Sicree and Watt v. Deputy Federal Commissioner of Taxation.
Judges:Jenkinson J
Court:
Supreme Court of Victoria
Jenkinson J.
Application for directions pursuant to sec. 188(3) of the Companies Act 1961 by receivers appointed by a debenture holder.
The summons by which the application was instituted came before O'Bryan J. in the Practice Court, who added as a respondent the liquidator of Bismarck Australia Pty. Ltd., by which the debenture had been granted, and ordered amendment of the summons to include a claim for a declaration that the debenture charge under which the applicant receivers were appointed was duly registered under the Companies Act. A transcript in the court file contains his Honour's reasons for the conclusion he expressed on 4 October 1978 ``that a declaration should be made that the subject charge was duly registered''. The file contains no order to that effect, but only the order of that date which added the company's liquidator as a respondent, directed amendment of the summons to include the claim for the declaration, adjourned the summons to the Miscellaneous Causes List and included consequential procedural directions. None of the parties asked that I consider whether the charge was duly registered.
The orders which O'Bryan J. made imply, although they do not include, grant of the special leave to bring the application before a Judge which r. 6 and 55 of Ch. V of the Court's Rules require.
The debenture was issued by Bismarck Australia Pty. Ltd. on 7 December 1976 to a man named Harry Rose. Clause 8 of the debenture contains a charge in his favour on -
``the undertaking of the company and its assets whatsoever both present and future including its uncalled and called but unpaid capital for the time being with payment of all principal, interest and other moneys hereunder, including any principal sums borrowed by any receiver or receiver and manager hereunder together with all interest and other charges thereon payable by the company or by such receiver and receiver and manager and such charge shall be:
- (a) as to the uncalled and called but unpaid capital of the company and as to its goodwill and the whole of its fixed assets including all freehold and leasehold land and shares in any subsidiary company which may from time to time belong to the company a fixed and specific charge;
- (b) as to the remainder of its assets a floating charge.''
I shall assume, in deference to what the transcript reveals of the conclusions
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expressed by O'Bryan J. and at the invitation of counsel for the applicant and for the respondent the Deputy Commissioner of Taxation, that the charge was duly registered under Div. 7 of Pt. IV of the Companies Act on 14 April 1977 after Newton J. had made an order extending the time for registration in proceeding No. C9669 of 1977.On 15 March 1978 Harry Rose appointed the applicants receivers and managers of the charged property in exercise of powers which they claim had then become available to him under the provisions of the debenture in consequence of events they and he alleged to have occurred before that date. The respondent, John Martin Walsh, was appointed liquidator of the company on 21 September 1978 when an order for the winding up of the company was made on a petition presented by the respondent Deputy Commissioner of Taxation. In an affidavit sworn before the order of O'Bryan J. was made, that the liquidator be added as a respondent to the summons, Mr. Walsh claimed that the applicants had not been validly appointed, on the ground that none of the conditions upon which power to make the appointment depended had been fulfilled on 15 March 1978. But when the summons came before me in the Miscellaneous Causes List counsel for Mr. Walsh did not desire to make any submission, except such submissions as might be necessary to protect his client's interests in relation to costs, and he sought and obtained, with the concurrence of counsel for the other parties, leave to withdraw.
The receivers' evidence that the company was insolvent when they were appointed is uncontradicted and is accepted by me. By September 1978 the applicants had received property subject to the charge and had by sale of the property obtained the sum of $103,356, which was held by them ``with the company's bankers''. When the applicants were appointed the company was indebted to Harry Rose in the sum of $17,770.75 and the debenture secured payment of that debt. At that time the company was indebted to the Crown in right of the Commonwealth in the sum of $75,681.27, or perhaps a greater sum, for tax due and payable under Sales Tax Assessment Acts and Sales Tax Acts. Before the receivers' appointment, the respondent Deputy Commissioner of Taxation had served notices on several persons in purported exercise of the powers conferred by sec. 38 of the Sales Tax Assessment Act (No. 1) 1930 on the Commissioner of Taxation and, as I assume, delegated to the Deputy Commissioner under the Taxation Assessment Act 1953, in respect of sales tax due by the company and constituting part of the sum of $75,681.27. One of the notices was served in February 1978. The evidence does not enable me to find when the other notices were served, but Dr. Spry of Counsel for the Deputy Commissioner of Taxation informed me, and I took Mr. Finkelstein of Counsel for the applicants to accept as fact, that they also were served in February 1978. Payments were made in compliance with the requirements of those notices by some of the persons on whom they had been served, and the amounts paid aggregated $5,800.12. Those amounts were sworn to have ``represented debts due to the company'', and counsel for the applicants and for the respondent Deputy Commissioner have made their submissions on the assumption that those debts had become due to the company by the persons on whom the notices were served before the applicants were appointed receivers. I was informed by Dr. Spry that the payments aggregating $5,800.12 were made to his client on 22 March 1978 and 18 May 1978.
