Pollack v Commissioner of Taxation

Re: PHILLIP J. POLLACK
And: DEPUTY COMMISSIONER OF TAXATION
No. P667 of 1991
FED No. 651
Bankruptcy - Income Tax - Constitutional Law
91 ATC 4925/22 ATR 670/103 ALR 133
(1991) 32 FCR 40

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
Beaumont(1), Pincus(2) and Gummow(3) JJ.

CATCHWORDS

Bankruptcy - Judgment for income tax due recovered in State court by Deputy Commissioner of Taxation - stay of enforcement of judgment debt - whether debt "payable either immediately or at a certain future time" within s.44(1)(b)(ii) for the purposes of s.52(1)(c) of Bankruptcy Act 1966.

Income Tax - Proceedings for recovery of - Rules of State court authorising orders for payment of judgment debts by instalments - whether inconsistent with Income Tax Assessment Act 1936, ss.206, 209.

Constitutional Law - Commonwealth investing State court with federal jurisdiction - whether inconsistency between State and federal statutes in this context - whether power to stay proceedings is a matter of substance or procedure.

Words and Phrases - "Payable immediately" - whether judgment debt "payable immediately" although the enforcement of the judgment has been stayed.

HEARING

SYDNEY

#DATE 25:10:1991

Counsel and solicitors Mr P.K. Searle instructed
for the Debtor: by Messrs Barkell and Peacock.

Counsel and solicitor Mr J.I. Fajgenbaum QC and
for the Creditor: Mr S. Gageler instructed

by the Australian Government Solicitor.

Counsel and solicitor Mr K. Mason QC (Solicitor-General)
for the Attorney-General and Mr L. Katz instructed by New South
for the State Wales Crown Solicitor.
of New South Wales
(Intervener):

ORDER

That the question asked in the stated case be answered as follows:

"The debt alleged in para.2 of the petition is a debt payable immediately within s.44(1)(b)(ii) of the Bankruptcy Act 1966 and is a debt still owing within the meaning of s.52(1)(c) of that Act.

That the debtor pay the costs of the creditor of the stated case.
NOTE: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.

JUDGE1

By a creditor's petition presented on 7 March 1991, the Deputy Commissioner of Taxation petitioned the Court for a sequestration order against the estate of Phillip J. Pollack ("the debtor"). In his petition, the Deputy Commissioner alleged that "the debtor is indebted to (him) in the sum of $37,156.43 ("the debt") being the amount due under the final judgment ("the judgment") recovered in the District Court of New South Wales at Sydney...for income tax and additional tax for late payment and...interest..." By s.44(1) of the Bankruptcy Act 1966 ("the Act"), it is provided, relevantly, that a creditor's petition shall not be presented against a debtor unless (a) there is owing by the debtor to the petitioning creditor a debt that amounts to $1,500; (b) that debt (i) is a liquidated sum due at law and (ii) is payable either immediately or at a certain future time. By s.52(1)(c) of the Act, it is provided that, at the hearing of the petition, the Court shall require proof of the fact that the debt on which the petitioning creditor relies is still owing. It is well settled that "what s.52(1)(c) requires shall still be owing at the hearing is 'the debt on which the petitioning creditor relies' and that debt is a debt described in s.44(1)(a) and (b) - in Lord Evershed's words (in Re A Debtor; Ex parte Debtor v Scott (1954) 1 WLR 1190 at 1196), a debt which 'has the necessary character and quality stated in' s.44(1)" per Riley J. in Re Agrillo; Ex parte the Bankrupt (1977) 29 FLR 484 at 487. See also Re Faulkner, Ex parte Deputy Commissioner of Taxation (unreported 1 February 1989, per Ryan J.) at pp 5-8.

At the hearing of the petition, the debtor opposed the petition on the ground that the debt was not, within the meaning of s.44(1)(b)(ii) of the Act, payable either immediately or at a certain future time. The debtor claimed that, because he had applied to the District Court for an order that the debt be paid by instalments and the District Court registrar had declined or refused to make that order on constitutional grounds, the debtor was entitled to a stay of the enforcement of the judgment. It followed, the debtor contended, that the debt was not payable either immediately or at a certain future time. I then stated a case referring for consideration of the Full Court the following question:

"Is the debt alleged in para.2 of the petition a debt that is payable either immediately or at a certain future time within the meaning of s.44(1)(b)(ii) of the Bankruptcy Act 1966 for the purposes of s.52(1)(c) of the Act?"

The application to the District Court to pay by instalments

The judgment was recovered on 21 August 1990. On 3 July 1991, the debtor lodged in the District Court registry an application to pay the judgment debt by instalments pursuant to Part 31A of the District Court Rules, which deals with payment of judgment debts. On 4 July 1991, the registrar of the District Court refused the application on the ground that it had no power to grant it.
The relevant provisions of Part 31A are as follows. The Court may, on the application of a party, or without any such application, when giving judgment in the action, order that the judgment debt be paid at such time, or by such instalments payable at such times as it thinks fit (r.1(1)). Subject to Part 31A, every judgment debt shall be payable forthwith (r.1(2)). Whether or not an order in respect of a judgment debt has been under r.1(1), the judgment debtor may make an application in writing, supported by an affidavit as to his property and means, to the registrar for leave to pay the judgment debt by instalments (r.2(1)(a)). Where an application is made by a judgment debtor under r.2(1)(a), the registrar shall forthwith consider and determine the application and may order that the judgment debt be paid by instalments (r.2(4)). Where such an order is made, the judgment creditor may object (r.2(5)). Where under r.2(4) the registrar refuses to make an order, or where the judgment creditor objects, the registrar shall set down the judgment debtor's application for hearing by the Court (r.2(6)). Where the registrar refused to make an order, the Court may order that the judgment debt be paid by instalments or refuse to make that order (r.2(7)(a)). Where the judgment creditor has objected, the Court may confirm, vary or rescind the order of the registrar (r.2(7)(b)). Where the registrar refuses under r.2(4) to make an order for payment by instalments, the application, until it is dealt with under r.2(7), and unless the Court otherwise orders, operates as a stay of enforcement of the judgment, except enforcement by way of a garnishee order to which s.98 of the District Court Act 1973 (N.S.W.) applies made before the application was made to the registrar (r.2(8)). Where the Court or the registrar makes an instalment order under r.2, the order shall, while it remains in force, operate as a stay of the enforcement of the judgment, except by way of a garnishee order as aforesaid (r.2(9)). An instalment order made under r.1 or 2 shall cease to be in force if the judgment debtor fails to make any payment in accordance with the order (r.3(2)).
As has been said, the registrar refused the application upon the ground that there was no power to grant it, relying, it seems, upon the reasoning of O'Bryan J. in Deputy Commissioner of Taxation v Zarzycki (1990) 96 ALR 146 in cancelling an instalment order made by a master under the Judgment Debt Recovery Act 1984 (Vic.), to which further reference will be made later.
The provisions of the taxation legislation
In order to understand the broader context in which the application for an instalment order was made, reference should be made to the relevant provisions of the Income Tax Assessment Act 1936. By s.204(1) of that Act, subject to the provisions of Part VI, any income tax assessed shall be due and payable on the date specified in the notice, not being less than 30 days after the service of the notice, or if no date is specified, on the thirtieth day after the service of the notice. By s.206(1), the Commissioner may in any case grant such extension of time for payment of tax (including additional tax - s.206(2)), 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. By s.207(1), if any tax remains unpaid after the time when it becomes due and payable or would, but for s.206, have become due and payable, additional tax is due and payable by way of penalty. By s.207(1A), where additional tax is due and payable, in certain circumstances, the Commissioner may remit the whole or part of the additional tax. By s.207(1B) where judgment is given by, or entered in, a court for the payment of an amount of tax then the tax shall not, for the purposes of s.207(1), to have ceased to be due and payable by reason only of the giving or entering of judgment and if the judgment debt carries interest, the additional tax payable is reduced by the amount of that interest. By s.208(1), income tax, when it becomes due and payable shall be a debt due to the Commonwealth, and payable to the Commissioner in the manner prescribed. By s.209(1), any tax unpaid may be sued for and recovered in any court of competent jurisdiction by the Commissioner or Deputy Commissioner suing in his official name.
The source of the jurisdiction of the District Court to determine the matter
The relevant provisions of the Constitution and of the Judiciary Act 1903 are as follows. By s.75(iii) of the Constitution, the High Court has original jurisdiction in all matters in which the Commonwealth, or a person suing on behalf of the Commonwealth, is a party. The Deputy Commissioner falls within s.75(iii) (see Naismith v McGovern (1953) 90 CLR 336 at 342). By s.77(iii) of the Constitution, with respect to any of the matters mentioned in s.75, the Parliament may make laws investing any court of a State with federal jurisdiction. By s.39(2) of the Judiciary Act, the several courts of the States shall, within the limits of their several jurisdictions, be invested with federal jurisdiction, in all matters in which the High Court has original jurisdiction, with certain presently immaterial restrictions (see Commonwealth v Evans Deakin Industries Ltd. (1986) 161 CLR 254 at 264).
Reference should also be made to ss.64 and 67 of the Judiciary Act as follows:

