Deputy Federal Commissioner of Taxation v. Moorebank Pty. Ltd.Judges:
Full High Court
Mason C.J., Brennan, Deane, Dawson and Gaudron JJ.
The issue raised by this appeal is essentially one of statutory construction. It is whether the effect of sec. 64 of the Judiciary Act 1903 (Cth) is to apply limitation periods imposed by the Limitation of Actions Act 1974 (Qld) (``the Queensland Act'') to an action brought by a Commonwealth Deputy Commissioner of Taxation in the Supreme Court of Queensland for recovery of income tax and ``additional tax'' payable under the provisions of the Income Tax Assessment Act 1936 (Cth) (``the Assessment Act'').
The income tax which the Deputy Commissioner claims in the present case is in respect of income earned during the tax years ended 30 June 1974, 1975 and 1976. The additional tax is for non-payment of that income tax (the Assessment Act, sec. 207). In its defence, the respondent taxpayer (``Moorebank'') pleaded what Connolly J. described in the Supreme Court [reported at 86 ATC 4561] as ``as many conceivable grounds of defence as the ingenuity of the pleader could devise''. Among them were pleas to the effect that the Deputy Commissioner's claim was wholly or partly barred by applicable provisions of the Queensland Act. The Deputy Commissioner demurred to a number of those defences, including those based on the Queensland Act. The demurrer to the Queensland Act defences was overruled by the Full Court of the Supreme Court (Connolly and
ATC 4445McPherson JJ.; Derrington J. dissenting). The present appeal to this Court is from the decision and judgment of the Full Court in that regard. It is common ground that, if the relevant provisions of the Queensland Act are applicable to bar the Deputy Commissioner's claim in the Supreme Court, the demurrer was correctly overruled for the reason that, if that be so, the pleas of the Queensland Act would constitute a full answer to the Deputy Commissioner's claim for income tax and a partial answer to the claim for additional tax. It is also common ground that the relevant provisions of the Queensland Act are not directly so applicable and that, if (as Moorebank argues) they are indirectly applicable, it must be by virtue of the operation of sec. 64 of the Judiciary Act.
Each of the judgments in the Supreme Court contains a careful analysis of the interaction between the relevant provisions of the Queensland Act. It is unnecessary for the purposes of the appeal to this Court to set out those provisions or to re-examine their internal relationship or overall effect. For reasons which will appear, it suffices to approach the matter on the assumption that the Full Court was correct in upholding Moorebank's contentions that an action for recovery of unpaid income tax would, in a suit between subject and subject in the Supreme Court of Queensland, be ``an action to recover a sum recoverable by virtue of [an] enactment'' to which a limitation period of six years ``from the date on which the cause of action arose'' would be applicable under the Queensland Act (sec. 10(1)(d)) and that an action to recover additional tax would, in such a suit, be ``[a]n action to recover a penalty'' to which a limitation period of ``two years from the date on which the cause of action accrued'' would be applicable (sec. 10(5)).
Section 64 of the Judiciary Act reads:
``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.''
Plainly enough, the proceedings by the Deputy Commissioner in the present case are, for the purposes of the section, a ``suit to which the Commonwealth... is a party'' (cf.
Naismith v. McGovern (1953) 90 C.L.R. 336). That being so, the provision of the section is prima facie applicable to prescribe that ``the rights of [the] parties shall as nearly as possible be the same'' as in a suit between subjects. The question which arises is whether the effect of that provision is to apply to the present proceedings the limitation periods which would be applicable if the Deputy Commissioner's action for unpaid tax and additional tax were, if that were possible, brought in the Supreme Court of Queensland by a subject. The conclusion which we have reached is that that question must be answered in the negative for the reason that the provisions of the Assessment Act themselves preclude any operation of sec. 64 which would have that effect. We turn to explain our reasons for that conclusion.
