IN THE SUPREME COURT OF QUEENSLAND No. 1345 of 1986 Mr

IN THE SUPREME COURT OF QUEENSLAND No. 1345 of 1986

FULL COURT

BEFORE:

Mr. Justice Connolly

Mr Justice McPherson

Mr. Justice Derrington

BRISBANE, 3 SEPTEMBER 1986

BETWEEN:

DEPUTY COMMISSIONER OF TAXATION Plaintiff

-and-

MOOREBANK PTY. LTD. DefendantNo. 2273 of 1986

BETWEEN:


-and-

JONRICH PTY. LTD. DefendantNo. 2303 of 1986

BETWEEN:


-and-

ALINGA PTY. LTD. DefendantNo. 2333 of 1986

BETWEEN:


-and-

YAKIRIKI PTY. LTD. DefendantNo. 2339 of 1986

BETWEEN:


-and-

STEWART JARDEN Defendant

JUDGMENT

MR. JUSTICE CONNOLLY: In the case of Jonrich I would order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15 to 18, 21, and 24 to 26 of the defence and so much of para. 22 thereof which denies the assessment was made. I would further order that the demurrer be overruled in relation to paras. 3 to 4 and para. 23 and so much of para. 22 of the defence that denies the due making of the assessment. I would order that the defendant pay the plaintiff's costs of the demurrer to be taxed.

In relation to Moorebank, I would order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 12, 15, 17 and 20 of the defence and so much of para. 18 thereof as denies the making of the assessment. I would order that the demurrer be overruled in paras. 3 to 4, 13, 14 and 19 of the defence and so much of para. 18 thereof as denies the due making of the assessment. I would, make no order as to costs.

In the case of Alinga, I would order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15 and 18 to 21 of the defence and so much of para. 16 as denies the making of the assessment. I would order that the demurrer be overruled in paras. 3, 4 and 17 of the defence and so much of para. 16 as denies the due making of the assessment. I would order that the defendant pay the plaintiff's costs of the demurrer to be taxed.

In the case of Jarden, I would order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15 to 18, 20, 22, 25 and 30 of the defence and so much of para. 23 as denies the making of the assessment. I would order that the demurrer be overruled in relation to paras. 3 to 4, 19 and 24 of the defence and so much of para. 23 as denies due making of the assessment. I would make no order as to costs.

In the case of Yakiriki, I would order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15, and 18 to 21 of the defence and so much of para. 16 that denies the making of the assessment. I would order that the demurrer be overruled in relation to paras. 3 to 4 and 17 of the defence and so much of para. 16 as denies the due making of the assessment. I would order that the defendant pay the plaintiff's costs of the demurrer to be taxed. I publish my reasons.

MR. JUSTICE McPHERSON: I agree. I publish my reasons.

MR. JUSTICE DERRINGTON: I agree save for the following: In the matter of Moorebank in respect of the demurrers to paras. 13 and 14 of the defence, I find that such demurrer's should be allowed. This extends to the demurrer to para. 19 of the defence in Jarden which is of a similar nature. I publish my reasons.

MR. JUSTICE CONNOLLY: The order of the Court will be as I have indicated.

-----


FULL COURT

BETWEEN:

DEPUTY COMMISSIONER OF TAXATION (Plaintiff)

AND:

MOOREBANK PTY. LTD. (Defendant)

BETWEEN:

No. 2273 of 1986DEPUTY COMMISSIONER OF TAXATION (Plaintiff)

AND:

JONRICH PTY. LTD. (Defendant)

BETWEEN:


AND:

ALINGA PTY. LTD. (Defendant)

BETWEEN:


AND:

YAKIRIKI PTY. LTD. (Defendant)

BETWEEN:

DEPUTY COMMISSIONER OF TAXATION (Plaintiff)No. 2339 of 1986

AND:

STEWART JARDEN (Defendant)

______________________

CONNOLLY J.

McPHERSON J.

DERRINGTON J.

_____________________

Reasons for Judgment delivered by Connolly J., Mcpherson J. and Derrington J. on 3rd September, 1986. McPherson J.

agreeing with Connolly J.

______________________

Re: MOOREBANK PTY. LTD.

“Order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 12, 15, 17 and 20 of the defence and so much of para. 18 thereof as denies the making of the assessment. Order that the demurrer be overruled in paras. 3 to 4, 13, 14 and 19 of the defence and so much of para. 18 thereof as denies the due-making of the assessment. No order as to costs.”

Re: JONRICH PTY. LTD.

“Order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15 to 18, 21, and 24 to 26 of the defence and so much of para. 22 thereof which denies the assessment was made. Further order that the demurrer be overruled in relation to paras. 3 to 4 and para. 23 and so much of para. 22 of the defence that denies the due-making of the assessment. Order that the defendant pay the plaintiff's costs of the demurrer to be taxed.”

Re: ALINGA PTY. LTD.

“Order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15 and 18 to 21 of the defence and so much of para. 16 as denies the making of the assessment. Order that the demurrer be overruled in paras. 3, 4 and 17 of the defence and so much of para. 16 as denies the due-making of the assessment. Order that the defendant pay the plaintiff's costs of the demurrer to be taxed.”

Re: YAKIRIKI PTY. LTD.

“Order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15, and 18 to 21 of the defence and so much of para. 16 that denies the making of the assessment. Order that the demurrer be overruled in relation to paras. 3 to 4 and 17 of the defence and so much of para. 16 as denies the due-making of the assessment. Order that the defendant pay the plaintiff's costs of the demurrer to be taxed.”

Re: JARDEN

“Order that the demurrer be allowed in relation to paras. 7 to 8, 11 to 13, 15 to 18, 20, 22, 25 and 30 of the defence and so much of para. 23 as denies the making of the assessment. Order that the demurrer be overruled in relation to paras. 3 to 4, 19 and 24 of the defence and so much of para. 23 as denies due-making of the assessment. No order as to costs.”

________________

IN THE SUPREME COURT OF QUEENSLAND No. 2273 of 1986No. 1345 of 1986No. 2303 of 1986No. 2339 of 1986No. 2333 of 1986

FULL COURT

Before the Full Court

Mr. Justice Connolly

Mr. Justice McPherson

Mr. Justice Derrington

BETWEEN:


AND:

JONRICH PTY. LTD. Defendant

AND OTHERS

JUDGMENT - CONNOLLY J.

Delivered the Third day of September, 1986.

Counsel: Fitzgerald Q.C. for P. Hack for Commissioner of TaxationDavies Q.C. & H. Frazer & B. Clarke for Defendant

Solicitors: Australian Government Solicitor for Commissioner of TaxationHenderson Lahey Trout Bernays for Defendant

Hearing dates:

20th and 21st August, 1986.


BETWEEN:


AND:


BETWEEN:


AND:


BETWEEN:


AND:


BETWEEN:


AND:

STEWARD MALCOLM JARDEN DefendantNo. 2333 of 1986

BETWEEN:


AND:

YAKIRIKI PTY. LTD. Defendant

JUDGMENT - CONNOLLY J.

Delivered the Third day of September, 1986.

The Court has in its list a large number of demurrers by the Commissioner of Taxation to defences by taxpayers in actions brought to recover income tax and additional tax. The defences may fairly be said to raise as many conceivable grounds of defence as the ingenuity of the pleader could devise. In many cases the points raised are already the subject of binding decisions of the High Court.

The Court invited the parties to bring on for hearing, in effect as test cases, enough of the demurrers to raise

all points in relation to which the parties seek the decision of the Court. This was done and the five cases, the subject of this judgment, raise all questions of law which the parties seek to have resolved. It will be convenient to deal with the cases in the order in which they appear above.

JONRICH PTY. LTD.

The plaintiff demurred to paras. 3-13, 15-18 and 20-26 of the defence. The demurrers to paras. 5, 6, 9, 10 and 20 were not set down for argument and their fate is governed by O. 29 r. 7. The defendant concedes that in this Court at least, the demurrer must be allowed in relation to paras. 11-13, 15-18, 21 and 26. The plaintiff on the other hand concedes that the demurrer to para. 23 was misconceived. Accordingly the Court is to determine the demurrers to paras. 3, 4, 7, 8, 22, 24 and 25.

Paragraph 3 alleges that the amounts of income tax and provisional tax assessed by the plaintiff were not calculated in accordance with the provisions of the Income Tax Assessment Act and says that upon a proper calculation the amounts of income tax and provisional tax are each nil or alternatively amounts less than the amounts assessed. Paragraph 4 contends that the additional tax is consequently nil or alternatively less than that assessed.

The ground of demurrer assigned was that the Supreme Court has no jurisdiction by virtue of s. 9 of the Administrative Decisions (Judicial Review) Act 1977. This ground was abandoned but the plaintiff argued that by virtue of ss. 175 and 177 such a question cannot be raised in proceedings to recover the tax but only in proceedings taken under the Act to challenge the assessment. Section 175 provides that the validity of any assessments ... shall not be affected by reason of any of the provisions of the Act. not having been complied with. S. 177(1) reads:—

(1) the production of a notice of assessment shall be conclusive evidence of the due making of the

assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment, are correct.”

In F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 C.L.R. 360 Mason and Wilson JJ., in whose judgment Stephen J. agreed, said at p. 375 that an explicit and in their Honours' view correct statement of the effect of s. 177(1) was made by Taylor J. in McAndrew v. Federal Commissioner of Taxation (1956) 98 C.L.R. 263 at p. 281. His Honour there concluded that “s. 177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground.” However, s. 177(1) operates only upon production of the notice of assessment or of a document purporting to be a copy of a notice of assessment. At p. 376 of the report in F.J. Bloemen Mason and Wilson JJ. emphasize this point and go on to say that in theory s. 177 leaves the Supreme Court with jurisdiction to decide whether an assessment has been duly made in a case in which an appropriate document is not produced. These being proceedings on demurrer, there is no question of the assessment being produced. It follows that while there will probably be very little practical advantage to the defendant, the demurrer to paras. 3 and 4 must be overruled.

