Forsyth v Deputy Commissioner of Taxation

[2005] HCATrans 848

[2005] HCATrans 848

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S8 of 2005

B e t w e e n -

ROSS FORSYTH

Applicant

and

DEPUTY COMMISSIONER OF TAXATION

Respondent

Application for special leave to appeal

KIRBY J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 7 OCTOBER 2005, AT 12.14 PM

Copyright in the High Court of Australia

MR R.L. HAMILTON:   If the Court pleases, I appear with my learned friend, MS R.L. SEIDEN, for the applicant.  (instructed by Paul Bard Lawyers)

MR S.J. GAGLER, SC:   If the Court pleases, I appear with MS M.N. ALLARS for the respondent.  (instructed by Australian Government Solicitor)

KIRBY J:   Yes.  Mr Hamilton.

MR HAMILTON:   Your Honours, I would like to seek the Court’s leave to file in Court an affidavit which I believe has been lodged through the Registry.

KIRBY J:   Yes.  That is relevant to the special significance of the case?

MR HAMILTON:   It is.

KIRBY J:   Have you seen that affidavit, Mr Gageler?

MR GAGELER:   Yes, your Honour.

KIRBY J:   Do you have any objection to the reading of the affidavit?

MR GAGELER:   No, your Honour.

KIRBY J:   You can take it that that affidavit is read.

MR HAMILTON:   Thank you very much, your Honour.  This is a case which concerns the ‑ ‑ ‑

KIRBY J:    We are at the moment inclined to call on the respondent but on the basis of the first point, that is to say the jurisdiction issue may be wrapped up in it – the impost issue – but if that was a matter upon which the Court were minded to grant special leave, would you wish to be heard on the other issues that you raise beyond what you have put in the written submissions?  We have read those written submissions but the point of the notice and so on do not seem to be special leave points but the point of jurisdiction is arguably so and we are inclined to call on Mr Gageler.

MR HAMILTON:   We would wish to be heard on the question of the validity of the first notice and what we say is the obligation of the Commissioner to provide full information so that a director may make a decision about what to do from the ‑ ‑ ‑

KIRBY J:   We have read all that in the written submissions.  We understand that.  We will protect you if need be, but in the meantime we would like to hear from you, Mr Gageler.

MR HAMILTON:   Yes, thank you very much.

CALLINAN J:   Just before you start, Mr Gageler, could I ask you this.  If special leave were to be granted and the appeal succeeded, would you be able to rectify the position by fresh proceedings or a fresh notice?  Is there any limitations period, any ‑ ‑ ‑

MR GAGELER:   Your Honour, that is not a question that I have considered.  There would be limitation difficulties.  The problem would be a problem not simply with respect to director penalty notices, it would be a problem with respect to all State and Commonwealth proceedings in the District Court to recover any form of tax.  So I think the answer would be, your Honour, there would be limitation periods of various sorts that would be called in.

CALLINAN J:   Well, applying – but what about this case?

MR GAGELER:   In this particular case I am not sure actually.

CALLINAN J:   The reason why I ask it is this:  it is really in a sense in your favour because it would be pointless, it seems to me, or it might be pointless, to give special leave and even for an appeal to succeed if ultimately you could proceed and achieve exactly the same result as you have now.  That would mean that a lot of people are going to spend a lot of money and ultimately there will be the same result as there is now.

MR GAGELER:   Yes.  Your Honour, I will check on that.

CALLINAN J:   It is in your favour and ‑ ‑ ‑

MR GAGELER:   Of course, yes.  No, I recognise that.  I will find out.  I am not sure of the answer in this particular case.

KIRBY J:   The irony of that may be that now the position of the divisional arrangements in the Supreme Court has been changed once again and it is back to the common law division so that the case might go back to the District Court after all, which is itself a slightly absurd consequence but may be required by law.

MR GAGELER:   I can say that I am instructed - I have not looked at this myself - that there is no limitation problem with respect to these proceedings.  So, yes, the irony would be that we would go back and do it all over again in the District Court and presumably reach the same result.

CALLINAN J:   Apart from these points - and I do not mean to refer to them disparagingly, but these very technical points – it does not appear as if the applicant has much merit.

MR GAGELER:   That is certainly our position and the position that was reached by the judge at first instance and all the judges of the Court of Appeal.

CALLINAN J:   I do not think it is suggested on the other side, is it, that there was any error, apart from jurisdictional, if anything, and you know what I mean when I say ‑ ‑ ‑

MR GAGELER:   There is the jurisdiction point which I accept is a point that I need to address ‑ ‑ ‑

CALLINAN J:   Yes.  But, is there any argument on the other side that there is error, error that might affect the merits or the outcome if you had done everything in a regular way and it had been in the appropriate jurisdiction?

