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Nomad Industries of Australia Pty. Ltd. v. Federal Commissioner of Taxation.

Judges:
Rogers J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 28 July 1983.

Rogers J.

With the establishment of the parallel system of Federal Courts, we have become used to submissions that a State Court has no jurisdiction, which, it is said, resides exclusively in the Federal Court. The present dispute adds a new twist to this argument. The primary submission for the Commissioner of Taxation is that Commonwealth legislation has divested the Supreme Courts of their former jurisdiction without conferring that jurisdiction on the Federal Court. The result it is said is that neither the Supreme Court nor the Federal Court have jurisdiction. There is a concession that the High Court has been permitted to retain its jurisdiction generally, but one of the arguments advanced, taken to its logical conclusion, would mean that in the present instance the High Court has no jurisdiction either. This drastic erosion of the citizen's rights to protection from the Executive, through the Courts, is said to have come about through an enactment, the stated purpose of which was to confer new rights of appeal and permit review of administrative actions by the Courts.

The submission I have mentioned has been advanced in support of a motion that the summons in this action be dismissed with costs. The amended summons seeks the following orders:

``1. A Declaration that the Nomad Courier Bag imported into Australia by the plaintiff and sold by it is within Item 96(1) of the First Schedule to the Sales

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Tax (Exemptions and Classifications) Act 1935;
  • `Goods of a kind used to wrap up or secure goods for marketing or delivery, namely: -
    • (a) wrapping material or bags consisting of paper, netting, flexible film or metallic foil, or of any combination of those materials;'.

Alternatively:

2. A Declaration that the Nomad Courier Bag imported into Australia by the plaintiff and sold with freight note affixed thereto by the plaintiff is within Item 96(1) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935:

  • `Goods of a kind used to wrap up or secure goods for marketing or delivery, namely: -
    • (a) wrapping material or bags consisting of paper, netting, flexible film or metallic foil, or of any combination of those materials;'.''

It would seem that the plaintiff is the importer of bags made from a material known as Tyvek. The bags are sold with an attached freight note under the name Nomad Courier Bags. As is evident from the terms of the summons, the plaintiff argues that the article is exempt from the provisions of the relevant sales tax legislation by reason of the Sales Tax (Exemptions and Classifications) Act 1935 (``the Exemptions Act'').

Whether or not the plaintiff's belief concerning its entitlement to exemption from sales tax is correct is not relevant for the purposes of the present motion. Suffice it to say that by a letter of 19th April 1982, it put its case for contending that the exemption provisions applied to Mr. Beddoe, the Senior Assistant Commissioner of Taxation. Correspondence ensued, but the Commissioner was not prepared to accept the claims of the plaintiff. Thereupon, on 20th December 1982, the plaintiff filed its summons in this Court, claiming the relief I have already set out; that summons was amended on 22nd March 1983.

The Commissioner's riposte was to file on 5th April 1983 the motion seeking a dismissal of the summons by reason of the alleged absence of jurisdiction in this Court. Thereupon, by consent, the proceedings were adjourned. The plaintiff did not wish to be involved in a sterile jurisdictional dispute as to whether this Court had jurisdiction or the Federal Court had jurisdiction. It simply wanted to know whether the Tyvek bags did or did not fall within the exemption. In their innocence its advisers assumed that if this Court could not give the answer the Federal Court could. However, in the view of the Commissioner of Taxation, life is not that simple. Prior to the institution of proceedings in the Federal Court, the plaintiff requested the Commissioner to furnish the reason for his decision, in the form of a statement as contemplated by sec. 13 of the Administrative Decisions (Judicial Review) Act 1977 (``the Act''). In his reply, the Commissioner outlined an argument that the Act had no application to the dispute between the parties, except insofar as it excluded the jurisdiction of the State Courts. Rather than to engage in yet another futile set of proceedings testing the jurisdiction of the Federal Court, the plaintiff wrote to the Commonwealth Crown Solicitor foreshadowing an application direct to the High Court. However, it wished to be indemnified in respect of the costs occasioned by the need to approach the High Court. The Commissioner felt able to rebuff the plaintiff in that request also.

In the result, then, the plaintiff returned to this Court and restored for argument the motion whereby the defendant questioned the jurisdiction of the Court.

