Commissioner of Taxation (Cth) v Waitara Linx Pty Ltd

[2025] NSWSC 581

Supreme Court

New South Wales

Medium Neutral Citation:

Commissioner of Taxation (Cth) v Waitara Linx Pty Ltd [2025] NSWSC 581

Hearing dates:

30 April; 22 May; 5 June 2025

Date of orders:

6 June 2025

Decision date:

06 June 2025

Jurisdiction:

Equity - Expedition List

Before:

Parker J

Decision:

See [101]-[105]

Catchwords:

TAXES AND DUTIES — Administration — Tax garnishee notices — Notice issued to purchaser under contract of sale of land by taxpayer — Mortgagee requires payment of purchase moneys in full – whether purchaser bound to account to Commissioner for tax debt specified in notice – whether mortgagee would have equitable interest in proceeds which would defeat Commissioners – Taxation Administration Act 1953 Sch 1, s 260-5

Legislation Cited:

Taxation Administration Act1953

Common Law Procedure Act 1854 (UK)

Cases Cited:

Federal Commissioner of Taxation v Park (2012) 205 FCR 1

Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1

Foran v Wight (1989) 168 CLR 385

Buhr v Barclays Bank Plc [2001] EWCA Civ 1223

Commissioner of State Revenue v Can Barz Pty Ltd [2017] 2 Qd R 537

Commissioner for Stamp Duty v Livingston [1965] AC 694

Category:

Principal judgment

Parties:

Commissioner of Taxation for the Commonwealth of Australia (Plaintiff/First Cross-Defendant)
Waitara Linx Pty Limited (Defendant/Cross-Claimant)
Anglican Community Services (Second Cross-Defendant)
The Sydney Law Practice Pty Limited (Third Cross-Defendant)
MCH Agency Services Pty Limited (Fourth Cross-Defendant) (22 May 2025)

Representation:

Counsel:
S Golledge SC/ S Scott (Plaintiff/First Cross-defendant)
I Kelly SC/ G Shepherd (Defendant/First Cross-Claimant)
R A Yezerski SC/M Hall (Second Cross-Defendant)
J R Anderson (Fourth Cross-defendant) (22 May 2025)

Solicitors:
Craddock Murray Neumann Lawyers (Plaintiff/First Cross-Defendant)
Samaras Lawyers (Defendant/Cross-Claimant)
Thomson Geer Law Firm (Second Cross-Defendant)
Sydney Law Practice (Third Cross-Defendant)
Minter Ellison (Fourth Cross-Defendant) (22 May 2025)

File Number(s):

2025/110378

Publication restriction:

Nil

JUDGMENT

1. In this case the defendant has contracted to sell land in Sydney for $56 million. The plaintiff (“the Commissioner”) claims that the defendant owes a tax debt of $27 million, which he is seeking to recover out of the purchase consideration payable under the contract.

2. The land which is the subject of the contract consists of several blocks of land which make up a development site at Park Avenue, Waitara. Waitara Linx Pty Limited (“Waitara Linx”), the defendant, is the registered proprietor. It holds the land as trustee of a unit trust named the Park Avenue Trust (“the Trust”). The land is the main, and apparently the only significant, asset of the Trust.

3. Waitara Linx is one of a number of companies which collectively were referred to in the evidence as the “Demian Group”. The land is the subject of a mortgage in favour of a financier to the Demian Group named MCH Agency Pty Limited (referred to by the parties as “Metrics”). The mortgage has been provided as security for the liabilities of another Demian Group company named Settlers Estate Pty Limited (“the principal debtor”). There is no dispute that the debts secured by the mortgage are liabilities of Waitara Linx in its capacity as trustee of the Trust.

4. The liabilities of the principal debtor to Metrics exceed $116 million. This is considerably more than the value of the Waitara land. Those liabilities may however also be secured on other assets owned by other companies in the Group.

5. Waitara Linx entered into the contract for the sale of the Waitara land in September last year. The purchaser is Anglican Community Services (“Anglican”). Anglican has paid a 10% deposit to Waitara Linx’s agent as stakeholder in accordance with the terms of the contract. Waitara Linx’s solicitor under the contract is an incorporated legal practice named The Sydney Law Practice Pty Limited (“SLP”).

6. The contract provided for settlement of the purchase in March this year. But about six weeks prior to the contractual date for settlement, the Commissioner issued a notice of assessment against Waitara Linx for the claimed tax debt of $27 million to which I have referred, and at the same time issued notices (“tax garnishee notices”) to Anglican and SLP under the Taxation Administration Act1953 (“TAA”). The tax garnishee notices required the recipients to account to the Commissioner, up to the amount of the tax debt, for any amounts owed by them, or to be owed by them in future, to Waitara Linx.

7. At the same time, the Commissioner lodged a caveat over the Waitara land. The caveat claims an interest in the land on the basis that the Commissioner is, as a creditor of the Trust, subrogated to Waitara Linx’s entitlement to indemnity out of the assets of the Trust, which include the land.

8. The assessment is disputed by Waitara Linx and steps are to be taken to challenge it. The sum in the assessment also contains a substantial amount for penalties, which, it is suggested, would not be covered by the trustee’s indemnity. But the tax legislation requires the parties and the Court to proceed on the basis that, while the assessment stands, the tax debt is due and payable.

9. SLP has been joined as a party to these proceedings but has not actively participated. Its obligations under the tax garnishee notice which it has received do not require separate consideration. For convenience I will henceforth refer only to the notice issued to Anglican.

10. The Commissioner does not seek to have Anglican pay anything under its notice prior to settlement. But the Commissioner contends that the notice will be binding on settlement and will therefore oblige Anglican to withhold from the purchase consideration sufficient monies to satisfy the tax debt, and account for those monies to the Commissioner.

11. Metrics is content for settlement to proceed notwithstanding that the sum raised by the sale is less than the liabilities secured by its mortgage, provided that it receives the purchase consideration. But Metrics will not provide a discharge of its mortgage unless it is assured of full payment of the purchase monies on settlement. Metrics is no doubt influenced by what happened to the mortgagee in Federal Commissioner of Taxation v Park (2012) 205 FCR 1 (see [57] below). The settlement therefore can only proceed if Waitara Linx gives a direction to Anglican to pay the purchase monies to Waitara Linx on settlement.

