Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Judiciary Amendment Bill 2008, which is an amendment to the Judiciary Act 1903, a very important act of this parliament which regulates aspects of the judicial system of the Commonwealth and, among other things, regulates the manner in which state courts exercise federal jurisdiction. In simple terms, these amendments alter section 79 of the Judiciary Act and restore to the states the protection of limitation periods in state laws which put a time limit on suing state governments to recover taxes paid under a law later found to be invalid. These limitation periods are generally quite tight. In Victoria, New South Wales, Queensland, Tasmania and Western Australia, there is a 12-month limitation period from the date of payment of the tax, and South Australia imposes a six-month restriction, as do the Northern Territory and Australian Capital Territory governments.

The case which gave rise to this bill is a 2003 decision of the High Court of Australia in British American Tobacco Australia Ltd v Western Australia, and I might say something about that case, because it explains why these amendments are now needed. The case focused on section 79 of the Judiciary Act, which is what this bill amends, and it is worth setting out the exact terms of the section:

The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

What the bill does is rename that provision, section 79(1), and insert sections 79(2) to 79(4), which deal specifically with limitations on actions as I have indicated.

The Attorney-General said, in introducing this bill, that it:

... assists in restoring the states and territories to the position they were in ...

before the decision of the High Court in British American Tobacco Australia Ltd v Western Australia. In that case the High Court found that state laws imposing conditions on the right to sue the state government did not apply where the state court was exercising federal jurisdiction because the provisions were inconsistent with Commonwealth law, particularly sections 39 and 64 of the Judiciary Act. The proposed amendments to section 79 of the Judiciary Act contained in this bill will establish that state and territory laws which apply to the recovery of invalidly imposed state or territory taxes, including the imposition of conditions on the right to bring an action, are binding where the proceedings are in federal jurisdiction.

The decision of the High Court—and it is worth bearing in mind that it is a decision made as long ago as 2003—concerned a claim by a tobacco wholesaler against the government of Western Australia to recover licence fees paid under the Western Australian Business Franchise (Tobacco) Act 1975. The claim was brought by British American Tobacco after an earlier decision of the High Court in Ha v New South Wales, a 1997 decision where the court found that fees imposed under a very similar law in New South Wales amounted to excise duties and thus had been imposed in contravention of section 90 of the Commonwealth Constitution and were therefore unconstitutional and invalid.

At the time there were provisions in the Western Australian legislation, the Crown Suits Act, which stated that no right of action lay against the Crown unless, first, the party proposing to take action gave written notice to the Crown solicitor within three months of the action accruing or as soon as practicable and, secondly, the action was commenced within a year of the action accruing. In the case, it was common ground that the action had accrued on 5 August 1997, which was when judgement was delivered in the case of Ha v New South Wales. So the issue that came up to the High Court in British American Tobacco v Western Australia was whether or not the single judge in the Supreme Court of Western Australia and the full court of the Supreme Court of Western Australia had been correct in striking out the action brought by British American Tobacco on the ground that the time limits in the state legislation had not been complied with.

In the British American Tobacco case, the High Court found that the question was one that was not to be determined by looking at the Crown Suits Act of Western Australia because as the High Court found—and as had not been considered fully in the two levels below, namely, before the single judge of the Supreme Court of Western Australia and in the full court of the Supreme Court of Western Australia—it was the exercise of federal jurisdiction. As such, in the British American Tobacco case the High Court found that a law such as section 39 of the Judiciary Act, being an exercise of power under section 78 of the Constitution, was sufficient to confer on British American Tobacco the right to proceed in attempting to recover the taxes that it had paid under the invalid law. The High Court further found that, because of section 39(2) of the Judiciary Act, there was a federal law providing otherwise than the state law, and as a consequence the state limitation periods and the notice provision in the state act were not binding on the Supreme Court of Western Australia exercising federal jurisdiction.

The High Court also held that the limitation period found in the Western Australian Crown Suits Act was invalid for another reason, namely, that it was inconsistent with section 64 of the Judiciary Act, that being a very well-known provision that provides as follows:

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.

As Justice Kirby commented in his judgement in the British American Tobacco case, there are possibly issues about whether state acts such as the Crown Suits Act of Western Australia should be seen as regulating litigation involving the state and indeed whether the state should be equated for any purpose as the Crown. But putting those questions entirely to one side, Western Australia and other states of the Commonwealth have proceeded for many decades on the basis that legislation like the Crown Suits Act is effective and, consequently, the states have ordered their affairs on the basis that provisions like the limitation periods that are found in the Crown Suits Act of Western Australia are effective.

