be payable to the [chief executive] pursuant to subsection (5) of this section, which date may be earlier than the date the assessment is so delivered. (5) Where a District Court Judge makes an assessment under this section, the amount of the assessment shall, from the date the Judge delivers his assessment (or such other date, if any, as the Judge specifies pursuant to subsection (4) of this section), be payable to the [chief executive] by the person specified in the [chief executive's] application under section 18A of this Act; and, until paid in full to the [chief executive], the amount shall constitute a debt due to the Crown by the person and may be recovered accordingly in any Court of competent jurisdiction.Operation of system of road user charges[30] At the inquiry, evidence concerning the operation of the road user charges system was led from Mr Bryan Talbot, who was then the senior technical advisor of the Economic Compliance Unit at the Land Transport Safety Authority. Mr Talbot stated:4. The intent of the RUC system (s 5 of the Act) is that every vehicle to which the Act applies must have an RUC licence to operate on public roads. The RUC licence specifies the type of vehicle and the maximum gross weight of the vehicle. The vehicle operator, or licence applicant, is permitted to nominate the maximum gross weight to be specified in the licence. This recognises that the gross weight of a given vehicle type may vary somewhat depending on the commodity being carried. All RUC vehicles, with the exception of vehicles requiring time licences, must have a current distance licence at all times. Distance licences are available in multiples of 1000 kilometres in 1 tonne maximum gross weight increments. The whole number values were chosen based on administrative and enforcement considerations. 5. The RUC rate for a distance licence recognises that the vehicle is likely to be at less than the specified maximum gross weight for a portion of the distance. The assumption used in the calculation for the road wear effect of the vehicle is that one-half of the distance is at the specified maximum gross weight and the other half is with the vehicle empty, i.e. at tare weight. Because the road wear effect of a heavy vehicle at tare weight is approximately one-tenth of that at maximum gross weight, the road wear effect for a distance licence is taken as 0.55 of that for the vehicle at the specified maximum gross weight (50% x 1.00 + 50% x 0.10). It should be noted that there are a range of other combinations of nearly full and nearly empty operation that result in the same road wear reduction factor. 6. The fact that allowance is made in the RUC rate calculations for a percentage of operation at less than the maximum gross weight specified in a distance licence is referred to in the RUC booklet and other information supplied by the Land Transport New Zealand. Although the Act does not explicitly state the assumption of the 0.55 factor described above, it can be demonstrated by reference to the RUC rates in the schedule to the Act, specifically, the difference between the rate for a distance licence and that for a supplementary licence. 7. The Act (s 7) allows the maximum gross weight specified in a distance licence to be increased by an associated supplementary licence, which is available in multiples of 50 kilometres. The purpose of the supplementary licence provision is to cover the situation where a heavier than normal load is carried on a particular journey, or part of a journey. Because of the way that supplementary licences are used, it is assumed in the rate calculation that all of the distance covered by the supplementary licence is at the specified maximum gross weight, i.e. the 0.55 road wear factor is not applied.[31] Mr Burns for the respondent acknowledged that there was no statutory basis for the approach underlying the setting of the charges. Rather, the administrative determination of appropriate charge rates was based on likely patterns of travel by transport operators and perceived issues of fairness in terms of road usage. The rates were based on the most inefficient use of the roads in the sense they assumed that trucks would be empty on all return journeys. Mr Davison QC for the appellant agreed that the legitimacy of this approach had not received much attention during the inquiry. While the approach was not seriously challenged, it is fair to acknowledge that the appellant did not accept the legitimacy of the assumptions upon which the charge rates were based.Submissions on behalf of the respondent[32] It is convenient to deal first with the submissions made by Mr Burns on behalf of the respondent.Compliance with obligation to pay road user charges[33] Counsel submitted that the RUC Act provided a statutory scheme governing the payment of road user charges by transport operators based on the principle that the greater the wear on the road, the greater will be the cost to the operator. [34] Counsel relied on the observations of Hardie Boys J in Taieri Dynes Haulage Ltd v Ministry of Transport [1981] 2 NZLR 354 at 355 where His Honour stated that the RUC Act: provides a scheme for the taxation of operators of heavy motor vehicles by requiring licence fees to be paid in respect of distances to be travelled, the amount of the fees being calculated with reference to the gross weight of the vehicle in multiples of one tonne. Distance licences are issued in multiples of 1000 km, and by reference to a distance recorder which is required to be fitted to the vehicle, it can be ascertained at any time whether or not the distance authorised by the licence or licences being carried has been exceeded. Thus on every journey the vehicle must carry its own licence or licences which at all times meet two requirements. First, they must specify a distance which exceeds that disclosed by the distance recorder. Secondly, they must specify a weight not less than the gross weight of the vehicle.