Forsyth v Deputy Commissioner of Taxation
Document type: Decision Impact Statement
Venue: High Court (S543/2005)
Judgment date: 1 March 2007
Date published: 30 March 2007

Summary of decision:
Outlines the Tax Office's response to this case which concerned whether the District Court of NSW had jurisdiction, at the relevant time, to deal with a tax-related debt recovery matter. | Courts and judges - Federal jurisdiction in State courts - Whether s 39(2) of the Judiciary Act 1903 (Cth) conferred jurisdiction on the District Court of New South Wales to hear and determine an action to recover a penalty under the Income Tax Assessment Act 1936 (Cth). | Federal jurisdiction in State courts - Limitations on the jurisdiction of State courts - Whether s 44(1)(a) of the District Court Act 1973 (NSW) was a limit on the jurisdiction of the District Court of New South Wales within the meaning of the Judiciary Act 1903 (Cth). | Federal jurisdiction in State courts - Statutory interpretation - s 44(1)(a) of the District Court Act 1973 (NSW) gave the District Court of New South Wales jurisdiction to hear and dispose of certain classes of actions - Whether s 44(1)(a) should be given an ambulatory or fixed time construction. | Statutory interpretation - Subsequent regulatory change - s 44(1)(a) of the District Court Act 1973 (NSW) defined the jurisdiction of the District Court of New South Wales by reference to the allocation of work between the Divisions of the Supreme Court of New South Wales - Whether a subsequent reallocation of work between the Divisions of the Supreme Court of New South Wales alters the jurisdiction of the District Court of New South Wales.

Overview of facts:
The taxpayer appealed to the High Court on the basis that the NSW Court of Appeal erred in deciding that the District Court of NSW had jurisdiction, at the relevant time, to hear and determine the tax-related debt recovery matter. | Issues decided by the court | Did the District Court have jurisdiction invested by section 39(2) of the Judiciary Act 1903 to hear and determine an action by the Deputy Commissioner against the appellant to recover a penalty imposed by the Income Tax Assessment Act 1936? | The High Court held by a majority of 6 to 1 that the District Court did have jurisdiction.

Issues decided:
Did the District Court have jurisdiction invested by section 39(2) of the Judiciary Act 1903 to hear and determine an action by the Deputy Commissioner against the appellant to recover a penalty imposed by the Income Tax Assessment Act 1936? The High Court held by a majority of 6 to 1 that the District Court did have jurisdiction.

ATO view of decision:
The High Court's decision means that judgments entered by the NSW District Court during the period 1 August 2000 to 26 November 2004 are valid. It should be noted that the decision is not relevant for judgments entered into before 1 August 2000 and after 26 November 2004 where there was no doubt about the District Court having the relevant jurisdiction.

Administrative treatment:
Pending the High Court's decision in Forsyth, the Tax Office deferred legal recovery action in a small number of NSW cases that were potentially affected by this matter. | Now that the decision has been handed down, the Tax Office will adopt the following procedure for finalising those cases where legal recovery action was deferred and the tax-related debt remains outstanding: 1. Telephone each taxpayer, explain the current legal position and propose that the taxpayer enter into a payment arrangement; 2. Decide, on a case by case basis, whether remission of the general interest charge is appropriate; 3. Decide, on a case by case basis, whether not pursuing judgment interest is appropriate; 4. Where a taxpayer cannot be contacted by phone on three separate occasions, a letter will be sent to the taxpayer proposing that a payment arrangement be entered into within 21 days; 5. In the event that the taxpayer does not agree to enter into a payment arrangement, legal action will continue / commence as appropriate. | 1. Telephone each taxpayer, explain the current legal position and propose that the taxpayer enter into a payment arrangement; 2. Decide, on a case by case basis, whether remission of the general interest charge is appropriate; 3. Decide, on a case by case basis, whether not pursuing judgment interest is appropriate; 4. Where a taxpayer cannot be contacted by phone on three separate occasions, a letter will be sent to the taxpayer proposing that a payment arrangement be entered into within 21 days; 5. In the event that the taxpayer does not agree to enter into a payment arrangement, legal action will continue / commence as appropriate. | Implications on current Public Rulings & Determinations | None

Legislative references: Income Tax Assessment Act 1936 (Cth) Part VI, Division 9, Subdivision B Part VI, Division 2 (repealed) Judiciary Act 1903 (Cth) 39(2) Taxation Laws Amendment Act (No 3) 1998 (Cth) The Act Courts Legislation Further Amendment Act 1998 (NSW) The Act District Court Act 1973 (NSW) 44(1)
Case references: Forsyth v Deputy Commissioner of Taxation (2004) 62 NSWLR 132 2005 ATC 4025 58 ATR 178 Le Mesurier v Connor (1929) 42 CLR 481 Minister for Army v Parbury Henty & Co; Carrier Air Conditioning Ltd. Brickworks Ltd v Minister for Army (1945) 70 CLR 459 Deputy Commissioner of Taxation v Woodhams (2000) 199 CLR 370 2000 ATC 4141 43 ATR 757 Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435 Vale v TMH Haulage Pty Ltd 31 NSWLR 702 Victor Chandler International Ltd v Customs and Excise Commissioners [2000] 1 WLR 1296 [2000] 2 All ER 315 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Subject references: ambulatory amount payable court of competent jurisdiction penalty