Paragraphs 7 and 8 raise the contention that as the defendant had requested the reference to a Board of Review of the amount of tax payable for the year of income in dispute the additional tax claimed by the plaintiff was not and “will be taken for the purposes of s. 207 of the Act never to have been” payable. This action concerns income tax on income derived during the year ended 30th June, 1975 alleged to be payable by reason of a notice of assessment issued on 21st April, 1978. The argument in this case turns on the provisions of the Act relative to additional tax and the recovery of tax. Additional tax is the subject of s. 207(1). It will be convenient to set out the whole of s. 207 as it stood prior to 1982:—

“207(1) [Additional tax] If any tax remains unpaid after the time when it becomes due and payable, additional tax shall be due and payable at the rate of 10% per annum on the amount unpaid, computed from that time or, where an extension of time has been granted under s. 206, from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable:

Provided that the Commissioner may in any case, for reasons which he thinks sufficient, remit the additional tax or any part thereof.

207(2) [Recovery of tax] Notwithstanding anything contained in this section, the Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable.”

Section 207 was amended in 1982 but not in any which affects this argument. Finally in 1984 the following sub-s. 3 was added:—

“(3) In this section, unless the contrary intention appears, ‘tax’ includes additional tax under part VII.”

Moreover s. 207(1) was amended by inserting after the words “is due and payable” the words “by way of penalty by the person liable to pay the tax.” Additional tax under s. 207 is not “under part VII”. However, other relevant amendments were made. Section 201 in the form it took prior to 1984 dealt with the question of the recovery of Income tax pending appeal or reference. It read:—

“201. The fact that an appeal or reference is pending shall not in the meantime interfere with or affect the assessment the subject of the appeal or reference; and income tax may be recovered on the assessment as if no appeal or reference were pending.”

The defendant's contention is that prior to 1984 there was no similar provision in relation to additional tax under s. 207. This is correct. It was in 1984 that the following sub-s. 2 was added to s. 201:—

“(2) In sub-s. (1), ‘income tax’ includes additional tax under s. 207 or part VII.”

It may be accepted for present purposes that additional tax under s. 207 was not income tax but a penalty for late payment. The contention then is that the scheme of the Act was to allow recovery of the primary income tax but not additional tax pending the determination of appeals or references and that it was not until the 1984 amendment that s. 201 authorized the recovery of additional tax pending the determination of an appeal.

Despite the legislative history, I find it difficult to come to terms with this argument. Section 207(1) has, since 1982 provided that if tax remains unpaid after the time when it became due and payable, additional tax is due and payable. One would think that in the absence of some provision arresting or suspending the liability a sum which is due and payable is immediately recoverable. Attention is then drawn to s. 208 which provided, prior to 1984, that income tax when it becomes due and payable shall be a debt due to the Commonwealth and payable to the Commissioner in the manner and at the place prescribed. That provision however was not apt to include additional tax which, as I have said, was not comprehended in the expression “income tax”. This situation was remedied in 1984 by the insertion of the following sub-s. (2):—

“(2) In sub-s. (1), “income tax” includes additional tax under s. 207 or part VII.”

This amendment also is thought to support the view that additional tax was not recoverable pending appeal or reference prior to 1984. Again I have difficulty with this proposition. If some such force is to be given to s. 208 in relation to additional tax it must be on the footing that tax was not recoverable at all prior to 1984.

What is to be borne in mind, in my opinion, is that s. 201 was, in one sense, otiose in providing that income tax might be recovered notwithstanding the pendency of an

appeal or reference as by s. 204 income tax is and was due and payable on the date specified in the notice or if no date was so specified on the 30th day after service of the notice. For this obligation to be intercepted or suspended would have required a positive provision of the legislation. The real effect of s. 201 was to state a policy; and its practical consequence was to provide a powerful factor influencing the courts against staying proceedings pending appeal or reference. This is recognized in a series of cases from Deputy Commissioner of Taxation (W.A.) v. Australian Machinery & Investment Co. Pty. Ltd. (1945) 3 A.I.T.R. 236 at p. 241 where Latham C.J. said:—

“My brothers, Rich, Dixon and Williams and myself are of the opinion that the contention that there is no jurisdiction to grant a stay in these proceedings by reason of the provisions of the Income Tax Assessment Act, sec. 201 and the associated sections should not be accepted. We are of the opinion that there is jurisdiction to grant a stay in such proceedings, but that in considering any application for a stay the policy of the Act as stated in sec. 201 is a matter to which great weight should be attached.”

Cf. Deputy Federal Commissioner of Taxation v. Mackey (1982) 45 A.L.R. 284, a decision of the Court of Appeal of New South Wales and Deputy Federal Commissioner of Taxation v. Trower (1986) 86 A.T.C. 4157. By the same tokens. 207(1) makes additional tax due and payable if any tax remains, unpaid after the time when it became due and payable. There is no provision of the Act which intercepts or suspends this obligation, the 1984 amendments should, in my judgment, be regarded as statements of policy designed to achieve a similar result to s. 201. The right of the Commissioner to sue is indeed affirmed by s. 207(2) which provides that the Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it became due and payable.

It is contended for the defendant that the word “tax” in s. 207(2) is not apt to describe additional tax. This is because additional tax has been held to be a penalty. See

e.g. Re Dymond (1959) 101 C.L.R. 11 citing Richardson's case (supra) per Evatt J. In my opinion, however, its true characterization for constitutional purposes is not conclusive of the proper construction to be put on a provision such as s. 207(2). The reference to tax in that provision is unqualified. The subject matter of s. 207(1) is described as additional tax and there is the further feature that the introductory words of sub-s. 2 - “Notwithstanding anything contained in this section” - are designed to exclude the possibility that, the provision relating to additional tax may otherwise affect the meaning to be attributed to the operative part of sub-s. 2. I am clearly of the opinion that without resort to the 1984 amendments, additional tax may be sued for by the Commissioner as soon as it becomes due and payable and irrespective of the pendency of appeal or reference. Cf. Deputy Commissioner of Taxation (Victoria) v. Manners and Terrule (1985) 17 A.T.R. 206, a decision of Murphy J. of the Supreme Court, of Victoria. The demurrer to paras. 7 and 8 should be allowed.

Paragraph 22 denies the due making of the notices of assessment and in particular that any assessment has been made. The latter allegation is inconsistent with paras. 2 and 3 each of which confesses the assessment to tax by the notices of assessment referred to in the particulars of the statement of claim while denying the accuracy of the assessment on the one hand and the due calculation of the tax on the other. In my opinion the defendant cannot be heard, in the face of these admissions, to say that no assessment has been made against it. But, for the reasons I have given in relation to paras. 3 and 4 the defendant is entitled at this stage to deny the due calculation. As I have already said, it is unlikely that the defendant will ultimately derive any comfort from this paragraph but for the reasons I have already given the demurrer to so much of para. 22 as denies that the notices of assessment have been duly made must be overruled. The demurrer to the first allegation should be allowed.

Paragraph 24 pleads that in so far as the defendant is a trustee sued in that capacity certain of the provisions of s. 254 apply to it. As s. 254(1) sets out certain provisions which apply with respect to every trustee, the allegation is obviously correct, but it fails to disclose a ground of defence for no facts or circumstances are pleaded which would lead, by the application of s. 254, to the conclusion that the tax and additional tax sued for or any part of either of them are not payable. The demurrer must therefore be allowed we were asked however, to express an opinion upon the point which we were assured the defendant wishes to raise. That is, the construction to be given to s. 254 in order to deal with the theoretical possibility that a trustee with an obligation to retain sufficient money to pay tax which is or will become due may have distributed at a time when no tax was to become due but by a later assessment, tax became payable. Whether such a situation can ever arise is not demonstrated. If income tax upon the income of a given year is not and will not become due it is difficult to see how the subsequent assessment which is postulated will not be corrected on appeal or reference. In the absence of facts which clearly raise the point for decision, the court, should, in my opinion, decline to express any opinion.

Paragraph 25 alleges that the assessments sued upon are inconsistent, with other assessments issued by the Commissioner in so far as those other assessments are in respect of or assess or result from distributions of the same income. In Richardson v. Federal Commissioner of Taxation (1932) 48 C.L.R. 192, the taxpayer attributed part of his taxable income to a nominee who paid tax on it, he himself not disclosing that amount. The taxpayer was assessed upon the income which he disclosed. The nominee was also assessed upon the amount attributed to her. It was held that the Commissioner was not precluded by the existence of assessments upon the nominee from assessing the taxpayer in respect of the same income although the amount of tax paid by the nominee was ordered to be

deducted from the amount of tax and additional tax imposed, by an amended assessment.

In Tupicoff v. Federal Commissioner of Taxation (1984) 4 F.C.R. 505 the Full Court of the Federal Court of Australia in applying Richardson's case held that the evidentiary force given to a notice of assessment by s. 177(1) cannot be used as a basis for challenging the correctness of another and allegedly inconsistent assessment. If any of the notices of assessment referred to in para. 25 is to be attacked and displaced, it can only be by virtue of the appeal and reference provisions. The demurrer to para. 25 should be allowed.

MOOREBANK PTY. LTD.

In this case the plaintiff demurred to paras. 3-20 of the defence. The demurrer to paras. 5, 6, 9, 10 and 16 was not set down. The defendant concedes that the demurrer must be allowed in relation to paras. 11, 12, 17 and 20 of the defence while the plaintiff concedes the demurrer to be misconceived in relation to para. 19. The demurrer to paras. 3, 4, 7, 8, 13, 14, 15 and 18 thus falls for determination by the Court.

Paragraphs 3, 4, 7 and 8 are in the same terms as the defence in the Jonrich case. Accordingly the demurrer to paras. 3 and 4 must, be overruled and the demurrer to paras. 7 and 8 allowed. Paragraph 15 raises much the same point and it too must be allowed.

By para. 13 the defendant alleges that the cause of action to recover primary tax first accrued to the plaintiff more than six years prior to the institution of the proceedings so that, as it is alleged, it is statute barred by virtue of s. 10(1)(d) of the Limitations of Actions Act 1974-1981 of the State of Queensland. Paragraph 14 alleges that, the additional tax being a penalty, the cause of action to recover it first accrued to the plaintiff more than two years prior to institution of the

proceedings and alleges that it is statute barred pursuant to s. 10(5) of the same Act.