12. Waitara Linx is content to give such a direction (and thus to reduce the ongoing interest due to Metrics). But Anglican is concerned that if it pays in accordance with that direction and the settlement proceeds, it will be liable for failing to account to the Commissioner under the notice and will have to pay the $27 million itself. Failure to comply with the notice would also be a criminal offence.

13. The result is an impasse. Metrics cannot be forced to discharge the mortgage unless it receives the whole of the purchase price from Anglican at settlement. Anglican cannot be forced to make that payment when it is at risk under the Commissioner’s notice.

14. The Commissioner is an unsecured creditor of Waitara Linx. He cannot recover the tax debt due to him out of the Waitara land, given Metrics’ registered mortgage. The Commissioner also accepts, as I understand his counsel, that he could not prevent Metrics from exercising its power of sale over the land as mortgagee. In that event the purchase monies would be payable to Metrics, not Waitara Linx, and therefore would not be amenable to a tax garnishee notice.

15. But if the Commissioner is right, a consensual sale of the present type is not possible. Presumably, the Commissioner’s objective is to block such a sale in the hope of putting commercial pressure on the Demian Group (and, perhaps, Metrics) to make further funds available to satisfy the tax debt. What this case is about is whether it is open to the Commissioner to use that tactic.

16. Waitara Linx (and Anglican, and Metrics) contend that it is not, because the notice does not have the effect which the Commissioner contends it does. The validity of the Commissioner’s caveat is also disputed by Waitara Linx.

Claims for determination

17. Following the service of a lapsing notice, the Commissioner commenced the present proceedings by summons on an urgent basis on 21 March this year. Waitara Linx was named as the defendant.

18. The substantive relief claimed by the Commissioner is for judgment against Waitara Linx in the amount of the tax debt and a declaration that the Commissioner is entitled to be subrogated to Waitara Linx’s “right of indemnity and lien from and over the assets” of the Trust, and specifically the Waitara land, to the extent of that debt. An order was sought extending the caveat pending determination of the Commissioner’s claim.

19. A few days later, Waitara Linx initiated a cross-claim by way of cross-summons. The Commissioner was named as the first cross-defendant, Anglican as the second and SLP as the third. The cross-summons seeks declaratory orders which would enable the purchase of the land to be completed under the contract without Anglican, Waitara Linx or SLP being required to account to the Commissioner for the claimed tax debt. An order is also sought for the withdrawal of the caveat and for compensation to be paid for lodging it, allegedly without proper cause.

20. The proceedings were referred from the Duty List to the Expedition List and came before me on 28 March. The parties agreed to cooperate in an urgent final hearing of Waitara Linx’s cross-summons. The hearing date was fixed for 30 April. I also made directions for the Commissioner’s summons proceedings to continue by way of pleadings. Those proceedings were listed on 30 April for further directions.

21. The main protagonists in the cross-claim proceedings were Waitara Linx as cross-claimant and the Commissioner as first cross-defendant. Anglican, the second cross-defendant, was separately represented and supported Waitara Linx’s position. As already noted, SLP did not participate.

22. Metrics was not initially joined as a party to the proceedings, even though its interests as mortgagee were an essential part of the arguments presented against the Commissioner. In the course of the parties’ openings, this point was raised and eventually the proceedings were adjourned to allow for Metrics to be joined. The Commissioner’s statement of claim had been filed in the principal proceedings. Those proceedings were likewise adjourned.

23. The hearing resumed on 22 May. Counsel appeared for Metrics and supported the submissions made by Waitara Linx and Anglican.

24. The submissions from Waitara Linx covered not only the declaratory relief sought on the cross-claim, but also the claim for an order removing the Commissioner’s caveat. The Commissioner acknowledged that if the declaratory relief was granted, so that the tax garnishee notices were ineffective, the caveat would be removed. But counsel for the Commissioner was not otherwise able to deal fully with the removal and compensation application. It was agreed that I would decide the claim for declaratory relief first and return to the claim for removal of the caveat (which, of course, had the potential to affect the principal proceedings as well) after I had given my decision.

Evidence

25. There were no factual disputes at the hearing, and no witnesses were cross-examined. Most of the issues involved the interpretation of the relevant documents. There was some evidence from solicitors for the parties describing the PEXA settlement system. This evidence was not in dispute and none of the witnesses were cross-examined.

Effect of tax garnishee notices

Legislation and terms of sale contract

26. The tax garnishee notice in the present case has been issued under s 260-5 of Schedule 1 of the TAA. That enactment provides, in sub-s (1), that a notice may be issued for a “debt”, which may be one of a number of tax-related liabilities. The taxpayer liable for the debt is defined as the “debtor”. The other relevant sub-sections are:

260-5 Commissioner may collect amounts from third party

…

Commissioner may give notice to an entity

(2) The Commissioner may give a written notice to an entity (the third party) under this section if the third party owes or may later owe money to the debtor.

Third party regarded as owing money in these circumstances

(3) The third party is taken to owe money (the available money) to the debtor if the third party:

(a) is an entity by whom the money is due or accruing to the debtor; or

(b) holds the money for or on account of the debtor; or

(c) holds the money on account of some other entity for payment to the debtor; or

(d) has authority from some other entity to pay the money to the debtor.

The third party is so taken to owe the money to the debtor even if:

(e) the money is not due, or is not so held, or payable under the authority, unless a condition is fulfilled; and

(f) the condition has not been fulfilled.

How much is payable under the notice

(4) A notice under this section must:

(a) require the third party to pay to the Commissioner the lesser of, or a specified amount not exceeding the lesser of:

(i) the debt; or

(ii) the available money; or

(b) if there will be amounts of the available money from time to time—require the third party to pay to the Commissioner a specified amount, or a specified percentage, of each amount of the available money, until the debt is satisfied.

When amount must be paid

(5) The notice must require the third party to pay an amount under paragraph (4)(a), or each amount under paragraph (4)(b):

(a) immediately after; or

(b) at or within a specified time after; the amount of the available money concerned becomes an amount owing to the debtor. Debtor must be notified

…

27. The notice in the present case follows the statutory wording. It states:

ANGLICAN COMMUNITY SERVICES (TRADING AS ANGLICARE), YOU are a third party who owes, or may later owe, money ("the available money") to WAITARA LINX PTY LTD, ACN 619011200 AS TRUSTEE FOR PARK AVENUE TRUST ("the debtor"), of (or previously of) PO BOX 411, PARRAMATTA NSW 2124, who, in terms of section 260-5 of Schedule 1 of the Taxation Administration Act 1953 (TAA) has a debt payable to the Commonwealth of $27,004,702.24.