"64. In any suit to which the Commonwealth or a State is a party, the rights of parties shall as nearly as possible be the same, and judgment may be given and costs awarded on either side, as in a suit between subject and subject." "67. When in any such suit a judgment is given in favour of the Commonwealth or of a State and against any person, the Commonwealth or the State, as the case may be, may enforce the judgment against that person by process of extent, or by such execution, attachment, or other process as could be had in a suit between subject and subject."

The reasoning in Zarzycki and Mazuran

On behalf of the Deputy Commissioner, reliance is placed upon Zarzycki, above and upon the decision of Jenkinson J. in Re Mazuran; Ex parte Deputy Commissioner of Taxation (1990) 97 ALR 391.
In Zarzycki, the Deputy Commissioner obtained judgment in relation to tax owed by the judgment debtor. Following the commencement of bankruptcy proceedings based on that judgment, the judgment debtor filed an application for an instalment order under the Judgment Debt Recovery Act. Pursuant to that Act, such an application operates as a stay of enforcement or execution of the judgment. The Senior Master made an order under the Act, involving the payment of the judgment debt by instalment over 21 months. By s.9 of the Act, while in force, an instalment order has the effect of staying enforcement or execution of the judgment. It was held, cancelling the instalment order, that the Judgment Debt Recovery Act does not bind the Crown in right of the Commonwealth; that s.64 of the Judiciary Act cannot properly be construed as intended indirectly to apply the provisions of a State law to circumstances where the application of such a law would be invalidated by s.109 of the Constitution by reason of inconsistency with applicable provisions of a law of the Commonwealth; and that the discretionary powers conferred on the judgment creditor under s.206 and possibly s.209 of the Income Tax Assessment Act would be diminished and curtailed by the Judgment Debt Recovery Act as it would preclude proceeding to execution or sequestration after obtaining judgment for the time limited by an instalment order; hence these Acts cannot operate consistently.
In Mazuran, the Deputy Commissioner presented a bankruptcy petition founded on an act of bankruptcy by reason of the debtors's failure to comply with the requirements of a bankruptcy notice. The bankruptcy notice was based upon a final order of the Magistrates Court for recovery of unpaid taxation plus costs. Subsequent to the act of bankruptcy an order was made by the "proper officer" of the Magistrates Court at Melbourne which had effect, according to a submission made on behalf of the debtor, as a stay of enforcement for execution of the original order of the court. That order was made in pursuance of provisions of the Judgment Debt Recovery Act. It was held that no valid law authorised an order of the kind which the registrar of the Magistrates Court purported to make under the Act; that each of the debts of which recovery was ordered by the Magistrates Court were debts due to the Commonwealth; that there was no sufficient indication to displace the presumption against an intention on the part of the Victorian legislature in enacting the Act to bind the Crown in right of the Commonwealth; and that the relevant provisions of the Income Tax Assessment Act left no room for an application of either s.64 or s.67 of the Judiciary Act.
In Deputy Commissioner of Taxation v Homewood (1990) 91 ATC 4633, Southwell J. followed Zarzycki and Mazuran.
Both O'Bryan J. and Jenkinson J. found support for their conclusions in the reasoning of the High Court in Deputy Commissioner of Taxation v Moorebank Pty. Ltd. (1987-8) 165 CLR 56 where it was held that the provisions of the State Limitations Acts did not apply in proceedings brought in State Supreme Courts to recover additional tax payable under s.207 of the Income Tax Assessment Act. It was held that the provisions of the Assessment Act "relevantly cover the field" (at 66) with the consequence that the provisions of the Limitation Acts were not made applicable to the actions by s.64 of the Judiciary Act. Mason C.J., Brennan, Deane, Dawson and Gaudron JJ. said (at 67):

"The intrusion of State Limitation Acts provisions would undermine other aspects of the coherent scheme which the Assessment Act embodies. The intrusion of such provisions would, e.g., lie ill indeed with the Assessment Act provisions pursuant to which income tax and additional tax become and remain due and payable notwithstanding that an objection to payment of the tax has been lodged and the appellate procedures for challenging an assessment have been invoked: s.201. There will inevitably be cases in which it would be oppressive for the Commissioner to seek to enforce payment of the full amount due under a notice of assessment or by way of additional tax before the final resolution of a genuine dispute about the correctness of the assessment: cf. Deputy Federal Commissioner of Taxation v Australian Machinery and Investment Co. Pty. Ltd...; Marina Estates Pty. Ltd. v Deputy Commissioner of Taxation... A case in which the Commissioner issues a number of assessments on an alternative basis to different taxpayers in respect of the same income provides an obvious example. Viewed as a whole, the provisions of the Assessment Act relating to the procedures for challenging the correctness of an assessment leave no room for the applicability of a State law which would produce the consequence that, in a case where a genuine dispute about the correctness of the assessment remained unresolved against the particular taxpayer at the expiry of the relevant limitation period, the Commissioner would be barred from recovering income tax or additional tax if he had refrained from instituting separate proceedings for recovery of the tax."

In Australian Machinery and Investment Co. Pty. Ltd., above, it was contended that there was no jurisdiction to grant a stay of proceedings on a judgment obtained by the Deputy Commissioner pending the hearing of appeal. The contention relied on the provision of s.201(1) of the Assessment Act to the effect that the fact that a review or appeal is pending in relation to an assessment does not in the meantime interfere with, or affect, the assessment and income tax may be recovered as if no review or appeal were pending. Latham C.J., Rich, Dixon and Williams JJ. rejected the contention, holding (at 135) that there was jurisdiction to grant a stay "but that in considering any application for a stay the policy of the Act as stated is a matter to which great weight should be attached."
In Marina Estates, above, Barwick C.J. (with the agreement of Menzies, Stephen, Mason and Jacobs JJ.) also referred (at 220) to the Court's discretion to grant of a stay of proceedings on a judgment pending certain appeal proceedings. Although the stay was refused, the existence of a jurisdiction or power to grant a stay was not questioned.
The nature of the jurisdiction vested in the District Court for present purposes
In Russell v Russell (1976) 134 CLR 495, Jacobs J. said (at 554-5):

"There is nothing in the doctrine enunciated in Le Mesurier v Connor..., and acknowledged in the other cases to which I have referred, which would support the view that the Commonwealth Parliament when it invests a State court with Federal jurisdiction cannot prescribe the practice and procedure to be followed by parties who invoke, and by the Court which exercises, the invested jurisdiction. If the laws on the practice and procedure are within the subject matter of Commonwealth power and do not alter the structure of the State court then they offend no established principle."

