Richard Walter Pty Limited (in Liquidation) and Anor v Commissioner of Taxation and Ors S32/2000

[2000] HCATrans 606

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S32 of 2000

B e t w e e n -

RICHARD WALTER PTY LIMITED (IN LIQUIDATION)

First Applicant

GREGORY WINFIELD HALL as liquidator of the First Applicant

Second Applicant

and

THE COMMISSIONER OF TAXATION

First Respondent

MACQUARIE HEALTH CORPORATION LIMITED

Second Respondent

BUSINESS & PROFESSIONAL LEASING PTY LIMITED

Third Respondent

RYNDALE PTY LIMITED

Fourth Respondent

SARZANA HOLDINGS PTY LIMITED

Fifth Respondent

Application for special leave to appeal

GLEESON CJ
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 OCTOBER 2000, AT 9.32 AM

Copyright in the High Court of Australia

_________________

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR P.L. DODSON, for the applicants.  (instructed by Blake Dawson Waldron)

MR G.A.A. NETTLE, QC:   May it please the Court, I appear with my learned friend, MS M.M. GORDON, for the first respondent, the Commissioner.  (instructed by the Australian Government Solicitor)

GLEESON CJ:   There is a certificate from the Deputy Registrar saying that she has been informed by the solicitor for the second respondent and the solicitor for the third respondent that they do not wish to be represented at the hearing of this matter and will submit to any order of the Court save as to costs, and there is a certificate from the Deputy Registrar to like effect in relation to matter No S32 of 2000 saying that she has been informed by the solicitor for the second, third, fourth and fifth respondents that they do not wish to be represented at the hearing of this matter and will submit to any order of the Court save as to costs.  Yes, Mr Jackson.

MR JACKSON:   Thank you, your Honours. Your Honours, the central issue sought to be raised by the application is whether section 218 of the Income Tax Assessment Act - and if I can say so, parenthetically, its successor, which is section 260-5 of the Taxation Administration Act - makes the Commissioner of Taxation a secured creditor in the winding up of a taxpayer company or, if I could then put the alternative, otherwise operates so that the Commissioner in respect of the moneys, the subject of the notice, stands outside the liquidation.

Your Honours, could I say that if the former view were taken as the Full Court did that the provision makes the Commissioner a secured creditor in the liquidation, that gives rise to a further question, namely whether the creation of the security is the creation of a preference. Your Honours, could I pause to say at first sight section 218 being a provision of a Commonwealth law and the Corporations Law provisions being relevantly laws of the States, it might be thought odd that the State law could, prima facie, impact upon the Commonwealth law.

May I say three preliminary things in relation to that before going to the argument and they relate to the present position of the Commonwealth as a creditor.  The first things, your Honours, is that by the Crown Debts (Priority) Act 1981 - your Honours should have a book of legislation, this is behind tab 4 - the Commonwealth subjected itself to the laws of the States relating to the order in which debts were to be discharged. Could I refer your Honours simply to section 3(a) and also section 3(b) “relating to the avoidance of preferences”. Your Honours, that applies notwithstanding prerogative rights, et cetera of the Crown.

The second feature, your Honours, concerns the Corporations Act of the Commonwealth itself and that makes it clear that Chapter 5 of the Corporations Law of each State is to bind the Commonwealth.  Your Honours will see behind tab 3 there is an extract from the Corporations Law of the Commonwealth and your Honours will see particularly that section 18 says that:

Chapter 5 (except Part 5.8) –

which deals with criminal matters –

of the Corporations Law of each jurisdiction…..binds the Crown in right of the Commonwealth –

and could I refer also to sections 16 and 20, which your Honours will see are on the same page. Your Honours, if I could just pause to say that Chapter 5 of the Corporations Law contains the winding‑up provisions.

The third feature is that the Income Tax Assessment Act itself recognised that the Commonwealth was so bound.  Your Honours will see a section numbered 222ARA which is the last page of tab 1.  The pages are numbered, 275 at the top, and it says:

To avoid doubt, this Part is not intended to limit or exclude the operation of Chapter 5 of the Corporations Law of a State or Territory, in so far as that Chapter can operate concurrently with this Part.

