Deputy Commissioner of Taxation v New South Wales Insurance Ministerial Corporation

The case before the High Court of Australia concerned an application for special leave to appeal by the Deputy Commissioner of Taxation against the New South Wales Insurance Ministerial Corporation. The dispute centred on the effect of a notice served under section 218 of the *Income Tax Assessment Act 1936* (Cth) (the Act) on a third party, in circumstances where the taxpayer subsequently became bankrupt and was discharged from bankruptcy between the date of service of the notice and the date on which moneys became due from the third party to the taxpayer. The first respondent indicated it would submit to any order of the Court save as to costs.

The primary legal issue before the Court was whether a notice served under section 218 of the Act, requiring a third party to pay moneys due or accruing to a taxpayer to the Commissioner, remained effective and enforceable despite the intervening bankruptcy and discharge of the taxpayer. Specifically, the Court had to determine if the obligation imposed by the notice attached to moneys that were owed to the taxpayer at the time of service, even if those moneys were not yet due and payable, and whether the taxpayer's subsequent bankruptcy and discharge could render the notice nugatory.

The applicant argued that, by the plain words of section 218, once a notice was validly served, it immediately created an obligation on the third party to pay moneys to the Commissioner when they became due. This obligation was said to be unaffected by subsequent events such as the taxpayer's bankruptcy and discharge. Reliance was placed on judgments from *Clyne's case* (1983) 150 CLR 1, particularly the reasoning of Gibbs CJ and Mason J, which indicated that a statutory requirement under section 218 attaches to moneys owing to the taxpayer at the time of the notice, irrespective of whether those moneys continue to be owed to the taxpayer when they become payable. The Court was invited to consider that subsequent actions of the taxpayer, or indeed other parties, could not render the notice ineffective.