The bill demonstrates inaction by the former government. The decision made by the High Court was made in 2003 during the third term of the former Howard government. The whole of the balance of that third term of government and the whole of the fourth term of the Howard government passed by without any action to remedy the problem that had been disclosed by this decision of the High Court. The inactivity is made worse and is more marked by the fact that this matter was hardly secret. It was given rise to by a decision of the High Court of Australia and was actively discussed by the Standing Committee of Attorneys-General on several occasions. It gave rise to recommendations by the Standing Committee of Attorneys-General that federal legislation, and specifically an amendment to the Judiciary Act, was required in order to put the states back in the position that they had been in. Yet the former government did nothing.

In introducing this bill, the Attorney-General, Mr McClelland, said that this bill:

... is an example of the Rudd Labor government’s commitment to cooperative federalism.

He went on to say:

This is a matter that has long languished on the books of the Standing Committee of Attorneys-General for over four years because of the previous government declining to act for political reasons completely unrelated to the substance of the proposed legislation.

It is very clearly desirable legislation. Not only does it implement the recommendations of the Standing Committee of Attorneys-General, being recommendations which, to again quote the Attorney-General:

... have as their objective the protection of state and territory revenue ...

but at a policy level the amendments to the Judiciary Act are clearly desirable. They are desirable for reasons stated by the Attorney-General. He said:

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.

It is regrettable that this kind of inaction was typical of the attitude of the former government to the states. It is noteworthy that neither of the speakers from the other side of the House who have spoken on this bill have offered or even attempted to offer any explanation for the inactivity of the former government in respect of this obvious problem. It is indeed typical of an attitude of the former government that has been described by some with considerable justification as ‘a war on the states’. It involved criticising the states wherever possible, reducing payments to the states where possible and certainly not ever genuinely cooperating with the states.

For the new government, ending the blame game is a real objective, and it is not a new objective. Some have suggested that on our side of politics there historically has been opposition to the states in some respects, but anyone who suggest that that is a theme of the present government is someone who has clearly not been listening to statements that the Prime Minister has been making for several years. It is worth noting something that the Prime Minister said as long ago as July 2005 in a speech that he gave to the Don Dunstan Foundation. He said:

There is no secret to the fact that for many decades, there has been a strong tradition in Labor political thought that when political circumstances permitted, the States should be abolished. Personally, I’ve never shared that tradition as I have long been a committed Federalist – albeit a Federalist with a difference, one committed to using the Federal compact on a co-operative basis to deliver national outcomes that are politically sustainable well beyond a change in the political complexion of the government of the day. I’ve never been attracted to a doctrine of Federalism based on chanting the mindless mantra of States’ rights.

…            …            …

The challenge for a future Labor government will be to rebuild the Federation. And it is my argument that the Federation can be rebuilt based on the principles of co-operative (rather the coercive) Federalism.

It is ironic that in recent years the federal based Liberal Party has made greater moves towards centralisation of authority than were ever achieved by the Labor Party. The Rudd government’s aim is to rebuild the federation. To use the Prime Minister’s words from 2005, it will be a rebuilding ‘based on principles of cooperative rather than coercive federalism’. This is not a theoretical or an academic proposition. The Business Council of Australia said very clearly last year in its report entitled Reshaping Australia’s Federation:

The extent of the problems and dysfunctions of the current system of federal–state relations – marked by a lack of consensus on national goals and consistent forward planning – is such that it has become a major barrier to future prosperity.

The challenge of reforming federalism has now become an economic imperative.

This government is going to work on making federalism work better, on making the Federation work better and on ending the blame game. This is not mere rhetoric. It means working towards a seamless national economy to harmonise regulation and to assist the states to manage their budgets. What we have seen from the Rudd Labor government since the election last year is successive meetings of the Council of Australian Governments in December 2007 and in March 2008, and successive meetings of the Standing Committee of Attorneys-General, which have demonstrated that the government is committed to cooperating with the states.

For example, as promised at the December 2007 COAG meeting, the Business Regulation and Competition Working Group at the March meeting delivered an implementation plan which identified a first tranche of new regulatory reform. Notably, priority is to be given to harmonising occupational health and safety laws. The working group also made recommendations for early action on payroll tax administration, trade licences, rail safety regulation, national trade measurement, the consumer policy framework and the mortgage credit as well as advice in other areas. Some areas that COAG has now prioritised for reform are areas which were already on the agenda of the Standing Committee of Attorneys-General, including standard business reporting and business name regulation. These COAG meetings have recognised the importance of the existing ministerial councils and the continuing need for close cooperation between the Commonwealth and the states.

This amendment to the Judiciary Act is in the spirit of the cooperation with the states which is required. On its face it is a simple amendment which restores the states to the position that they thought they were in before the High Court’s decision in 2003. It is a simple amendment which ensures that limitation periods applying to attempts to recover taxes paid under legislation which has been found to be invalid have to be brought within particular specified periods of time. The importance of having such limitation periods is obvious because it provides certainty of financial management to the states. They will know where they stand in respect of all revenue collected after a certain time, notwithstanding that it might be found to be the case that, at some considerably later time, the legislation under which that revenue was collected was invalid.