Your Honours, those are the preliminary matters I wish to say.

Could I turn then to the substance of the argument as to the effect of section 218 and your Honours will see that provision in tab 1 at page 9. Now, could I pause to say immediately about it that one does not see the words “charge”, “lien” or any word which is apposite to the creation of a security used in it. It stands in that regard in contrast to the provision which is the immediately preceding provision, section 216, which deals with a situation where tax has not been paid during the lifetime of the taxpayer and your Honours will see, particularly, section 216(1)(d) which says that:

The amount of any tax payable by the trustees shall be a first charge on all the taxpayer’s estate in their hands.

Your Honours, if one goes to the terms of section 218 one sees that – I am sorry, perhaps I should say this first. Section 218 is after all a statutory provision and, no doubt, one should start by looking at its actual terms. If one does what one sees that all that is done by section 218(1) is to create an obligation, prima facie, an obligation in personam to pay monies to the Commissioner in accordance with the requirements of the notice. The existence of that obligation is supported by the offence provisions of section 218(2) which says in simplest form that it is an offence to fail or to refuse or fail “to comply with” such a notice.

GLEESON CJ:   Is that penalty of $1,000 still the relevant one?

MR JACKSON:   Your Honour, I am sorry, I cannot give your Honour an answer to that.

GLEESON CJ:   So the consequence of failure to comply with a notice to pay $40 million is that you get fined $1,000?

MR JACKSON:   But, your Honour, one goes on and there is a second remedy provided for and your Honours will see that in subsection (3) and that is that there is the ability upon conviction to order that the money be paid.  Now, your Honours, markedly absent in the whole of the provision is any suggestion that upon service of the notice the debt becomes the property, if I could use that expression, of the Commissioner.  Absent too is any reference to any form of relief for the Commissioner other than that provided for by the provisions of subsections (2) and (3).

Could I pause to invite your Honours to note one matter in passing and it is this:  it may be that if the Commissioner ascertained that the recipient of a notice intended to deal with the money inconsistently with the notice, an injunction might – I use the expression “might” – be granted to restrain that cause but, in our submission ‑ ‑ ‑

GLEESON CJ:   What would be the Commissioner’s equity?

MR JACKSON:   Your Honour, what I was going to say was that it would not be a case of the Commissioner’s equity in any property sense but it would be the case where the injunction would be granted on a public law basis in aid of the criminal law, the kind of issue dealt with by this Court in Cooney v Ku‑ring-gai Municipal Council in 1963.  It would not, in our submission, reflect an injunction in support of a proprietary right.

McHUGH J:   But it would mean that the remedy was discretionary?

MR JACKSON:   Quite, your Honour, quite and it may be because, inherently, the grant of injunctions in support of criminal provisions is one which is not necessarily frequently given.  I think it depends very much on the circumstances, the flagrancy, for example.  Your Honours, the only point I am seeking to make about it is that if it be said, “Well, you can get an injunction to support it”, one does need to look at the nature of the injunction.

Now, your Honours, the issue of whether it gives rise to a security is, no doubt, one on which different views can be taken and, indeed, the decision of the Full Court following the earlier decision of the Full Court in Commissioner of Taxation v Donnelly and some observations, particularly, of Justice Brennan in Clyne v Commissioner of Taxation in this Court reflect the opposite view.  But, your Honours, that is the matter which it sought to put in issue in the Court.

Your Honours, could I turn then to the second aspect, namely assuming that it does not give rise to a security, does section 218 operate independently of the winding up in any event? Now what one sees, in our submission, is that the provisions of section 218 make it apparent that the money is to be paid to the Commissioner. The possibility of dissipation of the moneys is lessened by that requirement, supported as it is by the criminal sanction but it does not mean that the debt, which is the subject of the section 218 notice is not part of the property of the company in liquidation to be dealt with as part of its assets. In our submission, the liquidator is entitled to have it paid to him or to her pursuant to the ordinary Corporations Law provisions.

Could I refer your Honours in that regard simply to two provisions.  They are behind tab 5.  Your Honours will see section 474(1), the familiar enough power or obligation of the liquidator to take into custody property of the company and then section 478(1) which your Honours will see at the top of page 335.  So our submission would be that although there is an obligation to pay the money to the Commissioner, the Commissioner is, at the same time, obliged to treat the money as being one of the assets of the company in liquidation.