Although, in some respects, sec. 64 plays a pivotal role in the federal legal system, it is important to remember that the section enjoys no special authority among the statutes of the Commonwealth. It is neither a constitutional provision nor an entrenched law. Its authority is that of an Act of the Parliament which can be expressly or impliedly amended or repealed, either wholly or in part, by a subsequent Act and whose application or operation to or with respect to cases falling within the provisions of a subsequent Act will be excluded to the extent that such application or operation would be inconsistent with those subsequent statutory provisions (see, e.g.
Goodwin v. Phillips (1908) 7 C.L.R. 1 at p. 7). More important for present purposes, the operation of sec. 64 in a particular case must be ascertained in the context of the general nature and function of that section.
Dao v. Australian Postal Commission (1987) 162 C.L.R. 317, which was delivered after the judgment of the Full Court of the Supreme Court in the present case and the judgment of the New South Wales Court of Appeal in
D.T.R. Securities Pty. Ltd. v. D.F.C. of T. 87 ATC 4156; (1987) 8 N.S.W.L.R. 204, this Court was at pains to stress that the provisions of sec. 64 of the Judiciary Act cannot properly be construed as intended indirectly to apply the provisions of a State law to circumstances where the direct application of the State law would be invalidated by operation of sec. 109 of the Constitution by reason of inconsistency with applicable provisions of a law of the Commonwealth. As the Court pointed out (at p. 331):
``To attribute to s. 64 [that] effect... would be to construe the words of that section as disclosing a general legislative intent to finesse or sidestep that prior question of constitutional invalidity by reason of inconsistency and effectively to override, for the purposes of `any suit to which the Commonwealth... is a party', a constitutional provision [i.e. sec. 109] of great importance. We are unable to discern any such legislative intent in either the general or qualified (`as nearly as possible') words of s. 64.''
The Court went on to explain (at pp. 331-332) the general nature and function of sec. 64 in words which bear repetition:
``That section was intended to fill what would otherwise be lacunae or gaps in the law of the Commonwealth. It is not to be understood as intended to have the practical effect of overriding s. 109 of the Constitution by indirectly applying a provision of a law of a State to circumstances to which its direct application is invalidated by reason of inconsistency with a provision of an existing law of the Commonwealth. A fortiori, s. 64 should not be construed as intended to manufacture a new kind of indirect inconsistency between a provision of a State law and a provision of a law of the Commonwealth by applying a provision of a State law to a situation to which it does not purport to apply in circumstances where, if rendered directly applicable, it would be relevantly inconsistent with the direct operation of the provision of the law of the Commonwealth. Rather, the section should and must be construed as intended to extend a litigant's rights in a suit in particular circumstances only if, and to the extent that, there be no directly applicable and inconsistent (in the relevant sense) Commonwealth law already regulating those circumstances.''
In particular, where a Commonwealth legislative scheme is complete upon its face, sec. 64 will not operate to insert into it some provision of State law for whose operation the Commonwealth provisions can, when properly understood, be seen to have left no room. Accordingly, the question arises whether the relevant provisions of the Assessment Act have effectively covered the field and left no room for the direct or indirect intrusion of provisions of State Limitation Acts to limit the time in which an action can be brought on behalf of the Commissioner of Taxation for unpaid income tax or additional tax. It can be said at once that the provisions of the Assessment Act dealing with liability for and recovery of additional tax are so dependent upon and interwoven with the provisions dealing with liability for and recovery of income tax that it is plain that there will be no room for the application of State limitation provisions to limit recovery of additional tax if there is no room for the application of such provisions in relation to the recovery of income tax.