It is not contended by the defendant that the Queensland Statute of its own force binds the Commonwealth. Indeed, for a reason which will appear, the defendant contends that it does not extend to the Commonwealth even where it excludes actions by the Crown from its operation. The contention is of course that this legislation applies in the proceedings against Moorebank by virtue of s. 64 of the Judiciary Act of the Commonwealth.

It will first be convenient to set out the relevant, provisions of s. 10 of the Queensland Act and of s. 6 of the same Act. They read:—

“10. Actions of contract and tort and certain other actions.

(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action arose:—

...

(d) an action to recover a sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of a penalty or forfeiture.

...

(5) An action to recover a penalty or forfeiture or sum by way of a penalty or forfeiture shall not be brought after the expiration of two years from the date on which the cause of action accrued.”

“6. Application to Crown.

(1) Subject to subsections (3) and (4), this Act binds the Crown and the Crown has the benefit of this Act.

...

(3) This Act does not apply to -

...

(b) an action by the Crown -

(i) for the recovery of a fee, tax, duty or other sum of money or interest on a fee, tax, duty or other sum of money;”

Section 64 of the Judiciary Act 1903 of the Commonwealth reads as follows:

“64. 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.”

By way of introduction a number of propositions may now be taken to be beyond question. The essential condition of the application of s. 64 is the existence of a suit, to which the Commonwealth is a party and as a result of s. 39(2) of the Judiciary Act that includes a suit in the Supreme Court in which the Commonwealth is plaintiff: The Commonwealth v. Anderson (1960) 105 C.L.R. 303 at p. 310 per Dixon C.J. In Naismith v. McGovern (1953) 90 C.L.R. 336 s. 64 was held to apply to a taxation prosecution by the Commissioner of Taxation for the recovery of pecuniary penalties under the Income Tax Assessment Act, s. 222 providing that taxation prosecutions were proceedings by the Crown for the recovery of pecuniary penalties. By s. 208 income tax when it becomes due and payable is a debt due to the Commonwealth, and payable to the Commissioner and the expression “income tax” includes additional tax under s. 207. I see no reason to doubt that the essential condition to which I have referred is satisfied. In Maguire v._Simpson (1977) 139 C.L.R. 362 at p. 389 Gibbs J., as he then was, said:

“In Pitcher v. Federal Capital Commission (1928) 41 C.L.R. 385 and in Naismith v McGovern (1953) 90 C.L.R. 336 the provisions of s. 64 were held applicable where the party to the suit was in one case the Federal Capital Commission and in the other the Commissioner of Taxation.

Those cases establish that it is not necessary for the application of the section that the Commonwealth should sue or be sued in that name. It would be a surprising result if an agency could claim that it represented the Commonwealth but that its rights in the suit were not affected by s. 64, although if the Commonwealth itself was a party its rights would be governed by that section. However, s. 64 does not have the effect that, an agency of the Commonwealth has a greater immunity than the Commonwealth itself.”

Next it is beyond question that s. 64 will apply whether the State provision to be picked up is procedural or substantive in character and although the State provision does not of its own force bind the Commonwealth. These propositions are finally established by Maguire v. Simpson as also is the proposition that s. 64 is ambulatory in character: Commonwealth v. Evans Deakin Industries Ltd (High Court, 26.8.86). What then is there to deny its operation in this case so as to subject the Crown in right of the Commonwealth in an action to recover a sum recoverable by virtue of an enactment on the one hand and to recover a penalty on the other to the periods of limitation prescribed by s. 10?

First it is said that it would be curious indeed if a limitation which, by virtue of s. 6, would not apply to the Crown in right of the State in an action for the recovery of a tax or other sum of money should apply to the Commonwealth and that although on its proper construction the State legislation is not intended to apply to the Commonwealth. See the definition of “Crown” which includes not only the Crown in right of the State but also, so far as the legislative power of Parliament permits, the Crown in all its other capacities. The answer to this is that it is not really curious at all. The Parliament of the Commonwealth has enacted that, in any suit to which the Commonwealth is a party, the rights of parties shall as nearly as possible be the same as in the suit between subject and subject, not in a suit between a subject and the Crown in right of a State. I take the rights of parties

to include the immunities acquired by a party by the effluxion of time.

Next it is said, if I do justice to the argument, that if s. 64 is to be applied, the suit to which the Commonwealth is a party must be of the same character as a suit between subject and subject. As there cannot be a suit between subject and subject for the recovery of tax and penalties, there is, the argument proceeds, no suit of an appropriate character to the incidents of which the Commonwealth is subject. Suits by the Crown reflect the special character of the Crown and this argument is really only another way of saying that in the attempt to apply s. 64 the special character of the Crown cannot be ignored. This proposition was rejected by Gibbs J. in Maguire v. Simpson at p. 387, his Honour saying that it the theory were carried to its logical conclusion, it would seem to give s. 64 no effect. The evident purpose of s. 64 is to put to one side the special character or the Crown, its special rights and its special immunities and this has been demonstrated by the course of authority e.g. with respect to discovery: Naismith v. McGovern (supra). In Asiatic Steam Navigation Co. Ltd. v. The Commonwealth (1956) 96 C.L.R. 397 Kitto J. at p. 428 said:

“In construing s. 64 of the Judiciary Act, however, the task is not to fix the limits of an implication. It is to give effect to unambiguous words. Its requirement is, in effect, to put out of account any special position of the Crown, and as far as possible to decide all questions of right in the same way as they would have been decided if the Commonwealth or State had been a subject.”

A subsidiary argument that the Queensland Statute excludes from the actions to which it relates actions by the Crown for the recovery of taxes and other sums so that, in effect, there is nothing relevant for s. 64 to pick up cannot be sustained. The Queensland Act excludes actions by the Crown in right of the State which are of that character from the operation of s. 10. To the extent to which it purports to exclude actions by the Commonwealth it purports

to deny the operation of s. 64 and this, by reason of s. 109 of the Constitution it cannot do.

Then it is said that Maguire v. Simpson which held the Limitation Act of New South Wales to bar a claim by the Commonwealth Trading Bank of Australia is authority only in relation to actions on the contract, as was the case in Maguire v. Simpson or, at least, to cases in which the claim of the Commonwealth is not of a governmental character. It was contended that the words “as nearly as possible” have this effect. This argument relies on authorities referred to in the judgment of Stephen J. in which it was suggested that s. 64 would not pick up a law inconsistent with “the notion of a sovereign State” or “incompatible with the dignity of the Crown”. These notions were thought to justify a substantial Crown privilege against discovery. It is noteworthy however, that in the judgment which is relied upon, the conclusion was that without attempting any general analysis of the extent of the qualification involved in “as nearly as possible”, Stephen J. was content to conclude that it did not operate to exclude from the operation of s. 64 the provisions of the relevant limitation act. There is indeed no novelty about the application of statutes of limitation to the Commonwealth. In William Crosby & Co. Pty. Ltd. v. The Commonwealth (1963) 109 C.L.R. 490 at p. 494 Dixon C.J. said:—

“I suppose that it cannot be regarded as completely clear that in an action in the High Court on a cause of action between subject and subject there is any Statute of Limitations, although as a judge sitting alone I held that s. 79 and s. 80 of the Judiciary Act 1903-1927 would supply one: Cohen v. Cohen (1929) 42 C.L.R. 91, at p. 99. See further, Musgrave v. The Commonwealth (1937) 57 C.L.R. 514, at pp. 531, 543, 547, 551 as to s. 79 of the Judiciary Act 1903-1960. Here, moreover, the Commonwealth, i.e. the Crown in right of the Commonwealth, is a plaintiff. Whence comes the time bar to its action? Does s. 64 of the Judiciary Act apply?”

The passage of time would seem to have affirmed the view His Honour took in Cohen v. Cohen.

Finally, it was contended that no case would be found in which s. 64 had been applied so as qualify or limit a right conferred by an Act of the Commonwealth. Here it is said the Income Tax Assessment Act gives to the Commonwealth a right to recover tax without limitation as to time. The contention is that if s. 64 picks up the limitation provisions of the Queensland Act this result will ensue. The answer to that proposition seems to me to lie in the ambulatory character of s. 64. There is no necessary conflict between the two in this respect. The right, of the Commonwealth to recover is established by the Income Tax Assessment Act, but that. Act was passed, after all, by a Parliament which had s. 64 on its statute book. This question seems to me to be one merely of statutory interpretation. If the Income Tax Assessment Act in terms denied to the subject the right to raise the statutes of limitation it could be credibly argued that to this extent it intended to exclude the operation of s. 64, but that is not the case.

Our attention was directed to the decision in Deputy Commissioner of Taxation v. D.T.R. Securities Pty. Ltd. (1985) 1 N.S.W.L.R. 653. I would, with respect, agree that a State law cannot impede the exercise by the Commissioner of the right of the Commonwealth to recover tax. This however, as it seems to me, says nothing to the effect, of s. 64 as an enactment of the Commonwealth.

Accordingly I am of the opinion that the demurrer to paras. 13 and 14 must be overruled.

Paragraph 18 of the defence raises the same point as para. 22 of the defence in the Jonrich case. Accordingly the demurrer should in my opinion be allowed to so much of this paragraph as denies the due making of the assessment.

ALINGA PTY. LTD.

In this case the plaintiff demurred to paras. 3 to 21 of the defence. The demurrer to paras. 5, 6, 9, 10 and 14 was not set down. The defendant concedes that the demurrer should be allowed in relation to paras. 11, 12, 15 and 18 of the defence while the plaintiff concedes that it is misconceived in relation to para. 17. There is thus before the court for determination a demurrer to paras. 3, 4, 7 and 8, 13, 16, 19, 20 and 21. Paragraphs 3, 4, 7 and 8 are to the same effect as paras. 3, 4, 7 and 8 in the Jonrich case. Accordingly the demurrer to paras. 3 and 4 should be overruled and that to paras. 7 and 8 allowed. Paragraph 13 is in the same terms as para. 15 of the defence in the Moorebank case and the demurrer should therefore be allowed. Paragraph 16 is in the same terms as para. 22 in the Jonrich case and it follows that the demurrer to so much of this paragraph as denies the due making of the assessment should be overruled. Paragraphs 19 and 21 are in the same terms as paras. 24 and 25 in the Jonrich case and it follows that the demurrer to these two paragraphs should be allowed.