In exercise of powers conferred on me as Deputy Commissioner of Taxation by delegation from the Commissioner of Taxation under section 8 of the TAA, YOU, ANGLICAN COMMUNITY SERVICES (TRADING AS ANGLICARE), ARE REQUIRED TO PAY TO THE COMMISSIONER OF TAXATION the sum of $27,004,702.24 or, if the available money is less than $27,004,702.24, the whole of the available money.

If you now owe the available money to the debtor, the payment to the Commissioner of Taxation is to be made IMMEDIATELY. If you do not owe the available money to the debtor but you will later owe it to the debtor, the payment to the Commissioner of Taxation is to be made immediately the money becomes owing to the debtor.

28. The contract for sale between Waitara Linx and Anglican uses the Law Society standard form contract (2022 edition). This comes with 32 standard form (SF) clauses. In addition, there are 21 special condition (SC) clauses.

29. Completion is dealt with in SF cl 16. The clause provides as follows:

Vendor

16.1 Normally, on completion the vendor must cause the legal title to the property (being the estate disclosed in this contract) to pass to the purchaser free of any charge, mortgage or other interest, subject to any necessary registration.

16.2 The legal title to the property does not pass before completion.

16.3 If the vendor gives the purchaser a document (other than the transfer) that needs to be lodged for registration, the vendor must pay the lodgement fee to the purchaser.

16.4 If a party serves a land tax certificate showing a charge on any of the land, by completion the vendor must do all things and pay all money required so that the charge is no longer effective against the land.

Purchaser

16.5 On completion the purchaser must pay to the vendor -

16.5.1 the price less any -

deposit paid;

FRCGW remittance payable;

GSTRW payment; and

amount payable by the vendor to the purchaser under this contract; and

16.5.2 any other amount payable by the purchaser under this contract.

16.6 If any of the deposit is not covered by a deposit-bond, at least 1 business day before the date for completion the purchaser must give the vendor an order signed by the purchaser authorising the deposit holder to account to the vendor for the deposit, to be held by the vendor in escrow until completion.

16.7 On completion the deposit belongs to the vendor.

30. SC cl 10 deals with charges on the land. It provides:

10.1. The Vendor shall not be obliged to remove any charge on the property for any rate, tax or outgoing until the time when completion of this Contract is effected. The Vendor shall not be deemed to be unable, not ready or unwilling to complete this Contract by reason of the existence of any charge on the property for any rate, tax or outgoing and shall be entitled to serve a Notice to Complete on the Purchaser notwithstanding that, at the time such Notice is issued or at any time thereafter, there is a charge on the property for any rate, tax or outgoing.

10.2. The Vendor shall not be required to register any Discharge of Mortgage or Withdrawal of Caveat affecting the property prior to settlement and will provide to the Purchaser on settlement a properly executed Discharge of Mortgage and/or Withdrawal of Caveat, if required, as regards the property hereby sold. Should a Discharge of Mortgage and/ or Withdrawal of Caveat be necessary, the Vendor will allow the appropriate registration and PEXA fees to the Purchaser by way of adjustment at settlement.

31. The contract contains provisions dealing with electronic settlement, and that is the method which the parties have agreed to use. As already mentioned, there was uncontentious evidence before the Court about how the PEXA system operates at settlement.

32. Briefly, the parties to the contract arrange with PEXA that the PEXA system will be used for settlement. An electronic workspace is made available, with each party to the settlement (which includes any participating mortgagee and others who may pay or receive funds) being given access, allowing them to send or receive money and upload documents for registration automatically.

33. Prior to the settlement, the parties submit their payment instructions and signed versions of the documents required for the settlement. The lodgement of these instructions and the documents does not involve any commitment, and any party is free to withdraw until the final required documents are lodged and the workspace is locked. Settlement then proceeds instantaneously, with payments being processed in accordance with the instructions given to the parties and the signed documents being lodged for registration. Following settlement, a report is provided to the parties confirming the transactions.

Submissions

34. The case for Waitara Linx and Anglican involves two arguments.

1. As a consequence of the settlement mechanism to be used under the contract, Anglican as purchaser would receive title, in the form of the transfer, and make payment, simultaneously. Thus, there would never be a point at which there was any debt owing from Anglican to Waitara Linx to which the notice could attach.

2. In any event, at all times up to and after settlement, Metrics would have an equitable interest in the purchase monies which would prevail over the notice.

35. Counsel for the Commissioner rejected both of these arguments. But independently of that rejection, counsel for the Commissioner contended that the notice has the effect of attaching to the debt contingently owing by Anglican, even before settlement. It is convenient to deal with this contention before dealing with the two arguments advanced for Waitara Linx and Anglican.

Obligations created by notice

36. The Commissioner’s argument requires attention to the decision of the High Court in Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1. That case dealt with a notice under s 218 of the Income Tax Assessment Act 1936, which is in similar terms to s 260-5.

37. In that case, the Commissioner served a notice on the taxpayer’s bank. At the time, the taxpayer held three term deposits with the bank which had not yet matured. Before the maturity date, the taxpayer assigned the benefit of the term deposits to someone else. The High Court held that s 218 nevertheless required the bank to pay the proceeds of the term deposit to the Commissioner on maturity.

38. At the time, s 218(1) provided:

The Commissioner may at any time, or from time to time, by notice in writing (a copy of which shall be forwarded to the taxpayer at his 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,

to pay to the Commissioner, either forthwith upon the money becoming due or being held, or at or within a time specified in the notice (not being a time before the money becomes due or is held) –

(i) so much of the money as is sufficient to pay the amount due by the taxpayer in respect of any tax and of any fines and costs imposed upon him under this Act, or the whole of the money when it is equal to or less than that amount; or

(ii) such amount as is specified in the notice out of each of any payments which the person so notified becomes liable from time to time to make to the taxpayer, until the amount due by the taxpayer in respect of any tax and of any fines and costs imposed upon him under this Act is satisfied,

and may at any time, or from time to time, amend or revoke any such notice, or extend the time for making any payment in pursuance of the notice.