It might be inferred from an affidavit sworn by Harry Rose and filed in respect of the application - and counsel have made their submissions on the assumption - that the amount of the company's present indebtedness to him which is secured by the debenture greatly exceeds the value of the property subject to the charge.
The summons claims, inter alia:
``4. A Declaration for the payments totalling $5,800.12 made by debtors of the company to the Respondent are moneys payable by the Respondent to the Applicants;
5. That the Respondent do pay the said sum of $5,800.12 to the Applicants.''
The respondent to whom reference is made in those paragraphs is the Deputy Commissioner of Taxation.
Clause 14(1) of the debenture reads:
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``The principal sum and interest thereon or so much as shall remain unpaid shall at the option of the mortgagee immediately become due and payable without necessity for any demand or notice (notwithstanding any delay or previous waiver of the provisions of this clause by the mortgagee) and this security shall become enforceable and the right of the company to deal for any purpose with the mortgaged property or any part thereof shall forthwith cease on the happening of any one or more of the following events:
- 1. If default be made by the company in due and punctual payment of any part of the principal sum or interest thereon, or of any instalment of principal and interest at any time due and payable by the company to the mortgagee or any other moneys which ought to be paid by the company pursuant to the provisions of this Debenture.''
Clause 14 specifies 16 other events on the occurrence of which the consequences stated in its introductory clauses follow. There was evidence that in 1977 default had been made by the company in due and punctual payment of the sum of $10,000 lent to it by Harry Rose, which was part of ``the principal sum'' within the meaning of that expression in cl. 14. Mr. Finkelstein submitted that upon the happening of that default the equitable charge constituted by the debenture over those of the company's assets which had not been subjected to the ``fixed and specific charge'' imposed by cl. 8(a) thereupon ``crystallised'' and became fixed on those assets. There was no evidence to suggest that Mr. Rose had before the appointment of the receivers taken any step indicative of an intention that the floating charge should become fixed. The introductory clauses of cl. 14, like the provisions under consideration in
Government Stocks and Other Securities Investment Company v. Manila Railway Co. (1897) A.C. 81, might be construed as operating to fix the floating charge upon the happening of any one or more of the events which are specified in the numbered subclauses. But the reasoning in that case demonstrates, I think, that the better course is to understand those provisions of cl. 14 as postponing the ``crystallisation'' of the charge until the debenture holder exercises an option which the occurrence of one of the specified events confers on him to bring about that result. If that construction be adopted, as I think that it should, the termination of the company's right ``to deal for any purpose with the mortgaged property or any part thereof'' on the happening of a specified event will leave the company in the position which Lord Macnaghten described ((1897) A.C. at p. 86): ``Thenceforward so long as the default lasts the business will be carried on, not as of right, but by the sufferance of the debenture-holders and at their mercy''.
If, as I think to be the case, the floating charge was not fixed upon the assets over which it had been given until the applicants were appointed receivers on 15 March 1978, the persons on whom the notices were served by the respondent Deputy Commissioner of Taxation may have fallen under an obligation to make payments to the Deputy Commissioner in compliance with the notices before that appointment. Reference is made in the affidavits filed in support of the summons to those persons as debtors of the company and the moneys they paid to the Deputy Commissioner of Taxation are said to have ``represented debts due to the company'', but the evidence does not explicitly establish that the debts were due and payable before the receivers were appointed.
