Berwick Ltd v Gray

[1976] HCA 12

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Mason, Jacobs and Murphy JJ.

BERWICK LTD. v. GRAY

(1976) 133 CLR 603

30 March 1976

Constitutional Law (Cth)

Constitutional Law (Cth)—Income Tax—Territories—Obligation to lodge returns—Application of Act to residents of Norfolk Island—Validity—The Constitution (63 &64 Vict. c. 12), ss. 51(ii), 122—Income Tax Assessment Act 1936-1973 (Cth), ss. 7A, 162.

Decisions

1976, March 30.
The following written judgments were delivered:-
BARWICK C.J. I have had the advantage in this case of reading the reasons for judgment prepared by my brother Mason. I agree with his conclusions and with the reasons he expresses for reaching them. (at p605)

2. In my opinion, Norfolk Island is part of the Commonwealth. The legislative power given by s. 51(ii.) of the Constitution is exercisable with respect to the income of residents of Norfolk Island. If it be thought that the Income Tax Assessment Act, 1936-1973 (Cth) must be placed upon the legislative power granted by s. 122 of the Constitution, in so far as it relates to the income of persons resident in Norfolk Island, it is not a valid objection to the statute that revenue derived under the Act from residents of Norfolk Island is not of necessity expended or to be expended in or for the benefit of Norfolk Island. (at p606)

3. I agree that the appeal should be dismissed. (at p606)

McTIERNAN J. I have had the advantage of reading the reasons for judgment of Mason J. I agree in them and would dismiss the appeal. (at p606)

MASON J. The appellant was convicted by the Court of Petty Sessions, Phillip Street, Sydney, under s. 223 of the Income Tax Assessment Act 1936-1973 for failing to lodge a return of its total income from sources in and out of Australia and of deductions claimed by it during the year ended 30th June 1973. (at p606)

2. The appellant's case is that the Court of Petty Sessions had no jurisdiction to hear and determine the proceedings which were commenced by summons and information. Its case is put in this way. Section 7(1) of the Income Tax Assessment Act 1936-1972, before the section was repealed by Act No. 164 of 1973, provided:

"This Act shall extend to the Territories of Papua and New Guinea, Norfolk Island, Cocos (Keeling) Islands and Christmas Island, but shall not apply to any income derived by a resident of those Territories from sources within those Territories."

Section 5 of Act No. 164 of 1973 inserted a new s. 7A in the Income Tax Assessment Act. The new section provided as follows:

"7A. (1) This Act extends to Norfolk Island, the Territory of Cocos (Keeling) Islands and the Territory of Christmas Island. (2) Subject to Division 1A of Part III, this Act has effect as if Norfolk Island, the Territory of Cocos (Keeling) Islands and the Territory of Christmas Island were part of Australia." (at p606)

3. This amendment was accompanied by the introduction into the Income Tax Assessment Act of div. 1A which contained a series of sections regulating the imposition of income tax on residents, including companies, in certain external Territories of the Commonwealth. Norfolk Island is one such Territory. The broad effect of these provisions is to confine the exemption of income tax previously enjoyed by a resident of a Territory to income derived in the Territory by the resident and which has been or will be applied for his benefit. Section 22 of Act No. 164 of 1973 provided that the amendments in question applied in relation to income derived on or after 20th July 1972. (at p606)

4. The first submission which the appellant then makes is that s. 7A is invalid because it is not supported by the power conferred by s. 122 of the Constitution to make laws for the government of a Territory. According to the argument income tax the imposition of which is regulated by the Income Tax Assessment Act is Australian income tax which will find its way into Australian consolidated revenue. It is not revenue which will be devoted exclusively or at all for the benefit of Norfolk Island or its residents. For this reason it is contended that the law cannot be characterized as a law for the government of Norfolk Island. (at p607)

5. The short and compelling answer to this argument is that the power conferred by s. 122 to make laws for the government of a Territory is a plenary power and that all that need be shown to support an exercise of the power is that there should be a sufficient nexus or connexion between the law and the Territory. Such a nexus or connexion is to be found in the circumstance that the law regulates the imposition of income tax on incomes derived by residents of the Territory. There is no limitation inherent in the power which inhibits its exercise by requiring that moneys thereby raised should be paid into a Territory treasury or consolidated revenue account or that the moneys thereby raised should be expended exclusively on Territory purposes. The imposition of taxation is a matter distinct from the payment of revenue into consolidated revenue account and the withdrawal of moneys therefrom for government purposes. There is in the Constitution no counterpart provision to s. 81 which requires moneys raised under a law made by the Parliament pursuant to s. 122 to be paid into a Territory revenue account rather than into Commonwealth consolidated revenue. (at p607)

