British Imperial Oil Co Ltd v Federal Commissioner of Taxation [1925] HCA 4;

British Imperial Oil Co Ltd v Federal Commissioner of Taxation [1925] HCA 4; - HCA 1925 case summary — Zoe

[8]

But in my opinion the contention on behalf of the taxpayer which is rested on the provisions relating to the constitution and powers of the Board of Appeal is well founded and must prevail. By sec. 50 (4) of the Assessment Act a taxpayer who is dissatisfied with the assessment made by the Commissioner may appeal to the High Court or to the Supreme Court of a State or to the Board of Appeal. It is clear that there is a right of appeal to the Board on questions of law, provided the objection also raises a question of fact. By sec. 51 the Board is empowered on the hearing of the appeal to make such order as it thinks fit, whether on questions of law or on questions of fact - the only distinction being that, while the decision of the Board on questions of fact is final and conclusive, its decision on questions of law is subject to appeal to the High Court "in its appellate jurisdiction." The power conferred on the Board of determining questions of law, the association of the Board as a tribunal of appeal with the High Court and the Supreme Court of a State, and the provision for an appeal to the High Court in its appellate jurisdiction from any order of the Board, except a decision on a question of fact, in my opinion establish that the expressed intention of Parliament was to confer on the Board portion of the judicial power of the Commonwealth, which at any rate includes the power to adjudicate between adverse parties as to legal claims, rights and obligations, and to order right to be done in the matter (per Griffith C.J. in Waterside Workers' Federation of Australia v. J. W. Alexander Ltd.[1]). And it is clear by the express terms of sec. 44 that the Board of Appeal in hearing references is to have the same powers, so far as applicable, as are conferred on it by sec. 51 in regard to appeals. It follows that Parliament has by this legislation purported to vest in the Board of Appeal on the hearing of either appeals or references under the Act portion of the judicial power of the Commonwealth. The decision in Alexander's Case establishes that the judicial power of the Commonwealth can only be vested in "Courts," that is, in Courts of law in the strict sense; and that, if any such Court be created by the Parliament, the tenure of office of the Justices of such Court, by whatever name they may be called, shall be for life subject to the power of removal contained in sec. 72 of the Constitution. Now, the Board of Appeal created by the Assessment Act either is or is not a "Court" in the strict sense. If it be not, Parliament has no power to invest it with functions appertaining to the judicial power of the Commonwealth; if, on the other hand, it be a "Court," its members have not the tenure of office required by the Constitution. In either event the provisions of the Constitution are infringed, and it follows that the Board of Appeal which Parliament has purported to create is not, and cannot lawfully be, constituted under the Assessment Act in its present form.

[14]