Section 38 of the Sales Tax Assessment Act (No. 1) 1930 provides:
``38(1) The Commissioner may, by notice in writing (a copy of which shall be forwarded to the taxpayer to the last place of address known to the Commissioner), require -
- (a) any person by whom any money is due or accruing or may become due to a taxpayer;
- (b) any person who holds or may subsequently hold money for or on account of a taxpayer;
- (c) any person who holds or may subsequently hold money on account of some other person for payment to a taxpayer; or
- (d) any person having authority from some other person to pay money to a taxpayer,
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to pay to him, forthwith, upon the money becoming due or being held, or within such further time as the Commissioner, a Second. Commissioner or a Deputy Commissioner allows, the money or so much thereof as is sufficient to pay the tax due by the taxpayer or the fines and costs (if any) imposed by a Court on him in respect of an offence against this Act.
(2) Any person who fails to comply with any notice under this section shall be guilty of an offence.
Penalty: One hundred dollars.
(3) Where the amount payable by the person to the taxpayer is less than the amount of tax due by the taxpayer, the person shall pay to the Commissioner in reduction of the amount of tax due the amount payable by that person to the taxpayer.
(4) Any person making any payment in pursuance of this section shall be deemed to have been acting under the authority of the taxpayer and of all other persons concerned and is hereby indemnified in respect of such payment.
(5) If the tax due by the taxpayer, or the fine and costs (if any) imposed by a court on him, are paid before any payment is made under a notice given in pursuance of this section, the Commissioner shall forthwith give notice to the person of the payment.
(6) In this section -
- `Tax' means sales tax and includes additional tax chargeable under this Act, and any judgment debt and costs in respect of tax;
- `Person' includes company, partnership, Commonwealth or State Officer, and any public authority (corporate or unincorporate) of the Commonwealth or a State.''
Each of the other Sales Tax Assessment Acts includes a provision that sec. 38 and other provisions of the Sales Tax Assessment Act (No. 1) 1930 ``shall mutatis mutandis apply in relation to the imposition, assessment and collection of the tax chargeable under this Act in like manner as they apply in relation to the imposition, assessment and collection of the tax chargeable under that Act''.
In my opinion sec. 38(1) imposes on a person served with a notice given under that subsection an obligation to make the payment described as ``the money or so much thereof as is sufficient to pay the tax due by the taxpayer or the fines and costs (if any) imposed by a Court on him in respect of an offence against this Act''. The words ``The Commissioner may... require'' do not merely authorise the Commissioner to state his requirement in the notice to which the subsection refers, in my opinion: they also express, I think, the statutory command to comply with the requirement. The obligation to make the payment does not arise until money becomes ``due'' to a taxpayer or is ``held'' for or on account of a taxpayer, or on account of some other person for payment to a taxpayer. I understand the word ``due'' in sec. 38(1) to mean due and payable. In my opinion service of the notice prescribed by sec. 38(1) does not impose on a debtor whose debt is not at the time of service due and payable any immediate obligation, nor attach to the debt any immediate right or interest in favour of the Commissioner or of the Crown in right of the Commonwealth. If, therefore, a debt was not due and payable at any time between service of a notice in February 1978 and the appointment of the receivers on 15 March 1978, the equitable assignment of that debt to Mr. Rose which was completed by that appointment would not have been subject to any right or interest or claim deriving from service of the notice, in my opinion, and the equitable assignment would have operated, as I think, to produce the result that the debt could not thereafter become due to the taxpayer company, for when it became payable it would have ``become due'' to Mr. Rose, not to the taxpayer company. See
George Barker Ltd. v. Eynon (1974) 1 W.L.R. 462; (1974) 1 All E.R. 900;
Rother Iron Works Ltd. v. Canterbury Precision Engineers Ltd. (1973) 2 W.L.R. 281; (1973) 1 All E.R. 394;
N.W. Robbie & Co. Ltd. v. Witney Warehouse Co. Ltd. (1963) 1 W.L.R. 1324; (1963) 2 All E.R. 199;
Leichhardt Emporium Pty. Ltd. v. A.G.C. (Household Finance) Ltd. (1979) 1 N.S.W.L.R. 701;
National Mutual Life Nominees Ltd. & Ors. v. National Capital Development Commission & Ors. (1975) 6 A.C.T.R. 1;
Spears v. Lord Advocate (1839) 6 Cl. & Fin. 180; 7 E.R. 665. Unless the debt in respect of
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which the notice was given had become payable before the appointment of the receivers, the event upon the occurrence of which sec. 38(1) operates to impose its requirement did not in my opinion occur and payment in purported compliance with the notice on 22 March 1978 or on 18 May 1978 was neither required nor authorized by the subsection, in my opinion.If before the appointment of the receivers the persons served with notices under sec. 38 were indebted to the taxpayer company in amounts aggregating $5,800.12 and payable to the company before that appointment, questions arise as to whether any further time had been allowed by the Deputy Commissioner of Taxation to any of those persons for payment (to him of amounts due to the company) after, rather than forthwith upon, those amounts becoming due, and whether, if time had been allowed, it had expired before that appointment. The evidence does not afford an answer to those questions. (The notices which are in evidence are not any of those under present consideration.) I shall assume for the present that either no time was allowed or the time allowed had expired before appointment of the receivers.