Gibbs J. was of the same opinion (at 518) and went on to say (at 519):

"It seems clear enough that the Parliament could validly legislate with respect to such matters as the time within which proceedings should be brought (Adams v Chas. S. Watson Pty. Ltd....and the rules of evidence to be applied (Milicevic v Campbell... I accept that it might also prescribe rules of practice and procedure to be observed. But on that assumption it is necessary to consider whether a particular provision is no more than a law regulating the practice and procedure which the State court is to follow in exercising its invested jurisdiction, or whether it goes further and is a law with respect to the court itself."

It follows, in my opinion, that the Commonwealth Parliament could validly legislate with respect to the power, or lack of power, in a State court exercising federal jurisdiction to determine when a judgment debt should be paid and to grant a stay of the enforcement of the judgment in that connection. But, although the power so to legislate exists, the Commonwealth Parliament has not yet exercised this power in respect of the time at which a federal judgment debt obtained in the N.S.W. District Court should be paid. In the absence of the exercise of this legislative power, and there is nothing in s.64 or s.67 of the Judiciary Act to the contrary, the federal jurisdiction vested in the District Court by s.39(2) of the Judiciary Act must be exercised by that Court in accordance with its Act and its Rules.

On this question, both s.64 and s.67 of the Judiciary Act are, as it were, neutral. Speaking generally, they assimilate the position of the Commonwealth to that of a subject. Neither provision purports to lay down a rule dealing with the time at which the judgment debt is payable.
With respect to those who have a different view, I do not think that the present issue depends at all on the question whether the Commonwealth is bound by the District Court Act. By s.39(2) of the Judiciary Act, federal jurisdiction is conferred on the District Court and unless and until the Commonwealth Parliament chooses to exercise its power to legislate with respect to the procedure to be followed by the District Court in exercising federal jurisdiction (and neither s.64 nor s.67 have any relevant application here) the procedure of that Court prescribed by its Act and Rules will apply (see Electric Light and Power Supply Corporation Ltd. v Electricity Commission of N.S.W. (1956) 94 CLR 554 at 559).
The general position is explained by Professor Lane (A Manual of Australian Constitutional Law, 4th ed. at 345) as follows:

"On a rare occasion the Commonwealth has not nailed its federal jurisdiction on to the existing framework of the State administration of justice. For instance, the launching of a State prosecution may be subject to a prescribed time limit, found in State law, of course. The launching of a tax prosecution under the Income Tax Assessment Act 1936 (Cth.), a prosecution that may be taken in a State court, may, according to the Commonwealth's Assessment Act, be subject to no time limit. However, apart from this feature, the federal prosecution makes use of the State court with its normal procedures, times, limits, internal appellate system."

Two comments may be made here. First, the position in no way depends upon the operation of s.64 of the Judiciary Act. Rather, the jurisdiction of the District Court is conferred directly by s.39(2) of the Judiciary Act and, unless the Commonwealth legislates to alter the procedures in that Court, the District Court Act and Rules will apply when federal jurisdiction is exercised. Secondly, I do not think that it is possible to describe s.206 of the Income Tax Assessment Act as a law with respect to the procedures to be followed by a court, State or federal, in the exercise of federal jurisdiction. For one thing, it is not possible to vest federal judicial power in the Commissioner of Taxation.
The statutory power of the Commissioner to extend time
Nor, in my view, could it be suggested that the powers of the Commissioner under s.206(1) of the Assessment Act have any relevant application here. Upon the assumption, which I believe to be valid, that the provisions of Part 31A of the District Court Rules apply, the matter falls to be determined by a registrar or judge of the District Court under Part 3lA in the exercise of federal jurisdiction. It is plain that the Commissioner cannot exercise this jurisdiction (see, e.g. Polyukhovich v Commonwealth of Australia (1991) 101 ALR 545 per Deane J. at 611; cf. Australian Machinery and Investment above, and Marina Estates, above).
Was there a stay of enforcement of the judgment?
Upon the assumption that the District Court Rules did apply, it is next necessary to consider whether there was a stay by virtue of those rules. It will be recalled that the registrar refused to make an instalment order on the ground that the Commonwealth was not bound by the rules. By Part 31A r.2(8)(b), it is provided that where the registrar refuses to make an instalment order, the application shall, until it is dealt with by the Court under r.2(7), operate as a stay of enforcement of the judgment. The Court has not, of course, dealt with the matter. It follows, in my opinion, that there is a stay in force in the present case. It further follows, in my view, that the judgment debt is neither payable immediately nor payable at a certain future time (see Re Faulkner, ex parte Deputy Commissioner of Taxation (unreported 1 February 1989, per Ryan J.)).
Once it is accepted, as, in my view it should be, that, under the District Court Rules, there is a stay of enforcement of the judgment, it must follow that the judgment debt is not immediately payable. It would be a contradiction in terms to say that, the judgment creditor was restrained from enforcing his judgment debt, yet the judgment debtor is legally bound to pay that debt immediately. It is true that there is no suggestion here of a permanent stay but even the grant of a temporary stay would have the consequence that the judgment debt is not immediately payable. If the temporary stay were for an indefinite period, the judgment debt would not be payable at a certain future date. In this respect, it is significant that in his petition the Commissioner has relied on the judgment debt as the source of the relevant indebtedness.
Orders proposed
I propose that it be ordered that the question in the stated case be answered in the negative and that the Deputy Commissioner pay the costs of the stated case.

JUDGE2

A case has been stated as follows:

"1. By a petition, presented on 27 March 1991, for a sequestration order against the estate of the debtor, Phillip J. Pollack, the Deputy Commissioner of Taxation alleges (para.2): 'The debtor is justly and truly indebted to me in the sum of $37,156.43 being the amount due under the final judgment recovered in the District Court of New South Wales at Sydney on the Twenty First day of August 1990

($33,940.04) for income tax and additional tax for late payment and ($3,216.39) interest thereon calculated to 18 February 1991'.

2. By his amended notice of intention to appear at the hearing of the petition, Mr Pollack gave the following, amongst other, grounds of opposition:

'2. Judgment debt has been stayed.

3. Judgment debt is not payable immediately or at a certain future time'.

3. On 3 July 1991 Mr Pollack lodged an application to pay by instalments the judgment debt entered in favour of the Petitioning Creditor; the application was on 4th July 1991 refused by the Registrar of the District Court, on the ground that the Court had no power to grant the application.

4. The following question is referred for consideration by the Full Court.

Question: 'Is the debt alleged in para.2 of the petition a debt that is payable either immediately or at a certain future time within the meaning of s.44(1)(b)(ii) of the Bankruptcy Act 1966 for the purposes of s.52(1)(c) of the Act?'"