6. The power conferred by s. 122 is a plenary power capable of exercise in relation to Territories of varying size and importance which are at different stages of political and economic development. It is sufficiently wide to enable the passing of laws providing for the direct administration of a Territory by the Australian Government without separate territorial administrative institutions or a separate fiscus; yet on the other hand it is wide enough to enable Parliament to endow a Territory with separate political, representative and administrative institutions, having control of its own fiscus. Consequently there is no foundation for concluding that the imposition of a tax on the residents of a Territory to be paid into Australian consolidated revenue stands outside the Territories power. (at p607)

7. The appellant's argument that because the taxes raised are paid into Australian consolidated revenue, they are imposed otherwise than for the benefit of Norfolk Island is at best an assertion unsupported by any material facts. What withdrawals are made from consolidated revenue for the benefit of Norfolk Island we do not know. Not that this is a matter of present importance because, as I have explained, the validity of the law now under challenge does not depend on the purposes on which the revenue is expended. I therefore reject the notion that an income tax law enacted under s. 122 is valid only if the revenue thereby raised is devoted to Territory purposes. (at p608)

8. The appellant further submits that the provisions of the Income Tax Assessment Act, to the extent to which they apply to residents of Norfolk Island, cannot be characterized as an exercise of the taxation power contained in s. 51(ii.) of the Constitution. The response to this submission is that s. 122 is not disjoined from other provisions in the Constitution, that it has been acknowledged in some instances at least that the legislative powers conferred by s. 51 must apply to the Territories (Lamshed V. Lake (1958) 99 CLR 132, at pp 141-143 ; Spratt V. Hermes (1965) 114 CLR 226, at pp 242, 246-247, 269-271 ) and that there is every reason for regarding s. 51(ii.) as one such power. Special considerations affected those Territories which were held under mandate from the League of Nations or under trusteeship from the United Nations but, with this qualification, it is my opinion, in conformity with the views expressed by Barwick C.J. (1965) 114 CLR, at p 247 and Menzies J. (1965) 114 CLR, at p 270 in Spratt V. Hermes that external Territories form part of the Commonwealth of Australia and that, in consequence, the Parliament, by laws enacted pursuant to s. 51(ii.), may impose and regulate the imposition of income tax in the external Territories. (at p608)

9. There are in any event powerful reasons for regarding Norfolk Island as part of the Commonwealth. The history of, and the historical documents relating to, Norfolk Island are set out in some detail in the judgment of Eggleston J. in Newbery V. The Queen (1965) 7 FLR 34 . In that case it was his Honour's conclusion that Norfolk Island was a Territory placed by the Crown under the authority of the Commonwealth within the meaning of s. 122. Without questioning the correctness of the conclusion reached by his Honour, I consider that the history and the historical documents also support the conclusion that Norfolk Island forms part of the Commonwealth of Australia. It was initially part of the penal settlement established in New South Wales and was later administered by the Governor of Van Diemen's Land as part of that colony. In 1856, pursuant to the authority conferred by the Australian Waste Lands Act, 1855 (Imp.), it was separated from the colony of Van Diemen's Land and constituted a separate settlement administered by the Governor of New South Wales who was appointed Governor of Norfolk Island. Subsequently, on 15th January 1897, on the eve, as it were, of the establishment of the Commonwealth, by an Order in Council it was recited that it was "expedient that other provision should be made for the government of Norfolk Island, and that, in prospect of the future annexation of that island to the colony of New South Wales, or to any federal body of which that colony may hereafter form part, in the meantime the affairs of the island should be administered by the Governor of New South Wales". The Order in Council went on to so provide and empowered the Governor of New South Wales to make laws for the peace, order and good government of the island. The continued administration of Norfolk Island as part of, or by the governors of, the Australian colonies culminating in the Order in Council made in 1897 vesting the administration in the Governor of New South Wales makes it abundantly clear that Norfolk Island forms part of the Commonwealth of Australia. (at p609)

10. The appellant's second submission arises out of the allegation in the information that the appellant failed to lodge a return "as and when required", an expression taken from s. 223(1) itself. The sub-section contemplates that the requirement is one which may be specified by the "Act or the regulations or by the Commissioner". According to the information the relevant requirement was contained in a notice dated 28th May 1974 signed by the respondent. This notice, it is conceded, called upon the appellant to set forth a full and complete statement of its income from all sources during the year ended 30th June 1973. (at p609)