It may be thought that some analogy can be traced between the processes ordained by sec. 38 and the attachment of debts by garnishee proceedings. It is well established that neither an order nisi attaching a debt owed to a judgment debtor nor an order absolute that the garnishee pay the amount of such a debt to the judgment creditor works assignment of the debt to the judgment creditor and that such an order creates no debt in favour of the judgment creditor; that the debt which upon service of the order nisi is thereby bound in the garnishee's hands remains the property of the judgment debtor and remains subject to any floating charge previously given over the debt; and that if the charge crystallises after the making of the garnishee order and before payment into court or to the garnisher, the right of a receiver appointed to receive the debt for the debenture holder (which right derives, in my opinion, from the completion on the receiver's appointment of the equitable assignment of the debt) prevails over those rights which had been conferred on the garnisher by the order attaching the debt; see
Norton v. Yates (1906) 1 K.B. 112; In
re Combined Weighing and Advertising Machinery Co. (1889) 43 Ch. D. 99;
Cairney v. Black (1906) 2 K.B. 746;
M.G. Charley Pty. Ltd. v. F.W. Wells Pty. Ltd. (1963) N.S.W.R. 22. It might be possible to allow to sec. 38 an operation by which the debt to a taxpayer of the person served with a notice under the section should become bound in that person's hands, in the sense in which an order nisi for attachment of a debt in garnishee proceedings binds. And if that conclusion were reached, the analogy might be completed by denying the rights thereby conferred on the Commissioner, or the Crown in right of the Commonwealth, efficacy in competition with the rights of a debenture holder whose charge crystallised before payment had been made to the Commissioner in compliance with the notice. To any such an analysis the provisions of sec. 38(4) might be thought to raise an obstacle. That provision protects the person paying in pursuance of the section not only against the claims of his creditor, as a garnishee is protected against his creditor's claims, but also against the claims ``of all other persons concerned''. It might be said that sec. 38(4) would operate to give the suggested rights of the Commissioner, or of the Crown, deriving from service of the notice, an unassailable protection once payment had been received from the person served with the notice.
The provisions of sec. 38 do not express, and I see no reason to imply, a grant to the Commissioner or to the Crown in right of the Commonwealth any interest in, or right over a debt or a fund which is comprehended by one of the four subparagraphs of sec. 38(1). If some such interest or right does arise, either upon service of a notice in pursuance of sec. 38(1) or at the time indicated by the words ``upon the money becoming due or being held'', I would accord it no greater efficacy when it came into competition with the right of a debenture holder whose charge had crystallised than has been allowed to the claim of a judgment creditor in whose favour an order for attachment of debt has been made in garnishee proceedings.