But the section was attacked on an independent ground much more serious. Sub-sec. 3 of sec. 28, on which the objection is founded, is in these terms: "A taxpayer who is dissatisfied with the decision of the Commissioner under this section may require the Commissioner to refer his case to a Board of Appeal, and the Commissioner shall refer the case accordingly." It is contended on behalf of the taxpayer, in the first place, that sub-sec. 3 is invalid because it purports to invest a tribunal which is not a Court with judicial power, and thereby it violates sec. 71 of the Constitution; and, in the next place, that the sub-section is inseparable from the rest of the section and consequently the whole is void. It is necessary to examine this objection step by step. Assuming the existence of a Board of Appeal free from any constitutional objection, sub-sec. 3, if nothing more were said as to the functions of the Board, would be unimpeachable. It would raise an implication that in the event of the taxpayer's dissatisfaction with the Commissioner's decision the Legislature entrusted the Board with the duty of reviewing the decision of the Commissioner, and, in case of difference, of substituting its opinion for his, with the legal effect that would otherwise have attached to the Commissioner's decision. The Board of Appeal would in that case be a mere revisory body of the same nature as the Commissioner and in no way exercising judicial power, because its decision would not be one determining existing rights and duties as they already stand, but would be one merely ascertaining a fact which the Legislature adopted as the standard upon which its will operated to create rights and duties. And that is the position asserted for it now by learned counsel for the Commissioner. That simple position, however, does not exist. The Legislature has certainly not left the Board's functions to implication. They have been expressed, and therefore there is no room for implication. Sec. 41 provides for a Board, consisting of a chairman and two other members, and fixes the tenure of its members at seven years. The nature of the tenure makes it impossible to be a Court (sec. 72 of the Constitution). Consequently no portion of the Commonwealth judicial power can be vested in a Board so constituted. This is, if possible, accentuated by the provisions of sec. 43 providing for temporary membership. Sec. 41 (1), however, distinctly states that the Board is to be created "for the purposes of this Part," which means that, if those purposes were inapplicable, no Board would be created. Then sec. 44, which is extremely important in this connection, says: - "(1) A Board of Appeal shall have power to hear such cases as are prescribed, or are referred to it by the Commissioner under this Act. (2) The provisions of section fifty-one, fifty-two, and fifty-three of this Act shall apply, so far as applicable, to references by the Commissioner to the Board as if those references were appeals." "References" are thus placed, as far as they can be, in precisely the same position as "appeals" so far as the Board's duty and powers are concerned; and this compels us to examine the provisions as to appeals. Turning then to sec. 50, dealing with "appeals," it provides by sub-sec. 4 that a taxpayer dissatisfied with the decision of the Commissioner may, by the method stated, require the Commissioner to forward his case, where the objection does not raise questions of law only, to (1) the High Court or (2) a Supreme Court or (3) a Board of Appeal. Pausing there for a moment, it is quite evident that judicial power is thereby conferred on the Board, because the power invested in the High Court is necessarily judicial (In re Judiciary and Navigation Acts[2]) and it is the identical power given by sec. 50 to the Supreme Court and the Board. The power thus given is one of ascertaining and determining whether and how far the rights and duties independently enacted have been accurately declared by the Commissioner, and not for the purpose of superseding his discretionary judgment to create a constitutive element of liability. This at once affects the third sub-section of sec. 28 in two ways. First, even assuming the Board's functions under that sub-section to remain always non-judicial, still a validly constituted Board is necessary. But, if the only Board intended by sub-sec. 3 is a Board as constituted under Part V., the invalidity of Part V. strikes also at sub-sec. 3 of sec. 28. Again, sub-sec. 3 is affected as to functions by force of sub-sec. 2 of sec. 44 and sec. 51, which carries on the judicial functions of sec. 50, because the Board, when sitting on a "reference" under sec. 28, would in deciding the "case" have to determine, if disputed, even the applicability of sec. 28 to the "case." That is, the Board would have to determine whether the "business which is carried on in Australia is controlled principally by persons resident outside Australia." Unless that is so, sec. 51 does not apply to a reference at all in any intelligible sense.

[16]

