Bills Digest no. 122 2007–08
Judiciary Amendment
Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Judiciary Amendment
Bill 2008
Date introduced:
28 May 2008
House: House
of Representatives
Portfolio: Attorney-General
Commencement: On
the day after it receives Royal Assent
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills
have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
The Bill seeks to amend section 79 of the Judiciary
Act 1903 (Cth) (the Judiciary Act) to provide that a State or Territory
law (which limits the recovery of invalidly imposed State or Territory
taxes) that would otherwise apply to a suit if it did not involve federal
jurisdiction is binding on a court exercising federal jurisdiction in
the relevant State or Territory.
Section 79 of the Judiciary Act currently provides that, ‘except as otherwise
provided’ by the Constitution or Commonwealth laws, the laws of a State
or Territory are binding on all courts exercising federal jurisdiction
in that State or Territory. The exact terms of section 79 are as follows:
The laws of each State or Territory, including the laws
relating to procedure, evidence, and the competency of witnesses, shall,
except as otherwise provided by the Constitution or the laws of the Commonwealth,
be binding on all Courts exercising federal jurisdiction in that State
or Territory in all cases to which they are applicable.
The Bill seeks to rename that provision as subsection 79(1).
It then seeks to insert proposed subsections 79(2)–(4), which
deal specifically with limitations on actions brought in a State or Territory
court exercising federal jurisdiction to recover taxes raised invalidly
under a State or Territory law.
The Bill ‘assists in restoring the states and territories to the position
they were in’ before the decision of the High Court of Australia in British
American Tobacco v Western Australia (2003) 217 CLR 30 (BAT v WA).[1]
In short, the High Court found that State laws imposing conditions on
the right to sue the State Government did not apply where the State court
was exercising federal jurisdiction, because the provisions were inconsistent
with Commonwealth law, particularly sections 39 and 64 of the Judiciary
Act. The decision in BAT v WA is discussed further below.
The proposed amendments to section 79 of the Judiciary Act contained
in the Bill make clear that State and Territory laws which apply to the
recovery of invalidly imposed State or Territory taxes (including the
imposition of conditions on the right to bring an action) are binding
where the proceedings are in federal jurisdiction.
The decision of the High Court of Australia
in British American Tobacco v Western Australia (2003) 217 CLR
30
The decision of the High Court in BAT v WA concerned a claim made
by a tobacco wholesaler against the Government of Western Australia (the
Crown) to recover licence fees paid under the Business Franchise (Tobacco)
Act 1975 (WA). The claim was brought under the Crown Suits Act
1947 (WA) (the WA Act) after the decision of the High Court in Ha
v New South Wales (1997) 189 CLR 465, where the Court found that fees
imposed under a similar law in NSW were excise duties and thus that they
had been imposed in contravention of section 90 of the Commonwealth
Constitution.[2]
At the time, section 6 of the WA Act stated that no right of action lay
against the Crown unless (a) the party proposing to take action gives
written notice to the Crown Solicitor advising of certain information
within 3 months of the action accruing or ‘as soon as practicable’ (whichever
period is longer), and (b) the action is commenced within one year of
the action accruing. (The provision has since been repealed.) In this
case, it was common ground that the action accrued on 5 August 1997, when
judgment was delivered in Ha v New South Wales. However, written
notice was not given under subsection 6(1) of the WA Act until some 10
months after the relevant payment was made. It was also common ground
that the proceedings were in federal jurisdiction, conferred on the Supreme
Court of Western Australia by subsection 39(2) of the Judiciary Act.
Section 39 is as follows:
(1) The jurisdiction of the High Court, so far
as it is not exclusive of the jurisdiction of any Court of a State by
virtue of section 38, shall be exclusive of the jurisdiction of the
several Courts of the States, except as provided in this section.
(2) The several Courts of the States shall within
the limits of their several jurisdictions, whether such limits are as
to locality, subject-matter, or otherwise, be invested with federal
jurisdiction, in all matters in which the High Court has original jurisdiction
or in which original jurisdiction can be conferred upon it, except as
provided in section 38, and subject to the following conditions and
restrictions:
(a) A decision of a Court of a State, whether
in original or in appellate jurisdiction, shall not be subject to
appeal to Her Majesty in Council, whether by special leave or otherwise.