MR GAGELER:   No.  They owed the money.  That is right.  No, there is not and there are certain statutory defences.  They are not available.

KIRBY J:   They come to this Court with the merit of a legal argument.  If the legal argument is right that is legal merit and that is enough.

MR GAGELER:   They come to this Court with a jurisdictional argument which on its face we have to accept is an important question.

CALLINAN J:   But it may not be the right case if in the end everybody is going to spend a great deal of money and expend a great deal of time to reach exactly the same position.

MR GAGELER:   Your Honour, we would embrace that and, as I said, my instructions are that there is no limitation issue in the present proceedings.  It would lead to the result if the applicant was ultimately successful in the appeal.  It would go back, do it all over again in the District Court really to no avail.

KIRBY J:   It leads to the avail of the upholding of the rule of law in our country.  I mean, it is quite an avail as far as I am concerned if it is what is required in the case.

MR GAGELER:   I accept what your Honour is saying but the rule of law, of course, operates within a tiered appellate structure and the fundamental point here is that the question of jurisdiction, albeit important for a significant number of cases over a discrete four‑year period, is one that relates only to the jurisdiction of the District Court of New South Wales.  It arises only in respect of a particular provision of New South Wales legislation and it is ‑ ‑ ‑

KIRBY J:   But the problem with the Court of Appeal’s hypothesis is that divisional arrangements, of their character, are changing all the time.

MR GAGELER:   No, that is really not the hypothesis.  The hypothesis is that divisional arrangements are changing by reason of decisions taken from time to time by the Rules Committee of the Supreme Court and in those circumstances – and the critical point is page 38, line 26.  It all comes down to a question of construction of one provision of a peculiar piece of New South Wales legislation, and the point that swayed the Court of Appeal at the end of the day is what is said at page 38, line 26:

It is most unlikely that Parliament intended that the jurisdiction of the District Court was able to be modified by the Supreme Court Rule Committee.

Now, the Supreme Court Rule Committee is charged with an aspect of the internal operations of the Supreme Court itself.  It would not be, could not be expected ‑ ‑ ‑

KIRBY J:   It is not just by the Rule Committee, it is by force of the federal legislation.

MR GAGELER:   No, the federal legislation, your Honour, really has nothing to do with it.

KIRBY J:   It is only by the federal legislation that you pick up the State laws, so it has a lot to do with it and it was overlooked in the earlier case today.  It is always being overlooked.

MR GAGELER:   No, I am sorry, your Honour, it is not overlooked here but can I say the reasoning of the Court of Appeal did not turn on the operation of section 39(2) of the Judiciary Act which is referred to at page 31.  It is there but ultimately, according to the Court of Appeal, it turned on the proper construction of section 44(1)(a) of the District Court Act at page 32 which was picked up by section 39(2).  So, section 39(2) picks up section 44(1)(a)(i) and the question – and this was the only question – is section 44(1)(a)(i) which is extracted at page 32 to be given an ambulatory operation or an operation fixed as at the date of its enactment on 2 February 1998?  That is really a very, very narrow question.

KIRBY J:   Can I just explain why I referred to federal jurisdiction because section 39(2), which is the federal law which breathes life into the State law here, is talking of “within the limits of their several jurisdictions”.  You could not seriously argue, could you, that that was their several jurisdictions at the time of 1903?  That is as from time to time, therefore, there is a federal question here as to whether a State law could entrench forever the jurisdiction of the State courts from time to time.  Do you see my point?

MR GAGELER:   I see your point, your Honour.

KIRBY J:   This may not have been noticed before, but as far as I am concerned a federal law is governing.

MR GAGELER:   Your Honour, it is not something that I wanted to emphasise in the special leave application but I did run a constitutional argument before the Court of Appeal that did not need to be addressed but it was not quite ‑ ‑ ‑

KIRBY J:   It may have to be addressed if special leave is granted.

MR GAGELER:   It would, and we would have to put on a notice of contention to deal with it, but really the point is that the Court of Appeal was able to deal with this question purely as a very narrow question of the construction of the State statute and it is certainly not inconsistent with section 39(2) of the Judiciary Act having an ambulatory operation.

KIRBY J:   So you assert.  I have my doubts.  The governing federal law contemplates that it will be as from time to time the limits of their several jurisdictions.

MR GAGELER:   As from time to time.  So, the question is, as at 2004 ‑ ‑ ‑

KIRBY J:   And you entrench forever a particular provision instead of taking it as from time to time, which is the theory that the federal law seems to require.

