Re Mazuran; Ex parte Deputy Federal Commissioner of TaxationJudges:
Hearing of a bankruptcy petition
The petition is founded on an act of bankruptcy consisting in the debtor's failure to comply with the requirements of a bankruptcy notice. The bankruptcy notice was based upon a final order of the Magistrates Court at Melbourne, made on 28 November 1988, that the debtor pay the creditor $10,265.16 and $77.20 for costs. The sum in respect of which the bankruptcy notice stated the requirements ordained by the Bankruptcy Act 1966 was $10,484.17. There had been accretions, to the aggregate of the two sums ordered to be paid, of interest under the Penalty Interest Rates Act 1983 (Vic.), and reductions by payments made by the debtor. When on 11 December 1989 the debtor committed the act of bankruptcy, which followed service of the bankruptcy notice, execution of the Magistrates Court order had not been stayed. Nor had execution been stayed when the petition was presented on 16 March 1990. But on 12 June 1990 an order was made by the ``proper officer'' of the Magistrates Court at Melbourne which had effect, according to the submission of Mr Irlicht, who appeared for the debtor, as a stay of enforcement or execution of the original order of that Court. The order of 12 June 1990 was that the amount of money then payable under and in respect of the original order, specified in the later order as $12,923.73, be paid by 58 monthly instalments, the first on 1 July 1990 and the last on 1 April 1995, the last instalment of $98.73 and each of the other 57 instalments of $225. (It seems likely that the computation of the amount specified as then payable included amounts in respect of interest, and that the proper officer of the Court lacked reliable information about payments in reduction of the debt.) The order of 12 June 1990 was made in pursuance of provisions of the Judgment Debt Recovery Act 1984 (Vic.). It was Mr Irlicht's further submission that, as the evidence established that the debtor was able to pay the instalments ordered to be paid by the proper officer of the Magistrates Court and her other debts, the conclusion followed that this Court should be satisfied that she is able to pay her debts, within the meaning of sec. 52(2)(a) of the Bankruptcy Act 1966. Alternatively, it was submitted, the order of the proper officer of the Magistrates Court for payment by instalments was a circumstance which, together with other circumstances proved, led to the conclusion prescribed by sec. 52(2)(b): ``that for other sufficient cause a sequestration ought not to be made''. Mr Fajgenbaum Q.C., who appeared with Mr T. North for the petitioning creditor, submitted that the Judgment Debt Recovery Act 1984 did not empower the Magistrates Court or any officer thereof to make in relation to this order for the payment of money to the Deputy Commissioner of Taxation any instalment order of a kind for which that Act makes provision because each of the debts upon which the original order was based, as well as the judgment debt constituted by that original order, was a debt due to the Crown in right of the Commonwealth and a debt arising under Div. 1 of Pt VI of the Income Tax Assessment Act 1936.
The Judgment Debt Recovery Act 1984 applies to a judgment or order for the recovery or payment of money made or given by the Supreme Court or the County Court or a Magistrates Court in a civil suit action or proceeding. Each of those Courts is authorised, in giving judgment, to order, either of its own motion or on the application of a party, that the ``judgment debt'' (which is defined to mean ``the amount of money recoverable or payable under and in respect of the judgment'': sec. 3) be paid by instalments: sec. 5. After judgment a judgment creditor or a judgment debtor may at any time apply, to the ``proper officer of the court'' by which the judgment was given, for an instalment order, either in substitution for an order made under sec. 5 or as an initial order: sec. 6(1). The proper officer is authorised either to make an order that the balance of the judgment debt then owing be paid by the instalments and at the times proposed in the application, or to refuse to make such an order: sec. 6(2), (3). He is required to notify the judgment creditor and the judgment debtor of the order or the refusal: sec. 6(4). Either of them may file with the proper officer notice of objection, in which case the proper officer is required to ``set the matter down for hearing by the court'' (sec. 6(5)), and the court is on that hearing empowered to make such instalment order as it thinks fit or to refuse to make such an order: sec. 6(7). Provision is made for variation or cancellation of an instalment order
ATC 4816by the court upon application by either party on specified grounds: sec. 8.
Section 9 provides:
``While an instalment order is in force and is being complied with, the instalment order shall operate as a stay of enforcement or execution of the judgment in respect of which the instalment order was made.''
