Decision impact statement

Forsyth v Deputy Commissioner of Taxation

Venue: High Court
Venue Reference No: S543/2005
Judge Name: Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ
Judgment date: 1 March 2007
Appeals on foot:
N/A

Impacted Advice

Relevant Rulings/Determinations:

• None

Subject References:
ambulatory
amount payable
court of competent jurisdiction
penalty

Précis

Outlines the Tax Office's response to this case which concerned whether the District Court of NSW had jurisdiction, at the relevant time, to deal with a tax-related debt recovery matter.

Courts and judges - Federal jurisdiction in State courts - Whether s 39(2) of the Judiciary Act 1903 (Cth) conferred jurisdiction on the District Court of New South Wales to hear and determine an action to recover a penalty under the Income Tax Assessment Act 1936 (Cth).

Federal jurisdiction in State courts - Limitations on the jurisdiction of State courts - Whether s 44(1)(a) of the District Court Act 1973 (NSW) was a limit on the jurisdiction of the District Court of New South Wales within the meaning of the Judiciary Act 1903 (Cth).

Federal jurisdiction in State courts - Statutory interpretation - s 44(1)(a) of the District Court Act 1973 (NSW) gave the District Court of New South Wales jurisdiction to hear and dispose of certain classes of actions - Whether s 44(1)(a) should be given an ambulatory or fixed time construction.

Statutory interpretation - Subsequent regulatory change - s 44(1)(a) of the District Court Act 1973 (NSW) defined the jurisdiction of the District Court of New South Wales by reference to the allocation of work between the Divisions of the Supreme Court of New South Wales - Whether a subsequent reallocation of work between the Divisions of the Supreme Court of New South Wales alters the jurisdiction of the District Court of New South Wales.

Brief summary of facts

The taxpayer appealed to the High Court on the basis that the NSW Court of Appeal erred in deciding that the District Court of NSW had jurisdiction, at the relevant time, to hear and determine the tax-related debt recovery matter.

Issues decided by the court

Did the District Court have jurisdiction invested by section 39(2) of the Judiciary Act 1903 to hear and determine an action by the Deputy Commissioner against the appellant to recover a penalty imposed by the Income Tax Assessment Act 1936?

The High Court held by a majority of 6 to 1 that the District Court did have jurisdiction.

Tax Office view of Decision

The High Court's decision means that judgments entered by the NSW District Court during the period 1 August 2000 to 26 November 2004 are valid. It should be noted that the decision is not relevant for judgments entered into before 1 August 2000 and after 26 November 2004 where there was no doubt about the District Court having the relevant jurisdiction.

Administrative Treatment

Pending the High Court's decision in Forsyth, the Tax Office deferred legal recovery action in a small number of NSW cases that were potentially affected by this matter.

Now that the decision has been handed down, the Tax Office will adopt the following procedure for finalising those cases where legal recovery action was deferred and the tax-related debt remains outstanding:

1.

Telephone each taxpayer, explain the current legal position and propose that the taxpayer enter into a payment arrangement;

2.

Decide, on a case by case basis, whether remission of the general interest charge is appropriate;

3.

Decide, on a case by case basis, whether not pursuing judgment interest is appropriate;

4.

Where a taxpayer cannot be contacted by phone on three separate occasions, a letter will be sent to the taxpayer proposing that a payment arrangement be entered into within 21 days;

5.

In the event that the taxpayer does not agree to enter into a payment arrangement, legal action will continue / commence as appropriate.

Implications on current Public Rulings & Determinations

None

Implications on Law Administration Practice Statements

None

Court citation:
[2007] HCA 8
(2007) 233 ALR 254
(2007) 231 CLR 531
2007 ATC 4278
64 ATR 573

Legislative References:
Income Tax Assessment Act 1936 (Cth)
Part VI, Division 9, Subdivision B
Part VI, Division 2 (repealed)

Judiciary Act 1903 (Cth)
39(2)

Taxation Laws Amendment Act (No 3) 1998 (Cth)
The Act

Courts Legislation Further Amendment Act 1998 (NSW)
The Act

District Court Act 1973 (NSW)
44(1)

Case References:
Forsyth v Deputy Commissioner of Taxation
(2004) 62 NSWLR 132
2005 ATC 4025
58 ATR 178

Le Mesurier v Connor
(1929) 42 CLR 481

Minister for Army v Parbury Henty & Co; Carrier Air Conditioning Ltd. Brickworks Ltd v Minister for Army
(1945) 70 CLR 459

Deputy Commissioner of Taxation v Woodhams
(2000) 199 CLR 370
2000 ATC 4141
43 ATR 757

Pelechowski v Registrar, Court of Appeal (NSW)
(1999) 198 CLR 435

Vale v TMH Haulage Pty Ltd
31 NSWLR 702

Victor Chandler International Ltd v Customs and Excise Commissioners
[2000] 1 WLR 1296
[2000] 2 All ER 315

CIC Insurance Ltd v Bankstown Football Club Ltd
(1997) 187 CLR 384