(c) The High Court may grant special leave to
appeal to the High Court from any decision of any Court or Judge of
a State notwithstanding that the law of the State may prohibit any
appeal from such Court or Judge.
In BAT v WA, the High Court found that a law such as section 39
of the Judiciary Act is an exercise of power under section 78 of the Constitution.
The majority (McHugh, Gummow and Hayne JJ, with Callinan J agreeing) held
that the conferring of jurisdiction with respect to a matter arising under
the Constitution (or involving its interpretation) under section 39(2)
of the Judiciary Act involves the conferral of any necessary right to
proceed against a State as a party in the matter. Their Honours found
that section 39(2) of the Judiciary Act ‘otherwise provided’ for the purposes
of that Act, and concluded that the Supreme Court had federal jurisdiction
because of section 39(2), supported by section 77(iii) of the Constitution.
They also found that section 79 of the Judiciary Act did not make subsection 6(1)
of the WA Act applicable in federal jurisdiction. In practical terms,
this means that the limitation period and the notice provision in subsection
6(1) of the WA Act were not binding on the Supreme Court exercising federal
jurisdiction in the case.
The Court also held that the limitation period in paragraph 6(1)(b) of
the WA Act, which applied only to actions against the Crown, was invalid
because it was inconsistent with section 64 of the Judiciary Act. Section
64 provides:
In any suit to which the Commonwealth or a State is
a party, the rights of parties shall as nearly as possible be the same,
and judgment may be given and costs awarded on either side, as in a
suit between subject and subject.
In the event, the High Court allowed the company’s appeal with costs.
In doing so, it set aside certain orders made by the Full Court of the
Supreme Court of Western Australia (which had given summary judgment in
favour of the Crown on the basis that the company had not complied with
subsection 6(1) of the Crown Suits Act 1947 (WA)), and also dismissed
the company’s appeal to the Full Court of the Supreme Court with costs.
It should be noted that the taxes paid by British American Tobacco were
in fact found by the High Court to have been invalidly imposed
by the Western Australian Government. It would seem reasonable that the
company should have the right to recover moneys from the Western Australian
(or other relevant State) Government. It remains a matter for speculation
if that right should be diminished because the company received some benefit
from having paid the fee/tax (for example, in the form of revenue from
tobacco sales, where the price of the tobacco product paid by the consumer
presumably included an amount to cover the cost of the fee paid by the
company to the Government), notwithstanding the fact that the fee was
invalidly imposed.
In a Press Release dated 28 May 2008, the Attorney-General, Mr Robert
McClelland MP, stated that the Bill is a clear example ‘of the Rudd Government
cooperating closely with the States and Territories to achieve progress
for the nation’.[3] Similarly,
Mr McClelland said that the Bill ‘is an example of the Rudd Labor government’s
commitment to cooperative federalism’, claiming that:
This is a matter that has long languished on the books
of the Standing Committee of Attorneys-General for over four years because
of the previous government declining to act for political reasons completely
unrelated to the substance of the proposed legislation.
While Mr McClelland’s statement is cryptic, it may be that he was referring
to the fact that the Howard Coalition Government received substantial
campaign funds in 2006–07 from British American Tobacco.[4] Arguably, British American Tobacco
(and similar organisations) would have been unhappy if the Howard Government
had acted to remedy the effects of the High Court decision in BAT v
WA.
In introducing the Bill, the Attorney-General also referred to the fact
that it implements recommendations of the Standing Committee of Attorneys-General
(SCAG) ‘which have as their objective the protection of state and territory
revenue’, saying:
It is desirable that there be a special, short limitation
period applicable to proceedings to recover invalid state and territory
taxes. Otherwise, claims could be made many years after a tax has been
paid, with potentially far-reaching consequences for government budgeting.[5]
Mr McClelland also referred to the fact that all the States and Territories
have ‘special limitation periods with respect to the recovery of taxes
paid under a mistake of fact or law, including constitutionally invalid
taxes’.[6] These limitation
periods range from 6 to 12 months from the date of the payment of the
tax.[7]
There has been no press commentary on the Bill. Also, there is no apparent
mention of it on any website of any political party, or on the website
of companies such as British American Tobacco Australia. Perhaps this
is not completely surprising, given the nature of the Bill and the fact
it has the support of SCAG.