The questions argued concerned the effect of Part 31A of the District Court Rules 1973 of the State of New South Wales ("the Rules") and the effect of those Rules on the rights of the Deputy Commissioner of Taxation ("the Commissioner") as a judgment creditor petitioning for a sequestration order under the Bankruptcy Act 1966 ("the Act" or "the Bankruptcy Act") against a judgment debtor. The debtor says that the effect of the Rules, in their operation on the facts, is that enforcement of the judgment is stayed and that therefore there is no right to petition. If the Rules have that effect, they do so in conformity with ss.64 and 79 of the Judiciary Act 1903. Those provisions read as follows:

"64. In any suit to which the Commonwealth or a State is a party, the rights of parties shall as nearly as possible be the same, and judgment may be given and costs awarded on either side, as in a suit between subject and subject.

...

79. The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable."

It may not be at first sight obvious that s.79 applies to State courts, as well as federal courts, exercising federal jurisdiction, but it plainly does so: De Vos v Daly (1947) 73 CLR 509 at 514, Peel v R. (1971) 125 CLR 447, and Maguire v Simpson (1977) 139 CLR 362 at 375, 376. Subject to one qualification, each of these provisions appears to be a basis for argument that the relevant Rules apply against the Commissioner in the present circumstances. That qualification is that the word "suit" in s.64 may confine the operation of that section to the stage of proceedings up to judgment. The point is not critical for present purposes, but in my view that appears to be too narrow a reading of s.64; for example, surely the process of taxation of costs under a judgment would not be taken to be outside the concept of a "suit".
Much of Part 31A of the Rules is relevant, but I do not propose to set it out in full. All the Rules referred to in the following discussion are in Part 31A.
Rule 1 reads, in part, as follows:

"(1) The Court may, on the application of any party to an action or without any such application being made, when giving judgment in the action, order that the judgment debt (if any) be paid at such time, or by such instalments payable at such times as it thinks fit.

(2) Subject to this Part, every judgment debt shall be payable forthwith".

It will be noted that Rule 1(1) gives the Court power to make an order of the kind mentioned "when giving judgment in the action". Here, there was a considerable gap in time between the entry of judgment and the application to pay the judgment debt by instalments. Rule 2 reads, in part, as follows:

"(1) Whether or not an order in respect of a judgment debt has been made under rule 1(1) -

(a) the judgment debtor may make an application in writing, supported by an affidavit (in duplicate) as to his property and means, to the registrar for leave to pay the judgment debt, or the balance of the judgment debt then owing to the judgment creditor, by such instalments payable at such times as may be specified in the application ...".

It appears that the application referred to in the case stated was made under Rule 2(1)(a). Under Rule 2(4):

"Where -

(a) an application is made by or on behalf of a judgment debtor under subrule (1)(a), the registrar shall forthwith consider and determine the application and may -

(i) order that the judgment debt be paid by such instalments payable at such times as are specified in the application; or

(ii) refuse to make such an order ...".

There was some discussion at the hearing before us as to whether, where (as here) the Registrar refuses to make an order on the ground of lack of power, he may be said to have acted under sub-rule 4(a)(ii). It is my view that the provision applies whether the refusal is based on the merits or on the Registrar's view as to the scope of the power to make such orders; I see no justification for confining the right to a stay, given by Rule 2(8), discussed below, to cases where the refusal is based on the evidence of property and means.

Under Rule 2(4), notice of an order under paragraph (a), which has been quoted, must be forwarded to the judgment creditor. Under Rule 2(5), the judgment creditor may then, within fourteen days of notice of the order, file notice "of his objection to the payment of the judgment debt by the instalments specified in the order". Under Rule 2(6), where the Registrar refuses to make an order or where the judgment creditor files a notice of objection under sub-rule (5), the Registrar is to set the judgment debtor's application down for hearing by the Court. Under Rule 2(7), where an application has been so set down, the Court may:

"(a) where the registrar refused to make the order -

(i) make an order that the judgment debt, or the balance of the judgment debt then owing to the judgment creditor, be paid by such instalments payable at such times as the Court thinks fit; or

(ii)refuse to make such an order; or

(b) where the judgment creditor has filed a notice of objection in accordance with subrule (5), confirm, vary or rescind the order of the registrar".

The critical provision for present purposes is Rule 2(8), which reads as follows:

"Where -

(a) an application is made by or on behalf of a judgment debtor under subrule (1) and no application in respect of the judgment debt has previously been made by or on behalf of the judgment debtor under that subrule or under rule 1(1); and

(b) the registrar refuses under subrule (4) to make an order pursuant to the application, the application shall, until it is dealt with under subrule (7), and unless the Court otherwise orders, operate as a stay of enforcement of the judgment in respect of which the application is made, except enforcement by way of a garnishee order to which section 98 of the Act applies made before the application was made to the registrar".

It was argued for the debtor that sub-rule 8(b) applies and that therefore the judgment was stayed and could not be the subject of a petition for a sequestration order.

It should be added that under Rule 3, the Court has power to vary or rescind an order made under Rule 1 or Rule 2 in respect of a judgment debt and, further, such an order ceases to be in force if the debtor fails to make any payment in accordance with the order.
Section 44(1) of the Act reads, in part, as follows:

"A creditor's petition shall not be presented against a debtor unless - ...

(b) that debt, or each of those debts, as the case may be -

(i) is a liquidated sum due at law or in equity or partly at law and partly in equity; and

(ii) is payable either immediately or at a certain future time;

..."

The debtor's contention was that the debt was payable neither immediately, nor at a certain future time, because of the stay under Rule 2(8).

Counsel for the Commissioner argued that the debt was payable immediately within the meaning of s.44(1)(b)(ii). He said that if there was a stay of enforcement of the judgment, the debt nevertheless remained payable. That appears to me to be correct. I have found no authority in support of the proposition that a stay of enforcement of a judgment produces the result that the debt ceases to be payable; surely the judgment creditor could, despite the stay of enforcement, plead the debt as a common law set-off. Counsel for the Commissioner aptly, in my view, contrasted the wording of s.44(1)(b)(ii) with that of s.40(1)(g) of the Act, which has the effect that an act of bankruptcy is committed by failure to comply with the requirements of a bankruptcy notice; that provision uses the expression:

"if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed ...".

A stay under Rule 2(8) has the effect that the obligation subsists but enforcement of the judgment cannot take place; I have read and express my respectful agreement with the analysis of this question in the reasons of Gummow J.

It was not contended that a stay of enforcement under Rule 2(8), by its own force and irrespective of the content of the Bankruptcy Act, prevents issue of or proceeding upon a bankruptcy petition. It would not be within the rule-making power to deprive the petitioning creditor of a right given by the Bankruptcy Act. But apart from any question of power, one could hardly construe the reference to "enforcement" in the Rule as intended to detract from rights given by, or otherwise affect, the operation of the Bankruptcy Act.
Under s.52(1)(c):

"At the hearing of a creditor's petition, the Court shall require proof of -

...

(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing

..."

For the purposes of this provision, again, if there is a stay of enforcement under the Rules, the debt is still owing; it does not cease to be owing because of the stay. It follows that the question should, in my view, be answered in favour of the Commissioner: the answer I propose appears at the end of these reasons.
The conclusion at which I have arrived makes it unnecessary to deal with the question whether a stay under Rule 2(8) has any effect upon the rights of the Commissioner in pursuing recovery of a tax debt. However, since the matter was elaborately argued, I propose to state my view on that point.
The problem is one of reconciling two laws: first, a State law made applicable to bankruptcy proceedings in this Court by the Judiciary Act, and, secondly, a Commonwealth law, whose operation may bring it into conflict with the State law. Questions of this sort may be dealt with by tests developed in resolving the problem of conflict between Commonwealth and State laws under s.109 of the Constitution: Deputy Commissioner of Taxation v Moorebank Pty. Ltd. (1988) 165 CLR 55 at 64. In particular, it is necessary to consider whether the relevant field has already been covered by the Commonwealth law.
The provisions relied on by the Commissioner as marking out the field covered are in the Income Tax Assessment Act 1936 (the "Tax Act") and their field of operation is, broadly, to define when tax becomes payable, how it may be recovered and the Commissioner's power to allow time to pay. The effect of the provisions relied on is stated sufficiently for present purposes in Moorebank (above) at p 65 of 165 CLR:

"Under those provisions, income tax is made 'a debt due to' the Commonwealth: s.208. 'Any tax unpaid may be sued for and recovered in any Court of competent jurisdiction': s.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': s.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': s.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': s.207".