The Assessment Act was enacted by the Parliament in reliance upon its legislative power with respect to taxation (Constitution, sec. 51(ii)). That legislative power is confined by the express requirement of sec. 51(ii) that it be not exercised ``so as... to discriminate between States or parts of States''. In that context, it is not surprising that the general scheme of the Act is to define the obligations and liabilities of taxpayers in respect of income tax and additional tax in comprehensive terms which apply generally throughout the Commonwealth and which, subject to presently irrelevant exceptions (see, e.g. sec. 221C(1AA)), apply to all taxpayers regardless of the State in which they live or in which income is derived or proceedings for recovery are brought. It would be surprising if, within that general scheme, there was room left for the application of whatever the laws of a particular State might provide in relation to barring an action to recover unpaid income tax or additional tax or, in the case of some States, in relation to extinguishing the underlying right and title of the prospective plaintiff in an action for recovery of such taxes (cf., e.g. Limitation Act 1969 (N.S.W.), sec. 63(1)). In that regard, it is relevant to note that it has long been recognised that to speak of even traditional limitation provisions as merely ``procedural'' or as ``barring the remedy and not the right'' is misleading in that such provisions will, at least in some circumstances, entail consequences which are substantive in that, by barring the remedy, they will effectively extinguish both rights and liabilities (see, e.g. In
re Hepburn; Ex parte Smith (1884) 14 Q.B.D. 394, at pp. 399-400). It is unnecessary to determine whether the express requirement of sec. 51(ii)
ATC 4447precluding discrimination between States would be infringed if the Assessment Act left room for sec. 64 of the Judiciary Act to apply different State limitation of actions laws to bar an action by the Commonwealth for recovery of unpaid income tax and additional tax according to the identity of the particular State in which proceedings happened to be brought, with the consequence that the citizen of one State might be effectively immune from action for unpaid income or additional tax after a short period while a citizen of another State might enjoy no such immunity. The reason why it is unnecessary to determine that question is that examination of the relevant provisions of the Assessment Act in the form which they bore at relevant times discloses that they left no room for such an application of sec. 64.
The essential provisions of the Assessment Act for present purposes are to be found in Div. 1 of Pt VI. Under those provisions, income tax is made ``a debt due to'' the Commonwealth (sec. 208). ``Any tax unpaid may be sued for and recovered in any Court of competent jurisdiction'' (sec. 209). Income tax assessed ``shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable'' (sec. 204). The Commissioner may, however, ``in any case'' grant such extension of time for payment of tax, or permit payment of tax to be made by such instalments and within such time ``as he considers the circumstances warrant; and in such case the tax shall be due and payable accordingly'' (sec. 206). If any due and payable tax remains unpaid, additional tax becomes payable, by the person liable to pay the tax, at the specified annual percentage rate (formerly 10 per cent but now 20 per cent) computed from the time when the unpaid tax became due and payable or, where an extension of time has been granted, ``from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable'' (sec. 207).
It can be argued that a provision of a State Limitation Act precluding the bringing of an action for unpaid income tax (or additional tax) after the expiry of six years (or two years) from the date on which the cause of action arose (or accrued) is directly inconsistent with the express provision of the Assessment Act (sec. 209) that any unpaid tax may be recovered in any court of competent jurisdiction by the Commissioner. We are not, however, persuaded that there is necessarily any direct inconsistency between a provision, such as sec. 209, conferring a right of action and recovery and a Limitation Act provision limiting the period in which such a right of action and recovery might be pursued. On the other hand, when one examines the general scheme of the Assessment Act provisions providing for collection and recovery of tax, it appears to us to be clear that there is no room for the importation into them of such State Limitation Acts provisions. The provisions of the Assessment Act relevantly cover the field. Indeed, the intrusion of State Limitation Acts provisions would significantly undermine the scheme for collection and recovery of tax which is contained in the Assessment Act. Thus, for example, sec. 206 of the Assessment Act authorises the Commissioner ``in any case [to] grant such extension of time for payment... as he considers the circumstances warrant'' and provides that ``in such case the tax shall be due and payable accordingly''. That power to grant an extension of time ``in any case'' plainly extends to the case where tax has already become due and payable with the result that the right of action to recover the tax has already arisen or accrued. The intrusion of a State Limitation Act provision which, according to its terms, barred recovery after the expiry of a specified time from the date on which the cause of action ``arose'' or ``accrued'' (see, e.g. the Queensland Act, sec. 10(1)(d) and (5)) or ``first accrues'' (see, e.g. Limitation Act 1969 (N.S.W.), sec. 14(1) and 18) would be incompatible with the existence of such a broad discretionary power. If, in such a case, the Commissioner granted an extension of time until after the expiry of the relevant limitation period from the date on which the right of action for recovery of the tax ``arose'' or ``accrued'' or ``first accrues'', the application of a State Limitation Act provision to bar recovery in accordance with the extension of time would be inconsistent with the provisions of the Assessment Act to the effect that the tax should be then due and payable (sec. 206) and that any tax unpaid may be sued for and recovered in any court of competent jurisdiction (sec. 209). If the application of the State limitation provision was not excluded, the result would be that the general discretion conferred upon the Commissioner was
ATC 4448effectively confined to preclude the grant of any extension of time beyond the limitation of action period since, if an extension of time beyond that period were granted, the tax would be irrecoverable at the time when it became due and payable in accordance with the extension.