39. The argument for the taxpayer and the assignee proceeded in two steps. Step one was that the word “due” in sub-para (a) meant “due and payable”. Step two was that the word “due” in sub-para (i) had the same meaning.

40. The leading judgment was given by Mason J, with whom Aickin and Wilson JJ agreed. Gibbs CJ and Brennan J delivered separate judgments concurring in the result.

41. The Court accepted the first step in the argument but not the second. This meant that the bank was not obliged to pay anything to the Commissioner until the term deposit had matured, because it was not until then that there would be an amount “due” from the bank to the holder of the deposit for the purposes of sub-para (a). But the word “due” in sub-para (i) did not require that the debt be payable; the notice was effective and attached to the term deposit before maturity, and thus was not defeated by the subsequent assignment.

42. It is the first step which is immediately relevant to the Commissioner’s argument. The High Court accepted that sub-para (a) should not be read as imposing an obligation to pay the Deputy Commissioner before the term deposit fell due for payment in accordance with its terms. The word “due” should be read as meaning “due and payable”.

43. Mason J said (footnotes omitted):

It is … common ground that the word "due" in s. 218(1)(a) in the expression "by whom any money is due or accruing or may become due" means "due and payable". This is because a debt "accruing" signifies a debt which is due but not immediately payable … and it cannot be that the Commissioner can by notice require a debtor of a taxpayer to pay the money which he owes to the taxpayer before the debt, as between the debtor and the taxpayer, has become payable.

44. Gibbs CJ explained the situation in more detail (emphasis added):

There can be no doubt that the word "due", where it appears in par. (a) of s. 218(1), and in the words "forthwith upon the money becoming due" and "not being a time before the money becomes due" in that sub-section, means "presently payable". This is clearly indicated by the fact that par. (a) refers not only to money due, but also to money "accruing", that is, falling due as a result of natural increase, e.g., by way of interest. If "due" simply meant "owing", it would include moneys accruing, and that word would add nothing to the meaning of the paragraph. Paragraph (a) obviously refers to moneys which are, will be, or may be payable. Moreover it would be drastic, and generally speaking unconscionable, to require a third party to pay to the Commissioner money which was owed to the taxpayer but which was not yet payable to him, and doubts might be raised as to the constitutional validity of such a provision. In the event of any ambiguity, s. 218 should be construed to avoid the unjust result that a third party should be required to pay to the Commissioner moneys that were not yet payable to the taxpayer. For all these reasons "due" in the passages mentioned must mean "payable".

45. The debate on the operation of s 260-5 essentially took place between counsel for Anglican on the one side and counsel for the Commissioner on the other. Counsel for Anglican submitted that a notice under s 260-5 does not operate until there is a debt payable from the recipient to the taxpayer. Counsel for the Commissioner did not agree.

46. Counsel for Anglican relied on the decision in Clyne. The judgment of Gibbs CJ quoted above identifies two reasons for reading s 218(1) down so that “due” in sub-para (a) meant “due and payable”. The first was a textual one, based on the inclusion of the reference to “accrual” which have would been redundant if the debt were not payable. The other was based on presumed statutory intention: it would have been unconscionable, and possibly unconstitutional, if the recipient of a notice were obliged to pay money over to the Commissioner which was not actually owed by the recipient to the taxpayer.

47. Counsel submitted that the same considerations apply to s 260-5. In particular, the reference to a debt being “due or accruing” in s 218(1)(a) appears in the very same words in s 260-5(3)(a).

48. Counsel for the Commissioner submitted that the decision in Clyne was distinguishable. Counsel pointed out that s 260-5 differs from s 218(1). The words at the end of s 260-5(3), including subparagraphs (e) and (f), are not found in s 218(1). Counsel submitted that these additional words make all the difference. Those words have been added to the section so as to expand it.

49. Counsel submitted that in the present case the completion of the transaction and the transfer of title is a “condition” for the purposes of s 260-5(3)(e) and (f). This meant that money was “due” from Anglican to Waitara Linx from the moment the contract had been signed. The Commissioner had not sought to enforce the notice prior to settlement, but, on counsel’s argument, the Commissioner could have done so.

50. Counsel for Anglican did not accept that s 260-5 could have any such operation. The fulfillment of a condition for the purposes of subparagraphs (3)(e) and (f) could not be equated to a contingency such as the completion of the contract in the present case. To do so would dissolve the distinction drawn in s 260-5(2) between a debt actually owing when the notice is served, and a debt which “may” become owing “in future”.

51. I agree with this submission. It should be noted that the word “condition” in subparagraphs (3)(e) and (f) is designed to apply to each of the separate circumstances identified in subparagraphs (3)(a) to (d). Relevantly for present purposes, the question is whether Anglican’s obligation under the contract to pay the purchase price can be seen as a debt which became “due” when the contract was entered into, subject to the fulfillment of a “condition” that the contract ultimately be completed.

52. In my view, this would be a strained and artificial way to read s 260-5. It does not address either of the points made by Gibbs CJ in Clyne, which apply to sub-paragraph (3)(a), and, clearly enough, the word “due” must have the same meaning in subparagraph (3)(a) as it does in subparagraph (3)(e). I also agree that to treat the completion of the contract as a “condition” would dissolve the distinction drawn in the section between debts owing when the notice is issued and debts which “may” become owing in future.

53. Furthermore, I think it is clear enough that the “available money” for the purpose of s 260-5(3) must be a figure which is fixed and certain. That cannot be said of the purchase price of the contract, as the amount payable, taking into account interest and other adjustments, will vary depending on when the settlement actually takes place.

54. For these reasons, no debt fell “due”, for the purposes of s 260-5, from Anglican to Waitara Linx at the date the contract was entered into. The debt only becomes “due” for those purposes on settlement.

Instantaneous discharge of payment obligation at settlement

55. The starting point for the first argument presented by counsel for Waitara Linx was the statement made by Mason CJ in Foran v Wight (1989) 168 CLR 385 at 396:

In a contract for the sale of land, the vendor's obligation to deliver a good title and the purchaser's obligation to pay the purchase money are concurrent and mutually dependent obligations in the sense that they are "simultaneous acts to be performed interchangeably"

56. Mason CJ dissented as to the outcome of the case, but his disagreement with the majority of the Court turned on another issue. Indeed, Brennan J, one of the members of the majority, stated the same proposition in almost identical terms: see at 417 (see also Deane J at 433, Dawson J at 450, and Gaudron J at 455)

57. The present case was argued around the decision of the Full Federal Court in Federal Commissioner of Taxation v Park. That case, like the present, involved a sale of land by the taxpayer. The taxpayer was issued a tax assessment for $76,000 and a s 260-5 notice was issued to the purchasers. The property was mortgaged, and the mortgagee was initially unwilling to allow the settlement to proceed unless it received the full amount of the purchase moneys. The purchasers, like Anglican in the present case, were concerned at the risk of paying out the full amount of the purchase price and then being required to pay a second time.