In the circumstances only the demurrer to para. 20 was argued. Paragraph 20 was intended to raise the same points as para. 24 in the Jonrich case. It suffers from the same defects of pleading. On any view it does not disclose a ground of defence and the demurrer must be allowed.

JARDEN

In this case the plaintiff demurred to paras. 3-13, 15-25 and 28-30 of the defence. The demurrer to paras. 5, 6, 9, 10, 21 and 28-29 was not set down. The defendant concedes that, the demurrer to paras. 11, 12, 13, 15, 16, 17, 18, 22 and 25 should be allowed while the plaintiff concedes that the demurrer to para. 24 is misconceived. There falls for determination therefore a demurrer to paras. 3, 4, 7 and 8, 19, 20, 23 and 30 of the defence. Paragraphs 3, 4, 7 and 8 are in the same terms as the same numbered paragraphs in the Jonrich case. It follows that the demurrer to paras. 3 and 4 should be overruled and that

the demurrer to paras. 7 and 8 should be allowed. Paragraph 19 is to the same effect as para. 14 in the Moorebank case and it follows that in my opinion the demurrer to this paragraph should be overruled. Paragraph 20 raises the same matters as paras. 7 and 8 in the Jonrich case and the demurrer should accordingly be allowed. Para. 23 raises the same point, as para. 22 in the Jonrich case and so much of it as denies the making of the consent must, be allowed and to such as denies its due making must, be overruled.

In the result only the demurrer to para. 30 was argued. Paragraph 30 alleges that in so far as payments have been made by the defendant in reduction of his alleged indebtedness, the plaintiff is obliged to appropriate such payments in accordance with directions given by the defendant. The circumstances in which this contention would afford the defendant, a ground of defence to the action are not shown. The point appears to be somewhat academic for the reasons given by Lockhart J. in Re Walsh ex parte Deputy Commissioner of Taxation (1982) 60 F.L.R. 355. It is not suggested in this case that the debts are due to the Commonwealth in respect of income tax pursuant to any other provision than s. 208. In those circumstances nothing is shown which would indicate any detriment which the defendant would suffer if the plaintiff has disregarded his appropriation, merged the separate debts and applied the payments against a single undifferentiated balance. However, I find the reasons of Lockhart J. for interpreting s. 208B, despite the language of s. 208B(1), as applying to a case in which debts are due to the Commonwealth under both s. 208 and s. 208A persuasive. I would allow this demurrer.

YAKIRIKI PTY. LTD.

The plaintiff in this case demurred to paras. 3-19 and 21 of the defence. The demurrer to paras. 5, 6, 9, 10 and 14 was not set down. The defendant concedes that, the demurrer should be allowed in relation to paras. 11, 12, 15 and 18 while the plaintiff concedes that its demurrer to

para. 17 is misconceived. Accordingly there is for determination a demurrer to paras. 3, 4, 7, 8, 13, 16, 19, 20 and 21 of the defence. As paras. 3, 4, 7 and 8 are to the same effect, as the same numbered paragraphs in the Jonrich case it follows that the demurrer to paras. 3 and 4 should be overruled and that to paras. 7 and 8 allowed. Paragraph 13 is to the same effect as para. 15 in the Moorebank case and paras. 7 and 8 of the Jonrich case and it follows that, the demurrer to this paragraph should be allowed. Paragraph 16 is to the same effect as para. 22 in the Jonrich case and it follows that the demurrer to so much of this paragraph as denies the due making of the assessment, should be overruled. Paragraph 19 is to the same effect as para. 24 in the Jonrich case and it follows that the demurrer should be allowed. Paragraph 20 is to the same effect, as para. 20 in the Alinga case and it follows that the demurrer should be allowed.

In the result, only the demurrer to para. 21 has been argued. Paragraph 21 contends that there has not been good service of the notice of assessment in that it was served upon the defendant as trustee for Lisa Margaret Magill whereas the defendant contends that it is trustee for the Magill Family Trust. This is a simple case of misnomer, not of the taxpayer, but of the cestui que trust. There is no substance in para. 21 and the demurrer must be allowed.

Before indicating the orders which should be made I shall state my approach to the question of costs. In my opinion, where both parties have succeeded on substantial questions there should be no order as to costs. In this connection I would not regard the points raised by the plaintiff under the Administrative Decisions (Judicial Review) Act as substantial nor the points raised by the defendants as to the due making and due calculation of the assessments. Nor would I regard as substantial grounds of defence raised which were plainly the subject of binding decisions by the High Court. The only really substantial questions argued were those raised by paras. 7 and 8 of each of the defences and the limitation point. In Moorebank

and in Jordan therefore each party succeeded on a substantial question and there should in my view be no order as to costs. In the other cases the plaintiff succeeded on the only substantial question which was raised and the defendant should therefore pay the costs.

The orders I propose are as follows:

Jonrich: Order that the demurrer be allowed in relation to paras. 7-8, 11-13, 15-18, 21 and 24-26 of the defence and to so much of para. 22 thereof as denies that the assessment was made. Further order that the demurrer be overruled in relation to paras. 3-4 and 23 and so much of para. 22 of the defence as denies the due making of the assessment. Order that, the defendant pay the plaintiff's costs of the demurrer to be taxed.

Moorebank: Order that the demurrer be allowed in relation to paras. 7-8, 11-12, 15, 17 and 20 of the defence and so much of para. 18 thereof as denies the making of the assessment. Order that the demurrer be overruled as to paras. 3-4, 13-14 and 19 of the defence and so much of para. 18 thereof as denies the due making of the assessment. No order as to costs.

Alinga: Order that the demurrer be allowed in relation to paras. 7-8, 11-13, 15 and 18-21 of the defence and to so much of para. 16 as denies the making of the assessment. Order that the demurrer be overruled as to paras. 3-4 and 17 of the defence and so much of para. 16 as denies the due making of the assessment. Order that the defendant pay the plaintiff's costs of the demurrer to be taxed.

Jarden: Order that the demurrer be allowed in relation to paras. 7-8, 11-13, 15-18, 20, 22, 25 and 30 of the defence and so much of para. 23 as denies the making of the assessment. Order that the demurrer be overruled as to paras. 3-4, 19 and 24 of the defence and so much of para. 23 as denies the due making of the assessment. No order as to costs.

Yakiriki: Order that the demurrer be allowed in relation to paras. 7-8, 11-13, 15 and 18-21 of the defence and so much of para. 16 as denies the making of the assessment. Order that the demurrer be overruled as to paras. 3-4 and 17 of the defence and so much of paras. 16 as denies the due making of the assessment. Order that the defendant pay the plaintiff's costs of the demurrer to be taxed.

IN THE SUPREME COURT OF QUEENSLAND Appeal No. 2273 of 1986


Mr Justice Connolly


Mr Justice Derrington

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JUDGMENT: McPHERSON J.

Delivered the 3rd day of september 1986.

CATCHWORDS:

Income tax - Recovery - Action to recover unpaid tax and additional tax - Debt due to Commonwealth - Whether Commonwealth bound by limitation statute Income Tax Assessment Act 1936, ss. 207(1), 208(1), 209(1); Judiciary Act 1903, s. 64; Limitation of Actions Act 1974, ss. 10(1)(d); 10(5).

Constitutional law - Federal jurisdiction - Commonwealth a party to suit - Claim for Income tax - State limitation statute - Power of State to bind Commonwealth “fiscal right” - Inconsistency with Commonwealth Act - Income Tax Assessment Act 1936, ss. 208(1), 209(1); Judiciary Act 1903; Limitation of Actions Act 1974 ss. 6, 10(1)(d), 10(5).

Counsel: Fitzgerald Q.C. with Hack for Plaintiff

Davies Q.C. with H. Frazer and Clark for Defendants

Solicitors: Australian Government Solicitor for PlaintiffHenderson Lahey Trout Bernays for Defendants

Hearing dates:

20th, 21st August 1986


FULL COURT

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JUDGMENT - McPHERSON J.

Delivered the 3rd day of september 1986.

Having read the reasons for judgment of Connolly J in these matters, I propose to confine my remarks to the proceedings no. 1345 of 1986 against Moorebank Pty. Ltd. That action in the name of the Deputy Commissioner of Taxation as plaintiff was instituted by specially indorsed writ issued out of the Supreme Court on April 1, 1986 to recover a sum of $92,349.15 and costs. The sum claimed comprises an amount of $42,918.10 in respect of income tax assessed on income alleged to have been derived by the defendant during the year ended June 30, 1974 the subject of a notice of assessment issued on April 21, 1978, together with further sums alleged to be due by way of additional tax for late payment. To these claims the defendant in paragraphs 13 and 14 of the defence, to which the plaintiff has demurred, sets up the pleas that the plaintiff's causes of action had accrued more than six years and two years respectively before the action was instituted, and that the claims to recover tax and additional tax are therefore barred by the provisions of s. 10 of the Limitation of Actions Act 1974 (“the State Act”).

The demurrer directly raises the question whether the State Act applies to a claim for income tax in an action brought by the Commissioner or his Deputy, and hence raises

the correctness of the decision of Lee J in Deputy Commissioner of Taxation v. DTR Securities Pty. Ltd. [1985] 1 N.S.W.L.R. 653, in which this question was answered in favour of the Commissioner, and also of Olney J Deputy Commissioner of Taxation v. Essex Securities Pty. Ltd. (1986) 86 ATC 4142, in which that decision was followed. It should be said that the provisions of the State Act in Queensland are indistinguishable from, as having been modelled on, the corresponding provisions of the New South Wales Limitation Act 1969.

The power to enact legislation imposing income tax as a form of taxation is vested in the Commonwealth Parliament by s. 51(ii) of the Constitution. The power so conferred is not exclusive to that Parliament, although since the Uniform Tax Case (South Australia v. Commonwealth (1942) 65 C.L.R. 373) and despite the enactment of the Income Tax (Arrangements with the States) Act 1978, in a practical sense it has been. Any supposed prerogative of the Crown, whether in right of the Commonwealth or of a State, now to levy taxes independently of Parliamentary enactment came to an end with the Bill of Rights in 1689.

