Chase AMP Bank Ltd v Commissioner of Taxation
[1991] FCA 575
•20 SEPTEMBER 1991
Re: CHASE AMP BANK LIMITED
And: COMMISSIONER OF TAXATION
No. G480 of 1990
FED No. 575
Debits Tax
22 ATR 528/91 ATC 4805
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Gummow J.(1)
CATCHWORDS
Debits Tax - whether account held by building society with bank pursuant to a facility agreement whereby the bank agreed to honour cheques drawn on it by members of the society, was an "account" within the meaning of s. 3 (1) of the Debits Tax Administration Act 1982 ("the Act") - whether cheques drawn by members upon that account were "cheques" within the meaning of s. 3 (1) of the Act.
Debits Tax Administration Act 1982
HEARING
SYDNEY
#DATE 20:9:1991
Counsel and solicitors Mr D.F. Jackson QC and Mr B. Sullivan, instructed for the Applicant: by Messrs Chambers, McNab, Tully and Wilson
Counsel and solicitors Mr R.B. Macfarlan QC and Mr S. Gibb, instructed
for the Respondent: by the Australian Government Solicitor.
ORDER
That there be set aside the respondent's decision of 15 May 1990 disallowing the objection by the applicant (dated 24 October 1988) to the assessment by the respondent (dated 1 September 1988).
That there be substituted a decision allowing that objection.
That the said assessment be amended accordingly.
That the respondent pay the costs of the applicant.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.
JUDGE1
Addresses in this matter were heard with those in Commonwealth Bank of Australia v Commissioner of Taxation and the same counsel appeared in both cases. These reasons should be read with the reasons delivered in the other matter.
On 15 May 1990, the respondent ("the Commissioner") disallowed the objection lodged on 24 October 1988 by the applicant ("Chase AMP") to an assessment dated 1 September 1988. The assessment was to debits tax in the sum of $584,426.55 for the period between 1 August 1987 and 30 June 1988 ("the relevant period").
Pursuant to s. 23 of the Debits Tax Administration Act 1982 ("the Administration Act"), Chase AMP requested the Commissioner to refer to this Court his decision on the objection. This was done on 21 August 1990. That referral constituted the institution by Chase AMP of an appeal against the Commissioner's decision: Administration Act, sub-s. 25B (3). During the relevant period, Chase AMP was a "bank" within the meaning of the definition in sub-s. 3 (1) of the Administration Act, and Metropolitan Permanent Building Society ("the Society") was a "non-bank financial institution" within the meaning of the definition in the same sub-section.
On 31 July 1987, Chase AMP and the Society entered into a written agreement styled "Member Cheque Facility Agreement" ("the Facility Agreement"). The nature of the operations of the Society is described in the judgment in Commonwealth Bank of Australia v Commissioner of Taxation. The arrangements made by the Society with Chase AMP succeeded those with Commonwealth Bank of Australia, Chase AMP having offered the Society a better rate of charges for provision by it of a facility whereby members of the Society could draw cheques on an account of the Society with Chase AMP.
It is recited in the Facility Agreement that the Society wishes to make available to members a facility for the drawing of cheques which are to be met from funds standing to the credit of the accounts of members with the Society, and that Chase AMP (defined as "the Bank") has agreed to provide a "Member Cheque Facility" on the terms and conditions set out in the Facility Agreement. The term "Member Cheque Facility" is defined in clause 1.2 as meaning:
"the facility provided by the Bank to the Members of the Society to permit them to draw cheques on the Society's Settlement Account with the Bank, to be met from funds standing to the credit of the
relevant Members' Society Accounts."
A "Member Cheque" is a cheque in a form agreed between the Bank and the Society which is drawn by a member on the Settlement Account. The objective of the Bank and the Society in entering into the Facility Agreement is stated in clause 1.1 as being "to permit the Members of the Society to draw cheques on the Bank, to be met from funds standing to the credit of the Members' accounts with the Society".
Clause 3 obliges the Society to establish four accounts with the Bank including a Settlement Account. The Society authorises the Bank to debit the amount of all Member Cheques to the Settlement Account (clause 3.4). Clause 6.3 (a) obliges the Society to maintain on deposit in the Society's Settlement Account an amount at least equal to the greater of $100,000 or the expected daily value of member cheques to be presented. A deposit of $100,000 was made on 24 August 1987.
Either the Bank or the Society might "cancel" the Facility Agreement by not less than 6 months' notice in writing to the other (clause 14.1). The Society is obliged to give to members at least 3 months' notice, prior to the effective date of cancellation of the facility (clause 14.3). Provision also is made in clause 15 for the Facility Agreement to be "cancelled" by the Bank in various events including failure by the Society to meet its settlement obligations as set out in clause 3. These include (clause 3.6) the obligation to maintain the deposit referred to in clause 6.3 (a).
Clause 2 lays down the procedures to be followed by any member of the Society wishing to use the facility. Clause 2.5 provides, as between the Society and the Bank, that when accepted by the Society, the application to it by the member will constitute an agreement between the member, the Society and Bank. This agreement will authorise the member to draw cheques on the Society's Settlement Account, authorise the Bank to debit that account with the amount of those cheques, authorise the Society to transfer funds from the account of the member with the Society to the Settlement Account so as to meet cheques drawn by the member, require the member to direct any enquiries concerning the facility to the Society, not the Bank, oblige the member to direct to the Society, not the Bank, any countermand instructions relating to cheques, acknowledge the right of the Bank to dishonour any cheque on receiving instruction to do so from the Society, and release the Bank from any duties or obligations otherwise imposed on it by law in relation to the facility to the extent that those duties or obligations were inconsistent with the terms of the Facility Agreement.