It was conceded that these provisions do not preclude a State court from making an order staying a judgment for tax due to the Commissioner pending an appeal; that point was first distinctly established by the High Court in Deputy Federal Commissioner of Taxation v Australian Machinery and Investment Company Pty. Ltd. (1945) 8 ATD 133. The correctness of the decision was assumed in the Moorebank case:

"There will inevitably be cases in which it would be oppressive for the Commissioner to seek to enforce payment of the full amount due under a notice of assessment or by way of additional tax before the final resolution of a genuine dispute about the correctness of the assessment: cf. Deputy Federal Commissioner of Taxation v Australian Machinery and Investment Co. Pty. Ltd. (1945) 8 ATD 133; Marina Estates Pty. Ltd. v Deputy Commissioner of Taxation

(1974) 48 ALJR 219". (p 67 of 165 CLR)

Here, it is a stay of enforcement of a judgment which is in question, but not one of the kind referred to by the High Court in the passage above. For the Commissioner to succeed on this point, it must be held that certain types of stays are to be distinguished, for this purpose, from those of the kind to which the High Court referred. It may be thought that the present stay is of the same general kind as a stay of a judgment pending appeal; it is one intended to fill in a gap in court proceedings pending the disposition of the matter by the court. But looked at more broadly, the Rule 2(8) stay is merely ancillary to the provisions for instalment payment orders; if they are inapplicable to the Commissioner's tax debts, then it would appear to follow that provisions for a stay, being part of that system, cannot apply to such debts either.
In Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 509, it was said that:

"... the sections of the Income Tax Assessment Act 1936 (Cth) ('the Act') giving rise to a liability to pay tax and empowering the Commissioner to sue for that tax are spent once judgment is entered in favour of the Commissioner".

It followed, so the debtor argued, that there could be no question here of a collision between the provisions of the Tax Act and the instalment payment provisions of the Rules. That does not appear to me to be so. The statement in Chamberlain's case may be treated as based on the general principle that the debt sued on merges in the judgment based on that debt. But the doctrine of merger does not, for all purposes, make irrelevant the characteristics of the debt on which the judgment was obtained. An example of this proposition is the decision of Lawrence J. in In Re Wethered; ex parte Salaman (1926) Ch 167. There, a question arose as to the character of a debt for the purposes of s.38(c) of the English Bankruptcy Act 1914. Lawrence J. rejected the contention:

"... that Saunders' original indebtedness which admittedly arose in the course of the bankrupt's business, was extinguished by the judgment which the bankrupt obtained, and that the debt owing on such judgment cannot properly be termed a debt due to the bankrupt in the course of his business" (174).

Another example of the limited effect of merger of a debt in a judgment is provided by the decision of the English Court of Appeal in Aman v Southern Railway Company (1926) 1 KB 59. There, a scheme affecting a company extinguished certain claims against it. The Court held that this prevented enforcement of a judgment, based on such a claim, entered before the scheme came into effect.
The Court did not say in Chamberlain's case, nor does it seem to be correct, that the Commissioner's power under s.206 of the Tax Act to extend time for payment of tax or permit payment of tax to be made by instalments is spent after judgment. On that point, I respectfully agree with the decision in Re Mazuran; Ex parte Deputy Commissioner of Taxation (1990) 97 ALR 391 at 400. Similarly, s.265 of the Tax Act, which allows taxpayers to be released from liability altogether in certain circumstances, applies even when the liability has been established by judgment of a court.
At the least, provisions of this sort sit awkwardly with a power in the court in which judgment is entered to permit payment by instalments. There would, of course, be a direct collision between the two provisions if the Commissioner agreed to accept payment on a certain deferred basis and an order were later made under the Rules providing for payment by instalments extending beyond the date fixed by the Commissioner.
It does not appear to me, however, that the solution to the problem lies in the distinction between procedural and substantive State provisions - the former but not the latter being operative against the Commonwealth. There are two reasons for thinking that this can no longer be treated as the decisive test. The first is that it was not so treated in Moorebank and the second is that such a distinction seems inconsistent with the scheme of the relevant provisions of the Judiciary Act. Section 64 of that Act has been held to apply to both procedural and substantive rights: Maguire v Simpson (1977) 139 CLR 362, Commonwealth of Australia v Evans Deakin Industries Limited (1986) 161 CLR 254 at 262, and s.79 of the Act expressly so applies. Substantive State laws are, no doubt, more likely than State procedural laws to conflict with Commonwealth statutes, as a matter of practicality. But one does not, with all respect to those who hold a contrary view, help consideration of the present matter much by attempting to characterise the instalment provisions of the Rules as substantive or procedural. The essential point is, in my opinion, whether the Commonwealth Parliament should be taken to have intended that citizens' obligations to pay tax debts should be capable of being alleviated by orders of State courts under the general provision of their Rules, as well as by the means specifically provided by the Tax Act. In my opinion, the answer to that question is no and for the reason that application of the State Rules would be likely to impose on taxpayers obligations inconsistent with those arising under the Tax Act.
Summary
1. Rule 2(8) had the effect, on the facts stated above, of bringing a stay into existence.
2. The stay did not affect the right to petition for and obtain a sequestration order based on the judgment debt.
3. The provisions of the Judiciary Act do not make applicable to judgments for income tax the relevant Rules of the New South Wales District Court, being those providing for orders for payment of judgment debts to be made by instalments.
4. I would answer the question:

The debt alleged in paragraph 2 of the petition is a debt that is payable immediately within the meaning of s.44(1)(b)(ii) of the Bankruptcy Act 1966 and is a debt which is still owing within the meaning of s.52(1)(c) of that Act.

JUDGE3

On 21 August 1990, the creditor recovered in the District Court of New South Wales at Sydney a final judgment for income tax and additional tax for late payment, together with a sum for interest thereon calculated to 18 February 1991.