The question with which we are here concerned is however not the levying of taxes but their enforcement or recovery. In that regard s. 208(1) of the Income Tax Assessment Act 1936 (“the Assessment Act”) provides that income tax, when it becomes due and payable, is to be a debt due to the Commonwealth. Originally the section said due to “the King on behalf of” the Commonwealth, but the omission of those words does not, I think, alter the conclusion that a debt arising from liability for income tax is due to the Crown in right of the Commonwealth, which in this context means the Executive Government of the Commonwealth. The submissions before us tended, I think correctly, to assume that this was so. The Commissioner is under the Assessment Act vested by Parliament with various forms of independent discretion, which means that his legal position in some respects more closely resembles that of the police constable considered in Enever v. The King

(1906) 3 C.L.R. 969 than that of some other Crown servants. But in the matter of collecting and recovering tax due to the Commonwealth, it cannot be seriously doubted that he represents the Crown in right of the Commonwealth : cf. Pitcher v. Federal Capital Commission (1928) 41 C.L.R. 385; Naismith v. McGovern (1953) 90 C.L.R. 336, referred to by Mr Davies Q.C. in this case.

For the recovery of debts due to it the Crown had at common law summary prerogative remedies not available to a subject seeking to recover a like debt due to him. The Crown might enforce its claim by information of debt or by writ of extent. See Robertson : Civil Proceedings by and against the Crown, at 170-175; 189-190. Holdsworth : History of English Law, vol. 10, at 344-345. Chitty, in discussing these prerogative judicial remedies in his Treatise on the Legal Prerogatives of the Crown (1820) observes that the Crown was not obliged so to proceed but might waive the prerogative remedies and instead maintain the usual common law actions : Chitty, op.cit., at 245. A peculiar exception was the action of ejectment, which was the subject of consideration in Commonwealth v. Anderson (1960) 105 C.L.R. 303; but, to recover debts due to the Crown, information of debt was for centuries the form in common use : see Robinson op.cit., at 172.

In England these forms of prerogative remedy were abolished by the Crown Proceedings Act 1947. Until then, information of debt was still used as a method of recovering income tax : see Robinson, loc.cit.; and for an example cf. Aramayo Francke Mines Ltd. v. Eccott [1925] A.C. 634. In Queensland the old Crown remedies were abolished by The Crown Remedies Act of 1874, which placed the Crown on a footing of equality with the subject in proceedings to enforce Crown rights : s. 10. See now Crown Proceedings Act 1980 (Qld.), s. 9. The Crown in right of the Commonwealth is not within either of those Queensland statutes. The corresponding Commonwealth provision is s. 64 of the Judiciary Act 1903. All these provisions, which have a common origin in the Claims against Government

legislation of colonial times, are alike in declaring that the rights of parties to a suit in which the Crown is a party shall be “as nearly as possible the same as in a suit between subject and subject”. Section 64 expressly mentions costs. It was another of the King's dignities that he did not pay or receive costs of litigation : Chitty, op.cit., at 310; Attorney-General (Qld.) v. Holland (1912) 15 C.L.R. 46. The effect of s. 64 is to abrogate that rule in a “suit”, which includes any action or original proceeding between parties : Judiciary Act 1903, s. 2.

By s. 209(1) of the Assessment Act:

“Any tax unpaid may be sued for and recovered in any Court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name.”

On its face s. 209(1) does not preclude resort by the Commissioner to the various forms of prerogative remedy available to the Crown at common law. It may, however, do so by implication because of the general rule that a prerogative of the Crown is displaced by a statutory provision covering the same subject matter: Attorney-General v. de Keyser's Royal Hotel [1920] A.C. 508; and cf. Deputy Commissioner of Taxation v. Corwest Management Pty. Ltd. [1978] W.A.R. 129. In any event, it is well settled that the Crown may waive its prerogative remedies (Chitty, op.cit., at 245). Here it is clear that the plaintiff in suing to recover the unpaid tax is relying on a combination of s. 208(1) and s. 209(1) of the Assessment Act and s. 64 of the Judiciary Act. The writ seeks costs, which are available to the Crown only by the operation of s. 64.

The proceedings therefore present the appearance of an action between subject and subject, except that the Crown in right of the Commonwealth is a party, and the subject matter is income tax. Considered apart from these aspects the action is simply one to recover a debt due by statute. At common law a debt made due by express statutory provision is regarded as a specialty : see Shepperd v. Hills (1855) 11 Exch. 55, per Parke B, at 67; 156 E.R. 743;

Cooper v. Municipality of Brisbane (1900) 10 Q.L.J. 120, 124-125; Federal Commissioner of Taxation v. E.O. Farley Ltd. (1940) 63 C.L.R. 278, 317, per Dixon J. Specialty debts attracted the extended period of limitation, which by s. 10(3) of the State Act is now fixed at twelve years from the date on which the cause of action accrued, although s. 10(3) also adds the qualification that it does not affect an action in respect of which a shorter period of limitation is prescribed by any other provision of the Act.

An action to recover a debt such as unpaid tax is also capable of being regarded as an action to enforce a contract : see the decision of this Court in Belyando Shire Council v. Rivers [1908] Q.W.N. 17; 2 Q.J.P.R. 47, in an action to recover local authority rates. The basis of the decision was that under the old system of pleading it was regarded as an action on an implied assumpsit : Stephen on Pleading, 7th ed., at 11. The Queensland decision was applied by Adam J in State of Victoria v. Hansen [1960] V.R. 582 to an action for recovery of stamp duty; and in the county court of Victoria to an action to recover State (not Federal, as Adam J said in the former case) income tax : Chenoweth v. Summers [1941] A.L.R.(C.N.) 364. Those were all cases of proceedings to recover sums of money made payable by statute, which were held to be actions to enforce a “contract” for the purpose of s. 11(1)(b) of the Service and Execution of Process Act 1901 (Cwth.). On that footing, the present action would fall within s. 10(1)(a) of the State Act as being “an action founded on simple contract”, so attracting the six year limitation period under that provision. Cf. also Re Ward; Thomas v. L.G. Abbott & Co. Ltd. (1950) 16 A.B.C. 214, where a claim to recover money as a preference avoided by s. 95 of the Bankruptcy Act 1924 was held by Pain J to be subject to the six year limitation in the character of an action on the case. It was not an action to recover a specialty debt because the Act gave no express cause of action in debt.

I mention these matters because of a submission of Mr Fitzgerald Q.C. in the present case. He said that the State

Act imposed no express limitation upon bringing an action to recover a debt. But what the foregoing decisions show is that it is often necessary to characterize the form of proceeding to recover money, such as tax, made payable by or in consequence of a statutory provision in order to fit it into a legislative scheme such as the statute of limitations or other enactment. In the present case no difficulty arises because s. 10(1)(d) specifically applies the six year limitation period to “an action to recover a sum recoverable by virtue of any enactment ...” It was said that thereby an inconsistency with s. 209(1) arose. That section of the Assessment Act says that “any tax unpaid may be sued for and recovered in any Court of competent jurisdiction ...” whereas s. 10(1) of the State Act says that

“(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action arose:—

(a) ...

(d) an action to recover a sum recoverable by virtue of any enactment ...”

Even apart from the fact that s. 10(3) reduces the limitation period in a case such as this from twelve to six years, it is evident that, superficially at least, a degree of inconsistency exists between the two provisions. That was apparently not thought to give rise to any difficulty in Re Pain (supra), which implies that a State limitation statute is not necessarily inconsistent with a Federal Act conferring a cause of action. Here, however, the conflict is more direct, in that the Assessment Act makes the debt “recoverable ... in a court”, whereas s. 10(1) of the State Act says that an action “shall not be brought” after six years. Assuming inconsistency, then, so the submission proceeds, the provisions of s. 10(1)(d) of the State Act are invalidated or displaced by s. 109 of the Constitution. Those provisions of the State Act cannot, it was submitted, be preserved by s. 64 of the Judiciary Act because even a

Commonwealth statute cannot negate the operation of s. 109 of the Constitution : see University of Wollongong v. Metwally (1984) 59 A.L.J.R. 48.

While this is not in doubt, it is nevertheless possible for the Commonwealth Parliament so to frame its legislation by confining its scope within limits that avoid any inconsistency with a State enactment and so do not attract s. 109. That, in my opinion, is the effect of s. 64 of the Judiciary Act. It is plainly not right first to compare 209(1) of the Assessment Act with s. 10(1)(d) of the State Act, and, having thereby identified an inconsistency, then apply s. 109 of the Constitution so as to invalidate the latter, at the same time granting no field of operation to s. 64 of the Judiciary Act. To do so would leave the matter to be determined according to the sequence in which the Commonwealth enactments were applied to the State legislation. The proper approach, in my view, is to consider the combined effect of the Commonwealth enactments before determining whether there is any conflict or inconsistency with State law. Read together in this way, the effect of s. 208(1), s. 209(1) and s. 64 may be expressed as follows:

Any tax unpaid may be sued for and recovered as a debt due to the Commonwealth in any court of competent jurisdiction by the Commissioner or Deputy Commissioner suing in his official name and in such suit the rights of the parties shall as nearly as possible be the same as in a suit between subject and subject.

Viewed in that manner, no necessary inconsistency exists between the provisions of s. 10(1)(d) of the State Act and the combined provisions of s. 209(1) of the Assessment Act and s. 64 of the Judiciary Act.

On behalf of the defendant, Mr Davies Q.C. answered the plaintiff's submission on this point in another way. He said the provisions of the State Act do not purport to apply to the Crown in right of the Commonwealth. Under the general law the Crown was not bound by, nor could it take

advantage of, the provisions of a statute of limitations : see Fisher v. The Queen (1900) 16 V.L.R. 460; Public Works Commissioners v. Pontypridd Masonic Hall Co. [1920] 2 K.B. 233. In the case of the Crown the State Act in s. 6(1) specifically reverses this rule by providing that the Crown is bound and has the benefit of the Act. But the application of s. 6(1) of the State Act is expressly made subject to s. 6(3) of the Act. Section 6(3) provides that the Act does not apply to:

“(b) an action by the Crown -

(i) for recovery of a fee, tax, duty or other sum of money or interest on a fee, tax, duty or other sum of money.”