Section 6(8) makes provision for a stay of enforcement or execution of a judgment from the time of service of a copy of an application under sec. 6(1) ``until the proper officer of the court or the court (as the case requires) deals with the matter''. No express provision elucidates the position concerning stay of enforcement or execution from the time the parties have been given notice of the proper officer's refusal to make an order until the time when the court ``deals with the matter'' upon notice of objection against that refusal. Section 13 provides:
``(1) Subject to sub-section (2), an instalment order shall not be made, confirmed, varied or cancelled by a court unless the court after the application for the making or variation or cancellation of the instalment order is made -
- (a) has orally examined the judgment debtor; or
- (b) is otherwise satisfied that in the circumstances an instalment order should be made, confirmed, varied or cancelled.
(2) This Part does not apply to or in relation to the making of an instalment order under section 6(3) or 7.''
(Section 7 makes provision for an instalment order to be made in terms of a written agreement filed in the court by which the order is made.) Sections 13, 16 and 15(2) and (3) prescribe procedures for securing the attendance of a judgment debtor for his oral examination, and procedures to be observed in the conduct of such an examination. Section 15(1) provides:
``The court shall examine a judgment debtor as to the following matters:
- (a) The amount and source of the income of the judgment debtor;
- (b) The property and assets of the judgment debtor;
- (c) The cash that is readily available to the judgment debtor or can be made so available;
- (d) The debts liabilities and other financial obligations of the judgment debtor; and
- (e) Any prescribed matter -
and may examine a judgment debtor as to any other matter related to the financial circumstances generally of the judgment debtor and the judgment debtor's means and ability to satisfy the judgment debt.''
Part IV of the Act makes provision for the enforcement of instalment orders. One power conferred on the court in the event of default in compliance with such an order is to ``cancel'' the order: sec. 18(2). When an instalment order was cancelled in exercise of that power it would no doubt be the case that the order would cease to be ``in force'', within the meaning of that expression in sec. 9, and no impediment to ``enforcement or execution of the judgment in respect of which the instalment order was made'' would then exist.
The order of 12 June 1990 for payment of the judgment debt owed by the debtor to the petitioning creditor by instalments was not made under sec. 5 of the Judgment Debt Recovery Act 1984, which authorises the making of an instalment order by a ``court, in giving judgment''. The order of 12 June 1990 was made under sec. 6(3) upon an application by the debtor. Section 6(1), (2) and (3) provide:
``(1) A judgment creditor or judgment debtor may at any time after judgment is given apply to the proper officer of the court -
- (a) where an instalment order has not been made under section 5, for an order that the judgment debt or the balance of the judgment debt then owing to the judgment creditor be paid by instalments; or
- (b) where an instalment order has been made under section 5, for another instalment order in substitution for the order under section 5.
(2) An application under sub-section (1) shall -
- (a) be in or to the effect of the prescribed form;
- (b) specify the amount of the judgment debt then owing to the judgment creditor; and
- (c) specify the amount of each instalment proposed to be paid and the times at which instalments are proposed to be paid.
(3) Subject to and in accordance with the rules, the proper officer of the court may without notice to the judgment creditor or judgment debtor and whether or not the judgment creditor or judgment debtor is before the proper officer -
- (a) order that the judgment debt or the balance of the judgment debt then owing to the judgment creditor be paid by the instalments and at the times specified in the application; or
- (b) refuse to make such an order.''
The expression ``proper officer of the court'' is defined in sec. 3 to mean -
``(a) in relation to the Supreme Court, such officer or officers of the Supreme Court as is or are prescribed in relation to the provisions of this Act in question of the Supreme Court;
(b) in relation to the County Court, the registrar or a deputy registrar of the County Court; and
(c) in relation to the Magistrates' Court, the principal registrar, a registrar or a deputy registrar of the Magistrates' Court.''
If the order of 12 June 1990, made in exercise of the power conferred by sec. 6(3)(a), be conceived as a purported exercise of federal jurisdiction invested by sec. 39 of the Judiciary Act 1903, it seems likely that it was not exercised by a person of a description specified in sec. 39(2)(d). This point was not mentioned during the hearing of the petition and for that reason I do not deal with it.