58. Eventually the impasse was resolved by the mortgagee agreeing to allow the settlement to proceed, on terms that the purchase moneys were paid into the mortgagee’s solicitor’s trust account, with the solicitor agreeing not to release the $76,000 without the Commissioner’s consent. Proceedings were then brought in the Federal Magistrates Court to determine who should receive the $76,000. The contest was effectively between the Commissioner and the mortgagee, but the mortgagee’s rights were later assigned to a trustee in bankruptcy, Mr Park.

59. The Federal Magistrate decided in favour of Mr Park and the Commissioner appealed. The appeal was complicated by the fact that the Federal Magistrate had reasoned by analogy with the security rights created in favour of a creditor by the crystallisation of a floating charge. All the members of the Full Court considered that this reasoning was incorrect. The analogy was inapt because, on crystallisation of a floating charge, the recipient of a notice would have been directly indebted to the security holder. No such direct obligation had arisen from the purchasers to the mortgagee in the instant case.

60. Siopis J considered however that the actual decision of the Magistrate was supportable on the ground that the mortgagee had an equitable interest in the purchase moneys which defeated the notice: see [69]-[70].

61. But the majority, Jessup and Katzmann JJ, disagreed. They concluded that an equitable interest could only arise after settlement, and then only in the context of an unauthorised disposition of moneys by the vendor (see below). Having rejected this argument, and the basis on which the case had been decided by the Magistrate, their Honours continued (at [113]-[114]):

How, then, should the present appeal be decided? … the only question which remains is whether s 260-5 imposed upon the purchasers an obligation to make a payment to the Commissioner of the kind referred to in his notice. Under the section, at the instant moneys became owing by the purchasers to Ms Bassili [the vendor taxpayer], the former fell under the statutory obligation to pay those moneys to the Commissioner. At settlement … Ms Bassili offered an unencumbered title to the purchasers. In exchange for that, the purchasers came under a contractual obligation to tender the whole of the purchase price, including the $75,508.64 presently in controversy. That is to say, the moneys then became owing by the purchasers to Ms Bassili. At that point, the purchasers’ obligation to pay to the Commissioner under s 260-5 became absolute. By reason of s 260-5, a payment to the Commissioner would, in effect, be sufficient (as against Ms Bassili) to satisfy the purchasers’ obligations under their contract.

We can well understand that the trustee [Mr Park], as the assignee of Instyle [the mortgagee], would regard this result as unsatisfactory. However, if there is a discernible point at which Instyle’s position was compromised by the sequence of events which occurred [at settlement], it was when [Instyle] released its mortgage over the property. Although the Commissioner consented to settlement going ahead under arrangements which included that release, he made it clear in correspondence that his consent was not to be interpreted as surrender of his claim under s 260-5. … counsel for the Commissioner] made it clear that their case still involved the proposition that, as events in fact played themselves out [at settlement], Ms Bassili was in a position to perform, and did perform, her part under the contract of sale such that the purchase price became unconditionally owing to her by the purchasers. They were entitled to so submit. The Commissioner was entitled to conduct his case on appeal by reference to the facts as they actually were.

62. Counsel for Waitara Linx recognised that it was necessary to get around the statement by Jessup and Katzmann JJ in [113] that “at the instant moneys became owing by the purchasers to Ms Bassili, the former fell under the statutory obligation to pay those moneys to the Commissioner” (emphasis added). They advanced two submissions to that end.

63. Counsel’s first argument was that “those moneys” referred only to the $76,000 which the mortgagee had set aside, which comprised the amount the purchaser was meant to pay under the relevant s 260-5 notice. Thus, they argued, [113] did not address the present case.

64. I do not accept this submission. The purchasers may only have had the “statutory obligation to pay” $76,000. But the moneys owed to Ms Bassili by the purchasers, to which the s 260-5 notice would attach, were the whole of the purchase price, not just the $76,000 in dispute. Jessup and Katzmann JJ expressly observed that the purchasers’ obligation to pay Ms Bassili once she had offered unencumbered title was a “contractual obligation to tender the whole of the purchase price, including the $75,508.64 presently in controversy.”

65. Counsel’s alternative argument was that what Jessup and Katzmann JJ said at [113] was wrong. Counsel argued that their Honours proceeded on the basis that the elements of the settlement happened sequentially, whereas, in accordance with the proposition stated in Foran, they operated simultaneously. Counsel submitted that, on that analysis, there was no point at which there could be any obligation on the purchaser to pay. Title was transferred to the purchaser at exactly the same instant as the money was paid over. Thereafter the liability to pay had been discharged and there was no outstanding obligation to which the tax garnishee notice could attach.

66. In the course of this argument, counsel remarked on what they contended was an “extraordinary result” of the contrary view. This remark focused on the position of the mortgagee. If a sequential analysis was adopted, then the discharge of mortgage had to precede the transfer of the title. But the mortgagee was not obliged to provide the discharge until the purchase price had been paid to it by the purchaser. What this reinforced was the interconnected and interdependent nature of all the transactions. Counsel characterised the argument for the Commissioner as necessarily involving a futile enquiry as to sequence which was comparable to asking which came first, the chicken or the egg.

67. Counsel’s argument focussed on the reasoning of Jessup and Katzmann JJ. But it should be noted that on this issue all of the members of the Full Court were agreed: see Siopis J at [39].

68. Leaving counsel’s remark about Metrics’ position to one side for a moment, I think that the argument, in its simplest form, proves too much. If it is correct that there is nothing to which the notice can attach because by the time the purchaser has received the title, the purchaser has already paid the money, then that same could be said in any situation in which the purchaser had given a direction for the purchase monies to be paid on settlement to a third party. The third party would not need to be an outgoing mortgagee. It could be a related company of the taxpayer in the Cayman Islands. Indeed, the same argument would probably apply to a payment to the taxpayer itself.