McHUGH J:   But Mr Jackson, why does this case call for a grant of special leave to appeal?  It concerns a question of statutory construction which you concede there are arguments open both ways.  There is a course of authority in the Full Court of the Federal Court and now the other section has been repealed.  Why should we grant special leave to appeal in those circumstances?

MR JACKSON:   Your Honour, could I say in relation to that, first there is a course of authority but only really in the sense that what has been done has been, as one would expect the Full Court to do, to follow earlier decisions of that court.  That is the first thing.  The second thing is that there is no difference in substance in the new provision that follows it, different language, more user or used friendly, perhaps one might say, but the position is no different in that regard and it is a provision which gives rise to a continuing issue and a provision which is likely to be used on many occasions.

Your Honours will have seen in our written submissions that we advert to the fact that very frequently it is the action – I do not mean this in any offensive way of course – of the Commissioner of Taxation that brings about liquidation and in circumstances where the general expectation provided for by the statutes is that the Commissioner will be an unsecured creditor. Then, in our submission, the terms of section 218 and the current equivalent of it provide a blip, in effect, in that system.

McHUGH J:   What do you say about the proposition in cases like Westfield’s Case and the New South Wales Insurance Ministerial Corporation Case, that ordinarily the Full Court of the Federal Court is the final Court of Appeal in taxation matters, subject to some exceptional cases in which questions of deep or fundamental principle are - - -

MR JACKSON:   Your Honour, what I would seek to say about that really consists of two things.  One does need to look at the observations really in the context in which they were made but if it be the situation that a particular area of litigation is selected as one in which some higher barrier is imposed for obtaining special leave then, in our submission, the Court should not apply that a priori, as an a priori notion.

McHUGH J:   I know but if you have a specialist court – it is the Full Court of the Federal Court in taxation matters, the Full Court of the Family Court in family matters, liquor courts and so on, Land and Environment Court.  They are specialist courts.

MR JACKSON:   Your Honour, I accept that, but could I just say in relation to it that what I am seeking to say is that to put the test in some way other than saying that in the end the question is whether in the particular case special leave should be granted, bearing in mind that matter, is to impose a barrier not provided for either by section 73 or by the Judiciary Act.

GLEESON CJ:   And sometimes there can be a change in mood, attitude.

MR JACKSON:   Yes, well indeed, your Honour.  Your Honour, if one bears in mind too that one of the reasons why special leave sometimes has been expressed to be refused is because of the amount of work the Court has.

McHUGH J:   I do not think any member of the Court has ever said that.  Our workload has doubled since 1980.

MR JACKSON:   Your Honour, Justice Deane certainly did.

McHUGH J:   Did he?

MR JACKSON:   I could not give your Honour a reference just at the moment but he referred to one of the factors as being the amount of work the Court had.

GLEESON CJ:   Mr Jackson, where is the error in what Justice Brennan said on page 112?

MR JACKSON:   In the application book, your Honour?

GLEESON CJ:   Yes.  I mean by that if a statute works on assignment why does it matter whether you call it a charge?

MR JACKSON:   Your Honour, could I say two things about it.  The first of them is that the observation made by Justice Brennan – perhaps three things – the observation made by Justice Brennan was not one in which other members of the Court specifically concurred.  The second thing is that your Honours will see that it was made, I think, immediately following or perhaps immediately preceding a reference by him to the O’Donnell Griffin Case which dealt with the subcontractors charges Act in Queensland where the particular legislation referred specifically to charges and liens, which was a significant matter.  The third thing, your Honours, is that your Honours will see that what Justice Brennan says is:

“The statute thus works an assignment of the moneys to be paid to the Commissioner –

Now, your Honours, that just does not, on our submission, do that. If one looks at the terms of section 218, that is the thing it does not do and that is the foundation of the ‑ ‑ ‑

McHUGH J:   What about subsection (4)?

MR JACKSON:   Your Honour, subsection (4) says no more than that when the money is paid it is treated as having been received with “the authority of the taxpayer”.