Section 10(1)(d) therefore imposes no limitation period upon an action by the Crown to recover tax or interest thereon. The Crown is, however, defined in s. 5 to include not only the Crown in right of the State “but also, so far as the legislative power of Parliament permits, the Crown in all its other capacities.”

The result is that the Commissioner of Taxation or his Deputy is bound by s. 10(1)(d) to the extent only that the legislative power of State Parliament permits. It might be possible to argue that, to like extent, the Commonwealth Crown or the Commissioner may take the benefit of s. 6(3)(b)(i), which expressly exempts an action by the Crown to recover a tax and interest thereon. That is not quite the sense in which “taking the benfit of” a limitation statute has been used in the past: cf. Fisher v. The Queen, supra; but there does not seem to be any reason why the specially privileged position in which tax due to the Crown is placed by the State Act should not be taken as a benefit by the Crown in right of the Commonwealth. Nor is there, so far as I am aware, any constitutional impediment to legislation by State Parliament conferring such a benefit upon the Crown in right of the Commonwealth, assuming always that such legislation is otherwise within power and that it is not inconsistent with Commonwealth legislation.

The question was not raised before us, but the short answer to it seems to be that, insofar as s. 6(1) of the State Act purports to extend the benefit of that Act to the Crown in right of the Commonwealth, it is inconsistent with s. 64 of the Judiciary Act, which is designed to place the Crown on a footing of equality with subjects engaged in litigation : cf. Maguire v. Simpson (1977) 139 C.L.R. 362, at 403, per Mason J.

What was submitted, and accepted on both sides, was that State Parliament had no power to enact legislation binding the Crown in right of the Commonwealth in the exercise of its prerogative power with respect to taxation. The authority for that proposition is the decision of the High Court in Commonwealth of Australia v. Cigamatic Pty. Limited (1962) 108 C.L.R. 372. The prerogative there in question was the right of the Crown to payment of its debt in priority to that of the subject in case of competition between debts of equal degree : see Federal Commissioner of Taxation v. E.O. Farley Ltd. (1940) 63 C.L.R. 278; Re Richard Foreman & Sons Pty. Ltd.; Uther v. Federal Commissioner of Taxation (1947) 74 C.L.R. 508. It is true that in the Cigamatic case Dixon C.J. describes that right as “a fiscal right belonging to the Commonwealth as a government and affecting its Treasury”; but I respectfully suggest that, in selecting that description, which His Honour thought “more correct” in modern times, the learned Chief Justice was simply preferring to express the priority claimed by the Commonwealth “as a government of the Queen” in language that better exposed its present constitutional function than if it continued to be stated as an ancient prerogative of the Sovereign. It is most unlikely that His Honour was intending to propound a new and more extensive right in favour of the Executive Government of the Commonwealth than had hitherto been recognized. Prerogative is part of the common law, and it is an accepted constitutional principle, as King Charles I discovered (or perhaps established) to his cost, that the Crown may not now enlarge or invent new prerogatives. Indeed, the “modern” description used by Sir Owen Dixon was adopted by

him from American constitutional practice, where, after the independence of the Thirteen Colonies, it was found expedient to justify the claim to have inherited prerogatives of the Crown but to do so in language that was consistent with the new form of republican government in that country : cf. Federal Commissioner of Taxation v. E.O. Farley Ltd. (1940) 63 C.L.R. 278, 301-302.

It will be evident from the foregoing that I find myself in respectful disagreement with the view expressed by Lee J in Deputy Commissioner of Taxation v. DTR Securities Pty. Ltd. [1985] 1 N.S.W.L.R. 653, 668-669. His Honour there held that:

“... to apply the provisions of the Limitation Act to an action for recovery of penalty under the Income Tax Assessment Act ... would be to give to a State Act efficacy to interfere with a ‘fiscal right’ of the Commonwealth, that right being to impose and recover tax from the citizens of the Commonwealth : that right of the Commonwealth to recover the tax sued for unimpeded by the Limitation Act is implicit in the power of the Commonwealth to levy and recover the tax as a function of government.”

We are, of course, bound to follow and apply the decision of the High Court in Commonwealth v. Cigamatic Pty. Limited, supra; but that case was concerned only with the prerogative or fiscal right of Government to a recognized priority in payment of its debts in competition with other creditors of equal degree. No such prerogative is involved in the present case. No one can possibly doubt the legislative power of the Commonwealth Parliament to impose income tax or to make provision for its recovery. If that is a “fiscal right” it has been exercised here in legislative form in the Income Tax Assessment Act. The legislation relies for its validity on no theory of “fiscal right”. Equally, it cannot be doubted that the Crown in right of the Commonwealth may enforce a debt due to it in respect of unpaid tax; but in this action it does not seek to do so by virtue of any “fiscal right” or prerogative remedy of the Crown but in reliance upon s. 209(1), which

is legislation of the Commonwealth. As such it enjoys the paramount and overriding quality attributed by s. 109 of the Constitution in the event of inconsistency with any State law.

I have already indicated my view that there is no necessary inconsistency between the provisions of s. 10 of the State Act and ss. 208(1) and 209(1) of the Assessment Act read with s. 64 of the Judiciary Act. It remains to consider whether the combined effect of the Commonwealth provisions are, indeed, inconsistent with the limitation provisions in s. 10 of the State Act. As stated earlier, the composite effect of the Commonwealth legislation is that unpaid tax may be sued for and recovered as a debt due to the Commonwealth, but that in such a suit the rights of the parties shall as nearly as possible be the same as in a suit between subject and subject. It must be accepted that an effect of s. 64 of the Judiciary Act is to attract the operation of the provisions of a State limitation statute where the debt sued for is a debt due to the Commonwealth arising out of an ordinary trading transaction : see Maguire v. Simspon (1977) 139 C.L.R. 362. By applying the limitation provisions the rights of the parties, who are the Commonwealth as plaintiff and the defendant, are made as “nearly as possible the same” as in a suit between subject and subject. I find it difficult to understand why the same should not be true of an action by the Commonwealth to recover the statutory debt resulting to it from s. 208(1) of the Assessment Act. A reason, it was submitted, is that the debt when sued for retains its character as income tax, and since no subject could ever sue for income tax, it is impossible to place the Commonwealth claim in suit “as nearly as possible” on the same footing as a claim between subject and subject.

There are, in my view, several answers to that proposition. One is that s. 209(1) gives to unpaid income tax the status of a debt for the purpose of recovering it. It is not the fact that it is income tax, but that it is a debt due by statute and unpaid, that vests the cause of

action in the Commonwealth : Deputy Commissioner of Taxation v. Corwest Management Pty. Ltd., supra, at 135. There is nothing in the cases down to State of Victoria v. Hansen, supra, including Chenoweth v. Summers (itself a case of an action to recover income tax), that suggests that its origin as income tax might invest it with any additional status beyond its rather mundane character of a debt. In any event, it is not quite beyond possibility that a subject might be plaintiff in an action to recover an income tax debt. It is very ancient law, long ante-dating the Judicature Acts, that the Crown is able to assign choses in action : Re Richard Foreman & Sons Pty. Ltd.; Uther v. Federal Commissioner of Taxation (1947) 74 C.L.R. 508, at 528. And if it be thought that the nature and terms of the Assessment Act are such as impliedly to exclude assignment of a debt arising under it, it is as well to remember that the origin of the income tax sued for by the Commissioner may not necessarily be the Assessment Act but the provisions of some State income tax law that make provision for the assignment to the Commonwealth of the right to receive and recover as a debt due to the Commonwealth an amount of State income tax : see S. 208A of the Assessment Act. Would it be permissible in such a case so to trace the origin of the income tax as to demonstrate that it does not spring from “fiscal rights” of the Commonwealth but simply of a State?

Section 64 makes no express reservation from its terms of any particular Crown or governmental right or immunity that would take an income tax debt outside its quite general scope. It is true that in Asiatic Steam Navigation Co. Ltd. v. The Commonwealth (1956) 96 C.L.R. 397, at 417, Dixon C.J., McTiernan and Williams JJ placed on one side a consideration of the effect of s. 64 in “special situations arising out of purposes or functions peculiar to Government”. This dictum was taken up by Stephen J in Maguire v. Simpson (1977) 139 C.L.R. 362, 394, who re-iterated the reference by their Honours to ships of war. The defence of the realm is certainly an aspect of the prerogative. No higher governmental function can be

conceived. Yet s. 64 of the Judiciary Act has been held to authorize a plaintiff member of the Defences Forces to recover damages in an action against the Commonwealth for an injury sustained in peace time by negligence for which the Commonwealth was vicariously responsible : Groves v. The Commonwealth (1982) 150 C.L.R. 113. The decisions referred to in the passage in Asiatic Steam Navigation Co. Ltd. v. The Commonwealth (supra) are Gibson v. Young (1900) 21 L.R.(N.S.W.) 7 and Davidson v. Walker (1901) 1 S.R.(N.S.W.) 196. Both concerned the function of the State Crown in constructing and maintaining goals. It is not altogether clear that they can stand in the face of the decision in Groves v. The commonwealth, supra, which involved the loftier government function of national defence. Nor is it easy to identify recent examples of cases in which the Commonwealth has succeeded in securing its exemption from the generality of s. 64 on the footing that the purposes or functions involved were “peculiar to Government”. That is perhaps not altogether surprising when it is considered that to exclude from s. 64 actions arising out of the governmental functions of the Commonwealth would leave the section with virtually no field of operation : cf. Maguire v. Simpson, supra, at 387, per Gibbs J. In my respectful opinion the statement of Kitto J in Asiatic Steam Navigation Co. Ltd. v. The Commonwealth (1957) 96 C.L.R. 397, at 427, correctly expresses the prevailing view of s. 64 - which is that it applies to the Crown “the whole body of the law, statutory or not, by which the rights of the parties would be governed if the Commonwealth were a subject instead of being the Crown”. Approached on that basis, there can be no doubt that the effect of s. 64 of the Judiciary Act engrafted, as I consider it must be, upon ss. 208(1) and 209(1) of the Assessment Act, is to extend to this action the provisions of 10(1)(d) of the State Limitation of Actions Act.