Before turning to the provisions of the Act which found the basis for the opposing contentions, it is appropriate to refer briefly to the provisions of the Sales Tax Assessment Act (No. 6) 1930 (``the No. 6 Act'') and the Sales Tax Assessment Act (No. 1) 1930 (``the No. 1 Act''). The No. 6 Act imposes sales tax upon the sale value of goods imported into Australia by a taxpayer. Section 5 provides that where goods are imported into Australia by a registered person and sold by the importer to an unregistered person, or to a registered person who has not quoted his certificate in respect of the purchase of the goods, sales tax shall be paid by the

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importer. Section 6 excludes from liability to sales tax the sale value of goods, the sale value of which is exempt by reason of the Exemption Act. Section 7 requires the making of returns within twenty-one days after the close of the month in which sales are made. Section 8 entitles the Commissioner to call upon any person to furnish a return or a further or fuller return. Section 9 provides that every person liable to pay tax under sec. 5 shall, within twenty-one days after the close of the month of sale, pay sales tax upon the sale value. Section 10(2A) entitles the Commissioner to make an assessment where there is default in furnishing a return or the Commissioner is not satisfied with the return. Section 12 makes certain provisions of the No. 1 Act applicable.

Part VII of the No. 1 Act contains the provisions relating to objections and appeals. Section 41 provides for objections to be lodged by a taxpayer who considers ``that any amount upon which he is required to pay sales tax in respect of any goods is not the sale value of those goods as declared by this Act or who is dissatisfied with any assessment or decision made by the Commissioner under this Act by which the sale value of any goods is ascertained''. Section 42 provides for an appeal from disallowance of an objection to a Board of Review or to the Supreme Court, and makes provision for subsequent appellate steps.