69. In my view, the argument is answered by what the High Court said about the second issue in Clyne. One of the points made against the Commissioner in that case was that, as a result of the assignment, when the term deposits matured there would be no obligation on the bank to pay the taxpayer. Instead, the bank’s obligation would be to pay the amount which had fallen due to the assignee.

70. But Mason J rejected this argument. He said:

Had there been no assignment the Bank would have been able to resist a claim for a payment of the term deposits by the first appellant before they became payable on two grounds, (a) that the debts were not then payable; and (b) that the giving of the s. 218 notice imposed an obligation on the Bank to pay at maturity to the Commissioner with an implied obligation not to make any inconsistent payment in the meantime.

Here the suggested answer to the application of this rule is that the moneys, the subject of the notice, were not at maturity moneys then due and payable to the first appellant (the taxpayer) and that the statutory obligation attaches only to moneys which satisfy the general description. I do not agree. The section … imposes an obligation to pay moneys which become payable at a future time when that time arrives. It does not explicitly prescribe as a condition preliminary to the creation of the obligation to pay that the moneys owing to the taxpayer at the date of the notice shall continue to be owing to him when they become payable. It merely requires the recipient to pay to the Commissioner when they become payable moneys owing to the taxpayer at the date of the notice. The obligation attaches to the recipient on service of the notice, though it cannot be performed until a future date. The effect of imposing the obligation is to make it unlawful for the recipient to pay the moneys to anyone but the Commissioner. after service of the notice. Although this might otherwise expose the debtor to liability of the suit of the taxpayer the debtor is protected by s 218(4) which provides that the payment is deemed to be made with the authority of the taxpayer and indemnifies the debtor.

71. The first passage which I have quoted makes it clear that, although the issue of a tax garnishee notice does not create any obligation on the recipient to pay before the debt to the taxpayer becomes payable, it still has the same effect. In the language of Mason J, it “prevents the recipient from making “any inconsistent payment in the meantime”.

71. In my view, when Mason J spoke of an “inconsistent payment” he must have been referring to something other than an unlawful one. As between the bank and the assignee the payment would have been lawful, and consistent with the bank’s obligations to the taxpayer. Nonetheless, Mason J considered that it was impermissible. By referring to an “inconsistent” payment, therefore, it seems that his Honour was simply referring to a payment to someone other than the taxpayer to whom the money was owed at the time the notice was issued.

72. Everyone accepts, in the present case, that Anglican is not and never at any stage will be indebted to Metrics for the purchase price. Any obligation which Anglican may have to pay Metrics could only derive from a direction to that effect being given by Waitara Linx at settlement. The contractual status of any such direction was not debated before me. On the face of it the obligation would be to pay Waitara Linx, leaving Waitara Linx to attend to any on-payment which It wished to make. I think it is by no means obvious that Anglican would be contractually obliged in all circumstances to pay the purchase money to a third party nominated by Waitara Linx instead. But it is not necessary to go into that question in this judgment.

73. In the present case, at the time the notice was issued the contractual obligation was to pay Waitara Linx as the vendor. Right up to the moment of settlement, Waitara Linx would be under no obligation to direct the purchase monies to Metrics as mortgagee. There would be nothing to prevent it from discharging the mortgage from separate sources of funds and then receiving the purchase moneys itself.

74. Counsel for Anglican pointed out that in Clyne the assignment post-dated the issue of the notice. Mason J acknowledged that:

There will be cases when a party other than the taxpayer by virtue of an antecedent security asserts in priority to the Commissioner rights to moneys not payable when the notice is served where the security is perfected after service of the notice and before the debt becomes payable ….

76. Counsel suggested that the present might be such a case, inasmuch as the contract was entered into before the notice was issued. But I think this makes no difference. For reasons I have already given, mere entry into the contract did not give rise to some sort of proprietary interest which would be “perfected” on completion.

77. In my view, if a direction were issued by Waitara Linx at settlement which legally obliged Anglican to pay the purchase price to Metrics, that would be an “inconsistent” payment and therefore contrary to the obligation imposed by s 260-5 on Anglican. If it were otherwise, the operation of the notice could readily be avoided by the giving on such a notice, whether in favour of a mortgagee or anyone else.

78. I do not think that counsel’s remark about the settlement of the mortgage happening simultaneously, or the point about the mortgage only being released once monies had been available, alters this analysis. The focus must be on Anglican as the recipient of the notice. For practical purposes, Anglican would no doubt insist upon receiving title cleared of the mortgage, and that would require the consent of Metrics. But none of that alters the fact that Anglican’s obligation under the contract is, and will remain, an obligation to pay Waitara Linx. In my view the Commissioner’s argument based on Park at [113] prevails.

Equitable interest of mortgagee

79. The argument under this head was developed both in written and oral submissions by counsel for both Waitara Linx and Anglican. However, in oral submissions, counsel for Waitara Linx left the running of the argument to counsel for Anglican. Without any intending disrespect to the written submissions presented by counsel for Waitara Linx, I will deal with the argument by reference to the submissions, both written and oral, presented by counsel for Anglican.

80. The argument focussed on the reasoning of Jessup and Katzmann JJ on this question in Park. The argument in that case was put in two different ways. Their Honours dealt with the first way in which the argument was put at [101]:

According to the argument, it was Instyle (because of its mortgage) which held the beneficial interest in those moneys. If Ms Bassili did receive them, she received the legal interest only, and the Commissioner’s notice either had no effect or, at most, entitled him to take the moneys subject to Instyle’s beneficial interest. In its crudest form as so expressed, this is not an argument that could be accepted. Under a Torrens system mortgage, the mortgagee has a registered security over the land, not a beneficial interest in all moneys that become owing to the registered proprietor, even under a contract for the sale of the land as such. However, there was a more sophisticated form of this argument which was advanced on behalf of the trustee.