MR GAGELER:   Your Honour, the federal law picks up the jurisdiction of the District Court, whatever it might be, from time to time.  The question is:  in 2004 how is the jurisdiction of the District Court defined?  Is it defined by reference to the cases that would be assigned to the common law division in accordance with the Supreme Court Rules as at that date or is it by reference to the cases that were assigned to the common law division of the Supreme Court on 2 February 1998 which is a date when that provision was enacted?  In our submission, it is not inconsistent with giving section 39(2) an ambulatory operation to say that the particular State statute which is picked up by section 39(2) speaks at a particular time.

KIRBY J:   But it cannot have a different theory than the federal statute which is one from time to time.

MR GAGELER:   But it can, your Honour.

KIRBY J:   That is what you say but on the face of things I find that a very peculiar outcome because normally you would look at section 44 and say that means from time to time, otherwise, citizens have to go burying into the history of the legislation to find out what it was on a particular date which has been bypassed by subsequent changes.

MR GAGELER:   It could have said that the jurisdiction of the District Court is that which was assigned to the Court of Common Pleas as at a particular date in 1863, for example.  There is no reason why a State statute ought not speak as at a particular time or by reference to ‑ ‑ ‑

KIRBY J:   It is not the way you would normally interpret a provision which is dealing with jurisdiction of a court which we all know will change from time to time.

MR GAGELER:   No.  That really comes back to the question, your Honour.  What is the better construction – and this is really the only way in which the Court of Appeal approached it – of section 44(1)(a)(i)?  Does it speak at a particular time or does it speak from time to time?  Now, the problem with it speaking from time to time is that you make the jurisdiction of the District Court wax and wane by reference to decisions made from time to time by the Rules Committee of the Supreme Court.  That would be an odd result, given that you would not ordinarily expect Parliament to have intended the Rules Committee of the Supreme Court ‑ ‑ ‑

KIRBY J:   Why not?  That is how matters are assigned to the divisions of the Supreme Court.  If that is what the State Parliament enacted - and it would be taken to know that that is how assignments to the common law division are made in the real world - why would that be so offensive to principle?

MR GAGELER:   Well, because it would produce changes to the District Court’s jurisdiction in a derivative way by reference to decisions that really would generally be thought to have nothing to do with the jurisdiction of the District Court.

KIRBY J:   I used to sit on the Rule Committee.  That was a very learned and distinguished group.  It even had members of the Bar coming along, and from time to time we would change the divisional arrangements.

MR GAGELER:   Yes.  Your Honours, the other point is this, that if that were to be the case, that is that the jurisdiction of the District Court was to change by reference to decisions from time to time of the Rules Committee, you would expect Parliament to have included some provisions dealing with the transitional problems that would necessarily arise when those decisions of the Rules Committee put something within jurisdiction that was not otherwise there or took something out of the jurisdiction that was previously there.  How were the pending cases to be determined?

Now, there is none of that in this legislation which – there is no scientific answer to this, your Honours, but on balance the better view is one that goes for the greater certainty that you have achieved by reading it as speaking at a particular date.  As I said, given that the conclusion may be contestable, it is, after all, a conclusion that is reached in respect of a particular narrow provision of the New South Wales law and it is appropriately left with the decision of the New South Wales Court of Appeal.  If the Court pleases.

KIRBY J:   Yes, Mr Hamilton.

CALLINAN J:   Mr Hamilton, do you agree that if you were to win the appeal, all of these proceedings could start over again?

MR HAMILTON:   It depends on what attitude the Court takes to the argument about the validity of the notices.

KIRBY J:   I think you must work from the assumption we are not with you on that, therefore, if you are going to get up at all you are only going to get up on this speaking statute point which I think is potentially bound up in a constitutional or federal statute point.

MR HAMILTON:   Yes.

KIRBY J:   Now, assuming that, what is your answer to Justice Callinan’s question?

CALLINAN J:   Dare I mention the merits of your client and your client’s position?  They do not look very good.  There is nothing you can say about that, is there?

MR HAMILTON:   We will take that, your Honour ‑ ‑ ‑

KIRBY J:   You have the legal merits, you say.

MR HAMILTON:   Yes, we say we have the legal merits.  We also say that if it did go back again it is another round of litigation, yes.

CALLINAN J:   At enormous expense.  I mean, it is not just expense to your clients; it is the expense to the community of the appeal to the High Court and then further proceedings and other clients’ delay in access to the courts and we might end up in exactly the same position.

MR HAMILTON:   So far as this particular litigant is concerned, that would follow on and ‑ ‑ ‑

CALLINAN J:   We often refuse special leave but specifically refrain from endorsing the decisions below.  That is one way of dealing with a contestable point.

