Federal Commissioner of Taxation v. Malouf.

Judges:
Lockhart J

Court:
Federal Court

Judgment date: Judgment handed down 22 September 1987.

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Lockhart J.

The recent transfer of jurisdiction in tax matters from the Supreme Courts of the States and Territories to the Federal Court has led to the question which arises in this case. The question is whether the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987 ("the Jurisdiction of Courts Act") (No. 23 of 1987) operates to transfer from the Supreme Courts to the Federal Court appeals from decisions of Boards of Review which had been brought to Supreme Courts before 1 September 1987 (the "commencement day" of the Jurisdiction of Courts Act), but the hearing of which had not then begun.

This question arises in two other cases which were argued on the same day as this case was argued. It appears that there are about six or seven more cases throughout Australia which raise the same question.

The question is essentially one of interpretation of sec. 4(3) of the Jurisdiction of Courts Act which, so far as relevant, provides:

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"(3) Where, under a provision of a relevant tax law as in force before the commencement day, a decision on an objection, or an objection, had been forwarded to a Supreme Court but the hearing, other than an interlocutory hearing, of proceedings in respect of the decision or objection had not begun before the commencement day -

• (a) the proceedings are, by force of this Act, transferred to the Federal Court of Australia on the commencement day;
• ..."

Section 4(1) defines certain of the terms used in sec. 4(3), in particular the following:

"`relevant tax law' means -

• (a) the Bank Account Debits Tax Administration Act 1982;
• (b) the Estate Duty Assessment Act 1914;
• (c) the Fringe Benefits Tax Assessment Act 1986;
• (d) the Gift Duty Assessment Act 1941;
• (e) the Income Tax Assessment Act 1936;
• (f) an Act providing for the assessment of sales tax;
• (g) the Taxation (Unpaid Company Tax) Assessment Act 1982; or
• (h) the Trust Recoupment Tax Assessment Act 1985.

`Supreme Court' means the Supreme Court of a State or of the Northern Territory or the Australian Capital Territory."

The word "objection" is defined, but nothing turns on this for present purposes.

If a decision of a Board of Review from which an appeal was brought to a Supreme Court before 1 September 1987 answers the description of "a decision on an objection, or an objection" which "had been forwarded to a Supreme Court" it will be a proceeding transfered to the Federal Court by the operation of sec. 4(3).

Federal tax legislation has always recognised a dichotomy, in respect of the Commissioner's decision on a taxpayer's obligation, between a right of review and a right of appeal: the right of a taxpayer to seek a review by an administrative tribunal on the one hand and his alternative right of appeal to a superior court on the other. Until 1 July 1986 (a date the significance of which I shall mention later), the right to seek a review by a Board of Review was expressed in relevant Acts in different terms from those in which the right of appeal to a court were expressed. The relevant Acts conferred on a taxpayer a right to request the Commissioner either "to refer the decision to a Board of Review; or to treat his objection as an appeal and to forward [it]... to the... Court".

The Federal Parliament has from time to time vested various Australian courts with jurisdiction to hear tax matters. Prior to the Income Tax Assessment Act (No. 3) 1973 (Act No. 53 of 1973) coming into operation on 18 June 1973 a taxpayer's right of appeal to a court lay to the High Court or to the Supreme Court of a State (sec. 187). By the Act of 1973 the taxpayer's right of appeal was confined to "the Supreme Court of a specified State". "Supreme Court" was defined by sec. 184A as meaning the Supreme Court of a State or of the Australian Capital Territory or of the Northern Territory. Also, the Commissioner or the taxpayer was thereafter entitled to appeal, not to the High Court from any decision of the Board which involved a question of law, but only to the Supreme Court of a State: sec. 196. The Commissioner or the taxpayer was entitled, by leave of the High Court, to appeal to the High Court against a decision of the Supreme Court of a State on an appeal under sec. 196.

The Federal Court was established by the Federal Court of Australia Act 1976 and it gave effect to the Federal Parliament's intention to interpose the Federal Court between the Supreme Courts of the States and the Territories and the High Court as an intermediate court of appeal in tax matters. The Income Tax Assessment Amendment (Jurisdiction of Courts) Act 1976 (No. 165 of 1976) was enacted to give effect to that intention.

The Income Tax Assessment Act 1936 ("the Assessment Act") has been amended from time to time including amendments made by the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 (Act No. 48 of 1986) ("the 1986 Act") which amended various taxing statutes including the Assessment Act. The 1986 Act came into operation on 1 July 1986. Part X of the 1986 Act related to amendments to the Assessment Act. Broadly

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speaking, what it did was to substitute the Administrative Appeals Tribunal ("the Tribunal") for the Boards of Review as the body with jurisdiction to review decisions on objections disallowed by the Commissioner. Section 187 of the Assessment Act was amended. Prior to the amendment by the 1986 Act sec. 187(1) read:

"187(1) A taxpayer dissatisfied with the decision [on an objection] may, within 60 days after such service, in writing request the Commissioner either -

• (a) to refer the decision to a Board of Review for review; or
• (b) to treat his objection as an appeal and to forward it to a specified Supreme Court."