[35] Counsel submitted that, although Taieri Dynes concerned an offence under s 23(3), the quoted passage was nevertheless apt to apply to the scheme of the RUC Act generally. In other words, transport operators must understand that there is a duty of compliance not only in terms of the offence provisions, but also in terms of the determination and payment of road user charges. [36] Mr Burns relied for this characterisation of the Act on the wording of s 5, particularly s 5(1)(b) and (c). Mr Burns noted that the requirement to pay road user charges in s 9(2) was again expressed in mandatory terms. Section 9(2) requires the appropriate road user charge for the relevant licence until paid in full to constitute a debt to the Crown by the applicant for the licence. This requirement is mitigated by the chief executive's broad discretion in s 9(3) to remit part of a road user charge in cases of under-utilisation. [37] Further, counsel submitted that the prosecution regime established under s 23 for a contravention of s 5 emphasises the requirement for compliance generally and supports the imposition of charges for heavy vehicles. [38] Further, Mr Burns submitted that the Act was concerned with prescribing liability for the full cost of the appropriate licence which ought to be held by the transport operator. He referred to the fact that ss 14 to 18 make provision for refunds where, for example, a supplementary licence is issued to cover a higher weight (s 14), a new licence is purchased which overlaps with the old (s 15), and where there is off-road travel (s 16). Where an operator has made the commercial decision to purchase a distance licence in 15,000 kilometre blocks, as the appellant had done during the relevant period, the operator assumes the responsibility of ensuring that the gross weight specified in the licence is not exceeded during the whole of the licence period. Therefore, where the gross weight is exceeded contrary to s 5, the licence is not the appropriate one. [39] Mr Burns next submitted that the process of assessment by the Judge under s 18C involved the exercise of a broad discretion unqualified by statutory indicia. Mr Burns submitted that the process comprised two stages, consistently with the way in which the RUC Act established liability for a transport operator. The first stage isto determine, on the balance of probabilities, whether all the appropriate licences that ought to have been obtained were in fact obtained. Secondly, if they were not obtained as required, the Judge may make an assessment of the amount of road user charges that in his opinion ought to have been, but were not, paid to the Crown during the relevant period. [40] Mr Burns acknowledged that an unfairness might be seen to arise from the strict application of the rule if, for example, there was but a single load above the relevant distance licence weight. He submitted that in that case, the unfairness could be alleviated by the application of the judicial discretion which the Judge was required to exercise when assessing the amount of road user charges that ought to have been paid. Counsel suggested that the Judge could apply a principle similar to that referred to in s 9(3) in cases of under-utilisation of the relevant licence. [41] Counsel submitted that the use of the term "assessment" denotes the existence of a discretion. The word "assessment" is not defined in the RUC Act, but counsel relied on various authorities from other taxation statutes as being of assistance in determining how the process is to be carried out. For example, inCommissioner of Inland Revenue v New Zealand Wool Board (1999) 19 NZTC 15,476 the Court of Appeal referred to the term "assessment" as used in the Income Tax Act 1976. The Court noted that in the earlier case of Commissioner of Inland Revenue v Canterbury Frozen Meat Co Ltd [1994] 2 NZLR 681 (CA), Richardson J had concluded at 690 that "the making of an assessment including an amended assessment requires the exercise of judgment on the part of the Commissioner in quantifying that liability on the information then in the Commissioner's possession". McKay J similarly observed at 695 that:To qualify as an assessment it must represent an honest attempt by the Commissioner to arrive as best he can on the information available to him at the amount of the taxable income and the amount of the tax.[42] The fact that the assessment will be difficult owing to the impossibility of precise ascertainment of any amounts to be owed is irrelevant. In Lowe v Commissioner of Inland Revenue [1981] 1 NZLR 326 (CA), Richardson J stated at 345-346 that:Difficulty or complexity of calculation is insufficient to overcome the requirement inherent in the charging provisions of ss 77 and 78 that any such profits or gains must be assessed. Speaking in 1912 Lord Mackenzie gave a robust answer to a similar argument which had been addressed to the Court of Session (Macpherson & Co v Moore (1912) 6 TC 107, 115): "If the Act of Parliament says the amount of profits is to be ascertained, ascertained they must be whether that can be done in a satisfactory method or not." The administration provisions of the New Zealand legislation recognise that the assessment of income may call for the exercise of judgment by the Commissioner. In exercising his judgment the Commissioner is not operating in a vacuum. It is well settled that generally accepted accounting principles and ordinary commercial practices are to be applied in the computation of income for tax purposes so far as