What I have said about the application of s. 10(1)(d) to the claim for tax in principle also applies to the claim for additional tax. Section 207(1) imposes additional tax at a specified rate of 20 per cent “by way of penalty” on

the amount of tax unpaid. By virtue of s. 209(2) such additional tax is made recoverable in the same way as the tax itself. It seems clear that it is to be regarded as in the nature of a “penalty” within the meaning of s. 10(5) of the State Act, which fixes a two year limitation period for its recovery. On this point, I respectfully accept the analysis and conclusion of Lee J in Deputy Commissioner of Taxation v. DTR Securities Pty. Ltd. [1985] 1 N.S.W.L.R 653, 656-662, but hold that s. 10(5) of the Act applies to the Commissioner's claim in the present case.

The demurrers to both paragraphs 13 and 14 of the defence should in my opinion be overruled.

In relation to the other demurrers in the proceedings before the Court, I agree with the reasons of Connolly J and the orders that he proposes.

IN THE SUPREME COURT OF QUEENSLAND Appeal No. 2273 of 1986Appeal No. 1345 of 1986Appeal No. 2303 of 1986Appeal No. 2339 of 1986Appeal No. 2333 of 1986

FULL COURT


Mr Justice Connolly


Mr Justice Derrington

BETWEEN:


AND:

JONRICH PTY. LTD. Defendant

AND OTHERS

JUDGMENT: DERRINGTON J.

Delivered the Third day of September 1986.

CATCHWORDS:

Counsel: Fitzgerald Q.C. for P. Hack for Commissioner of TaxationDavies Q.C. & H. Frazer & B. Clarke for Respondents (taxpayers)

Solicitors: Australian Government Solicitor for Commissioner of TaxationHenderson Lahey Trout Bernays for Respondents (taxpayers)Feez Ruthning & Co. for Respondent by Election

Hearing dates:

20th and 21st August, 1986


FULL COURT

BETWEEN:


AND:


BETWEEN:


AND:


BETWEEN:


AND:


BETWEEN:


AND:



AND:


JUDGMENT - DERRINGTON J.

Delivered the day of 1986.

The framework of this set of demurrers and the relevant issues are set out in the judgment of Connolly J. and will not be repeated here. This judgment will discuss certain points, but otherwise, I agree with his judgment and reasons on all issues.

Jonrich

The demurrer to paras. 3 and 4 of the defence claims that the amounts of tax and additional tax to which they refer were not calculated in accordance with the provisions of the Income Tax Assessment Act and that upon a proper calculation the amounts of tax are each nil or alternatively amounts less than the amounts assessed; and that the additional tax is consequently nil or alternatively less than that assessed. The demurrer relies

upon s. 177(1) of the Income Tax Assessment Act which reads as follows:—

“The production of a notice of assessment ... shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount, and all the particulars of the assessment are correct.”

In McAndrew v. Federal Commissioner of Taxation (1956) 98 C.L.R. at 263 at p. 281, approved by Mason and Wilson JJ. in F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 C.L.R. 360, Taylor J. said that “s. 177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground”. However, this does not mean any more than that the section facilitates proof by making the production of a notice of assessment irrebuttable proof of the matters referred to. That depends upon the production of the notice of assessment, assuming that there is one, and there is nothing whatever to suggest that the defence may not put all such matters in issue until the notice of assessment is in fact produced in evidence. The situation may be contrasted with that where a statutory provision facilitating proof provides that a mere averment in a pleading constitutes proof; and even in that case, it may be pleaded that a sufficient averment has not been made. In Bloemen's case (supra) Mason and Wilson JJ. at p. 376 said:—

“It does not necessarily follow from what we have said that, the Act excludes the general jurisdiction of the Supreme Court. Section 177(1) specifically operates by compelling a Court, for example the Supreme Court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue. In theory s. 177 leaves the Supreme Court with jurisdiction to decide whether an assessment has been duly made in a case in which an appropriate document is not produced.”

This passage clearly identifies the nature of the provision as evidentiary rather than as a pleading point. If at the trial the notice of assessment, is produced in accordance with s. 177(1), then the appropriate consequences of that, section will follow, but until then it is open to the defence to put the matter in issue; and it is not in point that, the defence in other parts refers to the notice of assessment because, at the pleading stage, it has not yet been produced in evidence. The demurrer to paras. 3 and 4 of the defence must be overruled.

In respect of the demurrers to paras. 7 and 8 of the defence, I agree with the decision of Connolly J. that they must be allowed and his reasons therefore. That additional tax under s. 207(1) is a penalty in a constitutional sense does not mean that it cannot also amount to income tax within the meaning of the provisions of the Income Tax Assessment Act; and the section itself clearly says that it is additional tax.

In respect of para. 25 of the defence, the demurrer should be allowed. The defence proceeds upon the basis that there may be conflicting assessments where two persons are wrongly assessed for taxation in respect of the same income. Because the Income Tax Assessment Act makes adequate provision for any error in that respect to be challenged upon appeal, the hypothetical proposition is no reason for reading down the clear terms of s. 177(1) which makes the production of any assessment which has been made proof of all relevant facts: Tupicoff v. Federal Commissioner of Taxation (1984) 4 F.C.R. 505.

Moorebank Pty. Ltd.

The issue in respect of paras. 13 and 14 of the Defence is whether the Limitations of Actions Act 1974-1981 (Queensland) has application to an action commenced in this Court by the Commissioner under ss. 208 and 209 of the Income Tax Assessment Act 1936 for the recovery of tax and additional tax from the defendant. Because the action is brought by the Commissioner and there is no question of his

entitlement to do so, the issue which concerned the High Court, in The Commonwealth of Australia v. Evans Deakin Industries Limited and Another (unreported - 26.8.86) is not relevant here. However, certain dicta in that case are valuable as a guide.

Since Maguire v. Simpson (1977) 139 C.L.R. 362, there is no doubt but that the Limitation of Actions Act can apply in an appropriate case to the Commonwealth. A number of other relevant principles have also been established already and there is no point in their recital. The only question on this issue remaining for determination in the present case is whether the application of the Limitation of Actions Act is restricted so that it does not apply to the exercise by the Commonwealth of a governmental function such as the collection of taxation by means of a statutorily invested civil remedy in this Court. The fount of the exception must be the words “as nearly as possible” in s. 64 of the Judiciary Act which provides:—

“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.”

The Commonwealth v. Evans Deakin Industries Ltd. (supra) approved of the view of Kitto J. appearing in Asiatic Steam Navigation Co. Ltd. v. The Commonwealth (1956) 96 C.L.R. 397 at p. 427 where he said that the expression “as nearly as possible” in effect requires the Court “to put out of account any special position of the Crown, and as far as possible to decide all questions of right in the same way as they would have been decided if the Commonwealth or State had been a subject”. That view has been described as having the effect of rendering the expression very narrow; but in the Evans Deakin Industries case, the majority judgment said:—

“It is unnecessary to consider for present purposes whether in some cases at least it would be right to consider the special position of the Crown, but this is

not a case of that kind. Here the Commonwealth, in entering into a building contract, was not performing a function peculiar to the government; it was making a contract of a kind commonly entered into by ordinary members of the public and the determination of the rights and liabilities of the Commonwealth by reference to the Sub-contractors' Charges Act would not be incompatible with the position of the Commonwealth or detrimental to the public welfare.”

It is difficult to know whether the High Court, in its approval of the approach of Kitto J., intended that the intensity of his extension of s. 64 and his confinement of the restriction generated by the words “as nearly as possible” should apply to activities of a purely governmental nature. Certainly that was not the issue in the Asiatic Steam Navigation Company case, Maguire v. Simpson or the Evans Deakin Industries case. In each of those cases, the subject matter was of a commercial or industrial nature, and although the comments of Kitto J. might be accorded the generality they bear, even as to actions involving activities of a governmental nature, their application in this area is not as clear as in that existing in those three cases.

Discussion of the meaning and application of the phrase is conveniently collected in the judgment of Stephen J. in Maguire v. Simpson (supra) at pp. 393-395 where, in the parts relevant to this discussion, he said:—

“In The Commonwealth v. Baume Griffith C.J. described it as meaning ‘as far as the provisions the aid of which is invoked are applicable to such a party as the Commonwealth’ (1905) 2 C.L.R. at p. 417; His Honour regarded as not so applicable a provision which required affidavits to be sworn by a party in person. O'Connor J. took a like view: (1905) 2 C.L.R. at p. 418. However it was not only the fact, that the Commonwealth was not a natural person, and hence incapable of swearing an affidavit, that the Chief Justice thought might bring into operation the qualification involved in ‘as nearly as possible’; any inconsistency with ‘the notion of a sovereign State’ would have a like effect and the Chief Justice instanced process for contempt as something

accordingly excluded from possible application to the Crown: (1905) 2 C.L.R. at p. 417. In The Commonwealth v. Miller (1910) 10 C.L.R. 742 at p. 756 Isaacs J. gave to ‘as nearly as possible’ the effect, of excluding from application to the Crown ‘all coercive action incompatible with the dignity of the Crown and unwarranted by the express words of the enactment’; His Honour would thus have viewed this qualifying phrase as excluding from application to the Crown any provision inconsistent with its dignity. He regarded the furtherance of public justice, which is the concern of s. 64 as obliged to give way in face of ‘still higher consideration of the general welfare’ (ibid.) - and accordingly also regarded the qualifying phrase as preserving an adequate measure of Crown privilege in the discovery of documents. Higgins J. regarded s. 64 as not carrying the process of assimilation of Crown to subject so far, as to take away, in the case of orders for discovery, the ‘privilege of the Crown's officers as to affairs of State, etc.’: (1910) 10 C.L.R. at p. 758. In Marconi's Wireless Telegraph Co. Ltd. v. The Commonwealth (No. 2) (1913) 16 C.L.R. 178 the Court was unanimous in concluding that Crown privilege against discovery was not abrogated by the effect of s. 64. The Chief Justice regarded a claim to privilege as examinable but if, on examination, it proved to be well founded the Crown might still take advantage of it: (1913) 16 C.L.R. at p. 186. Barton J. appears to have taken a similar view; Isaacs J. took the opportunity of repeating what he had said in Miller's case (supra) and of emphasising that the privilege of public interest remained available to the Crown.