The debts of which recovery was ordered, on 28 November 1988, by the Magistrates Court were for income tax assessed in respect of each of the years of income ended 30 June 1982, 1983, 1984, 1985 and 1986 and for several amounts of additional tax payable under sec. 207 of the Income Tax Assessment Act 1936. Although sued for and recovered by a Deputy Commissioner of Taxation suing in his official name under authority conferred by sec. 209, each of those debts was a debt due to the Commonwealth: sec. 208. The expression ``judgment creditor'' in the Judgment Debt Recovery Act 1984 is defined by sec. 3 to mean ``the person entitled to enforce or obtain execution of a judgment''. The word ``judgment'' is defined to mean ``a judgment or order for the recovery of money made or given by a court in an action'', which last word is defined to mean ``a civil suit action or proceeding''. If it be assumed that it is the Deputy Commissioner who in relation to the order of 28 November 1988 satisfied the description expressed in the definition of ``judgment creditor'', the question arises whether on its proper construction the Judgment Debt Recovery Act 1984 purports to apply to a ``judgment'', in the defined sense, in relation to which the Commonwealth is the person to which the judgment debt is owed and the ``judgment creditor'', in the defined sense of that expression, has brought the action and has obtained the judgment on the Commonwealth's behalf.
I find no sufficient indication, in the circumstances to which the Judgment Debt Recovery Act 1984 relates, in the purpose or content of the Act, or in ``the identity of the entity in respect of which the applicability of the provision arises'', namely the Commonwealth, to displace the presumption against an intention, on the part of the Victorian legislature in enacting the Judgment Debt Recovery Act 1984, to bind the Crown in right of the Commonwealth. (Cf.
Bropho v. Western Australia (1990) 64 A.L.J.R. 374.) If that be the proper construction of the Act - that it does not purport to apply to the Crown in right of the Commonwealth as a judgment creditor - it would in my opinion follow that the Act does not purport to apply to a person answering the description of judgment creditor who had brought the action on behalf of the Commonwealth in pursuance of authority conferred on him by the Commonwealth.
If I am wrong about those questions of construction, the question arises whether the Act is valid in its application to the Commonwealth. It is to be observed that the definition of ``judgment'' in the Act comprehends not only curial orders for the
ATC 4818recovery of debts, but also orders for the recovery of unliquidated damages. But any curial order which answered the description expressed by the definition would itself be an order creating a debt: a judgment debt. However, this judgment is for the recovery of taxes, and it is sufficient for present purposes to deal with the validity of the Judgment Debt Recovery Act 1984 in its application to such a judgment.
By sec. 9 of the Act an instalment order is to operate as a stay of enforcement or execution of the judgment while the instalment order is in force and is being complied with. The considerations by reference to which the exercise of each of the powers conferred by sec. 5, 6(7) and 10 on a court, as distinct from a proper officer, to make an instalment order are clearly, if somewhat obliquely, indicated in sec. 13 and 15(1). (The content of the form prescribed under sec. 6(2)(a) gives a strong indication that a proper officer is to govern his exercise of the power conferred on him by sec. 6(3) by reference to similar considerations. Section 6(3) could have no valid operation in a field from which sec. 6(7) had been excluded.) The court is by those provisions authorised, if not required, to make a discretionary ordering, pro tanto, of the priority in accordance with which the several ``debts liabilities and other financial obligations of the judgment debtor'' shall be discharged. In a case in which the judgment in relation to which the instalment order is to be made is one for the recovery of Commonwealth income tax, as the order of 28 November 1988 in this case was, the court would be authorised, if not required, by the Act to determine what priority should, according to that discretionary judgment of the court, be accorded to the judgment debt in competition with the other debts liabilities and financial obligations of the judgment debtor, including those debts of equal degree which were owed, and those liabilities and obligations which had been incurred, to subjects. Thereby the Act would purport in my opinion to affect the prerogative right of the Commonwealth to priority over the claims of subjects in respect of debts of equal degree. " It is an adjunct of the `Executive power of the Commonwealth' that is vested by s. 61 of the Constitution in the Sovereign. The prerogative of the Crown representing the Commonwealth, being as extensive as in Great Britain, is part of the constitutional law of the Commonwealth: cf.