81. Their Honours’ response to the second formulation of the argument was (at [102]-[103]):

That form of the argument, as we would interpret it, ran somewhat as follows. Ms Bassili entered into an unconditional contract to sell the unencumbered title to the property to the purchasers. At the time of the contract, she did not have such a title to sell, and that remained the case shortly before the point of settlement on 23 February 2010. These circumstances foreshadowed, therefore, an unauthorised disposition. In such a case — assuming that such a sale went ahead — the defrauded mortgagee would have an equitable charge over the proceeds: Buhr v Barclays Bank plc [2002] 1 P & CR DG7 at [40]. Counsel for the Commissioner submitted that this argument amounted to an attempt to uphold the judgment of the federal magistrate upon a ground other than those upon which it had been based, and should have been the subject of a notice of contention. Subject to that protest, they accepted that, in the circumstances postulated, the mortgagee would have such a charge.

This more sophisticated formulation of the trustee’s argument should be rejected, if for no other reason than because it was not covered by a notice of contention, and no attempt to come to terms with that omission was made on behalf of those representing the trustee. … We would, however, add that an equitable charge of the kind proposed in the argument would operate only with respect to the proceeds of the unauthorised disposition in the hands of the errant vendor. The silent premise on which the trustee’s argument is based is that the Commissioner’s rights under a s 260-5 notice are somehow derivative apropos those of the vendor/taxpayer in a situation in which the purchase moneys were notionally paid to him or her. Such an approach, however, implicitly mischaracterises the way that s 260-5 operates. A notice under s 260-5 (which this one was) imposes an obligation on the addressee immediately money becomes owing to the taxpayer. The money must be paid to the Commissioner instead of being paid to the taxpayer. There would, therefore, never be proceeds in the hands of the errant vendor which might be the subject of a charge in favour of the mortgagee.

82. Their Honours went on to deal in some detail with the arguments which had been advanced by counsel for Mr Park. The common theme to those arguments was that the Commissioner should not be allowed, by use of a s 260-5 notice, to turn a secured mortgagee into an unsecured creditor.

83. Jessup and Katzmann JJ were at pains to reject this characterisation of the matter. At [104], their Honours said:

... Dealing with it at the general level … the proposition cannot be accepted. In the circumstances postulated, nothing but the repayment of the secured moneys or the voluntary act of the mortgagee could result in him or her losing the security. The vendor and the purchaser could not, by their own agreement alone, deprive the mortgagee of the security. A notice under s 260-5, if complied with by the purchaser, would not affect the security. There is no conceivable construction of the section — at least none for which the Commissioner pressed on the present occasion — which could leave an unwilling mortgagee in the position of an unsecured creditor.

84. In a response to one of the specific variations of the argument, which characterised the purchasers as doing no more than giving effect to the terms of a security, their Honours responded (at [106]):

This argument … mischaracterises the operation of the section. And it also mischaracterises the act by which a purchaser of land performs his or her contract. The contractual obligation is not to give effect to the terms of the vendor’s security. The terms of the security are entirely a matter for the vendor. He or she is under no obligation to use the purchaser’s money to disencumber the title. Neither is the purchaser under any obligation to take the slightest interest in the subject. He or she may well have contracted to take a clean title, but how that state of affairs might be brought about is not a matter about which he or she need be concerned. Indeed, returning to the Administration Act itself, under s 260-15 a payment to the Commissioner in compliance with the s 260-5 notice is taken to have been authorised by the vendor, and to be the subject of an indemnity. The only thing to which s 260-20 attaches a criminal sanction is the purchaser’s failure to pay the money owing by him or her to the Commissioner rather than to the vendor. The relevant provisions are quite unconcerned with the terms of any security which the vendor may have given over property, if the exchange of property for value is indeed the kind of transaction to which the s 260-5 notice attaches.

85. Their Honours also dealt with an argument based on the decision of the Court of Appeal of England and Wales in Buhr v Barclays Bank Plc [2001] EWCA Civ 1223. That case concerned a dispute as to priorities between a second mortgagee and the registered proprietors (by then bankrupt) over the surplus remaining after the first mortgagee had been paid out. It was argued for the trustees in bankruptcy that, following settlement, the second mortgagee had no proprietary interest in the surplus. The argument was rejected by the Court of Appeal.

86. Arden LJ said at [55]:

Mortgages, despite their roots in twelfth and thirteenth centuries, are still an important means of raising money and using assets for this purpose. Mr and Mrs Buhr like many other small entrepreneurs used their home as security for their business interests. This is a very important function of mortgages of every kind and I would have been loathe to reach a conclusion which would have exposed a significant technical gap in the protection given to mortgagees. It would in my view be contrary to expectation and common sense. That conclusion would have been liable to cause mortgagees to decline to permit sales by mortgagors without their consent. That would hamper the freedom of mortgagors or dissuade mortgagees from lending money on the security of mortgages at all. It matters that there should be appropriate incentives and protections in the law for mortgagees as well as mortgagors.

87. In Park, Jessup and Katzmann JJ distinguished Buhr in the following way:

The security in question was a charge which ranked subsequent to a first mortgage to a third party. Because of the way the charge was noted on the registry, the registration of it was of no effect. … Clearly Arden LJ’s reluctance “to reach a conclusion which would have exposed a significant technical gap in the protection given to mortgagees” would have no relevance to a valid registered mortgage. In the case of the latter, there is no “technical gap”: the mortgagee is entitled to the protection provided by his or her security for so long as the obligation secured thereby remains outstanding. A judgment in favour of the Commissioner on the present appeal may well apply to other forms of debt secured by mortgage, but, if it does so, it would not have the consequence that all these other mortgagees would be at risk of losing their securities without satisfaction of the obligations to which they relate.

88. Counsel for Anglican pointed out that, as a matter of ratio, the arguments in Park were rejected because they had not been the subject of a notice of contention. The decision was therefore not, strictly speaking, binding on me. I understood counsel for the Commissioner to accept this. Counsel for Anglican added that the argument which he was advancing in the present case did not seem to have been advanced in Park.

89. Counsel also relied on the subsequent decision of the Queensland Court of Appeal in Commissioner of State Revenue v Can Barz Pty Ltd [2017] 2 Qd R 537. The case concerned a notice issued under Queensland legislation which is materially the same as s 260-5. The notices were issued for payroll tax liabilities. The recipients were trustees of a superannuation fund. It was common ground that the payroll tax liability was not a trust liability. It was argued for the recipients that the notice procedure could not be used to require trust monies to be paid over. This argument was upheld by the Court.

90. The leading judgment was given by Philip McMurdo JA, with whom Morrison JA agreed. Philippides JA delivered a concurring judgment.