McHUGH J:   But the person is “indemnified in respect of” the “payment”.

MR JACKSON:   Of course, your Honour.  I appreciate that but if one is looking to see – your Honour the Chief Justice asked about what Justice Brennan said but if one is looking to see is there an assignment of the moneys, the moneys have not been assigned.  There is an obligation to pay but it is not an assignment, in our submission.    

Your Honours, I mentioned there was another issue which arose if the view were taken that section 218 gives rise to a security because the question which then arises is ‑ ‑ ‑

GLEESON CJ:   Just before you go there, your submission, as I understand it, amounts to the proposition - and the present case with tens of millions of dollars indicates the significance of it - that the sanction for non‑compliance with what you say is the personal obligation imposed by section 218 is liability to a $1,000 fine or the possibility of a discretionary order by a magistrate that you comply with the statute, an order that presumably you could resist on the ground of hardship.

MR JACKSON:   An order that could be resisted on a – it may be capable of being resisted.  One would think, in the ordinary course of events, it

would not be very often capable of being resisted.  Your Honour referred to the penalty.  At page 288 it is provided that the penalty, I think, is now 20 penalty units and that is dealt with by section 4AA of the Crimes Act.  I just do not have the precise figure, your Honours, but it is obviously a figure capable of moving.

Your Honours, could I mention very briefly our third issue that arises.  It is whether there is a voidable transaction by the giving of the notice.  Your Honours, the relevant provisions can be seen in the Full Court’s reasons at pages 106 to 108.  Your Honours, I see the time and could I take your Honours to what is the absolutely central part of the Full Court’s reasons.  You will see that at page 134 in paragraphs 133 and 134 so that the view taken was that there was not a transaction of the company because the company itself played no part except in a supine way.  Your Honours that is the matter which would be sought to be agitated.

Your Honours will see the discussion of the issue at pages 131 to 134, the relevant provisions being pages 106 to 108 and if I could just go to page 107 for a moment, about line 16 on that page you will see the requirement that:

the company and the creditor are parties to the transaction –

That is how the issue arises.  Your Honours, in our submission, the case is one of enduring importance meriting the grant of special leave.

GLEESON CJ:   Yes, Mr Nettle.

MR NETTLE:   If your Honours please, section 471C of the Corporations Law, as you know, provides that nothing in section 471A or 471B affects a secured creditor’s rights to deal with his security. The question which is put forward by the applicant in this case as one warranting the grant of special leave is not - I say again, not - whether the service of a section 218 notice gives rise to a hypothecation which equity would recognise as creating a charge. It is rather whether whatever the nature of any interest created by a section 218 notice it creates of the Commissioner a secured creditor, whatever that may mean for the purpose of section 471C.

If your Honours please, it is submitted that it has been clear law for now nearly 130 years that a garnisher is a secured creditor for the purposes of the bankruptcy legislation, which as was observed by the judge at first instance and by the Full Court, is relevantly no different to the provisions of the Corporations Law with which your Honours are concerned.  It is also clear it is submitted beyond doubt by reason of the unanimous decision of this Court in Clyne’s Case that whatever, if ever there be a proprietary interest created by a section 218 notice be, it does place the Commissioner in a position as least as good as a garnisher, that is to say ‑ ‑ ‑

McHUGH J:   Did Chief Justice Gibbs deal with that in Clyne?

MR NETTLE:   Yes, he did, your Honour.  Yes, indeed.  Justice Gibbs at page 11 about halfway down after reference to the “second submission”:

The section itself answers the appellants’ contentions. The conditions for the giving of a valid notice are laid down in s. 218(1). If those conditions exist at the time when the notice is given there is a valid requirement in respect of the money to which the notice refers, which, in a case under par. (a), will be money which is due…..The words by which the Parliament grants the power to make the requirement necessarily imply that the person to whom the requirement is given will obey it. Subsequent actions by the taxpayer cannot render the requirement nugatory or ineffective.