Before parting with this branch of the subject, one argument in support of the Board's position should be noticed. Sec. 53 - one of the sections applied to references, "so far as applicable" (which means so far as the nature of the proceeding permits) - provides in the first sub-section that "the Governor-General shall make rules for regulating the practice and procedure in relation to appeals dealt with by a Board of Appeal, and a Board shall not be bound in its consideration of any question by any rules of evidence, but in forming its decision shall be guided by good conscience and the facts of the case." It was urged that the latter part of the sub-section was decisive that the Board was not a Court and that the Act did not purport to invest it with judicial power, because, as it was urged, the provision was inconsistent with strict judicial power. For this position Moses v. Parker[3] was relied on. But in that case, as I pointed out in the Tramways Case [No. 1][4], the enactment that the tribunal was "expressly exonerated from all rules of law or practice" (see Canadian Pacific Railway Co. v. Toronto Corporation[5]) was an extremely important factor and was the turning-point of the case. It cannot be maintained here that, by virtue of the words relied on, the Board is absolved from all rules of law, as, for instance, the express provisions of the Taxing and Assessment Acts themselves, or the rules of practice and procedure made by the Governor-General. Nor, as already shown, can it be maintained that the functions of the Board on appeals are confined to mere ascertainment of facts unaffected by law. Many of the facts ultimately to be found on such appeals, require, so to speak, a "direction" in law. If a Judge were trying such cases with a jury, he would be bound to direct them as to the law. The High Court or the Supreme Court would necessarily "direct" itself in such case, and the Board of Appeal could not possibly in the majority of instances arrive at a final conclusion without previously forming an opinion as to the intention of the Legislature respecting some disputed item or items. The observations of Collins L.J. in Maude v. Brook[6] are illustrative, and the numerous workmen's compensation cases in the House of Lords show how difficult it is in a disputed case to get all the issues of pure fact. But even the issues of pure fact to be determined by the Board on appeals are determinations - not to create a standard of liability, but to ascertain and authoritatively pronounce upon the standard already created. That is judicial power, and, having regard to the mode of its investment, is Commonwealth judicial power. And none the less is it so because of the provision relied on in sub-sec. 1 of sec. 53. Not merely does the case of Moses v. Parker[7] not sustain the argument against judicial power, but there are clear authorities which show that such a provision is perfectly consistent, not merely with true judicial power in the first instance, but also with the coexistence of true appellate jurisdiction from the primary decision. Barlow v. Orde[8] was a case where the law provided that in such a case the Judge was to act "according to justice, equity, and good conscience." That was part of what Lord Westbury there termed "the Regulations ... for defining the jurisdiction of the Courts of the Province"[9]. And those words require the application by the Court of "the principle of natural justice." The Privy Council itself considered the case by that standard and reversed the primary judgment. In 1913 in Skinner v. Naunihal Singh[10] Lord Shaw for the Judicial Committee said: - "From the case of Barlow v. Orde ... it is plain that English rules of interpretation - in so far at least as these are artificial rules of construction which have arisen in the administration of English Courts of equity - must not be allowed to govern the interpretation of Thomas Skinner's will. Questions affecting the construction of such a settlement as the present, or the regulation of a succession under it, must be determined by the principles of natural justice, or, to use the familiar language, according to justice, equity and good conscience." Their Lordships then proceeded as an appellate tribunal to review the decision of the appeals from the High Court of Judicature at Allahabad, which had itself reversed judgments and decrees of a subordinate Court. The Judicial Committee reversed the judgments of the High Court. It is therefore certain that the argument, so far as it rests on the provision referred to in sec. 53, cannot avail to alter the conclusion otherwise arrived at and already stated.

[32]

The Income Tax Assessment Act 1922, Part V., provides for the constitution of a Board or Boards of Appeal consisting of a chairman and two other members appointed by the Governor-General, and has enacted that the members of a Board shall hold office for a term of seven years, subject to removal or suspension (see secs. 41, 48). Jurisdiction or authority is conferred upon a Board so constituted to hear such cases as are prescribed, or are referred to it by the Commissioner under the Act (see secs. 44, 50, 51). The cases so prescribed are set forth in sec. 50, sub-sec. 4, whilst secs. 17 (5), 21 (5), 23 (3) and 28 (3) are instances of cases which may be referred. A Board is empowered to decide both questions of law and questions of fact in the cases so prescribed or referred. It may make such orders as it thinks fit, and either reduce or increase the assessment of a taxpayer made for the purpose of ascertaining the taxable income upon which income tax is leviable (see secs. 51, 35), and its decisions on questions of fact are final and conclusive, but otherwise are appealable to this Court. The jurisdiction or authority is thus to ascertain and declare the liability of a taxpayer to the tax imposed by the Income Tax Acts. That is a clear exercise of the judicial power of the Commonwealth (cf. The Constitution, sec. 71; In re Judiciary and Navigation Acts[18]). The provisions of sec. 53 do not militate against this view; for that section, in my opinion, does not alter the standards of liability set up by the Acts, but simply deals with procedure and proof of facts. Alexander's Case[19], however, is an authoritative decision of this Court that the Parliament cannot confer upon tribunals constituted as are the Board or Boards of Appeal, the judicial power of the Commonwealth or any part of it. The provisions of the Income Tax Assessment Act purporting to authorize a Board or Boards of Appeal to exercise part of the judicial power of the Commonwealth are contrary to the Constitution, and therefore invalid. Consequently, I agree that a case cannot be stated for the opinion of this Court by a Board which has no existence in point of law, and that it must be struck out.

At a glance

Court

Decision date

Before

Source

Judgment (47 paragraphs)

British Imperial Oil Co Ltd v Federal Commissioner of Taxation [1925] HCA 4; (1925) 35 CLR 422 (9 April 1925)

Parties

Legislation Cited (2)

Cases Cited (1)