91. McMurdo JA began by referring to authorities concerning garnishee notices. The procedure dates back to the Common Law Procedure Act 1854 (UK). His Honour pointed out that from the outset, the courts had been disinclined to allow the garnishee procedure to be used to affect trust property: at [65]-[66]. His Honour stated at [67]:

In summary, because the remedy of a garnishee order is a form of execution by attachment of the judgment debtor’s property, the remedy has been confined to prevent the pre-existing rights and equities of third parties, including beneficiaries under trust, from being affected. In turn, this has informed the interpretation of provisions such as s 218 of the Income Tax Assessment Act and s 260-5 of the Taxation Administration Act in the cases now to be discussed.

92. His Honour then reviewed the authorities concerning tax garnishee notices. One of those authorities was Park. His Honour said:

… The majority (Jessup and Katzmann JJ) held that there was no equitable charge enjoyed by the mortgagee over the proceeds so that the Commissioner’s claim succeeded. The third judge (Siopis J) held otherwise, so that it is his Honour’s opinion upon the effect of the s 260-5 notice which is presently relevant…

93. His Honour continued:

Siopis J said that the Commissioner, having served a s 260-5 notice, was to be regarded as being in a similar position to that of a person who had issued a garnishee notice. It followed, he said, that “the debt the subject of the demand made in the s 260-5 notice, is subject to the rights and equities which already exist in respect of the debt …” A further principle, according to Siopis J, was that a demand made under a s 260-5 notice only applies to moneys that are payable to the taxpayer “in his or her capacity as beneficial owner”.

94. After referring to further authorities, his Honour concluded at [81]-[82]:

The limitations identified in the authorities on s 218 and s 260-5 are a consequence of the purpose of the statutory remedy. As in those cases, the purpose of the remedy in s 50 is to assist in the recovery of unpaid tax by providing recourse to money to which the taxpayer is entitled and which could be lawfully applied in payment of the tax if it were in the taxpayer’s hands. The purpose of the statute is not to permit the recovery of tax by recourse to money which belongs to someone other than the taxpayer or which, for some other reason, could not be lawfully applied by the taxpayer in the payment of his or her own tax debt.

It is clear that the proceeds of the sale of the real property, if now in the hands of Ms Bird and Mr Scott [the trustees of the superannuation fund], could not be seized in the enforcement of a judgment against them for the unpaid tax and nor would those moneys be available to their creditors if they were made bankrupt. Further and importantly, they could not choose to pay those moneys to the Commissioner because such a payment would contravene s 62 of the SIS Act as well as the terms of the deed. In no sense therefore would these moneys in the taxpayers’ hands be available in any lawful way for payment of their tax debt. Just as these moneys would not have been accessible to the Commissioner under the garnishee process, so are they unavailable by means of s 50 [the relevant Queensland tax garnishee notice provision].

95. Counsel submitted that it was too narrow to say, as Jessup and Katzmann JJ said in Park at [102], that the mortgagee’s equitable rights were limited to circumstances where there had been an unauthorised disposition of the settlement monies. According to counsel, previous authorities, including Buhr, had recognised the existence of a wider equitable interest, which existed even before settlement, in the mortgaged property. This could be traced into the proceeds of the property in the event of sale.

96. I accept that I may not strictly speaking be bound by the majority reasoning of the Full Court in Park. Nonetheless, I am reluctant, as a judge sitting at first instance, to say that the reasoning was wrong. The very fact that it is a majority decision with a clearly expressed dissent indicates that the decision, although it may be obiter, was carefully considered.

97. Counsel for Anglican did not point me to any decision, whether at intermediate appellant level or even at trial level, which was directly inconsistent with the majority reasoning in Park. As counsel for the Commissioner pointed out, Buhr and some of the other earlier decisions which were referred to by Siopis J in his judgment were all cases where the settlement had taken place and the question was whether the mortgagee had a proprietary interest in moneys which formed part of the proceeds. None of those decisions established that a mortgagee had had some form of equitable interest in the property prior to settlement.

98. Nor is the decision in Can Barz in any way inconsistent with the majority decision. Can Barz case concerned the interests of a beneficiary under a trust. McMurdo JA expressly distinguished the majority reasoning in Park on the ground that it concerned a mortgagee’s interest.

99. In my respectful opinion, the majority reasoning in Park cannot be described as being clearly wrong. I do not think it is self-evident that one can work backwards from the position after settlement, by some form of reverse tracing, to conclude that the mortgagee has an equitable interest in the property prior to settlement. To reach such a conclusion it would be necessary to address at least two contrary points. One is what the Privy Council said about equitable interests in Commissioner for Stamp Duty v Livingston [1965] AC 694 at 712C. The other is the point already made, that up until the moment of settlement the purchase moneys cannot be said to have been irrevocably committed to payment to the discharge of the mortgage.

100. The submissions by counsel for Anglican were lucidly and persuasively put. They may have differed in matters of emphasis and detail from the arguments put forward by the respondent in Park. But I did not detect any argument in them that was so radically different or new that it would allow me to say that the majority reasoning failed to consider some essential point.

101. In these circumstances, I think that if this Court is to decide that the majority reasoning in Park is incorrect, that is a decision which would need to be made by the Court of Appeal.

Conclusion

102. For these reasons, I do not accept that Waitara Linx is entitled to the declaratory relief claimed in its cross-claim. The claims for that relief must be dismissed.

Orders

103. A draft of the judgment to this point was issued to the parties on 4 June, and the proceedings were relisted on 5 June for the parties to consider what orders should follow from the conclusions I have reached. The parties agree that Waitara Linx’s claim for declaratory relief should be dismissed, and the claim for an order removing the caveat, together with the Commissioner’s principal claim in the proceedings, should be adjourned until August. I will make orders accordingly.

103. The orders of the Court are:

In respect of the Cross-Summons:

1. Order that the claims for the declarations in prayers 1 and 4 of the Cross Summons be dismissed.

2. Costs are reserved.

3. Stand over the Cross-Summons for further directions at 9:30am on 22 August 2025.

In respect of the Summons:

4. The Summons be listed for directions at 10.00am on 22 August 2025.

5. Direct that the defendant file and serve its Defence on or before 3 July 2025.

6. Caveat AU819644 be extended on an interim basis until 5pm on 22 August 2025.

7. These orders be entered forthwith.

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Decision last updated: 06 June 2025