Baxter v Commissioners of Taxation (NSW)

This case concerned an appeal to the High Court of Australia from a decision of a New South Wales District Court. The appellant, a Commonwealth officer, had been sued by the Commissioners of Taxation (NSW) for income tax on his salary. The appellant claimed exemption, arguing that taxing his salary interfered with the free exercise of Commonwealth powers, a principle derived from *D'Emden v. Pedder*. The District Court Judge, following the Privy Council's decision in *Webb v. Outtrim*, ruled against the appellant.

The High Court was required to determine whether the District Court was exercising federal jurisdiction, thereby making the appeal competent to the High Court. Crucially, the Court had to decide the weight to be given to the Privy Council's decision in *Webb v. Outtrim* when it conflicted with the High Court's own prior ruling in *Deakin v. Webb* on the same issue of implied prohibition in the Constitution. The Court also considered its duty as the ultimate arbiter on questions concerning the limits inter se of Commonwealth and State constitutional powers, as outlined in section 74 of the Constitution.

A majority of the High Court (Griffith C.J., Barton and O'Connor JJ.) held that the question raised was indeed one concerning the limits inter se of constitutional powers, thus falling within section 74 of the Constitution and making the appeal competent. They affirmed that the High Court, by the Constitution, is the ultimate arbiter on such questions and is not bound to follow a Privy Council decision that conflicts with its own prior judgment. While acknowledging the weight due to Privy Council decisions, the majority found no new light in *Webb v. Outtrim* to warrant departing from their own established precedent in *Deakin v. Webb*, thereby reaffirming the rule in *D'Emden v. Pedder*. Isaacs J. agreed that the High Court was the ultimate arbiter but felt compelled to reconsider the question due to the Privy Council's conflicting decision, ultimately finding the New South Wales Act not to be an infringement of the non-interference rule. Higgins J., however, maintained that the Privy Council remained the ultimate appellate court and its decisions were binding, finding no interference with federal instrumentalities.

By majority decision, the appeal was allowed, the District Court's judgment was reversed, and the Privy Council's decision in *Webb v. Outtrim* was not followed. A certificate for leave to appeal to the Privy Council was refused.