More recent cases throw little further light upon the effect of the qualification, ‘as nearly as possible’. In Asiatic Steam Navigation Co. Ltd. v. The Commonwealth (supra) the joint judgment of Dixon J., McTiernan and Williams JJ. suggests that where ‘purposes or functions peculiar to government’ are in question, s. 64 may have but limited application: (1956) 96 C.L.R. at p. 417 - and see the reference to Ships of War: ibid at p. 420. On the other hand Kitto speaks (ibid) at p. 427 of s. 64 as making the law as between subjects applicable ‘as completely as possible’ to the Crown, any ‘special position of the Crown’ being put out of account (ibid) at p. 428. This would appear to give a relatively narrow field of operation to the words ‘as nearly as possible’.

In South Australia v. The Commonwealth (1962) 108 C.L.R. at p. 140 Dixon C.J. observed that the necessary difference between principals of private and public law had to be borne in mind in applying the law as between subject and subject to a course concerning the rights and obligations of government. In Downs v. Williams (1971) 126 C.L.R. at p. 103 Gibbs J. remarked that ‘not every statute which imposes a duty on a subject can be rendered applicable to the situation of the Crown’. ...To these references may be added what was said by Newton J. in The Commonwealth v. Burns (1971) V.R. at p. 830 in relation to the Chief Justice's observations in South Australia v. The Commonwealth (supra) to which I have already referred and, in particular to the judgment of Else-Mitchell J. in The Commonwealth v. Lawrence (1960) 77 W.N. (N.S.W.) 538; (1960) N.S.W.R. 312. In the latter case His Honour at p. 315 provides instances of the possible operation of the phrase ‘as nearly as possible’ instances which serve to emphasise a variety of cases to which the phrase may possibly have occasion to operate.”

This review establishes that, on those authorities which are binding on this Court, some purely governmental activities are such that they cannot be equated with a “subject and subject” situation, so that by implication they are excluded from the operation of s. 64 by the qualifying expression. That was the basis of the reservation made in the majority decision in the Evans Deakin Industries case which has been quoted above. The more difficult question is whether recovery of taxation as in this case is of that character. On the one side it might be argued that the Income Tax Assessment Act, 1936, by creating by s. 208(1) a statutory debt in respect of income tax which is due and payable, and by providing by s. 209(1) a means of recovery under the civil jurisdiction of the Courts, has set a position in respect of its cause of action where there is no difficulty in the application of s. 64 of the Judiciary Act, for its status is like that of any other debt, or at least, statutory debt; and there is no difficulty in applying the Limitations of Actions Act to such a claim “as in a suit between subject and subject”. So far as it goes, this is in accordance with the approved view of Kitto J., for in such litigation there is indeed no

difficulty whatever in applying the limitation. Moreover, it is said, the Commonwealth, by assimilating the claim to that of a civil debt for its own convenience, must bear the consequence of the application of s. 64 to it in the same way as in Maguire v. Simpson (supra). This argument is based upon a separation of the process of imposing a tax from that of its collection.

The alternative proposition is more attractive. In this jurisdiction, the imposition and collection of income tax as a total exercise is purely a governmental function having no feature of private law. The imposition and collection of tax is a special process controlled by the relevant acts and limited to the relationship of Crown and taxpayer and no other; and as a concept of that particular governmental function it is artificial to separate the imposition from the collection. The field of taxation is quite different from that of a simple statutory debt so that it would be maladroit to try to impose upon the former the restraints of a limitation statute simply because it may apply to the latter even though, on the collection side, the obligation of the taxpayer is also made a statutory debt. The distinction is that the process of taxation as a whole is quite different and its similarity on merely this one procedural point is insufficient to disturb the distinction.

Comfort in this view is drawn from the exclusion of taxes from the operation of the Queensland Limitations of Actions Act which generally binds the Crown in right of the State. Similarly, s. 30(1) of the English Limitations Act, 1939 provides:—

“30(1) Save as in this Act otherwise expressly provided and without prejudice to the provisions of section thirty-two thereof, this Act. shall apply to proceedings by or against the Crown in like manner as it applies to proceedings between subjects and for the purposes of this Act a proceeding by petition of right shall be deemed to be commenced on the date on which the petition is presented:

Provided that this Act shall not apply to any proceedings by the Crown for the recovery of any tax or duty or interest thereon or to any forfeiture proceedings under the Customs Acts or the Acts relating to duties of excise or to any proceedings in respect of the forfeiture of a ship.”

It is of interest to note that as with s. 64 of the Judiciary Act, this section also puts the Crown in the position of a subject, but the latter has no equivalent to the phrase, “as nearly as possible”. It may be possible to argue that these provisions indicate the need to have an express exception as to taxes, which demonstrates that taxation is in no special position, but in each case the Act expressly binds the Crown in general terms, and an exception must be expressly stated. It is possible conceptually to associate the special exception in the limitation statute with the more generally expressed exception in the Judiciary Act which has a more general application. The lesson is that taxation is and should be regarded as being a function not readily amenable to the constraints of the limitations statutes. That is a reason for not approaching these proceedings, for the purpose of the application of s. 64 of the Judiciary Act, as merely an action for the recovery of a statutory debt between parties, but rather for recognising it as one for the recovery of tax, for which there is no comparable situation between subject and subject to which the Limitation of Actions Act could apply by virtue of s. 64 of the Judiciary Act. This reflects the difference between principles of private and public law to which Dixon C.J. referred in South Australia v. The Commonwealth (1962) 108 C.L.R. at p. 140.

This view is in line with the cases referred to by Stephen J. which speak of the purposes or functions peculiar to government, or similar expressions. The reason is that the words “as nearly as possible” mean what they say, and if it is not possible to refer to a situation between subject and subject in which the situation may exist, because the purpose of function is peculiarly

governmental, then the phrase excludes it by implication. It is a matter of substance and not of form. It must refer to the activity as a whole, and not artificially to only the convenient form of recovery which is provided by statute, for that is no substitute for the substance of the governmental framework of the enterprise. Nor is it appropriate to confine the exclusion to the exercise of the prerogatives of the Crown. There is no justification for such a restriction, for the reasoning behind the formulation of the exception implied by the phrase applies as much to functions which are purely governmental in character as to Crown prerogatives.

With respect I agree with the observations made in Deputy Commissioner of Taxation v. D.T.R. Securities Pty. Ltd. (1985) 1 N.S.W.L.R. 653 as to the nature of proceedings for the recovery of taxes and their relationship with s. 64. That decision was not limited to saying that a State could not override the Commonwealth's power of taxation, and it recognised the possible effect of s. 64 of elevating a State law to bind the Commonwealth by virtue of the Commonwealth provision. It decided further that, because of the nature of taxation, s. 64 does not have such an effect in respect of the State statute of limitations where taxation is involved. Further, Commonwealth of Australia v. Cigamatic Pty. Ltd. (In Liq.) (1962) 108 C.L.R. 372 provides additional support, as the analysis of this case in the former judgment shows. If anything, the circumstances of the present case are more persuasive than those in the Cigamatic case.

The conclusion is that the Limitation of Actions Act does not apply to this action. However, lest that conclusion be wrong and because other matters have been argued, it is desirable to refer to them.

The first is that, because s. 6 of the Queensland Limitation of Actions Act expressly excludes from its operation an action by the Crown for the recovery of, inter alia, tax, that section should be read as having

application to the Crown in right of the Commonwealth or so as to restrict the meaning of the other sections so that they do not apply to tax. It could equally be argued that, if the remaining sections did not, on their face and despite their generality, apply to tax, there would have been no reason for the exclusions contained in s. 6. As support for an alternative construction, it is pointed out that it would be incongruous if the exemptions from the limitations imposed by the Act were to apply to State taxes but not Commonwealth taxes. That does not follow, for the Act was not drafted as having application to the Commonwealth; and the position which the Commonwealth took, which legislatively was entirely in its own hands, may in theory have been a deliberate decision to that effect or alternatively may merely have overlooked the position that, the exemption from the State Act applied only to State tax. There is no good reason shown why the limitations imposed in the Act should not be so wide as to encompass Commonwealth tax if the Commonwealth chose to submit itself to the Act nor why the exemption contained in s. 6 as to tax should not be limited to State tax.

The other argument was that, because s. 208 of the Income Tax Assessment Act made the tax as assessed payable to the Commonwealth as a debt, the Queensland Limitation of Actions Act, in imposing an impediment upon the right, of the Commonwealth, if it had application, would fail by reason of s. 109 of the Constitution because of the conflict. Then, the argument proceeds, s. 64 of the Judiciary Act could not validly elevate the Queensland Act to apply to the Commonwealth Act because in this respect it is already destroyed in effect by s. 109 and cannot be validated by Commonwealth legislation. This reasoning embarks on an artificial separation of the operation of the three pieces of legislation. The limitations provision on its face is valid because it does not purport to bind the Commonwealth and so is not in conflict with the tax legislation. It is only when s. 64 comes into operation, that the latter, through the former could be brought within the limitations statute. In effect, the taxation Act is so

modified by s. 64 that the limitations provision is not in conflict with it. This ground should also fail. However, as the plaintiff was successful on the first point, the demurrer to paras. 13 and 14 of the defence should be allowed.

Jarden

Paragraph 19 of the defence in this case is generally similar in terms to para. 14 in the case of Moorebank Pty. Ltd. and accordingly, for the reasons given in that case, the demurrer should be allowed in respect of this paragraph.

In respect of para. 30, notwithstanding the construction placed on s. 208B of the Income Tax Assessment in re Walsh ex parte Deputy Commissioner of Taxation (1982) 60 F.L.R. 355, there appears to be no factual foundation laid for the principle invoked in this paragraph. As no defence is disclosed, the deraurrer should be allowed. Otherwise, I agree with the reasons and conclusions of Connolly J. in respect of all matters concerning this party.

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IN THE SUPREME COURT OF QUEENSLAND No. 1345 of 1986 Mr