In my opinion the question whether the appointment of the applicants disentitled the Deputy Commissioner of Taxation to receive the payments aggregating $5,800.12 is to be answered by determining what it was that
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sec. 38 commanded the persons who paid those sums of money to do at the time the payments were made. On its proper construction sec. 38(1) expresses, in my opinion, a command to the person served with a notice under the subsection only to pay money which is due and presently payable by that person to the taxpayer, or which is held by that person for or on account of the taxpayer or on account of some other person for payment to the taxpayer. The phrase ``upon the money becoming due or being held'' merely fixes the time at which the obligation to pay arises, unless some further time has been allowed. But the presence of the phrase in the subsection draws attention to other considerations by reference to which sec. 38 is to be construed. The words ``the money or so much thereof as is sufficient to pay the tax due by the taxpayer or the fines and costs (if any) imposed by a Court on him in respect of an offence against this Act'' must, in my opinion, be understood as specifying a sum of money equal in amount to that which, at the time of payment, is due and payable by the payer to the taxpayer, or so much thereof as is sufficient to pay what is specified by the concluding phrases in the subsection. It is not in my opinion to be supposed, in the absence of express provision, that the section imposes an obligation to make a payment other than one measured by the payer's obligation to make payment to the taxpayer and by the taxpayer's obligation under the Act, or that the section imposes an obligation to make a payment at a time when, in consequence of the occurrence of a supervening event, money is no longer due to the taxpayer, or is no longer held for or on account of the taxpayer or for payment to the taxpayer. The quantification of the taxpayer's obligation is directed by the concluding words of sec. 38(1) and a means is ordained by sec. 38(5) of enabling the payer to ascertain that amount. The quantification of the payer's obligation to, or in respect of payment to, the taxpayer is directed by sec. 38(3). Effect can be given to the provisions of that subsection only at the time of payment to the Commissioner, for the two amounts specified therein may vary between the time when the obligation to pay to the Commissioner first arises - ``upon the money becoming due or being held, or within such further time as the Commissioner allows'' - and the time when the obligation is in fact discharged by payment. So too, in my opinion, the existence of the obligation expressed in sec. 38(1) to pay to the Commissioner ``the money'' is to be ascertained at the time of payment, and that is achieved by construing the expression ``the money'' (where it last occurs in sec. 38(1)) as meaning an amount equal to the amount then due and payable by the person served with notice to the taxpayer. It is true that, if the words ``the money'' were construed as meaning an amount equal to the sum due or held at the time when that sum first, on or after service of the notice, became due or was held, there would be less opportunity for evasion of the legislative intention which the section manifests than the construction I have adopted offers. But sec. 38(2) is a deterrent to evasion, at least in cases where the notice requires payment ``forthwith, upon the money becoming due or being held''; and I cannot find in the provisions of the section a warrant either for exposing the legal relations between a taxpayer and his debtor or trustee to the risk of so gross a disturbance as the construction alternative to mine would involve, or for implying a statutory charge or lien in favour or the Commissioner or the Crown in right of the Commonwealth.When payments in compliance with the notices were first made on 22 March 1978 nothing was due and payable to, or held for, Bismarck Australia Pty. Ltd. by the persons who made those payments, in my opinion. The debts in respect of which the payments were made had been assigned to Mr. Rose, in my opinion, and the assignments had been completed on 15 March 1978. No obligation, in my opinion, was imposed by sec. 38 to make the payments, nor were any of them authorised by that section.
If, contrary to my opinion, it were incorrect to regard the crystallisation of a floating charge as effecting or as ``completing'' an equitable assignment of debts subject to the charge to the debenture holder (see Sykes: The Law of Securities (3rd ed.) pp. 786-7) the nature and effect of the charge fixed on such debts might nevertheless produce the result that upon the crystallisation of the charge the debts would cease to be due and payable to the company which had granted the debenture. Once the debtor had notice that the charge had
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crystallised, such a result would seem more probable. But I need express no opinion on those points.The conclusion I have stated would not be affected if, contrary to the assumption previously made, a time expiring after 15 March 1978 had been allowed by the Deputy Commissioner of Taxation for the payments required by the notices and in fact made on and after 22 March 1978.