The intrusion of State Limitation Acts provisions would undermine other aspects of the coherent scheme which the Assessment Act embodies. The intrusion of such provisions would, for example, lie ill indeed with the Assessment Act provisions pursuant to which income tax and additional tax become and remain due and payable notwithstanding that an objection to payment of the tax has been lodged and the appellate procedures for challenging an assessment have been invoked (sec. 201). There will inevitably be cases in which it would be oppressive for the Commissioner to seek to enforce payment of the full amount due under a notice of assessment or by way of additional tax before the final resolution of a genuine dispute about the correctness of the assessment (cf.
D.F.C. of T. v. Australian Machinery and Investment Company Pty. Ltd. (1945) 8 A.T.D. 133;
Marina Estates Pty. Ltd. v. D.F.C. of T. 74 ATC 4166; (1974) 48 A.L.J.R. 219). A case in which the Commissioner issues a number of assessments on an alternative basis to different taxpayers in respect of the same income provides an obvious example. Viewed as a whole, the provisions of the Assessment Act relating to the procedures for challenging the correctness of an assessment leave no room for the applicability of a State law which would produce the consequence that, in a case where a genuine dispute about the correctness of the assessment remained unresolved against the particular taxpayer at the expiry of the relevant limitation period, the Commissioner would be barred from recovering income tax or additional tax if he had refrained from instituting separate proceedings for recovery of the tax.
Another example of potential conflict which would be involved in the application of State limitation provisions is to be found in the provisions of the Assessment Act dealing with the amendment of assessments. Those provisions contain their own carefully structured time restrictions upon the power of the Commissioner to issue an amended assessment (see, in particular, sec. 170). In some circumstances, the Commissioner is expressly empowered to issue an amended assessment at any time (see, e.g. sec. 170(1) and (6)). It would scarcely be consistent with the general scheme to be discerned in the Assessment Act for a limitation provision to intrude to bar an action for, or to extinguish the underlying right or title to, the income tax payable in respect of particular income in circumstances where, under the express provisions of the Act, the Commissioner remained free to issue an amended assessment in respect of the whole or part of that very income.
The conclusion that the relevant provisions of the Assessment Act leave no room for the intrusion of limitation provisions to bar the right of a Commissioner or a Deputy Commissioner to recover unpaid income tax and additional tax necessarily involves the consequences that Moorebank's pleas based on the Queensland Act were bad and that the Deputy Commissioner's demurrer to those pleas should have been upheld. That being so, it is unnecessary to determine whether the assumptions made (see above) about the proper construction and effect of the Queensland Act are correct. Nor is it necessary to consider whether, and if so to what extent, the provisions of sec. 64 of the Judiciary Act are, in any event, ineffective to apply the provisions of State laws in circumstances where their application would interfere with the discharge of an essentially governmental function such as the collection of taxes.
The appeal should be allowed and the order of the Full Court of the Supreme Court of Queensland should be varied so as to uphold with costs the Deputy Commissioner's demurrer to each of the pleas based on the Queensland Act. At this stage, the matter should be adjourned to enable the parties to agree upon the precise content of formal orders to dispose of both this appeal by Moorebank and of the various associated appeals from the Full Court of the Supreme Court of Queensland which are in the list awaiting the outcome of this appeal. In accordance with the conditions upon which special leave to appeal was granted, the Deputy Commissioner must pay the taxpayer's costs of the appeal to this Court. In all the circumstances, the order for costs made in the Full Court should be left undisturbed.