Section 187, as amended by the 1986 Act, reads as follows:

"187 A taxpayer who is dissatisfied with a decision under section 186 on an objection by the taxpayer may, within 60 days after service on the taxpayer of notice of the decision, lodge with the Commissioner, in writing, either -

• (a) a request to refer the decision to the Tribunal; or
• (b) a request to refer the decision to a specified Supreme Court."

The different language in which a taxpayer's right to proceed either to a Board of Review or a Supreme Court was cast was removed by the 1986 Act and replaced by substantially similar language, i.e. "a request to refer the decision to" the Tribunal or a Supreme Court as the case may be.

Section 4(3) of the Jurisdiction of Courts Act uses precise language to specify the proceedings which it transfers to the Federal Court reflecting the language of the sections of the Assessment Act (and of other relevant tax laws) which from time to time have conferred rights of appeal direct to courts from decisions of the Commissioner on objections: the words "a decision on an objection" having been "forwarded to a Supreme Court" being apt to describe a taxpayer's right of appeal to a Supreme Court after 1 July 1986; and the words "an objection" having been "forwarded to a Supreme Court" being apt to describe a taxpayer's right of appeal to a Supreme Court before that date.

Section 4(2) of the Jurisdiction of Courts Act should be mentioned. It provides:

"4(2) Where, under a provision of a relevant tax law in force before the commencement day -

• (a) the Commissioner of Taxation had received a request to refer a decision on an objection to a Supreme Court; or
• (b) the Commissioner of Taxation had received a request to treat an objection as an appeal to a Supreme Court and the request was, under section 226 of the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986, treated as a request to refer the decision on the objection to a Supreme Court.

and the request had not been forwarded to a Supreme Court before the commencement day, the request shall, on and after the commencement day, be treated as a request to refer the decision on the objection to the Federal Court of Australia."

The language of para. 4(2)(a) echoes the language of para. 187(b) of the Assessment Act after the amendments made by the 1986 Act where the taxpayer's request is described as "a request to refer the decision to a specified Supreme Court".

Paragraph 4(2)(b) is designed to deal with cases where the taxpayer has requested the Commissioner to treat his objection as an appeal to a Supreme Court under sec. 187 in the form which it took before 1 July 1986. The reference to sec. 226 of the 1986 Act is simply a reference to that part of the section which provides that where under a relevant tax law in force immediately before 1 July 1986 the Commissioner had received a request to treat an objection as an appeal but the request had not been forwarded to a Supreme Court before that day, the request shall with effect from that day be treated as a request to refer the decision on the objection to a Supreme Court.

Subsections 4(2) and (3) of the Jurisdiction of Courts Act thus consistently reflect the terms of the relevant provisions of the Assessment Act which have conferred rights of appeal to courts from decisions of the Commissioner. They also reflect the language of "other relevant tax laws", namely:

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• • the Bank Account Debits Tax Administration Act 1982: sec. 23
• • the Estate Duty Assessment Act 1914: sec. 25
• • the Fringe Benefits Tax Assessment Act 1986: sec. 81
• • the Gift Duty Assessment Act 1941: sec. 32
• • the Sales Tax Assessment Act (No. 1) 1930: sec. 41
• • the Taxation (Unpaid Company Tax) Assessment Act 1982 which incorporates so far as relevant the material provisions of the Assessment Act: sec. 4.

The Trust Recoupment Tax Assessment Act 1985 (also defined by sec. 4(1) as a "relevant tax law") does not bear upon the question presently under consideration.

The language of sec. 4(3) is not apt to describe appeals to Supreme Courts by the Commissioner or taxpayers from decisions of Boards of Review against which appeals were lodged to Supreme Courts. Section 196 of the Assessment Act was repealed by the 1986 Act because the Tribunal then became the relevant administrative body to review decisions of the Commissioner. That section in the form which it took immediately before it was repealed (i.e. before 1 July 1986) entitled the Commissioner or the taxpayer to "appeal to" a Supreme Court from any decision of the Board "which involves a question of law" (sec. 196(1)). Although there may be force in the submission of counsel for the taxpayer in the present case that the draftsman of the Jurisdiction of Courts Act may not have realised that some appeals were still pending before Supreme Courts from decisions of Boards of Review (as distinct from decisions of the Tribunal) and that Federal Parliament may have intended to transfer all tax matters from Supreme Courts to the Federal Court, the convenience of this interpretation cannot in my view outweigh the clear meaning of the language of sec. 4(3) itself. I should add that I have perused the second reading speeches of the responsible ministers as reported in Hansard and the Explanatory Memoranda relating to the relevant changes to the Assessment Act and other "relevant tax laws". They shed no light on the question before me.