It is necessary now to set out in some little detail applicable provisions of the Act. Section 3 contains the definitions:

```Court' means the Federal Court of Australia;

`decision to which this Act applies' means a decision of an administrative character made, proposed to be made, or required to be made, as the case may be (whether in the exercise of a discretion or not) under an enactment, other than a decision by the Governor-General, or a decision included in any of the classes of decisions set out in Schedule 1;.''

Section 3(2) gives an extended meaning to the expression ``the making of a decision'' by including in it, inter alia, making, suspending, revoking or refusing to make an order, award or determination; making a declaration, demand or requirement; and doing or refusing to do any other act or thing.

Section 5 provides for the Federal Court to review ``a decision to which this Act applies''. Section 6 provides for a review by the Federal Court of ``conduct for the purpose of making a decision to which this Act applies''. Section 7 provides for a review in respect of the failure to make a decision at all, or within the period specified by the enactment pursuant to which the decision is made, where it is ``a decision to which this Act applies''.

Section 9 I need to set out in full:

``9(1) Notwithstanding anything contained in any Act other than this Act, a Court of a State does not have jurisdiction to review -

  • (a) a decision to which this section applies that is made after the commencement of this Act;
  • (b) conduct that has been, is being, or is proposed to be, engaged in for the purpose of making a decision to which this section applies;
  • (c) a failure to make a decision to which this section applies; or
  • (d) any other decision given, or any order made, by an officer of the Commonwealth or any other conduct that has been, is being, or is proposed to be, engaged in by an officer of the Commonwealth, including a decision, order or conduct given, made or engaged in, as the case may be, in the exercise of judicial power.

(2) In this section -

  • `decision to which this section applies' means -
    • (a) a decision that is a decision to which this Act applies; or
    • (b) a decision of an administrative character that is included in any of the classes of decisions set out in Schedule 1, other than paragraphs (m) and (n);
  • `officer of the Commonwealth' has the same meaning as in paragraph 75(v) of the Constitution;
  • `review' means review by way of -

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    • (a) the grant of an injunction;
    • (b) the grant of a prerogative or statutory writ (other than a writ of habeas corpus) or the making of any order of the same nature or having the same effect as, or of a similar nature or having a similar effect to, any such writ; or
    • (c) the making of a declaratory order.

(3) For the purpose of this section, any decision given, or any order made, by a member, or a member of the staff, or a delegate, of the National Companies and Securities Commission, or any other conduct that has been, is being, or is proposed to be, engaged in by such a member or delegate, in the performance of a function, or the exercise of a power, conferred, or expressed to be conferred, upon the Commission by a State Act or a law of the Northern Territory shall be deemed not to be a decision given, or an order made or conduct that has been, is being or is proposed to be, engaged in, as the case may be, by an officer of the Commonwealth.

(4) This section does not affect -

  • (a) the jurisdiction vested in a court of a State by the Bankruptcy Act 1966;
  • (b) the jurisdiction conferred on the Supreme Court of a State by section 32A of the Federal Court of Australia Act 1976; or
  • (c) the jurisdiction of a Court of a State in respect of any matter that is pending before it at the commencement of this Act.''

Schedule 1 sets out classes of decisions which are by the definition in sec. 3 excluded from the category of ``decision to which this Act applies''. Relevantly for present purposes, cl. (e) of the Schedule details decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax or duty, or decisions disallowing objections to assessments or calculations of tax or duty under, inter alia, Acts No. 1 and 6.

It will at once be perceived that there are significant differences between the extent to which jurisdiction to review is conferred on the Federal Court and the jurisdiction of the State Courts is excluded by sec. 9. Thus whilst there is an exclusion of State jurisdiction by sec. 9(1)(a) in respect of a ``decision to which this section applies'', as defined in subsec. (2), it is only in respect of the category of matters in subsec. (2)(a) that jurisdiction is conferred upon the Federal Court by sec. 5. That is by reason of the definition of the phrase ``a decision to which this Act applies''. In other words, matters in sec. 9(2)(b) which are excluded from the jurisdiction of State Courts do not fall within sec. 5. The exclusion in sec. 9(1)(b) is again wider, and for the same reason, than the conferment of jurisdiction by sec. 6. The same comment is applicable to the exclusion contained in sec. 9(1)(c) when compared with the jurisdiction conferred by sec. 7. Finally, there is no grant of power to the Federal Court corresponding with the exclusion of State Court jurisdiction contained in sec. 9(1)(d).

The primary submission for the defendant was that the subject of the summons was a decision of an administrative character within Sch. 1(e). Accordingly it was excluded from the jurisdiction of State Courts by either sec. 9(1)(a), (b) or (c) being a ``decision to which this section applies'' by reason of the provisions of sec. 9(2)(b). Yet it was not within the jurisdiction of the Federal Court by reason of any of sec. 5, 6 or 7. I should mention, in parenthesis, that this is not the first time that such an unattractive proposition has been advanced on behalf of federal officers and the apparent catch-22 situation exposed. The same submission was put to Waddell J. in
Appliance Holdings Pty. Limited v. Lawson (unreported, 3rd May 1983), where in the circumstances there obtaining it succeeded. Alternatively it was submitted the same result followed because the matter was encompassed by sec. 9(1)(d) by which State jurisdiction was excluded without any power to review being conferred on the Federal Court.