According to the Explanatory Memorandum for the Bill, the amendments
‘are not expected to have any significant financial impact’.[8] The Bill may have financial implications
for the budgets of State Governments—but to a large extent that is in
their own hands, given they bear the ultimate financial responsibility
for imposing valid taxes. Also, as mentioned above, the Bill ensures
that claims must be made 6–12 months from the date of payment of the invalid
tax, which limitation gives the State and Territory Governments some certainty
and protection.
Item 2 of Schedule 1 seeks to insert proposed subsections 79(2)–(4)
into the Judiciary Act. These provisions would override the effect of
the decision in BAT v WA.
Proposed subsection 79(2) expressly states that a provision of
the Judiciary Act ‘does not prevent’ a State or Territory law (of the
sort mentioned in proposed subsection 79(3)) from binding the Crown
in relation to a suit involving federal jurisdiction that relates to the
recovery of ‘an amount paid in connection with’ a tax that was invalidly
imposed under State or Territory law.
This provision is intended to overcome the difficulties with the operation
of section 79 identified in BAT v WA.[9] Particularly it overcomes the fact that if section
79 does not refer to a right to proceed, it may then be inconsistent with
subsection 39(2) which implicitly confers a right to proceed. Similarly,
any limitation on the right to proceed will not be picked up by section
79 in its current terms.
Proposed subsection 79(3) states that the types of State or Territory
law that would apply to a suit ‘if it did not involve federal jurisdiction’
include a law that:
- limits the period for bringing the suit to recover the amount
- requires notice to be given, and
- bars the suit on the ground that the person bringing the suit has
charged someone else for the amount.
Proposed subsection 79(4) provides some examples of an amount
‘paid in connection with a tax’ (being a phrase used in proposed subsection
79(2)), including:
(a) an amount paid as the tax;
(b) an amount of penalty for failure to
pay the tax on time;
(c) an amount of penalty for failure
to pay enough of the tax;
(d) an amount that is paid to a taxpayer
by a customer of the taxpayer and is directly referable to the taxpayer’s
liability to the tax in connection with the taxpayer’s dealings with
the customer.
Thus, it is clear that the provisions are intended to cover not only
taxes paid but invalidly imposed, but also penalties for the late payment
(or non-payment) of those taxes. The provisions also cover the situation
where the taxpayer has already recovered the amount from a third party
(such as a consumer of the taxpayer’s goods or services).
The proposed amendments are not intended to have retrospective operation.
Item 3 of Schedule 1 states that the amendments ‘apply in relation
to the recovery of amounts paid after the commencement of this Schedule’.
As mentioned above, the Act (and thus the Schedule) is intended to commence
on the day after Royal Assent.
The decision in BAT v WA was handed down on 2 September 2003.
The Howard Government made no obvious attempt to counteract the effect
of the decision in its third or fourth terms of government. The Bill
has now been introduced by the Rudd Government, not only with the support
of SCAG, but particularly to implement recommendations by SCAG designed
to protect State and Territory revenue. SCAG is a co-operative body of
Commonwealth, State and Territory Attorneys-General, whose members are
all of Labor Party affiliation at present.
The amendments overcome much of the uncertainty that resounds in the
individual judgments of members of the High Court in BAT v WA,
especially in relation to the operation in federal jurisdiction of State
or Territory provisions dealing with limitation requirements and the contemporaneous
operation of relevant Commonwealth law, particularly the Judiciary Act.
The amendments make clear the types of State or Territory law that will
apply to suits heard in State or Territory courts exercising federal jurisdiction,
while leaving open the possibility that other State laws may operate in
federal jurisdiction as well. This scenario gives certainty, but also
allows scope for the operation of State laws which either are not assumed
to be relevant (or apply) at the present time or which may come into being
in the future.
Morag Donaldson
4 June 2008
Bills Digest Service
Parliamentary Library
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