Richard Foreman & , Re; Sons Pty Ltd; Uther v Federal Commissioner of Taxation
(1947) 74 CLR 50821 ALJ 360
8 ATD 348
[1947] ALR 589
(Judgment by: Rich J)
In the Matter of: Richard Foreman
&
Sons Pty Ltd
Between: Uther
And: Federal Commissioner of Taxation
Judges:
Latham CJ
Rich JStarke J
Dixon J
McTiernan J
Williams J
Subject References:
Constitutional law (Cth)
Judgment date: 2 December 1947
Judgment by:
Rich J
The company here in question, which was incorporated by registration in New South Wales on 19th January 1914, went into voluntary liquidation on 31st March 1942. On 31st March 1947 its ordinary unsecured debts amounted to 29,217 pounds 19s. 7d., and its only asset is a sum of 1,459 pounds 13s. 7d. The Federal Commissioner of Taxation claimed payment from the liquidator of a total sum of 766 pounds 18s. 1d. made up of sales tax 595 pounds 8s. 10d. and pay-roll tax 172 pounds 9s. 3d. incurred up to February 1942; and to be entitled to priority over all other unsecured creditors. The liquidator thereupon applied to the Supreme Court of New South Wales on a summons for directions as to whether the Commissioner was entitled to the priority which he claimed, or only to be paid pari passu with the ordinary creditors; and this has been treated by that Court as raising a question as to the respective powers inter se of the Commonwealth of Australia and of the State of New South Wales. In this Court we considered that the matter involved the interpretatin of the Constitution and ordered that the cause should be removed into the High Court (Judiciary Act, s. 40). (at p523)
The claim to priority which has been made on behalf of the Commonwealth is based on the prerogative right of the Crown, which prima facie it possesses in the right of the Commonwealt, as it does also in the respective rights of all other parts of the Empire, to be paid the amount of any debt owing to it in priority to the payment of any debts of equal degree owing to subjects, if the fund for payment of debts is insufficient to pay all. It is necessary, therefore, to consider the nature and operation of this part of the Royal prerogative. (at p523)
As I have already pointed out in Minister for Works (W.A.) v. Gulson (1944) 69 CLR 338 , at pp 356-357 there is but one Crown for the whole Empire, and that Crown possesses certain prerogative rights which it enjoys and exercises not for its personal benefit or at its personal initiative but for the benefit of some particular part of the Empire on the advice of responsible Ministers officiating in that part. One of these prerogative rights is the right in question in the present proceedings. It is well established that when the funds of a debtor are under the control of a particular part of the Empire, this prerogative of priority prima facie attaches to all debts owing by the debtor to the Crown, whether to the Crown in the right of that part or in the right of any other part of the Empire; and, if the debtor's funds are insufficient to pay even his debts to the Crown, the amounts owing to the Crown in each of its respective rights rank pari passu. But the legislature of any part of the Empire which controls the fund may, as a general rule, abridge or abrogate this prerogative by legislation so providing either in express terms or by necessary implication.
As regards the prerogative now in question, the legislature of New South Wales can, as to any funds within its legislative competence, abridge or abolish it qua the Crown in the right, for example, of Great Britain, or of South Africa, or of any of the States of Australia. In so far as the right of the Crown in the right of the Commonwealth to rank as a preferential creditor is based merely on the prerogative of the Crown as such, I see no reason why the State legislature cannot validly abridge or abolish it just as it could any other Crown prerogative of this sort. Quite different questions would arise if the Commonwealth legislature, in the exercise of some of its constitutional powers, enacted that debts owing to the Commonwealth, or debts of certain kinds owing to the Commonwealth, should have specified priorities in relation to funds subject to the jurisdiction of the Commonwealth. Assuming such legislation to be valid, the Commonwealth would clearly be entitled to the priority so provided for, but it would be a statutory, not a prerogative, priority (South Australia v. The Commonwealth (1942) 65 CLR 373 , at pp 434-435, 440-441, 464-465 ). (at p524)
In the present case, s. 199 of the New South Wales Companies Act 1936 provides that the provisions of Part X relating, inter alia, to the priorities of debts shall bind the Crown. Section 297, which is included in Part X, provides by sub-s. (1) that subject to the provisions of the Act in a winding up there shall be paid in priority to all other debts five specified classes of debts. In the fourth class come certain land tax and income tax assessed under any Act or Commonwealth Act. Since the New South Wales legislature has in s. 297 made express provision as to priority of payment of debts in company liquidations, and has in s. 199 provided that these provisions shall bind the Crown, there is no room in this field for the operation of the Royal prerogative in respect of Crown priorities, and, in this field, Crown priorities in all rights by virtue of the Royal prerogative must be regarded as abrogated (Attorney-General v. De Keyser's Hotel Ltd. [1920] AC 508 , at p 561 ). (at p524)
It follows that the first question should be answered No, and the second Yes. (at p524)