Finally it was only as a much less appropriate and desired alternative that it was submitted that the subject of the summons was ``a decision to which the Act applied'' - that is, a sec. 9(2)(a) matter - and on this alternative the Federal Court was the forum having jurisdiction.

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On behalf of the plaintiff it was submitted that none of the provisions of sec. 9(1)(a), (b) or (c) could have any application, because there was not involved here any decision or conduct by the defendant for the purpose of making a decision which it was sought to have reviewed. The thrust of the submission was twofold: firstly it was submitted that there was no matter in relation to which a decision was required, called for, or permitted to be made by the defendant. This was by reason of the fact that the tax was imposed by the very terms of the provisions of the No. 6 Act. The provisions are self executing. No action of the Commissioner was required for the imposition of the liability. The issue of an assessment levying sales tax was in no way a condition precedent, or indeed necessary at all, for the liability to arise and for the Commissioner to proceed to collect the tax. Although, as I have said, sec. 10(2A) of the No. 6 Act permits the issue of an assessment, it is clear enough that that is purely discretionary, and in no wise associated with the liability arising.

The fundamental difference in this context between the No. 6 Act and the No. 1 Act on the one hand, and the provisions of the Income Tax Assessment Act are emphasised when it is perceived that in an action for recovery of sales tax, the defendant is entitled to challenge his liability to tax on any and all grounds, save for non-compliance with formality. This is made clear by the joint judgment in
D.F.C. of T. v. Hankin (1959) 100 C.L.R. 566. At p. 578 their Honours said:

``The result is that a taxpayer, who is dissatisfied with an assessment of the Commissioner, may refuse to pay the amount assessed, and, when he is sued by the Commissioner, may take any objection to the assessment other than the objection that some required formality has not been observed.''

It is only that last-mentioned matter that is made incontestable by sec. 39 of the No. 1 Act. Indeed, counsel for the plaintiff went further and submitted that the entire route of objection and appeal charted by Pt. VII of the No. 1 Act is inapplicable where what is claimed is an exemption from liability to sales tax by reason of the provisions of the Exemption Act. He supported this submission by reference to a number of decisions of the Board of Review, culminating in the decision in Case C69, 71 ATC 305 at p. 310. The authorities are set out in the judgment of Davies J., sitting in the Administrative Appeals Tribunal, in
Qantas Airways Ltd. v. D.F.C. of T. (W.A.) 79 ATC 108. Certainly this additional step in the plaintiff's argument is not beyond question. However, it is unnecessary to the main argument. The essential submission was, that all that the defendant did and was permitted to do was to express a view as to the applicability of the legislation, and it was thereafter for a State Court to determine, in an action for recovery of the sales tax, brought in a Court of appropriate jurisdictional limit, whether or not there was a liability. There was thus no room for any ``decision'' to be made by the Commissioner, and therefore no room for the Commissioner to engage in conduct leading to or for the purpose of making a ``decision''. In any event even if the Commissioner could make a relevant ``decision'', for example, to issue an assessment or to institute proceedings for recovery of the tax, in the present case, he had not done so. He simply expressed his view as to the correct interpretation of the Exemption Act. As a matter of law that had no effect whether as a sword or a shield. The Commissioner could not be held to that view if he wished to change his mind, nor yet did his view, if incorrect, make the tax payable.

Counsel for the plaintiff has referred me to what fell from Ellicott J. in
Ross v. Costigan (1982) 41 A.L.R. 319 at p. 331.

``Questions could arise as to whether the respondent has yet made `a decision'. In relation to the Act it may well be that the word `decision', means an ultimate or operative determination not a mere expression of opinion or a statement which can of itself have no effect on a person (cf.
Director-General of Social Services v. Chaney (1980) 31 A.L.R. 571; 3 A.L.D. 161 per Deane J. at pp. 590-593 (A.L.R.); pp. 178-179 (A.L.D.)). Section 3(3) also assists this view. If this be correct it could be argued that the respondent's ruling of 4 March and possibly his decisions to issue summonses are not `decisions' within the meaning of the Act.''

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For completeness, I mention that no demand for payment was made by the Commissioner (cf.
Director-General of Social Services v. Hangan (1982) 45 A.L.R. 23 especially at p. 46).

Counsel for the defendant submitted that what the Commissioner said in his letter amounted to a ``decision'', otherwise the question submitted to the Court would be a purely hypothetical one. That is in my view an incorrect conclusion. Contentions or opposing viewpoints may proffer a dispute for resolution by the Courts without need for a ``decision'' being made by either party. It is sufficient for the contestants to embrace opposite views of the proper construction or application of a statutory provision. Thus, for example, a vendor and purchaser may seek a declaration as to the applicability or otherwise of land tax legislation. Neither of them has any power to make a ``decision''. In my view there was here no decision within the meaning of sec. 9 of the Act.

This left the problem of the meaning to be ascribed to sec. 9(1)(d). Even if what the defendant did was not a decision given or an order made, was it ``any other conduct that has been... engaged in by an officer of the Commonwealth''? Now there is no doubt that the defendant is an officer of the Commonwealth. Taken at its widest, there is no boundary to the expression ``any other conduct''. By reason of the word ``other'', the conduct obviously is something wider than the conduct referred to in sec. 9(1)(b). By reason of the concluding words of the subsection, it need not be conduct in the course of decision-making of an administrative character. It need not be conduct ``under an enactment'' (see sec. 3(1), definition of ``decision to which this Act applies''). Thus, it may be conduct of an officer of the Commonwealth in relation to some contractual obligation (see, for example,