Members of the Society wishing to use the facility were required by the Society to sign a form headed "Cheque Facility Request", which was addressed to the Society and reflected the terms of clause 2 of the Facility Agreement. The forms of cheque used by the members of the Society were prepared by the Society and approved by Chase. Cheques drawn by members were not signed or countersigned by the Society. No cheque forms to operate the Settlement Account were issued by Chase AMP to the Society.
As I have indicated, clause 3.1 obliged the Society to establish with the Bank the Settlement Account and three other accounts, all at a nominated branch of Chase AMP. This was done on 31 July 1987, the branch being that of Chase AMP at 12 Creek Street, Brisbane. One of the other accounts was styled the "Replenishment Account". Clause 6.3 (b) of the Facility Agreement provided that in addition to maintaining in the Settlement Account the deposit referred to in clause 6.3 (a), the Society would lodge with the Bank certain bank bills and maintain a cash deposit in the Replenishment Account. The Bank was entitled by clause 3.7, if it determined "in its sole discretion" that "a debit position in the Society's Settlement Account is excessive", inter alia to realise these deposits and securities. The third and fourth accounts were entitled the "Miscellaneous Adjustment Account" and the "Fees and Charges Account" to which there were debited various fees and charges.
Clause 3.2 of the Facility Agreement provided:
"The Society will furnish to the Bank a certified copy of a
resolution of the Board of Directors of the Society approving the opening of the Society's Settlement Account, Miscellaneous
Adjustment Account, Replenishment Account and Fees and Charges
Account authorising the completion of requisite application forms and appointing authorised signatories to the accounts in a form
acceptable to the Bank."
By resolution of its directors on 30 June 1987, the Society had resolved to open with Chase AMP the four accounts to be referred to in clause 3.2 of the Facility Agreement, and authorised certain officers of the Society to open those accounts and "to nominate persons to operate on those accounts". The form of authority in respect of the Settlement Account was completed by the Society on 22 July 1987. It followed the standard printed form used by Chase AMP for the opening of a corporate bank account. The form stated that the Society authorised any two of the persons listed in a Schedule (these being officers of the Society) to "draw cheques on the Account". From this it might appear, at first blush, that although the objective of the Facility Agreement, as stated in clause 1.1, was that members be permitted to draw cheques on the Bank, the Society itself was also to have that right. However, whilst operations on three of the four accounts would certainly, and plainly consistently with the terms of the Facility Agreement, be conducted by the Society, the Settlement Account was in a special position. This is because it was the vehicle for the attainment of the objective specified in clause 1.1. of the Facility Agreement, namely the permitting of members of the Society to draw cheques on Chase AMP.
Counsel for Chase AMP emphasised that clause 3.2 of the Facility Agreement required the Society to furnish to the Bank a certified copy of a resolution of the board of the Society, inter alia authorising the completion of the requisite application forms. What was done went beyond what was specified in clause 3.2, and was inconsistent with what counsel submitted was the basis of the Facility Agreement, that cheques to be drawn on the settlement account would be drawn by members. What happened was, he submitted, an error to which legal consequences adverse to Chase AMP should not be attached for the purposes of this appeal.
Affidavit evidence was furnished by two officers of Chase AMP. They were not cross-examined. The evidence shows that Chase AMP sent to the Society for completion by it a standard form used by Chase AMP for the opening of an account. The officers of Chase AMP who were responsible did not give consideration to whether the entire contents of the form were appropriate to the conduct of the Settlement Account or consistent with the terms of the Facility Agreement. In the event, the Settlement Account was operated throughout the relevant period by Chase AMP on the footing that only members of the Society issued with cheques in the format agreed between the Society and Chase AMP could operate on the Settlement Account. I accept the submissions by counsel for Chase AMP that the present appeal cannot turn upon the terms of the form of authority completed by the Society on 22 July 1987.
In other respects, the rival contentions of the taxpayer and the Commissioner matched those in Commonwealth Bank of Australia v Commissioner of Taxation and should have the same outcome. I accept the submission for Chase AMP that the terms of the Facility Agreement between it and the Society indicate that in drawing cheques on the Settlement Account the members were acting on their own behalf and not as agents of the account holder, the Society. The Facility Agreement is drawn so as to distinguish the functions of the four accounts specified in clause 3.1. The objective of the arrangement was to permit members to draw cheques on the Settlement Account, on terms that they authorised the Society to transfer funds from the relevant accounts of members with the Society to meet those cheques. In drawing the cheques, the members were not acting as agents of the Society.
Nor was the Settlement Account one upon which, in the relevant period, the Society might itself draw cheques. The Settlement Account stood under the Facility Agreement in contrast to the other three accounts for which it made provision. This is emphasised by the special provisions in clauses 3 and 6 as to the supply by the Society of deposits and securities to cover operations by members upon the Settlement Account. Further, it would be quite inconsistent with the objective of the Facility Agreement if the Society could itself draw cheques upon the Settlement Account, to be recouped from the funds of members on deposit with it.
The Commissioner's decision of 15 May 1990 should be set aside, and there should be substituted a decision allowing the objection. The relevant assessment should be amended accordingly. The Commissioner should pay the costs of Chase AMP.
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