On 27 March 1991, the creditor presented to this Court a petition for a sequestration order against the estate of the debtor, pursuant to the Bankruptcy Act 1966 ("the Bankruptcy Act").
Sub-paragraph 44 (1) (b) (ii) of the Bankruptcy Act states that a creditor's petition shall not be presented against a debtor unless the debt in question is payable either immediately or at a certain future time. At the hearing of the creditor's petition, the Court shall require proof of the fact that the debt on which the petitioning creditor relies is "still owing": para. 52 (1) (c). These provisions may be compared with that in para. 40 (1) (g). This deals with the requisites of a bankruptcy notice. The final judgment or final order upon which the bankruptcy notice is based must be one "the execution of which has not be stayed". That is not a requirement carried over to s. 44, or s. 52.
In the present petition, the creditor relies upon the District Court judgment debt. The debtor contends, in the statement of grounds of opposition to the petition, that (i) the judgment debt has been stayed, and (ii) the judgment debt is not payable immediately or at a certain future time. It follows from what I have said that the first of these grounds, even if made out, would not of itself be a sufficient answer to the petition.
Part 31A subrule 1 (1) of the District Court Rules 1973 (N.S.W.) ("the District Court Rules"), made under the District Court Act 1973 (N.S.W.) ("the District Court Act"), provides that when giving judgment in an action that court may, with or without application by any party to the action, order that the judgment debt be paid at such time or be paid by such instalments payable at such times as the court thinks fit. It is common ground that no such order was made in the present case. The result is that, subject to the taking of steps provided for in the balance of Part 31A, the judgment debt was payable forthwith: Part 31A subrule 1 (2).
Provisions similar to those in Part 31A were previously included as ss. 87 - 89 of the District Court Act, but were removed from the statute itself by the District Court (Procedure) Amendment Act 1984 (N.S.W.).
Part 31A rule 2 provides, inter alia, for the making by the judgment debtor of an application in writing to the Registrar, supported by an affidavit as to his property and means, for leave to pay the judgment debt by instalments as specified in the application. Subrule 2 (4) states that the Registrar "shall forthwith consider and determine the application" and that he may refuse to make such an order or may order that the judgment debt be paid by the instalments specified in the application. If an order is made the judgment creditor is to be notified. The judgment creditor may then file a notice of objection to the payment of the judgment debt by the instalments specified in the order. Where the judgment creditor has filed such a notice, or where the Registrar has refused to make an order, the Registrar is obliged by subrule 2 (6) to set down the application for hearing by the court. The court may vary or rescind any order that has been made by the Registrar or, where the Registrar refuses to make an order, make an order for payment "by such instalments payable at such times as the Court thinks fit": subrule 2 (7).
Subrule 2 (8) provides that where the Registrar refuses under subrule (4) to make an order pursuant to an application, the application shall until it is dealt with under subrule (7), and unless the court otherwise orders,

"operate as a stay of enforcement of the judgment in respect of which the application is made, except enforcement by way of a garnishee order to which section 98 of the Act applies made before the application was made to the registrar."

Where the court or the Registrar makes an instalment order under Part 31 rule 2, the order operates as a stay of enforcement of the judgment, except enforcement by way of a garnishee order: subrule 2 (9). An order made under Part 31 rule 1 or rule 2 shall cease to be in force if the judgment debtor fails to make any payment in accordance with the order. Thereafter the judgment may, except where otherwise directed by the court, be enforced for the balance by the judgment debt owing to the judgment creditor: subrule 3 (2).
Legislation and rules of court in various States and Territories makes provision for orders for payment of judgment debts by instalments. The applicable provisions are collected in The Law Reform Commission Report No. 36 "Debt Recovery and Insolvency", 1987, paras. 94 - 98. In Victoria, provision for the recovery of judgment debts by instalments is made by the Judgment Debt Recovery Act 1984 (Vic.) ("the Victorian Act").
In the present case, on 3 July 1991, the debtor lodged an application in the District Court to pay by instalments the judgment debt recovered by the creditor. The Registrar refused the application on 4 July 1991, on the ground that the District Court had no power to grant it.
In that regard, it may be noted that on 12 July 1990 the Supreme Court of Victoria (O'Bryan J.) held that the provisions of the Victorian Act were not applicable to a judgment debt for income tax, penalty tax and additional tax because they could not operate consistently with Part VI of the Income Tax Assessment Act 1936 ("the Tax Act").: Deputy Commissioner of Taxation v Zarzycki (1990) 96 ALR 146. The reasoning in that case was followed, in this Court, by Jenkinson J. in Re Mazuran; Ex parte Deputy Commissioner of Taxation (1990) 97 ALR 391 at 401, and in the Supreme Court of Victoria (Southwell J.) in Deputy Federal Commissioner of Taxation v Homewood (1991) 91 ATC 4,633. Both of these cases were also concerned with orders for instalment payments, made under the Victorian Act.
In the present case, the debtor submitted to us that the conduct of the Registrar amounted to a refusal under Part 31A subrule 2 (4) and that therefore, by dint of subrule 2 (8) the application itself operated as a stay of enforcement of the judgment until disposed of by the court under subrule 2 (7). Therefore, so it was submitted, the judgment debt was not payable either immediately or at a certain future time within the meaning of sub-s. 44 (1) of the Bankruptcy Act. I do not accept that submission.
In Part 31A, distinctions are drawn between giving judgment in an action, enforcement of the judgment, stays of enforcement of the judgment, and the character of the judgment debt both as an obligation payable forthwith and as an obligation payable by instalments. Enforcement is concerned with the means of compulsion, whether of the debtor or of third parties such as those to whom orders for a garnishee are directed, whereby the creditor receives satisfaction in whole or part of the outstanding obligation represented by the judgment debt. The debt may be payable by the debtor although the means of enforcement are denied to the creditor. An order for payment by instalments would not, of itself, necessarily operate as a stay of enforcement of the judgment in respect of which the order was made. Subrule 2 (9) was needed expressly to so provide. When, pursuant to subrule 2 (8), there is an application which operates as "a stay of enforcement" (as in the present case) the judgment debt in question, in my view still remains payable forthwith as specified in subrule 1 (2).
In Re Padagas; Ex parte Carrier Air Conditioning Pty Ltd (1977) 30 FLR 170 at 172, Riley J., dealt with a case where an instalment order had been made by the Registrar under sub-s. 88 (4) of the District Court Act, as it then stood. By reason of sub-s. 88 (8), the order, whilst it remained in force, operated as a stay of enforcement of the judgment; cf. the present Part 31A, subrule 2 (9). Nevertheless, his Honour held that the debt was payable. It was payable only "at a certain future time", but this was sufficient for sub-s. 44 (1) of the Bankruptcy Act. The existence of the stay would have been fatal to validity of a bankruptcy notice. But it was no obstacle to the presentation of a petition.
In my view, in the present case the existence of a stay of enforcement pursuant to subrule 2 (8) does not, of itself, and without more, deprive the judgment debt of its character an obligation that is payable immediately, as indicated in subrule 1 (2).
Further, in my view, in the events that have happened the stay provided for in subrule 2 (8) has not come into operation. This is because there has been no "refusal" by the Registrar to make an order under subrule 2 (4). This is an additional, and, in a sense, threshold reason why the debtor has not made good his case.
Subrule 2 (4) of Part 31 is concerned with a refusal on the merits, having regard to what is disclosed as to the property and means of the debtor in the affidavit filed in support of the application pursuant to subrule 2 (1). Therefore, in the events that have happened, nothing has occurred to displace the operation of subrule 1 (2) that the judgment debt be payable forthwith. In respect of any error by the Registrar in deciding that he had no power to exercise, the debtor may have had remedies under ss. 65 and 69 of the Supreme Court Act 1970 (N.S.W.); see Glenvill Homes Pty Ltd v Builders Licensing Board (1981) 2 NSWLR 608; Coles v Burke (1987) 10 NSWLR 429. But it is not appropriate here to pursue that question.
The result is that the debtor has not shown that the debt alleged in the petition is not payable either immediately or at a certain future time within the meaning of sub-para. 44 (1) (b) (ii) of the Bankruptcy Act. Further, the debt is "still owing" within the meaning of para. 52 (1) (c) of the Bankruptcy Act. Therefore the question referred for consideration by the Full Court should be answered favourably to the creditor.
However, in the light of the detailed and careful arguments that were presented to the Full Court, I should deal also with the alternative, and indeed primary, submission put for the creditor. This was that even if there was in operation a stay of enforcement of the judgment, pursuant to Part 31A subrule 2 (8) of the District Court Rules, that stay was ineffective, given the nature of the judgment debt and the character of the creditor as a representative of the federal fisc. The creditor submitted that as regards the operation of the District Court Rules, the same result should follow as in relation to the Victorian Act upon the construction given it in Deputy Commissioner of Taxation v Zarzycki (supra) and the other decisions to which I referred. The resistance to that proposition by the debtor was supported by the Solicitor-General for New South Wales, who appeared for the State Attorney after the necessary notices had been given under s. 78B of the Judiciary Act 1903 ("the Judiciary Act").
In dealing with these submissions, it is necessary first to have regard to certain provisions of the Tax Act and to some basic legal propositions.
Part V of the Tax Act deals with objections and appeals; the purpose of the procedure of assessment, objection and appeal or review is to ascertain the true tax liability of the taxpayer under the substantive provisions of the legislation: Federal Commissioner of Taxation for the Commonwealth of Australia v Dalco (1989) 168 CLR 614 at 621.
Part VI of the Tax Act is headed "Collection and Recovery of Tax". When it becomes due and payable, income tax, including additional tax, is a debt due to the Commonwealth and payable to the Commissioner: s. 208. However, in any case the Commissioner may grant such extension of time for payment of tax, including additional tax, or permit payment of tax to be made by such instalments and within such time, as the Commissioner considers the circumstances warrant; the tax shall be due and payable accordingly: s. 206. Special provision is made in s. 207 for remission by the Commissioner of additional tax.
Section 265 (which is in Part VIII of the Tax Act) makes special provision for the release of taxpayers from liability in cases of hardship. Section 170 and other provisions in Part IV of the Tax Act make extensive provision for the amendment of assessments by the Commissioner. In some circumstances he may issue an amended assessment at any time: sub-ss. 170 (1), (6). Tax may be recovered whilst a review or appeal under Part V is pending: s. 201.
In The Federal Commissioner of Taxation v The Official Liquidator of E.O. Farley Limited (In Liquidation) (1940) 63 CLR 278 at 315, Dixon J. said, of the sales tax and income tax legislation as it then stood:

"Having made the tax a personal liability, that is, a debt, as in the present case, the Parliament may make particular provisions to facilitate the enforcement of the liability and to ensure the actual recovery of the debt. Measures of this sort are incidental to the main purpose of the power and, independently altogether of sec. 51

(xxxix.), fall under the power."

This the Parliament has done in a number of provisions in Part VI of the Tax Act. Liquidators, receivers, and other persons falling within the meaning of the term "trustee" in sub-s. 215 (1) have special obligations imposed upon them in respect of the assets under their administration. The same is true of those conducting the administration of estates of deceased taxpayers: s. 216. Further, s. 218 creates in favour of the Commissioner rights in the nature of a statutory garnishee: Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1.

In addition, s. 209 provides that any unpaid tax, including additional tax, may be sued for and recovered "in any Court of competent jurisdiction" by the Commissioner or a Deputy Commissioner suing in his official name. The principles of merger of causes of action into judgments apply to actions brought pursuant to s. 209: Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502. But the merger of the cause of action into a judgment debt does not necessarily extinguish the original debt for the purpose of bankruptcy proceedings against the taxpayer: Re Seckold; Ex parte Sargood, Gardiner, Ltd (1933) 5 ABC 195 at 198-199. Further, it will be apparent that curial recovery is but one of the measures provided for in Part VI for the collection and recovery of tax.

It was common ground before us that the action in the District Court brought by the creditor against the debtor and in which the judgment in question was recovered was a matter in respect of which the District Court was invested with federal jurisdiction by the operation of ss. 75 (iii) and 77 (iii) of the Constitution and sub-s. 39 (2) of the Judiciary Act.
It was said by Griffith C.J. (in The Federated Sawmill, Timberyard and General Woodworkers' Employes' Association (Adelaide Branch) v Alexander (1912) 15 CLR 308 at 313) that:

"(W)hen the Federal Parliament confers a new jurisdiction upon an existing State Court it takes the Court as it finds it, with all its limitations as to jurisdiction, unless otherwise expressly declared."

Effect was given to that proposition in Le Mesurier v Connor (1929) 42 CLR 481. However, in Adams (Deputy Federal Commissioner of Taxation (Victoria)) v Chas. S. Watson Pty Ltd (1938) 60 CLR 545 at 554, Latham C.J. dealt with the submission that the earlier cases decided that when the Parliament invested a State court with federal jurisdiction "the Parliament must necessarily adopt that court as it found it in State law with all its limitations, whatever they might be, whether relating to jurisdiction or to other matters". The Chief Justice said:

"But Le Mesurier's Case is not authority for so wide a proposition. It relates to the constitution and organization of a court, and decides that the Commonwealth Parliament cannot, in purporting to adopt a State court as a judicial instrument, change the character or constitution of that instrument. . . . The decision rests upon the distinction between structure and function. The Commonwealth Parliament cannot change the structure of a State court, but it may confer new functions upon such a court."

Adams' case decided that the Parliament might legislate with respect to the time within which proceedings in the invested jurisdiction might be brought in the State court.

Further, as it was put by Jacobs J. in Russell v Russell (1976) 134 CLR 495 at 554-555 (with like expressions of view by Gibbs J. at 519 and Mason J. at 535-536):

"There is nothing in the doctrine enunciated in Le Mesurier v Connor, and acknowledged in the other cases to which I have referred, which would support the view that the Commonwealth Parliament when it invests a State court with Federal jurisdiction cannot prescribe the practice and procedure to be followed by parties who invoke, and by the Court which exercises the invested jurisdiction. If the laws on the practice and procedure are within the subject matter of Commonwealth power and do not alter the structure of the State court then they offend no established principle."