MR HAMILTON:   That will though, in our submission, not really solve the other 6,700 potential cases.

CALLINAN J:   No, but one of them might be - dare I use this other word which I do not like using - a better vehicle.

KIRBY J:   I never thought I would hear Justice Callinan use that expression.

CALLINAN J:   It just shows what the company you keep does to you.

MR HAMILTON:   Yes.  The other point about going back to the District Court is that other defences may well be able to be directed at that point.  Yes, it will mean more litigation and more expense but ‑ ‑ ‑

KIRBY J:   In the affidavit some point is made about a comment of Justice Gummow about the bankruptcy proceedings and the importance of clarifying this, but I suppose if special leave is refused then the law is clarified by accepting the construction of the Court of Appeal of New South Wales, so there is then no doubt that with a wave of the wand we remove any doubt for the 6,000 other people.

MR HAMILTON:   Your Honour, the refusal of special leave has previously been held not to necessarily be an endorsement of the decision below.

KIRBY J:   That is true, and they can keep coming back, but the position would be that the Court of Appeal decision would stand, at least at that level, for the time being.  The point that has been made that it has now gone

back to the common law division and thereby can be brought in the District Court is going to remove the problem for future litigation.  Therefore, we just have the residual class in the short interval but we do have something which I find uncomfortable, a notion that a State statute can freeze the operation of a federal statute which contemplates variation from time to time in jurisdiction of State courts.

What Justice Callinan put to you is very similar to the point Justice McHugh raised earlier today, that we can only give special leave in 60 or 70 cases and therefore we tend to be prudent and we conserve the grants to cases which have to be decided.  Now, there may be a feeling here that your case, though it involves quite an interesting legal point, interesting to me, is nonetheless not one that really calls out for our intervention because in the end the Commissioner can bring the proceedings and start it all over again and win again and a lot of costs and public cost has been thrown away.

MR HAMILTON:   Yes, your Honour.  We might admit that it is not a perfect vehicle but there are other cases, according to my instructions, on their way through.  There are 6,700 of these cases potentially affected.  The exhibit to the affidavit shows that there are 130 a month and 110 of those are undefended, so there would be quite a number of bankruptcy notices, one would assume.  We have also indicated that there are 1.434 million companies on the ASIC register at the end of August, so we would draw from that that there is public interest in the questions that are being ventilated here.

KIRBY J:   Yes, but it is a terminable public interest because it only deals with an interim period, does it not, when for a short time the equity division of the Supreme Court of New South Wales was assigned to jurisdiction.

MR HAMILTON:   Yes, that is correct.  There is the opportunity that it could reopen again if there is a change to the rules again.

KIRBY J:   Is there anything else that you want to say?  I must say I found your written submissions very helpful and I understand the way you put the case.

MR HAMILTON:   Thank you very much, your Honour.  Those are our submissions.

KIRBY J:   Yes.  Is there anything in reply, Mr Gageler?

MR GAGELER:   No, your Honour.

KIRBY J:   There will be a grant of special leave in this matter limited to the issue concerning the jurisdiction of the District Court of New South Wales.  Now, what ground of appeal is that?  It is 2 and 3, is it not?

MR HAMILTON:   Yes, that is correct.

KIRBY J:   The parties should give consideration to the questions presented by the exercise of federal jurisdiction in this case and consider whether notices should be given under the Judiciary Act in relation to the operation of section 39(2) of the Judiciary Act in this case.  How long do you think the case is going to take, Mr Hamilton?

CALLINAN J:   It might depend on interventions because New South Wales could well intervene and perhaps the other States.

MR HAMILTON:   Half a day to a day would be my estimate.

KIRBY J:   I think we should say it will be half a day but it may take the whole day depending on the development of the issue.

MR GAGELER:   It took half a day, I think, before the Court of Appeal and the oral argument was limited to the jurisdictional issue.  As I said, in the Court of Appeal I, for the Commissioner, ran a constitutional argument and it is likely that that will occur by way of notice of contention in this case.

KIRBY J:   Yes.  Mr Hamilton will have to give some thought in the light of the matters elaborated in the special leave hearing as to whether he seeks to enlarge the grounds of appeal by reference to constitutional or federal statutory questions and that may then give rise to a notice of contention and if need be the matter can be called over before a Justice in order to determine any matters that are in dispute between the parties so that the appeal can be ready for hearing.

Adjourn the Court now until noon on Friday, 21 October 2005 in Canberra when some judgments will be handed down.

AT 12.41 PM THE MATTER WAS CONCLUDED