Liquidators of the Maritime Bank of Canada v. Receiver-General of New Brunswick (1892) A.C. 437 at p. 441. The rule that when the title of the Crown and the title of a subject concur, that of the Crown is to be preferred, is a general rule of the common law of the Constitution. `It is founded not so much upon any personal advantage to the sovereign as upon motives of public policy, in order to secure an adequate revenue to sustain the public burdens and discharge the public debts' (per Story J.,
United States v. State Bank of North Carolina (1832) 31 U.S. 29 at p. 35; [8 Law. Ed. 308 at p. 310]. `From Lord Coke's time to the present day it has never been questioned as a rule of law' (Per Lord
Macnaghten, Commissioner of Taxation for New South Wales v. Palmer (1907) A.C. 179 at p. 182). `It only means that the interests of the individuals are to be postponed to the interests of the community ((1907) A.C. 179 at p. 182).
Such a prerogative right of the Crown is exercisable by the Executive Government of the Commonwealth. It may be relinquished or modified by and with the consent of the Parliament of the Commonwealth. But from its very nature it must be outside the power of a State to detract from it.
Here the Commonwealth Parliament has, I think, confirmed the prerogative right to preferential payment. For can it seriously be doubted that a purpose of the express provisions that the taxes should be deemed debts due to the King in right of the Commonwealth (though at the same time made recoverable at the suit of the Commissioner) was to ensure that unpaid taxes owing should stand in the superior position which the law gives to claims by the Crown and should rank accordingly ": per Dixon J. in
Re Foreman & Sons Pty. Ltd.; Uther v. F.C. of T. (1947) 74 C.L.R. 508 at p. 531. (See
Commonwealth v. Cigamatic Pty. Ltd. (in liq.) (1962) 108 C.L.R. 372; McNairn: Governmental and Intergovernmental Immunity in Australia and Canada, ch. 5.) If, contrary to my opinion, the Act on its proper construction applied in relation to a judgment for the recovery of income tax due to the Commonwealth, it would in my opinion be to that extent invalid as beyond the legislative competence of the State of Victoria.
The judgment debtor in this case not being ``a body (whether corporate or unincorporate)'', within the meaning of that expression in the Crown Debts (Priority) Act 1981, that Act may be disregarded.
It was submitted by Mr Fajgenbaum that sec. 64 of the Judiciary Act 1903 did not operate to make applicable in relation to the proceeding in the Magistrates Court which resulted in the order of 12 June 1990 the provisions of the Judgment Debt Recovery Act 1984. To that submission I now turn.
It may be a question whether sec. 64 of the Judiciary Act has relation to the subject with which the Judgment Debt Recovery Act 1984 deals. Section 64 is expressed by its introductory phrase - ``In any suit to which the Commonwealth or a State is a party'' - to give directions with respect to a suit. The word ``suit'' in the Judiciary Act 1903 is by sec. 2 declared to include any action or original proceeding between parties. It might be said that the suit concludes upon final judgment: see
Bank of Australasia v. O'Donnell (1904) 40 S.R. (N.S.W.) 169. Although the power to make an instalment order which is conferred by sec. 5 of the State Act, exercisable as it is ``in giving judgment'', may be said to be a power exercisable in the suit, the same cannot as confidently be said of the other provisions for the making of instalment orders. If sec. 64 on its proper construction did not comprehend ``the rights of parties'' conferred by those other provisions, it would be to sec. 67 that attention would turn. Section 67 itself refers to process of execution as ``process as could be had in a suit between subject and subject'', thus casting doubt on the supposition that a ``suit'' ends with judgment in the terminology of the Judiciary Act 1903. Section 67 is a provision declared by Barwick C.J. in
Maguire v. Simpson (1976-1977) 139 C.L.R. 362 at p. 369 to relate only to procedure. It may be that sec. 9 of the Judgment Debt Recovery Act 1984 is properly to be characterised as a procedural restriction of processes of execution, and that from that premise the conclusion may be drawn that the provisions of that Act which authorise instalment orders are also to be characterised thus, with the result that all those provisions are made applicable to judgments in favour of the Commonwealth by sec. 67. If so, a question might arise as to whether sec, 67 would have that operation in relation to a judgment in the name of the petitioning creditor. It is established that in sec. 64 ``the Commonwealth'' comprehends the Commissioner - and, no doubt, Deputy Commissioners - of Taxation:
Naismith v. McGovern (1953) 90 C.L.R. 336; Maguire v. Simpson (supra). But in the latter case Mason J. expressed (at p. 399) some doubt whether the expression (bore so broad a meaning in sec. 61, 65 and 67). In relation to a proceeding such as this was, for recovery of debts declared by sec. 208 of the Income Tax Assessment Act 1936 to be debts due to the Commonwealth, I do not doubt that sec. 67 would apply.