Making more certain and more secure the revenue of the states is something which, as I have said, is entirely in the spirit of increasing cooperation between the Commonwealth and the states. This is legislation which in creating certainty of revenue is going, in the long term, to improve the quality of services, which the states are then able to deliver to the people of Australia. It is improving the quality of services—in the end, the purpose of cooperative federalism—and improving the quality of services to the people of all the states will of course include improving the quality of services to the people of my electorate of Isaacs.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to have this opportunity to support the Judiciary Amendment Bill 2008 and also to support the well-informed comments of my colleague the member for Isaacs. The bill seeks to amend section 79 of the Judiciary Act 1903 to provide that a state or territory law which limits the recovery of invalidly imposed state or territory taxes, which would otherwise apply to a suit if it did not involve federal jurisdiction, is binding on a court exercising federal jurisdiction in the relevant state or territory. Section 79 of the Judiciary Act currently provides that, except as otherwise provided by the Constitution or Commonwealth laws, the laws of a state or territory are binding on all courts exercising federal jurisdiction in that state or territory. The exact terms of section 79 are as follows:

The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

This bill seeks to rename that provision as section 79(1). It then seeks to insert proposed sections 79(2) to (4), which deal specifically with limitations on actions brought in a state or territory court exercising federal jurisdiction to recover taxes raised invalidly under a state or territory law.

The bill is intended to restore the states and territories to the position they were in before the decision of the High Court of Australia in British American Tobacco v Western Australia. That decision was made in 2003. The High Court found that state laws imposing conditions on the right to sue the state government did not apply where the state court was exercising federal jurisdiction because the provisions were inconsistent with Commonwealth law and particularly sections 39 and 64 of the Judiciary Act. The proposed amendments to section 79 of the Judiciary Act contained in the bill make clear that state and territory laws which apply to the recovery of invalidly imposed state or territory taxes, including the imposition of conditions on the right to bring an action, are binding where the proceedings are in federal jurisdiction.

The decision of the High Court in British American Tobacco v Western Australia concerned a claim made by a tobacco wholesaler against the government of Western Australia to recover licence fees paid under the Business Franchise (Tobacco) Act 1975, a Western Australian act. The claim was brought under the Crown Suits Act 1947—also a Western Australian act—after the decision of the High Court in Ha v New South Wales, where the court found that fees imposed under a similar law in New South Wales were excise duties and thus that they had been imposed in contravention of section 90 of the Commonwealth Constitution.

At the time, section 6 of the Western Australian act stated that no right of action lay against the Crown unless (a) the party proposing to take action had given written notice to the Crown Solicitor advising of certain information within three months of the action accruing or ‘as soon as practicable’, whichever period was longer, and (b) the action was commenced within one year of the action accruing.

In British American Tobacco, the High Court found that a law such as section 39 of the Judiciary Act is an exercise of power under section 78 of the Constitution. The court also held that the limitation period in paragraph 6(1)(b) of the Western Australian act, which applied only to actions against the Crown, was invalid because it was inconsistent with section 64 of the Judiciary Act. In the event, the High Court allowed the company’s appeal with costs. In doing so it set aside certain orders made by the full court of the Supreme Court of Western Australia, which had given summary judgement in favour of the Crown on the basis that the company had not complied with subsection 6(1) of the Crown Suits Act 1947. It had also dismissed the company’s appeal to the full court of the Supreme Court with costs.

In May this year the Attorney-General in a press release advised that this bill would be brought forward and described it as a clear example of:

... the Rudd government cooperating closely with the states and territories to achieve progress for the nation.

Similarly, the Attorney-General described the bill as an example of the Labor government’s commitment to cooperative federalism, and he said:

This is a matter that has long languished on the books of the Standing Committee of Attorneys-General for over four years because of the previous government declining to act for political reasons completely unrelated to the substance of the proposed legislation.

It has been pointed out to me that the Howard government received substantial campaign funds in 2006-07 from British American Tobacco. This is referred to by Katharine Murphy in her article ‘Tough talk on political donations’, where she cites records held by the Australian Electoral Commission that show that British American Tobacco donated $166,000 to the coalition in 2006-07.

In the absence of any evidence to substantiate this, I do not personally think that this is the reason, although I think that there is an unhealthy pattern of corporate influence on the Liberal Party. We see it in relation to their current handling of the tax on alcopops and we also see it in relation to the action they are taking on the issue of disclosure of electoral donations, which can only fuel public suspicion about their motives in these matters. Nevertheless, I think that the more likely explanation is that it was simply a piece of meanness or trickiness from the former federal government, which disliked the states and invariably sought to make their lives more difficult and was guilty of inflicting gratuitous violence on them. This was something which had made life more difficult and less certain for the states.