It may be implicit in what is there said that in the absence of provision in federal law, the matter in respect of which the State court is invested with jurisdiction will be determined solely according to the practice and procedure of that court. But in the present case federal law does deal with the applicable procedure. Although special provision as to procedure was not made by federal law, when the District Court exercised federal jurisdiction in a matter with which it was invested by s. 39 of the Judiciary Act, it was bound by s. 79 of the Judiciary Act to apply the laws of the State of New South Wales relating to procedure: De Vos v Daly (1947) 73 CLR 509 at 514. Hence it was submitted that in the absence of provision by some federal law other than s. 39, the scheme for the payment by instalments of judgment debts, established by Part 31A of the District Court Rules, was to be viewed as an element in the procedures of that court and therefore as something binding that Court in the exercise of the invested federal jurisdiction.
The distinction between matters of procedure and substance is in some respects an elusive one, many substantive rights having been "secreted in the interstices of procedure": Maxwell v Murphy (1957) 96 CLR 261 at 286 per Fullagar J. The point is illustrated, in particular, by a consideration of the true nature of various limitation provisions: The Deputy Commissioner of Taxation v Moorebank Proprietary Limited (1988) 165 CLR 55 at 64-65. However, for the purposes of characterisation in private international law, a law which suspends the personal remedy on a contract, such as s. 25 of the Moratorium Act 1930-1931 (N.S.W.), is procedural rather than substantive; Noske v McGinnis (1932) 47 CLR 563 at 586, 589, 590, 592-593. But the line may be drawn in different places for different purposes; and in each case what is required is an analysis of the specific questions calling for decision, their legal background and the factual context: In the Estate of Fuld dec'd (No. 3) (1968) P 675 at 695.
No doubt the power of a court to stay proceedings as an abuse of process or to stay proceedings upon a judgment so as to protect the subject matter of an appeal would ordinarily be regarded as procedural in character. It may be conceded that the exercise of invested jurisdiction by a State court ordinarily would include those procedures, by reason of the operation of s. 79 of the Judiciary Act. There are numerous authorities in which it was stated or assumed that because the institution of proceedings in a State court for recovery of tax, pursuant to s. 209 of the Tax Act and sub-s. 39 (2) of the Judiciary Act, may operate unfairly or oppressively to the taxpayer if there is a genuine dispute as to the assessment and his rights of review or appeal in respect of the assessment have not yet been exhausted, the State court may (no doubt upon appropriate terms) stay or adjourn the recovery proceedings or stay enforcement of a judgment recovered in those proceedings. To the State court it might also appear oppressive for the Commissioner still to seek forthwith to enforce a judgment for the full amount, where the liability to pay the unpaid tax, the subject of the judgment recovered in that court by the Commissioner, then had been qualified by a permission under s. 206 for payment by instalments. The authorities in this area are collected and discussed by French J. in Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 at 135-139; see also The Deputy Commissioner of Taxation v Moorebank Proprietary Limited, supra at 67. But weight must be given, on an application to the Court for such relief, to the legislative policy in s. 201 of the Tax Act.
But, in my view, the scheme established by Part 31A of the District Court Rules is to be characterised as essentially substantive rather than procedural. In Deputy Federal Commissioner of Taxation v Zarzycki, O'Bryan J. described the Victorian Act as establishing a means for obtaining legal authorisation to pay a judgment debt by instalments over a period of time. The same may be said of Part 31A which, as I have indicated, establishes a regime whereby a judgment debtor may apply for leave to pay by instalments a judgment debt otherwise payable forthwith, the application being supported by evidence as to the property and means of the judgment debtor. The order for payment by instalments may be made when judgment is given in the action, or upon later application, and the order may be of short or long duration; upon default by the debtor the stay on enforcement for the balance of the judgment debt will be removed by operation of Part 31A subrule 3 (2). But whilst in force, the effect of an order under Part 31A is to change the nature of the legal obligations to which the judgment debt, into which the cause of action has merged, gives rise. It is not merely a case of suspending the access of the creditor to enforcement procedures. The operation of Part 31A upon a judgment debt recovered in a matter in respect of which the District Court is invested with federal jurisdiction, is not to be seen as a matter of procedure and therefore simply as something "picked up" by s. 79.
As I understood the submissions, it was conceded that it was not within the competence of State legislation to impair by substantive provision the recovery or enforcement of debts owing the Commonwealth in respect of taxes levied by it; cf. The Commonwealth of Australia v Cigamatic Pty Limited (In Liquidation) (1962) 108 CLR 372; Bank of New South Wales v The Commissioner of Taxation of the Commonwealth of Australia (1979) 145 CLR 438 at 444; Shaw v Coco (1991) 102 ALR 75 at 80-81. But it was submitted by the debtor that individually or in combination, ss. 64, 67 and 79 of the Judiciary Act "picked up" Part 31A.
Section 67 may be put to one side. It provides:

"67 When in any such suit a judgment is given in favour of the Commonwealth or of a State and against any person, the Commonwealth or the State, as the case may be, may enforce the judgment against that person by process of extent, or by such execution, attachment, or other process as could be had in a suit between subject and subject."

Section 67 was designed as a facultative provision to overcome the cumbersome procedures previously in existence for the recovery of debts and property by the Crown: Re Oskar; Ex parte Commonwealth of Australia (1984) 55 ALR 717 at 719-720. It is a provision that is procedural in character: Maguire v Simpson (1977) 139 CLR 362 at 369 per Barwick C.J. It does not import supervening restrictions upon what otherwise are existing rights of enforcement held by the Commonwealth.

As I have said, when the District Court exercises federal jurisdiction it is bound by s. 79 of the Judiciary Act to apply the laws of the State of New South Wales. The laws which may be picked up are not confined to those which are procedural in character; e.g. Musgrave v The Commonwealth (1937) 57 CLR 514. But s. 79 binds the District Court only to the extent that provision otherwise is not made by the Constitution or the laws of the Commonwealth: Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313 at 368-369. And the laws of the State only bind the District Court in "cases to which they are applicable"; if the relevant litigant in the District Court matter is the Commonwealth, it is s. 64 of the Judiciary Act which applies State law to the Commonwealth: Trade Practices Commission v Manfal Pty Ltd (1990) 97 ALR 231 at 262-263. The present problem is then to be answered by looking to the operation not of s. 67 or s. 79, but s. 64 of the Judiciary Act.
Of s. 64 of the Judiciary Act the High Court has held that it does not operate to insert into a Commonwealth legislative scheme which is complete upon its face, some provision of State law for whose operation the Commonwealth provisions, when properly understood, can be seen to have left no room because they have "covered the field": The Deputy Commissioner of Taxation v Moorebank Proprietary Limited (1988) 165 CLR 55 at 64.
The Tax Act being a law made by the Parliament after the enactment of s. 64, the usual method of statutory construction would be to ascertain whether the former effected an implied pro tanto repeal or implied amendment of the latter. This will be so if the two laws are "inconsistent" in their application to a particular subject matter. Where the issue is one of contrariety between statutes of the same legislature, the term "inconsistent" does not necessarily bear the same meaning as in s. 109 of the Constitution; this is because there is a strong presumption that the legislature intended not to contradict itself and intended both of its laws to operate: Butler v Attorney-General for the State of Victoria (1961) 106 CLR 268 at 276; Suatu v Australian Postal Corporation (1989) 86 ALR 532 at 546-547.
However, s. 64 is a law of a special character. It operates in respect of laws which of their own force do not apply to the suit to which the Commonwealth is a party. Therefore, without more, no question of inconsistency between Commonwealth and State laws would arise. But the consequence of giving effect to s. 64 could be to render applicable in the suit a State law which, if it had been applicable of its own force, would have been inconsistent with some other Commonwealth law. Accordingly, s. 64 is properly construed as intended to fill what otherwise would be gaps in the federal law applicable in the suit and as not intended "to manufacture a new kind of indirect inconsistency" by applying a State law which if it had been directly applicable would have been inconsistent with federal law: Dao v Australian Postal Commission (1987) 162 CLR 317 at 331-332.
I have referred to various provisions in the Tax Act and, in particular, to the powers given the Commissioner by s. 206 to extend time for payment of tax and permit payment to be made by instalments. I agree, with respect, with Jenkinson J. in Re Mazuran; Ex parte Deputy Commissioner of Taxation (1990) 97 ALR 391 at 400-401, that s. 206 confers a broad power exercisable from time to time after an amount of tax has first become due and until the liability to pay it has been discharged; I agree also that the power is not diminished by the recovery of a judgment for the tax, in proceedings instituted under s. 209.
In the present case, the legislative scheme, of which ss. 170, 201, 206, 208 and 209 are essential elements, provides for the imposition of liability to pay tax for the recovery of unpaid tax and for the giving by the Commissioner of permission for payments by instalments to discharge that liability. In my view, the legislative scheme leaves no room for the operation, by force of s. 64 of the Judiciary Act, of the scheme in Part 31A of the District Court Rules for the making of judgment debts, recovered by the Commissioner for unpaid tax, payable by instalments. This is so, not only in respect of stays and orders for payments by instalments which are made upon subsequent application under Part 31A rule 2, but those made under rule 1 when judgment is given. In both classes of case, the rules would trespass upon the field covered by the Tax Act, were they to be rendered applicable by s. 64 of the Judiciary Act.
The question asked in the stated case should be answered in the affirmative, in the terms proposed by Pincus J. The debtor should pay the creditor's costs of the stated case. There should be no order in respect of the costs of the intervener.

[1991] FCA 651

25 OCTOBER 1991