Whether it be sec. 64 or 67 that is proposed as making the State Act applicable, I am of the opinion that the provisions of the Income Tax Assessment Act 1936 leave no room for such an application of either section. In
D.F.C. of T. v. Moorebank Pty. Ltd. 88 ATC 4443; (1987-1988) 165 C.L.R. 55 the High Court came to the same conclusion in respect of a State statutory provision prescribing a limitation period and sec. 64, in a case in which income tax and additional tax was sought to be recovered in an action in the Supreme Court of that State. I am guided to the conclusion I have stated by the reasoning of the High Court in that case, the following passages from which I set out (at ATC pp. 4445-4447; C.L.R. pp. 62-65):
``Plainly enough, the proceedings by the Deputy Commissioner in the present case are, for the purposes of the section, a `suit to which the Commonwealth... is a party' (cf. Naismith v. McGovern (1953) 90 C.L.R. 336). That being so, the provision of the section is prima facie applicable to prescribe that `the rights of [the] parties shall as nearly as possible be the same' as in a suit between subjects. The question which arises is whether the effect of that provision is to apply to the present proceedings the limitation periods which would be applicable if the Deputy Commissioner's action for unpaid tax and additional tax were, if that were possible, brought in the Supreme Court of Queensland by a subject. The conclusion which we have reached is that that question must be answered in the negative for the reason that the provisions of the Assessment Act themselves preclude any operation of sec. 64 which would have
ATC 4820that effect. We turn to explain our reasons for that conclusion.
Although, in some respects, sec. 64 plays a pivotal role in the federal legal system, it is important to remember that the section enjoys no special authority among the statutes of the Commonwealth. It is neither a constitutional provision nor an entrenched law. Its authority is that of an Act of the Parliament which can be expressly or impliedly amended or repealed, either wholly or in part, by a subsequent Act and whose application or operation to or with respect to cases falling within the provisions of a subsequent Act will be excluded to the extent that such application or operation would be inconsistent with those subsequent statutory provisions (see, e.g.
Goodwin v. Phillips (1908) 7 C.L.R. 1 at p. 7). More important for present purposes, the operation of sec. 64 in a particular case must be ascertained in the context of the general nature and function of that section.
Dao v. Australian Postal Commission (1987) 162 C.L.R. 317, which was delivered after the judgment of the Full Court of the Supreme Court in the present case and the judgment of the New South Wales Court of Appeal in
D.T.R. Securities Pty. Ltd. v. D.F.C. of T. 87 ATC 4156; (1987) 8 N.S.W.L.R. 204, this Court was at pains to stress that the provisions of sec. 64 of the Judiciary Act cannot properly be construed as intended indirectly to apply the provisions of a State law to circumstances where the direct application of the State law would be invalidated by operation of sec. 109 of the Constitution by reason of inconsistency with applicable provisions of a law of the Commonwealth. As the Court pointed out (at p. 331):
- `To attribute to s. 64 [that] effect... would be to construe the words of that section as disclosing a general legislative intent to finesse or sidestep that prior question of constitutional invalidity by reason of inconsistency and effectively to override, for the purposes of `any suit to which the Commonwealth... is a party', a constitutional provision [i.e. sec. 109] of great importance. We are unable to discern any such legislative intent in either the general or qualified (`as nearly as possible') words of s. 64.'
The Court went on to explain (at pp. 331-332) the general nature and function of sec. 64 in words which bear repetition:
- `That section was intended to fill what would otherwise be lacunae or gaps in the law of the Commonwealth. It is not to be understood as intended to have the practical effect of overriding s. 109 of the Constitution by indirectly applying a provision of a law of a State to circumstances to which its direct application is invalidated by reason of inconsistency with a provision of an existing law of the Commonwealth. A fortiori, s. 64 should not be construed as intended to manufacture a new kind of indirect inconsistency between a provision of a State law and a provision of a law of the Commonwealth by applying a provision of a State law to a situation to which it does not purport to apply in circumstances where, if rendered directly applicable, it would be relevantly inconsistent with the direct operation of the provision of the law of the Commonwealth. Rather, the section should and must be construed as intended to extend a litigant's rights in a suit in particular circumstances only if, and to the extent that, there be no directly applicable and inconsistent (in the relevant sense) Commonwealth law already regulating those circumstances.'
