Nette v Howarth
53 CLR 55(Judgment by: Dixon J)
Between: Nette
And: Howarth
Judges:
Rich J
Starke J
Dixon JEvatt J
McTiernan J
Subject References:
BANKRUPTCY
Superannuation fund
Contributions by bankrupt
Refund in lump sum
Capital receipt
Property divisible amongst creditors
Protection by State statute
Legislative References:
Superannuation Act 1916 (NSW) No 28 - ss 38, 88
Bankruptcy Act 1924 (Cth) No 37 - s 4; s 6; sub-s 60(1); sub-s 91(1); s 101
Judgment date: 30 April 1935
Melbourne (heard in Sydney)
Judgment by:
Dixon J
Section 5 (3) of the Bankruptcy Act 1924-1933 enacts that, except as otherwise expressly provided in that Act, its provisions relating among other matters to the remedies against the propertyof a debtor shall bind the Crown as representing the Commonwealth or any State.
Section 88 of the Superannuation Act 1916 of the State of New South Wales provides that benefits under that Act shall not pass by operation of law to any person other than the beneficiary. Benefits which would, apart from the section, pass under the provisions of the Bankruptcy Act to the Official Receiver of the estate of a bankrupt beneficiary will do so notwithstanding an enactment of a State law to the contrary.
Section 109 of the Constitution gives paramountcy to the Federal statute, and, according to the express provision contained in s. 5 (3), the Federal statute intends to bind the State in reference to such a matter.
The Superannuation Act 1922 of the Commonwealth contains in s. 80 a provision similar to s. 88 of the State enactment, but as it is legislation by the same Parliament any seeming repugnance between it and the Bankruptcy Act must be dealt with under the rule of construction, generalia specialibus non derogant, and, in the unlikely event of that rule being held inapplicable, under the rule of law, leges posteriores priores contrarias arrogant. This difference in the treatment of the same provision when it occurs in a State and a Federal enactment may be a necessary result of federalism, but it produces an anomaly. For it would appear that while benefits arising under the State Act are not, those arising under the Federal Act probably are, protected from the consequences of bankruptcy.
In the present case the bankrupt, who was in the public service of the State, resigned. His resignation took effect from a date shortly after sequestration. He had been a contributor to the State Provident Fund, and upon his resignation he became entitled, subject to this bankruptcy, to receive payment of a lump sum equal to the contributions paid by him under the Act (s. 38 of the Superannuation Act 1916 (N.S.W.)). The question is whether the Official Receiver can intervene and obtain this sum for the creditors.
Prima facie he can, because the bankrupt's right to receive the sum is property, and if it did not belong to him and was not vested in him at the commencement of the bankruptcy, it has been acquiredby him or has devolved on him before his discharge. (See Bankruptcy Act 1924-1933, s. 91 (i), s. 60 (1), and s. 4, definition of "Property.") But s. 101 provides that, subject to the Act, where a bankrupt is in receipt of pay, pension, salary, emoluments, profits, wages, earnings, or income, the trustee shall receive for distribution amongst the creditors so much thereof as the Court, on the application of the trustee, directs. By a proviso, the section is not to apply to any pay, pension, salary, or wages which by any Commonwealth Act or State Act is made exempt from attachment or incapable of being assigned or charged. The lump sum payable to a contributor on his retirement is by the State Act made incapable of being assigned or charged.
The learned Judge of the Federal Court of Bankruptcy has held that the lump sum payable to the bankrupt fell within the description of receipts contained in the main clause of the section and also within the description of the proviso, descriptions which this Court has held not to be co-extensive (Stuart-Robertson v Lloyd). [F14]
Treating s. 101 as a special provision excluding from the subject matter with which it deals the operation of the general provisions which otherwise might apply, his Honour held that the sum did not pass to the Official Receiver, a consequence produced by an intention discoverable in the proviso. This view depends initially upon the interpretation attached to the description of receipts contained in the main clause of s. 101. Upon consideration I am of opinion that the sum payable upon the bankrupt's resignation does not fall within any part of that description. The governing words of s. 101 are "is in receipt of." Whilst these words do not connote necessarily a regular periodicity, they do suggest recurrence as an actual or expected characteristic of the things the section proceeds to describe. They raise a presumption that they will be of a revenue nature. The lump sum payable to a contributor on his retirement is to be equal to his contributions, and those contributions were deducted from his salary. But the contributions ceased to be salary when they were made to the fund. The lump sum cannot be considered deferred salary or pay. It may be regarded as a refund perhaps, but, even so, the money refunded is received notas remuneration, but as a lump sum payable on a contingency. If it is a refund, at least it is a fund. In the receipts enumerated in s. 101 the words "pay," "salary" and "wages" refer to remuneration earned by present service. "Pension" refers predominantly to payments which follow service. The time has passed when the idiomatic use of the word extended to non-recurring payments. But it may perhaps include in this section a succession of payments which are not the consequence of past service or the like. "Emolument" too is a word which has ceased to bear its original meaning of mere gain, profit, or advantage. It too relates to revenue, whether casual or constant, arising from an office, station, or situation. "Profits," "earnings" and "income" are wide words.
They cover the fruits of labour and much more besides. For example, "income" in the analogous s. 51 (2) of the English Bankruptcy Act 1914 includes maintenance payable under an order in divorce (In re Landau; Ex parte Trustee). [F15] Decisions interpreting expressions reproduced in the Australian section which occur in s. 51 and corresponding previous British enactments will be found in that case (1) and in Hollinshead v Hazleton. [F16] But the English and Australian provisions alike appear to be directed at revenue receipts. Indeed, they are reminiscent of the rule long established in bankruptcy, that the personal earnings of a bankrupt do not pass to his trustee except to the extent that they are not required for the support of himself and his family.
The words of s. 101 refer to the character in which money is paid or received. The character in which an accumulated fund is received is not determined by the source of the accumulations. The sum now in question is not in truth even an accumulation of income, salary or the like. It is a sum payable pursuant to statute, which is ascertained by a calculation of the amount contributed in the past from income by deductions from salary. It comes into the hands of the retiring contributor simply as money. It is, as it appears to me, a capital receipt.
In my opinion the appeal should be allowed. A declaration should be made that the lump sum payable to the bankrupt under the Superannuation Act 1916 (N.S.W.) vests in the official receiver,and is payable to him by the State Superannuation Board. With that declaration the matter should be remitted to the Federal Court of Bankruptcy to be dealt with according to law. I would make the costs of the appeal costs in the cause, so that the Court of Bankruptcy can make such order as to how they shall be borne as appears to it to be just.