The question then arises as to whether the applicants might obtain on this present application or in any other proceedings an order recouping the amounts aggregating $5,800.12 which were paid to the respondent Deputy Commissioner. There is no evidence that the persons who made the payments had knowledge of the applicants' appointment as receivers. No relief is claimed against any of them in this application, nor any direction sought concerning them. It is a question, upon which no submission was advanced on the hearing of the application, whether the deeming provision in sec. 38(4) could afford the Deputy Commissioner of Taxation or the Crown in right of the Commonwealth any defence to a proceeding against either of them.
By a notice dated 22 March 1978 the respondent Deputy Commissioner of Taxation required one of the applicants to make payment to the Deputy Commissioner of ``money now held by you directly or indirectly for or on account of Bismarck Australia Pty. Ltd.'' and to make payment to that respondent of any money which should in the future come to be so held. The notice specified sec. 38 as the source of the Deputy Commissioner's authority to make those requirements. Those circumstances suggest that the respondent Deputy Commissioner may have had knowledge of the applicants' appointment before he received any of the payments aggregating $5,800.12. If he did, that may justify an exercise against him, or against the Crown in right of the Commonwealth, of the equitable jurisdiction to trace Mr. Rose's property into the funds with which those payments are now mixed. (See Snell's Principles of Equity (27th ed.) pp. 286 et seq.; Hanbury & Maudsley: Modern Equity (10th ed.) pp. 565 et seq.) Argument by counsel was not directed to the question as to what relief was available to the applicants against the respondent Deputy Commissioner, nor to the question whether any relief ought to be granted against him in a proceeding under sec. 188(3) of the Companies Act 1961. In Paterson & Ednie's Australian Company Law (2nd ed.) vol. 2, para. 188/4 the learned authors observe that directions given under the subsection often go to questions of substance, and the reported decisions they cite justify the observation. But sec. 188(3), unlike sec. 369(1) of the English Companies Act 1948, confers no express power to make orders binding respondent parties. The evidence before me leaves the facts so uncertain upon which any order of the kind sought in para. 4 and 5 of the summons might be based that I think that I should decline to make any order and to give any direction concerning the payments aggregating $5,800.12 unless and until satisfactory evidence of those facts has been adduced or until an agreement concerning them has been made between the parties. If that evidence is adduced or agreement is made, I would be prepared to hear the parties further concerning the nature and extent of the jurisdiction conferred by sec. 188(3) and the principles in accordance with which the jurisdiction is to be exercised, and concerning the question as to what relief may be granted in respect of those payments. It may be that the parties would be content with a declaration. If they were, and if there were evidence or agreement about the facts, I would be prepared, as at present advised, to make a declaration to the effect that each payment was neither required by sec. 38 nor otherwise authorised by law, and that at the time when each payment was made the amount of the payment was due and payable by the payer to the applicants as receivers under the debenture.
By notice dated 9 February 1978 the respondent Deputy Commissioner required, in exercise of the power conferred by sec. 98, A.G.C. (Factors) Ltd. to pay to him forthwith money ``now held by you directly or indirectly for or on account of... Bismarck Australia Pty. Ltd.'' and to pay to him, within five days of its coming to be held, money which ``comes to be held by you for or on account of'' that company. According to an affidavit sworn by one of the receivers in September 1978 A.G.C. (Factors) Ltd. ``is indebted to'' Bismarck Australia Pty. Ltd. in the sum of $30,010.73 under the provisions of a factoring
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agreement between those companies made in December 1976. There is no evidence as to when the indebtedness arose. It seems that no part of that sum has been paid to any person by A.G.C. (Factors) Ltd. There is a term of the factoring agreement (cl. 5(i)(c)) which provides for certain periodic payments by A.G.C. (Factors) Ltd. to Bismarck Australia Pty. Ltd. ``so long only as a receiver shall not have been appointed of the whole or any part of the undertaking of'' the latter company. There is no evidence as to whether the indebtedness in the sum of $30,010.73 was one which was to be discharged by those periodic payments. Counsel did not advert to that term of the factoring agreement in their submissions. Paragraph 6 of the summons seeks a declaration that ``A.G.C. (Factors) Ltd. is entitled to pay such moneys to the applicants as it holds on account of Bismarck