In particular, where a Commonwealth legislative scheme is complete upon its face, sec. 64 will not operate to insert into it some provision of State law for whose operation the Commonwealth provisions can, when properly understood, be seen to have left no room. Accordingly, the question arises whether the relevant provisions of the Assessment Act have effectively covered the field and left no room for the direct or indirect intrusion of provisions of State Limitation Acts to limit the time in which an action can be brought on behalf of the Commissioner of Taxation for unpaid income tax or additional tax. It can be said at once that the provisions of the Assessment Act dealing with liability for and recovery of additional tax are so
ATC 4821dependent upon and interwoven with the provisions dealing with liability for and recovery of income tax that it is plain that there will be no room for the application of State limitation provisions to limit recovery of additional tax if there is no room for the application of such provisions in relation to the recovery of income tax.
The Assessment Act was enacted by the Parliament in reliance upon its legislative power with respect to taxation (Constitution, sec. 51(ii)). That legislative power is confined by the express requirement of sec. 51(ii) that it be not exercised `so as... to discriminate between States or parts of States'. In that context, it is not surprising that the general scheme of the Act is to define the obligations and liabilities of taxpayers in respect of income tax and additional tax in comprehensive terms which apply generally throughout the Commonwealth and which, subject to presently irrelevant exceptions (see, e.g. sec. 221C(1AA)), apply to all taxpayers regardless of the State in which they live or in which income is derived or proceedings for recovery are brought. It would be surprising if, within that general scheme, there was room left for the application of whatever the laws of a particular State might provide in relation to barring an action to recover unpaid income tax or additional tax or, in the case of some States, in relation to extinguishing the underlying right and title of the prospective plaintiff in an action for recovery of such taxes (cf., e.g. Limitation Act 1969 (N.S.W.), sec. 63(1)). In that regard, it is relevant to note that it has long been recognised that to speak of even traditional limitation provisions as merely `procedural' or as `barring the remedy and not the right' is misleading in that such provisions will, at least in some circumstances, entail consequences which are substantive in that, by barring the remedy, they will effectively extinguish both rights and liabilities (see, e.g. In
re Hepburn; Ex parte Smith (1884) 14 Q.B.D. 394 at pp. 399-400). It is unnecessary to determine whether the express requirement of sec. 51(ii) precluding discrimination between States would be infringed if the Assessment Act left room for sec. 64 of the Judiciary Act to apply different State limitation of actions laws to bar an action by the Commonwealth for recovery of unpaid income tax and additional tax according to the identity of the particular State in which proceedings happened to be brought, with the consequence that the citizen of one State might be effectively immune from action for unpaid income or additional tax after a short period while a citizen of another State might enjoy no such immunity. The reason why it is unnecessary to determine that question is that examination of the relevant provisions of the Assessment Act in the form which they bore at relevant times discloses that they left no room for such an application of sec. 64.
The essential provisions of the Assessment Act for present purposes are to be found in Div. 1 of Pt VI. Under those provisions, income tax is made `a debt due to' the Commonwealth (sec. 208). `Any tax unpaid may be sued for and recovered in any Court of competent jurisdiction' (sec. 209). Income tax assessed `shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable' (sec. 204). The Commissioner may, however, `in any case' grant such extension of time for payment of tax, or permit payment of tax to be made by such instalments and within such time `as he considers the circumstances warrant; and in such case the tax shall be due and payable accordingly' (sec. 206). If any due and payable tax remains unpaid, additional tax becomes payable, by the person liable to pay the tax, at the specified annual percentage rate (formerly 10 per cent but now 20 per cent) computed from the time when the unpaid tax became due and payable or, where an extension of time has been granted, `from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable' (sec. 207).''
