Thisbill responds to the 2003 decision of the High Court in British American Tobacco v Western Australia. This case relates to the recovery of invalid taxes paid under Western Australian law. The High Court held that a limitation period and a related special notice requirement in Western Australian laws applicable to actions against the Crown in right of Western Australia were not applied by section 79 of the Judiciary Act 1903 where proceedings were in federal jurisdiction.

Cases challenging the constitutional validity of a tax, including a State tax, are, by virtue of section 76(i) of the Constitution, matters in federal jurisdiction.

Section 79 of the Judiciary Act applies State and Territory laws to proceedings in courts exercising federal jurisdiction in that State or Territory ‘except as otherwise provided by the Constitution or the laws of the Commonwealth’.

In the BAT case, the High Court held that a special limitation period applicable to actions against the Crown would be inconsistent with section 64 of the Judiciary Act as the limitation period would not apply as between subject and subject. As the law was inconsistent with section 64, it was ‘otherwise provided…by a law of the Commonwealth’ and so was not picked up by section 79 of the Judiciary Act.

It was also held that the right to proceed and related notice provision conferred by the State law was not picked up by section 79 of the Judiciary Act as it would have been inconsistent with section 39(2) of the Judiciary Act which implies a right to proceed.

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 imposes a 6-month restriction, as do the Northern Territory and the Australian Capital Territory.

This is an example of the Rudd Labor Government’s commitment to co-operative Federalism. The bill assists in restoring the States and Territories to the position it was thought they were in before the BAT case. It does so by amending section 79 of the Judiciary Act to make clear that nothing in the Judiciary Act precludes State and Territory laws applicable to the recovery of invalid State and Territory taxes from applying where the relevant proceedings are in federal jurisdiction.

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.

The bill implements recommendations of the Standing Committee of Attorneys-General which have as their objective the protection of State and Territory revenue. I commend this bill.