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Monday, 23 June 2008
Page: 5598

Mr KELVIN THOMSON (4:28 PM) —I am pleased to have this opportunity to support the Judiciary Amendment Bill 2008 and also to support the well-informed comments of my colleague the member for Isaacs. The bill seeks to amend section 79 of the Judiciary Act 1903 to provide that a state or territory law which limits the recovery of invalidly imposed state or territory taxes, which 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.

This bill seeks to rename that provision as section 79(1). It then seeks to insert proposed sections 79(2) to (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 is intended to restore 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. That decision was made in 2003. 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 and particularly sections 39 and 64 of the Judiciary Act. 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 in British American Tobacco v Western Australia concerned a claim made by a tobacco wholesaler against the government of Western Australia to recover licence fees paid under the Business Franchise (Tobacco) Act 1975, a Western Australian act. The claim was brought under the Crown Suits Act 1947—also a Western Australian act—after the decision of the High Court in Ha v New South Wales, where the court found that fees imposed under a similar law in New South Wales were excise duties and thus that they had been imposed in contravention of section 90 of the Commonwealth Constitution.

At the time, section 6 of the Western Australian act stated that no right of action lay against the Crown unless (a) the party proposing to take action had given written notice to the Crown Solicitor advising of certain information within three months of the action accruing or ‘as soon as practicable’, whichever period was longer, and (b) the action was commenced within one year of the action accruing.

In British American Tobacco, 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 court also held that the limitation period in paragraph 6(1)(b) of the Western Australian act, which applied only to actions against the Crown, was invalid because it was inconsistent with section 64 of the Judiciary Act. 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 judgement in favour of the Crown on the basis that the company had not complied with subsection 6(1) of the Crown Suits Act 1947. It had also dismissed the company’s appeal to the full court of the Supreme Court with costs.

In May this year the Attorney-General in a press release advised that this bill would be brought forward and described it as a clear example of:

... the Rudd government cooperating closely with the states and territories to achieve progress for the nation.

Similarly, the Attorney-General described the bill as an example of the Labor government’s commitment to cooperative federalism, and he said:

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.

It has been pointed out to me that the Howard government received substantial campaign funds in 2006-07 from British American Tobacco. This is referred to by Katharine Murphy in her article ‘Tough talk on political donations’, where she cites records held by the Australian Electoral Commission that show that British American Tobacco donated $166,000 to the coalition in 2006-07.

In the absence of any evidence to substantiate this, I do not personally think that this is the reason, although I think that there is an unhealthy pattern of corporate influence on the Liberal Party. We see it in relation to their current handling of the tax on alcopops and we also see it in relation to the action they are taking on the issue of disclosure of electoral donations, which can only fuel public suspicion about their motives in these matters. Nevertheless, I think that the more likely explanation is that it was simply a piece of meanness or trickiness from the former federal government, which disliked the states and invariably sought to make their lives more difficult and was guilty of inflicting gratuitous violence on them. This was something which had made life more difficult and less certain for the states.

All of 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. For example, Victoria, New South Wales, Queensland, Tasmania and Western Australia impose a 12-month limitation period from the date of the payment of the tax. South Australia, the Northern Territory and the Australian Capital Territory impose a six-month restriction. These limitation periods are different from the general limitation period of six years which applies in ordinary proceedings between subject and subject—for example, in cases of contract and tort. The amendments which have been brought forward do not extinguish the right to bring actions for the recovery of invalid state and territory taxes; they simply apply as far as possible the state and territory special short limitation periods for the recovery of invalid taxes, which places the states and territories in the position that they thought they were in prior to the British American Tobacco case.

Without these amendments, there is a much greater likelihood that claims could be made many years after a state or territory tax has been paid with potentially far-reaching consequences for state and territory government budgeting. I do not think it takes much thought for people to appreciate how chaotic the situation could be if a court was to find a state tax to be invalid many years after its introduction. It would be simply impossible to practically repay it to those who had been paying it in the first instance.

These amendments have been developed in consultation with the states and territories through the Standing Committee of Attorneys-General. They are amendments which are prospective in operation. The 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 including an amount paid as the tax, an amount of penalty for failure to pay the tax on time, an amount of penalty for failure to pay enough of the tax and 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 his dealings with the customer. It is clear that the provisions are intended to cover taxes not only paid but invalidly imposed, also penalties for the late payment of those taxes. 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.

These amendments will not have a retrospective operation. They apply in relation to the recovery of amounts paid after the commencement of this schedule and the act, commencing the day after royal assent. I make no criticism of the High Court concerning their decision. I know the former government was in the habit of bullying the High Court. You had Tim Fischer talking about the need for a capital ‘c’ Conservative, you had the former Attorney-General regularly bemoaning judicial activism and another former Liberal Attorney-General, Daryl Williams, saying it was not his job to defend the High Court or other courts from political attacks. I do not think the previous government displayed the kind of commitment to judicial independence that is in the best interests of this nation. I am pleased to see the current Attorney-General taking a more responsible path.

The decision in British American Tobacco v Western Australia was handed down on 2 September 2003. The Howard government made no attempt to counteract the effect of the decision in its third or fourth terms of government. This bill, introduced by the Labor government, has the support of the Standing Committee of Attorneys-General and it implements recommendations of that standing committee designed to protect state and territory revenue. The amendments overcome much of the uncertainty that resounds in the individual judgements of members of the High Court, 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. This is an overdue reform. It is cooperative federalism at work. It shows the Commonwealth and the states working together, not the blame game, not the buck-passing which characterised federal-state relations under the previous Howard government. I commend the bill to the House.