No provision is made in the Income Tax Assessment Act 1936 (``the Assessment Act'') that the word ``tax'' in sec. 206 should include a judgment debt in respect of tax. Such a provision is made in respect of that word in sec. 218, by which the Commissioner is enabled to require a debtor of a taxpayer to pay to the Commissioner so much of the money due by the debtor to the taxpayer as is sufficient to pay
ATC 4822the amount due by the taxpayer in respect of income tax. Nor is that provision made in relation to sec. 206 which is made by sec. 207(1B) in relation to sec. 207(1), that for the purposes of the section the tax shall not be taken, where a judgment is given by, or entered in a court for the payment of that tax, to have ceased to be due and payable by reason only of the giving or the entering of judgment. Those circumstances may suggest what the terms of sec. 206 may also be thought to suggest, that the power conferred by sec. 206 in respect of any particular amount of income tax is not exercisable after legal proceedings for the recovery of that amount of tax have been instituted. If in respect of a particular sum due and payable a legal proceeding for recovery were instituted and thereafter before judgment the power conferred by sec. 206 were exercised to extend the time for payment to a date later than the date of institution of the proceeding, the basis of the legal proceeding, a debt due and payable at the time when the proceeding was instituted, would be displaced by the operation of the final clause of sec. 206: ``and in such case the tax shall be due and payable accordingly''. Upon a consideration of Div. 1 of Pt VI of the Assessment Act as a whole, however, I would interpret sec. 206 as conferring a broad power exercisable from time to time after an amount of ``tax'' has first become due and until the liability to pay the tax has been discharged, and I would regard the power as not affected by the institution of a legal proceeding for recovery of the tax or by the recovery of a judgment for the tax, except in respect of the period between those two events. If that be the proper interpretation of sec. 206, the legislative scheme, of which sec. 204, 208, 209, 201 and 206 are cardinal provisions, for the imposition of liability to pay income tax and for discretionary variation of the times within which, and the instalment payments by which, that liability may be discharged leaves no room, in my opinion, for the operation, by force of any provision of the Judiciary Act 1903, of any of the provisions of the Judgment Debt Recovery Act 1984. And in my opinion no provision of the Judiciary Act 1903 does operate to make that Act applicable to a ``judgment or order for the recovery or payment of'' income tax.
The decision of O'Bryan J. in
D.F.C. of T. v. Zarzycki 90 ATC 4707 was based on his Honour's conclusion that the Judgment Debt Recovery Act 1984 was not made applicable to a judgment of the Supreme Court of Victoria for the recovery of income tax by sec. 64 of the Judiciary Act 1903, and I respectfully follow that decision. In this Court an adjournment of the hearing of a bankruptcy petition has been granted on the assumption that sec. 6(8) had operated to stay enforcement or execution of a judgment for recovery of income tax, but in that case neither party questioned the correctness of the assumption. And, so far as I am aware, there is no decision of a Judge of this Court on any of the questions raised by counsel for the petitioning creditor in this case about the operation of the Judgment Debt Recovery Act 1984.
For the foregoing reasons I conclude that no valid law authorised an order of the kind which the registrar of the Magistrates Court purported to make under the Judgment Debt Recovery Act 1984 on 12 June 1990. I am therefore to consider the petition on the footing that no such an order exists. But Mr Irlicht relied on other circumstances which in his submission constituted ``sufficient cause'', within the meaning of that expression in sec. 52(2)(b) of the Bankruptcy Act 1966, by reason of which it should be concluded that a sequestration order ought not to be made. The debtor's indebtedness accumulated in respect of income tax assessments during years when she was working much overtime, instalment deductions in respect of which were not made, in order to help support her six children. Having separated from her husband in 1989, she hoped to receive by way of a property settlement the means of satisfying her income tax liabilities. Her hopes were disappointed and she became insolvent, failing in her attempts to borrow enough to pay the amount owing for income tax. In the last year her financial position has improved. Her gross earnings as a nurse exceed $600 per week. None of her children remains dependent on her and the two children who live with her contribute $50 per week to household expenses. She is 53 years old and in good health. She is able and willing to make substantial weekly payments in reduction of the judgment debt. Less than half her gross income is committed to payment in reduction of the loan debt secured by mortgage of her home, which she owns. Mr Fajgenbaum expressly eschewed any submission but those relating to the Judgment
ATC 4823Debt Recovery Act 1984 and the submission that the proofs required by sec. 52 of the Bankruptcy Act 1966 had been made, as I find they have. In all the circumstances I conclude that for sufficient cause, other than ability to pay her debts, a sequestration order ought not to be made against the estate of the debtor. The debtor will be ordered to pay the petitioning creditor's costs of the petition, including costs reserved, but the petition will be dismissed.
I should record that I was satisfied as to compliance with the requirements of sec. 78B(1) of the Judiciary Act 1903 in relation to this cause.
THE COURT ORDERS THAT:
1. The petition be dismissed.
2. The petitioning creditor's costs of the petition (including costs reserved) be taxed and paid by the debtor.