It was argued that a "decision on an objection" within the meaning of sec. 4(3) includes the decision of a Board of Review made before 1 July 1986 and from which the appellant (the taxpayer or the Commissioner) brought an appeal to the Supreme Court before that date. This argument was based on the form which sec. 193(1) of the Assessment Act took before its repeal, effective from 1 July 1986, by the 1986 Act, namely:

"193(1) For the purposes of reviewing such decisions, the Board shall, subject to this section, have all the powers and functions of the Commissioner in making assessments, determinations and decisions under this Act, and such assessments, determinations and decisions of the Board, and its decisions upon review, shall for all purposes (except for the purpose of objections thereto and review thereof and appeals therefrom) be deemed to be assessments, determinations or decisions of the Commissioner."

It was argued that the words in brackets "(except for the purpose of objections thereto and review thereof and appeals therefrom)" were inserted simply to make it clear that the taxpayer could not lodge an objection to a Board's decision similar to the objection which he had lodged to the original decision of the Commissioner. It was described by counsel as an exception intended to avoid multiplicity of appeals. Reliance was placed upon the judgment of Williams J. in
Denver Chemical Manufacturing Co. v. C. of T. (N.S.W.) (1949) 79 C.L.R. 296, a decision with reference to the Income Tax (Management) Act (N.S.W.). Williams J. considered sec. 248 of the Income Tax (Management) Act 1941 (N.S.W.) which read in all material respects the same as the subsequent sec. 193(1) of the Assessment Act. His Honour said at p. 317:

"Under s. 248 of the Act of 1941 the opinion of the Board of Appeal then became the opinion of the commissioner for all the purposes of the Act except for the purpose of objections thereto and appeals therefrom. Objections and appeals therefrom were no doubt expressly excepted to make it clear that a taxpayer could not lodge an objection to the opinion of the Board similar to the objection which he could lodge to the original opinion of the commissioner."

The next step in the argument was that the "decision on an objection" within the meaning of sec. 4(3) of the Jurisdiction of Courts Act

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was the decision of the Board which, by force of sec. 193(1), became the decision of the Commissioner and which was forwarded to the Supreme Court. Section 4(3) does not state who must forward the decision. It is enough if it is in fact forwarded. It was said that the decision was forwarded to the Supreme Court pursuant to the provisions of O. 65 r. 14 of the High Court Rules, which were applicable to Supreme Courts by sec. 196A of the Assessment Act.

In my opinion, the observations of Williams J. in Denver, although stating his Honour's perception of the reason for the exception, do not touch the question of the proper interpretation of the language of sec. 4(3), language which plainly picks up the specific words of present or former sections of the Assessment Act and other relevant tax laws. The subsection envisages the case where a Supreme Court is seized with jurisdiction in a tax matter not on appeal from a decision of the Board of Review, but by way of an appeal to it direct from the disallowance of an objection.

Counsel for the taxpayer did not suggest that sec. 196A of the Assessment Act assists the resolution of the present question.

It follows in my opinion that appeals of the kind with which this case is concerned (i.e. appeals to Supreme Courts from decisions of Boards of Review where the decisions of the Boards and the appeals to the Supreme Courts were made or lodged respectively before 1 July 1986) still remain with the Supreme Courts and were not transferred to the Federal Court by the operation of the Jurisdiction of Courts Act.

It was not suggested in argument that the appeal to the Supreme Court of New South Wales in this case would be affected by the Jurisdiction of Courts Act if my finding were to be, as it is, that the Federal Court has no jurisdiction to hear this matter. It was common ground that the appeal to the Supreme Court would not be barred and that the respondent would not be divested of his extant rights in respect of the appeal to the Supreme Court. I do not think it appropriate for me to express any view as to the effect, if any, of the 1986 Act or the Jurisdiction of Courts Act upon the question whether the unsuccessful party in due course before the Supreme Court has any further right of appeal or right to seek leave to appeal from this Court or the High Court or any right to seek leave to appeal from the High Court from any decision of this Court. If it emerges that there is a lacuna in either the 1986 Act or the Jurisdiction of Courts Act, this is a matter which Parliament may consider.

The Court declares that this proceeding was not, by force of the Jurisdiction of Courts Act, transferred from the Supreme Court of New South Wales to the Federal Court. At the request of both parties the Court reserves costs and grants liberty to either party to apply with respect thereto on seven days' notice.

THE COURT ORDERS THAT:

1. It be declared that this proceeding was not transferred from the Supreme Court of New South Wales to the Federal Court of Australia by operation of the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987.

2. Either party is at liberty on seven days' notice to apply to this Court with respect to costs.