the statutory language permits.Five percent tolerance[43] The final part of Mr Burns' submissions dealt with the issue raised by the second question of whether the five percent tolerance provided for under the infringement notice procedure should in law apply to the gross weight ascertained for the purpose of a proceeding under the provisions of ss 18A to 18D of the RUC Act. [44] Mr Burns noted that the offences under s 23 can be prosecuted either by summary prosecution or by infringement notice. If the enforcement authority were to choose the former course, the five percent tolerance does not apply: see Ministry of Transport v Chamberlaine HC RO AP40/92 6 July 1992, Doogue J. In that case, His Honour stated at p 8 that:It is apparent that the language of [Schedule 2] is to create an allowance for a margin of error in respect of excess weight where the infringement offence notice procedure is adopted. It is not in conflict with the provisions of ss 5 and 6 of the Road User Charges Act but to the benefit of any operator receiving an infringement offence notice.[45] Mr Burns submitted that the five percent tolerance is therefore in effect a type of legislative indulgence to the benefit of those charged with offences under the infringement notice procedure. It is not a general endorsement for applying a fivepercent tolerance when a determination is being made as to whether appropriate licences have been obtained by transport operators in order to meet the statutory obligations set out in s 5. [46] In conclusion, Mr Burns submitted that the answer to the first question should be "yes" and the answer to the second question should be "no".Appellant's submissions[47] For the appellant Mr Davison submitted that both parts of question one should be answered "no" and question two should be answered "yes". [48] However, Mr Davison acknowledged that when a District Court Judge is called upon to make an assessment in the context of an inquiry under s 18A of the RUC Act, a two-stage process is to be followed. Further, it was common ground that the second stage of the process requires the Judge to make an assessment of the amount of road user charges that ought to have been paid to the Crown. Mr Davison accepted that in making such an assessment the Judge is required to make an honest attempt to arrive at the amount of road user charges payable based on the information available at the inquiry. This involves forming a judgment on the facts with discretionary elements. Both parties also recognised that the broad discretion inherent in the forming of the opinion is to be exercised fairly and on a principled basis with regard to any relevant factors which emerged during the inquiry. [49] The real dispute between the parties was whether the statutory scheme of the RUC Act and s 5 in particular required an operator to have a licence for the relevant motor vehicle which specifies a weight not less than the gross weight of each load carried at all times during the currency of the licence. [50] Mr Davison submitted that the RUC Act is a revenue or taxation statute which ought not to be construed in a manner that results in a taxpayer paying more tax than they are properly liable for, and certainly not in a manner that would involve an assessment of liability to pay road user charges notwithstanding that there had been no or under-utilisation of the distance licences upon which the assessment wasmade. In this regard counsel referred to Commissioner of Inland Revenue v Lilburn[1960] NZLR 1169 (CA) where McGregor J stated at 1175 that:It is accepted that a revenue statute must be construed strictly, and the subject is not to be taxed unless the language of the statute clearly imposes the obligation: Maxwell, 10th ed., 288; and in the case of reasonable doubt the construction most reasonable to the subject is to be adopted.[51] Mr Davison sought to confine the observations of Hardie Boys J in Taieri Dynes in the passage quoted at [34] above to the prosecution context. Mr Davison submitted that there was a need for the Judge to apply a degree of flexibility which would permit, for example, the application of a five percent tolerance to be applied by analogy to cover the eventuality of potential discrepancies in the weights used from commercial weigh-bridges. This submission was made despite the fact that the observations of Hardie Boys J in Taieri Dynes suggests that the licence must be sufficient to cover all loads carried during its term. [52] Further, Mr Davison submitted that while the natural and ordinary meaning of the words used in s 5 make it clear that the purpose of the section is to prohibit the operation of motor vehicles on a road unless, inter alia, "the gross weight of the motor vehicle is not more than the maximum gross weight specified in the licence", there is nothing in s 5 that would either specify or indicate that liability is to be calculated using the distance of the distance licence actually purchased, for example, for 15,000 kilometres, notwithstanding a continuing breach over a lesser distance travelled, for example, 150 kilometres. [53] Counsel submitted that a number of features of the legislation support the methodology employed by the Judge in the decision under appeal when making his assessment of road user charges payable, namely, selecting the lowest cost licence period or form of licence necessary to cover the excess load. Counsel cited in support the availability of supplementary licences under s 7 where vehicles are known to be overweight and referred also to the defences available under s 23(3) in the context of supplementary licences. For example, it is a defence if it was not possible to obtain a licence at any time from when the need for the licence was reasonably foreseeable and the time when the alleged offence of being overweight arose, and an appropriate licence was obtained forthwith.