Federal Commissioner of Taxation v Jaques

The Federal Commissioner of Taxation (the appellant) appealed to the High Court of Australia against a decision of the Federal Court of Bankruptcy. The dispute concerned payments made by a bankrupt, Walter Neville Winkler, to the Deputy Commissioner of Taxation within six months prior to the sequestration of his estate. The official receiver, Stanley Theodore Jaques (the respondent), sought to recover these payments, arguing they constituted preferential payments voidable under section 95 of the *Bankruptcy Act 1924-1950* (Cth). The Deputy Commissioner contended that section 95 did not bind the Crown, and therefore the payments, being in respect of a Crown debt (sales tax), were not voidable.

The High Court was required to determine whether section 95 of the *Bankruptcy Act* binds the Crown. Specifically, the Court had to consider whether section 95 falls within the categories of provisions that section 5(3) of the Act expressly states shall bind the Crown, namely those relating to "remedies against the property of a debtor" or "priorities of debts". The Court also considered whether the intention for section 95 to bind the Crown could be necessarily implied from the Act.

The Court reasoned that section 95 does not create a remedy against the property of a debtor in the sense contemplated by section 5(3). Instead, it renders certain antecedent transactions void as against the trustee, thereby increasing the property available for distribution. The remedies for recovering such property are provided by other parts of the Act or by common law. Furthermore, the Court found that section 95 is not a provision relating to the "priorities of debts" as that phrase is used in section 5(3), which refers to the order of payment of provable debts in the administration of a bankrupt's estate. Section 95 operates to invalidate transactions that would otherwise prevent the estate from being administered according to the prescribed priorities. As the Act did not expressly bind the Crown in relation to section 95, nor was such an intention necessarily implied, the Court concluded that section 95 does not apply to the Crown.

Consequently, the High Court allowed the appeal, discharged the order of the Federal Court of Bankruptcy, and declared that the payments made by the bankrupt to the Deputy Commissioner of Taxation were not void as against the trustee. The respondent trustee was ordered to pay the appellant's costs both in the High Court and in the Federal Court of Bankruptcy.