Australia Pty. Ltd. in liquidation, notwithstanding the service upon it by the respondent of a notice pursuant to sec. 38 of the Sales Tax Assessment Act 1930-1973''. I am not prepared to make any declaration or give any direction relating to the notice to A.G.C. (Factors) Ltd. until further evidence concerning the sum of $30,010.73 has been adduced. I would hear submissions by the parties concerning the provisions of the factoring agreement.The respondent Deputy Commissioner of Taxation maintained that the applicants are under an obligation to pay to him or to the Crown in right of the Commonwealth, out of the moneys received by them on realisation of assets in enforcement of the debenture charge, an amount equal to the sum owing to the Crown for sales tax in priority to all other claims to those moneys, except claims by persons other than the debenture holder which are founded upon the provisions of sec. 196 and 292 of the Companies Act 1961. The obligation was rested, in the submissions of counsel for the Deputy Commissioner, on the common law prerogative right of the Crown to priority in respect of the payment of debts. Since those submissions were made the reasons for judgment of the members of the High Court in
Bank of New South Wales v. F.C. of T. & Ors. 79 ATC 4687 have, in my opinion, demonstrated that no such an obligation can be derived from the suggested source. I shall give effect to that conclusion by a direction that the moneys which have come or which shall come into the possession of the applicants in their capacity as receivers appointed under the debenture issued by Bismarck Australia Pty. Ltd. to Harry Rose on 7 December 1976 as proceeds of the realisation of assets charged by the said debenture be not applied in payment of the indebtedness of the company to the Crown in right of the Commonwealth for sales tax due and payable by the said company on or before 15 March 1978 and for additional tax thereon until after payment out of the said moneys of the indebtedness of the said company to the said Harry Rose which is secured by the said debenture.
It will be observed that no reference is made in that direction to payment of creditors whose claims may be given priority by sec. 196 or sec. 292 of the Companies Act or by Commonwealth legislation other than the Sales Tax Assessment Acts. I did not understand the parties to be in dispute about such statutory preferences, nor that the applicants sought directions concerning them.
A claim having been advanced in correspondence that the Crown in right of the Commonwealth should have priority in respect of sales tax over the costs charges and expenses of the receivers, a particular declaration on that subject was sought by the summons. Clause 19(e) of the debenture provides:
``The receiver shall be entitled to receive and deduct and obtain from moneys from time to time in his hands disbursements properly made and expenses properly incurred by him and also such remuneration for his services as may from time to time be fixed or approved by the mortgagee.''
The receivers' costs charges and expenses properly incurred in the discharge of their ordinary duties are payable out of the fund produced by the assets over which the debenture was given: see In
re Universal Distributing Co. Ltd. (In Liquidation) (1933) 48 C.L.R. 171; Kerr on Receivers, ch. 10. Sales tax is, in my opinion, not payable in priority to those claims on the fund and I shall give a direction accordingly.
I have stated that one of the receivers has been given a notice dated 22 March 1978 in pursuance of sec. 38(1) of the Sales Tax Assessment Act (No. 1) 1930. Money will
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not, in my opinion, become due by him to Bismarck Australia Pty. Ltd., nor be held by him for or on acount of that company, unless and until the indebtedness of the company to Mr. Rose which is secured by the debenture has been discharged. (Cf.Seabrook Estate Co. Ltd. v. Ford (1949) 2 All E.R. 94.) That is an unlikely event and need not now be considered.
When the summons has been amended in compliance with the order of O'Bryan J. I shall pronounce the following orders:
1. It is directed that the moneys which have come or which shall come into the possession of the applicants in their capacity as receivers appointed under the debenture issued by Bismarck Australia Pty. Ltd. to Harry Rose on 7 December 1976 as proceeds of the realisation of the assets charged by the said debenture be not applied in payment of the indebtedness of the said company to the Crown in right of the Commonwealth for sales tax due and payable by the said company on or before 15 March 1978 and for additional tax thereon until after payment out of the said moneys of their costs charges and expenses properly incurred by them and after payment out of the said moneys of the indebtedness of the said company to the said Harry Rose which is secured by the said debenture.
2. Adjourn the further hearing of the application to a date to be fixed.
(Discussion ensued.)
Certify for counsel.
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