[54] Counsel also adopted the submission made on behalf of the respondent as to the chief executive having a discretion under s 9 of the RUC Act in the case of proven under-utilisation of a distance licence. Given the existence of such a discretion, Mr Davison submitted that it would be open to a Judge making an assessment to apply a similar discretionary factor by analogy. [55] Other statutory provisions cited in support of the nature of the discretion included s 14 (which deals with the refund of a distance licence charge where a supplementary licence is issued), s 15 (which provides for the refund of current distance licence charges where a new distance licence is obtained and issued), and s 16 (which makes provision for refunds and remissions for off-road travel).Discussion[56] Having carefully considered the statutory scheme of the RUC Act, I am satisfied in answering the first question that the observations of Hardie Boys J do have wider application than just in the context of a prosecution. I have no doubt that the observations reflect a proper interpretation of the legislation concerning the imposition of road user charges for the use of roads by heavy vehicles. The RUC Act requires transport operators to ensure that on every journey the vehicle carries its own licence which at all times meets the twin requirements of a distance which exceeds that disclosed by the distance recorder and which specifies a weight not less than the gross weight of the vehicle. Accordingly, as Hardie Boys J added later in the judgment, a transport operator "may thus not just trust to luck": at 356. Transport operators have a duty to ensure compliance. [57] For the purpose of both determination and payment of road user charges and the avoidance of risk of prosecution, a proper interpretation of s 5, read in its statutory context, requires transport operators to ensure that the relevant distance licence exceeds the gross weight at all times. Hence, the onus falls squarely on the operator not to overload. [58] The consequence of this conclusion for the purposes of an inquiry under s 18A is that the Judge is required, as the first step, to determine whether in therelevant period all the appropriate licences that ought to have been obtained for the motor vehicles were in fact obtained. The starting point is that there is to be strict compliance with the requirements of s 5 in relation to the determination and payment of road user charges. [59] The second stage of the inquiry involves making the assessment of payable road user charges under s 18C. The Judge must form an opinion of the amount of road user charges that ought to have been, but were not, paid to the Crown. The nature of the assessment to be made was not contentious, as discussed at [48] above. Undoubtedly, when the Judge is called upon to formulate the required opinion, it will involve a discretionary consideration of various factual issues which may arise in the context of the inquiry. It is pertinent to emphasise that the assessment will fall to be made in the light of the evidence adduced, but ultimately on a broad-brush basis. An inquiry is not the same as a prosecution and the principles and evidential requirements applicable to a criminal prosecution do not apply. This is emphasised by the fact that s 18C(2) of the RUC Act provides:In giving reasons for an assessment under this section a District Court Judge need not indicate how the assessment is calculated or what licences he considers ought to have been obtained.[60] That said, there will inevitably be issues of fact concerning whether discretionary factors should be applied in any given case. Some such factors have already been identified in the submissions of both parties. These include the possibility of an allowance being made by analogy with various categories covered in the RUC Act including an allowance for under-utilisation (s 9(3)), a refund where supplementary licences are issued (s 14), a refund where new distance licence is issued (s 15), and refunds for off-road travel (s 16). [61] It is not appropriate in the context of a declaratory judgment to go further and seek to limit or define particular discretionary factors. These will depend on the circumstances of the case. Nothing in this judgment should be seen as limiting or prescribing the discretionary factors which a party may wish to advance and establish by evidence in the context of an inquiry.[62] The second question posed, namely, whether the five percent tolerance provided for under the infringement notice procedure in Part 4 of Schedule 2 of the Transport Act 1962 should in law apply to the gross weight ascertained for the purpose of determining whether all appropriate licences had been obtained (as part of the stage one process), must therefore be answered "no". Mr Davison acknowledged that the appellant had never contended that the five percent tolerance should apply as a matter of law. Rather, it was advanced by analogy as a possible relevant factor in the assessment process as part of stage two. In this regard, I note that the Judge held that the appellant had failed on the facts to demonstrate that such an allowance, or indeed any allowance at all, should be made.Result[63] For the reasons set out above, there will be a declaratory judgment as follows: a) Both parts of the first question are answered "yes"; and b) Question two is answered "no".Costs[64] The parties were agreed that the questions formulated for the opinion of the Court were in the nature of a test case. No application for costs was made and no order is required. _________________________ Stevens J