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, the Northern Territory and the Australian Capital Territory impose a six-month restriction. These limitation periods are different from the general limitation period of six years which applies in ordinary proceedings between subject and subject—for example, in cases of contract and tort. The amendments which have been brought forward do not extinguish the right to bring actions for the recovery of invalid state and territory taxes; they simply apply as far as possible the state and territory special short limitation periods for the recovery of invalid taxes, which places the states and territories in the position that they thought they were in prior to the British American Tobacco case.

Without these amendments, there is a much greater likelihood that claims could be made many years after a state or territory tax has been paid with potentially far-reaching consequences for state and territory government budgeting. I do not think it takes much thought for people to appreciate how chaotic the situation could be if a court was to find a state tax to be invalid many years after its introduction. It would be simply impossible to practically repay it to those who had been paying it in the first instance.

These amendments have been developed in consultation with the states and territories through the Standing Committee of Attorneys-General. They are amendments which are prospective in operation. The proposed subsection 79(3) states that the types of state or territory law that would apply to a suit if it did not involve federal jurisdiction include a law that limits the period for bringing the suit to recover the amount, requires notice to be given and bars the suit on the ground that the person bringing the suit has charged someone else for the amount. Proposed subsection 79(4) provides some examples of an amount paid in connection with a tax including an amount paid as the tax, an amount of penalty for failure to pay the tax on time, an amount of penalty for failure to pay enough of the tax and an amount that is paid to a taxpayer by a customer of the taxpayer and is directly referable to the taxpayer’s liability to the tax in connection with his dealings with the customer. It is clear that the provisions are intended to cover taxes not only paid but invalidly imposed, also penalties for the late payment of those taxes. Provisions also cover the situation where the taxpayer has already recovered the amount from a third party such as a consumer of the taxpayer’s goods or services.

These amendments will not have a retrospective operation. They apply in relation to the recovery of amounts paid after the commencement of this schedule and the act, commencing the day after royal assent. I make no criticism of the High Court concerning their decision. I know the former government was in the habit of bullying the High Court. You had Tim Fischer talking about the need for a capital ‘c’ Conservative, you had the former Attorney-General regularly bemoaning judicial activism and another former Liberal Attorney-General, Daryl Williams, saying it was not his job to defend the High Court or other courts from political attacks. I do not think the previous government displayed the kind of commitment to judicial independence that is in the best interests of this nation. I am pleased to see the current Attorney-General taking a more responsible path.

The decision in British American Tobacco v Western Australia was handed down on 2 September 2003. The Howard government made no attempt to counteract the effect of the decision in its third or fourth terms of government. This bill, introduced by the Labor government, has the support of the Standing Committee of Attorneys-General and it implements recommendations of that standing committee designed to protect state and territory revenue. The amendments overcome much of the uncertainty that resounds in the individual judgements of members of the High Court, especially in relation to the operation in federal jurisdiction of state or territory provisions dealing with limitation requirements and the contemporaneous operation of relevant Commonwealth law, particularly the Judiciary Act. The amendments make clear the types of state or territory law that will apply to suits heard in state or territory courts exercising federal jurisdiction, while leaving open the possibility that other state laws may operate in federal jurisdiction as well. This scenario gives certainty. This is an overdue reform. It is cooperative federalism at work. It shows the Commonwealth and the states working together, not the blame game, not the buck-passing which characterised federal-state relations under the previous Howard government. I commend the bill to the House.

Robert McClelland (Barton, Australian Labor Party, Attorney-General) Share this | Link to this | Hansard source

in reply—I would like to thank the members for their contributions to the debate. I welcome the opposition’s support for this uncontroversial but nonetheless important bill. The Judiciary Amendment Bill 2008 is the government’s response to the issues raised by the 2003 decision of the High Court of Australia in British American Tobacco v Western Australia, and many of those who contributed to the debate commented on that decision. It is an example of the Rudd Labor government’s commitment to cooperative federalism. The previous government had not acted on this in the four years since the British American Tobacco decision, as was pointed out a little while ago by the member for Wills. Yet it was a decision with the potential for a grave impact on state and territory government finances.

The bill amends section 79 of the Judiciary Act to make clear that nothing in the Judiciary Act precludes special state and territory laws applicable to the recovery of invalid state and territory taxes from applying where the relevant proceedings are in a federal jurisdiction. This was thought to be the situation prior to the High Court’s decision. It is highly 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 state and territory government budgeting. The amendments resolve this important issue for the state and territory governments. I commend the bill to the House.

Question agreed to.

Bill read a second time.