11. The respondent asserts that authority for the giving of this notice is to be found in s. 162(1) which is in the following terms:

"Every person shall, if required by the Commissioner, whether before or after the expiration of the year of income, furnish to the Commissioner, in the manner and within the time required by him, a return, or a further or fuller return, of the income or any part of the income derived by him in any year, whether on his own behalf or as agent or trustee, and whether a return has or has not previously been furnished by him for the same period." (at p609)

12. To that contention the appellant makes this answer: that the word "income" in the sub-section must be read as referring to income arising on and after 20th July 1972, with the consequence that the notice dated 28th May 1974 was invalid on the ground that it required a statement of the appellant's income before that date. The basis of this submission lies in s. 22(1) of Act No. 164 of 1973 which provides that the relevant amendments made by the Act "apply in relation to income derived on or after 20th July 1972". The argument assumes that before the amendments made by Act No. 164 of 1973 the Commissioner had no power under s. 162 to require a resident in Norfolk Island to furnish a statement of his income. (at p610)

13. This assumption is in my opinion erroneous. The provisions of s. 162(1) are couched in the widest terms and are capable of applying to persons outside Australia who are not Australian residents. Although in certain circumstances there is a presumptive rule of construction that a statute will be read as applying to persons and things within the jurisdiction, there is no occasion for so construing a provision in a revenue statute which entitles the Crown to require the giving of information relevant to the establishment of the existence of a liability to taxation. Plainly enough a power to require persons to give information relating to income earned cannot be confined, as the appellant seeks to confine it, to persons who have earned income and who are legally liable to taxation. In its nature the power, if it is to serve a useful purpose, must extend beyond the actual class of persons who have incurred a liability to pay income tax. (at p610)

14. Even if there is some ground for confining the application of s. 162 so as to inhibit its operation in relation to residents of foreign countries having no connexion with Australia-and I do not wish to be taken as suggesting such a restriction-I am unable to discern any reason for thinking that the Commissioner's power under s. 162 does not, and did not before 20th July 1972, extend to the residents of external Territories. Clearly enough the rule of construction confining the application of a statute to the territorial jurisdiction can have no operation to Norfolk Island. (at p610)

15. This conclusion in itself is sufficient to dispose of the appellant's submission. Once s. 162 is read in this fashion it becomes apparent that it is in terms unaffected by the provisions of s. 22 of Act No. 164 of 1972. That Act dealt with the imposition of income tax in Norfolk Island on and after 20th July, but it left untouched the Commissioner's power under s. 162 to require a resident of Norfolk Island to lodge a return of his income before and after that date. (at p610)

16. In the result I would dismiss the appeal. (at p610)

JACOBS J. The argument for the appellant mistakes the nature of Commonwealth power. The power of the Commonwealth Parliament to legislate upon the subject matters stated in the Constitution is plenary in the fullest sense of that word. Once a law is found to be a law on the particular subject matter and once the subject matter is found to be one of Commonwealth power no other nexus or relationship between the law and the subject matter of power needs to be established. The Parliament is sovereign. In this respect the test of power applicable to the laws of the Commonwealth differs from the tests of power applicable to the laws of the States and applied in such cases as Commissioner of Stamp Duties (N.S.W.) V. Perpetual Trustee Co. Ltd. (Watt's Case) (1926) 38 CLR 12 ; Commissioner of Stamp Duties (N.S.W.) v. Millar (1932) 48 CLR 618 ; Broken Hill South Ltd. v. Commissioner of Taxation (N.S.W.) (1937) 56 CLR 337 and Johnson v. Commissioner of Stamp Duties (1956) AC 331 . The impugned legislation is a law with respect to taxation within the meaning of s. 51(ii.). It is also a law with respect to the Territory of Norfolk Island within the meaning of s. 122. It is therefore within Commonwealth power. (at p611)

2. As to the only further ground of appeal which was argued, namely, that s. 162 of the Income Tax Assessment Act 1936-1973 (Cth) did not empower the Commissioner to require the appellant to furnish a return of the whole of its income for the year ended 30th June 1973. I agree with the conclusion of Mason J. and with his reasons for that conclusion. (at p611)

MURPHY J. I agree in substance with the judgment of Mason J. The appeal should be dismissed. (at p611)

Orders

Appeal dismissed with costs.