Australian National University v. Burns (1982) 43 A.L.R. 25). One asks, where does the width of the provision stop? Is the method of driving a post office truck excluded from the supervision of State Courts? Is the discharge of a firearm in a public street by a Commonwealth officer excluded from supervision by a State Court? To allow for the functioning of an orderly society there must be some further restriction on the operation of sec. 9(1)(d) than merely the requirement that the conduct be that of an officer of the Commonwealth. One must recognise and pay proper regard to the evident wish of the Federal Parliament to place the governmental and judicial conduct of its affairs beyond the reach of the State Courts. However, it cannot be thought that the freedom conferred extends to complete licence from the supervision of all Courts in all aspects of conduct simply by wearing the appointment of a Commonwealth officer.

It is unnecessary in the present case to determine what are the outer parameters of the reach of the provision. In my view it is entirely inapposite to say that the declarations sought in the present case constitute a ``review'' of conduct engaged in by a Commonwealth officer. Whilst I accept that the word is one of wide meaning, as suggested by Waddell J., and normally extends to ``any process of examining the correctness of a decision or of any conduct'', it seems to me to be a misuse of language to say that a declaration as to the application of a statutory provision is a ``review'' of the conduct of a particular person.

The foregoing in essence represents a restatement of the view which I expressed earlier in the year in
Clyne v. D.F.C. of T. 83 ATC 4001. What the summons seeks is a statement from the Court by way of declaration as to the existence or otherwise of a liability imposed by the law. As I have sought to show, no decision of the Commissioner, no conduct of the Commissioner, has anything to say, any role to play, in the answer to be returned to that question. The liability will neither be greater nor smaller, will neither arise nor be extinguished, the time at which liability arises is not fixed, and it is in no wise affected by anything which the Commissioner may do or omit to do. Thus to enunciate judicially by means of a declaratory order that there is no liability does not, in my view, constitute a ``review'' of any relevant matter. This conclusion adopts the second arm of the submissions advanced by the plaintiff.

On behalf of the defendant it was submitted that there was no power in this Court to grant the relief sought by the summons, for yet another reason, unrelated to the provisions of the Act. It was submitted that, whilst it is true that the Commissioner

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of Taxation is, for the purposes of sec. 75(iii) of the Constitution, the Commonwealth, and sec. 39(2) of the Judiciary Act 1903 confers original jurisdiction on State Courts in matters against the Commonwealth, there is nonetheless no substantive law which in the instant case may be applied in the exercise of that jurisdiction. Section 56 of the Judiciary Act only relates to actions in contract or in tort. In other words, it is said, the jurisdiction conferred remains an empty vessel, except insofar as actions in contract or in tort are concerned.

The same submission was put to Yeldham J. in
Australian Airport Services Pty. Ltd. v. Commonwealth 10 A.L.R. 167. His Honour held that in the matter before him, which, like the present, did not involve a matter of contract or tort, there was jurisdiction ``as a matter of procedure, derived from sec. 39(2) of the Judiciary Act and sec. 75 of the Constitution and that, the Commonwealth in those circumstances being properly before the Court, there is power to make a declaration under sec. 75 of the Supreme Court Act, 1970'' (p. 172). His Honour followed the majority judgment of the High Court in
Commonwealth v. New South Wales (1923) 32 C.L.R. 200, notwithstanding the heavy criticism, judicial and academic, to which that decision has been subjected.

I am content to follow his Honour in the path he charted. However, in addition, I think it is possible to hold that there is power to make declarations of the kind sought, by reason of the combined work of sec. 78 of the Constitution and sec. 64 of the Judiciary Act. In
Maguire & Anor. v. Simpson & Ors. (1976-1977) 139 C.L.R. 362, members of the Court held that sec. 64 of the Judiciary Act conferred substantive rights, not merely procedural rights. The relevant passages from the judgments are set out in the judgment of Cantor J. in
Strods v. Commonwealth of Australia (1982) 2 N.S.W.L.R. 182. Those provisions also appear to me to be sufficient to confer power to grant declaratory relief otherwise than in actions in contract and in tort.

I might add that the objection which the fertile mind of counsel for the defendant has constructed was one which did not occur either to counsel or to Gobbo J., the trial Judge, in
Downland Publications Ltd. v. D.F.C. of T. 82 ATC 4093, or the Full Court of the Supreme Court of Victoria, 82 ATC 4617, or the High Court of Australia, 83 ATC 4137. As Gobbo J. said (p. 4094):

``It was common ground that the procedure by way of declaration was an appropriate one... The sole issue was whether or not the publication Best Bets was exempt.''

In my opinion there is jurisdiction in this Court to make the declarations sought if they are otherwise appropriate. It was finally submitted on general grounds that no declaratory relief was available in the present case. Counsel for the defendant pointed to the objection and appeal provisions of the No. 1 Act. He then drew attention to the judgment of Murphy J. in
F.J. Bloemen Pty. Ltd. v. F.C. of T. 81 ATC 4280; (1980-1981) 147 C.L.R. 360 to the effect that the objection and appeal provisions in the Income Tax Assessment Act deprived the Court of jurisdiction to give declaratory relief. However the provisions of the No. 1 Act are substantially less expansive. Further the other members of the High Court took the view that the question was not one of jurisdiction but merely calling for the exercise of discretion.

I accordingly dismiss the motion and order the applicant defendant to pay the respondent plaintiff's costs. If there is no appeal taken from this decision within twenty-eight days, the matter is to be listed before Lee J. so that a date for hearing of the summons may be given.


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