Now that is exactly, it is submitted, in accordance with what was said by Justice Mason at page 19, and, again, if one reads at the bottom of page 11 in Chief Justice Gibbs’ observations, last stanza:

It would indeed be possible, in every case in which the money was not payable to the taxpayer at the time when the notice was given, entirely to defeat the purposes of the section.  However, once the notice is given, it operates to prevent any subsequent dealing with the money which will prevent compliance with the notice when the time for compliance arrives.  An assignment made by the taxpayer after the date of the notice will be ineffective to relieve the person –

Now that is either because, it is submitted, there is a proprietary interest created but it does not matter, or because, and perhaps more accurately as, with respect, Justice Mason puts it, the service of the 218 notice, in the old sense, binds the recipient of the notice so that he or she cannot then deal with it and it is in that old sense that the moneys are said to be charged, not in the sense of carving out some sort of hypothecatory or proprietary interest but rather binding the fund so that it may not be dealt with otherwise than on particular conditions or in particular ways.  That is what Justice Mason refers to at page 19, about halfway down the page:

I think that the effect of the service of a s. 218 notice is to prevent a taxpayer from thereafter assigning a debt…..In this respect I do not agree with the comments made by Jenkinson J. –

in the earlier case in Sicree and again at 20, about five‑eighths of the way down –

The rule that an assignment is subject to equities has been described as a paramount rule…..The effect of the rule is that an assignee of a non‑negotiable chose in action acquires no greater right than was possessed by his assignor –

and what is being said there by Justice Mason is that once the notice is given any subsequent purported assignee takes subject to the equity in the broad sense created by the service of the section 218 notice.

Now, your Honours, in this case both at first instance in the application book at page 19, at lines 15 to 25, and later in the Full Court to a passage to which I will take you in a moment, the matter was decided explicitly on the basis that the service of the 218 notice made of the Commissioner a secured creditor for the purpose of section 471C. At page 19 in the application book, line 15:

Hill J in Donnelly’s Case considered –

and then at line 20 –

While section 471C was not under consideration in Donnelly’s Case, the principles with respect to bankruptcy appear to me to be sufficiently indistinguishable from the principles applicable in relation to section 471C –

to make it applicable and that was also explicitly the basis on which the case was decided by their Honours of the Full Court at page 118 in the application book at line 25:

The short answer to the submission would seem to be that, once it is accepted that service of a s 218 notice constitutes the Commissioner a secured creditor, step (iv) in the Debtors’ argument is not made out –

et cetera.  Now, if your Honours please, in Donnelly’s Case the question was whether the service of a section 218 notice created of the Commissioner a secured creditor for the purposes of the bankruptcy provision and it was held by a Full Court of the Federal Court that it did and the reason that it was held that it did was because the service of a 218 notice was so much like a garnishment order as to place the Commissioner, in effect, the garnisher, in a position where the fund was bound for his benefit.

Thus, if I could quickly take your Honours to what was said in Donnelly 25 FCR 432 at 455 in the judgment of Justice Hill, the first full paragraph:

The requirements of a lien or charge sufficient to be a security for bankruptcy purposes were considered by the full High Court in Hall v Richards (1961) 108 CLR 84. The issue in that case was whether a judgment creditor who had entered a caveat against the land of a judgment debtor under a section of the Real Property Act 1886 (Tas) was a “secured creditor” –

as we know it was not.  Dropping down to the next paragraph:

As Hall v Richards points out it was held in Holmes v Tutton that while the service of an order of attachment on a garnishee under the Common Law Procedure Act 1854 (UK) bound debts due to the judgment debtor having the effect that the garnishee could not pay his original creditor or anyone claiming under him, that did not give the judgment creditor a “lien” so that the judgment creditor had under the English Bankruptcy Law Consolidation Act 1849 (UK) to share pro rata with other creditors.  The present definition of “secured” creditor derives from the later English Bankruptcy Act 1869 (UK) and under that definition the case of Emanuel v Bridger was decided.

Then reference is made to the judgment of his Lordship Justice Quain in Bridger:

“We think that the word ‘charge’ has a wider meaning than the words ‘mortgage’ or ‘lien’, and we cannot doubt but that an execution creditor who has obtained, served, and made absolute his garnishee order before the bankruptcy, is a creditor holding a charge on a part of the bankrupt’s estate as a security for a debt –

and then going down to what Justice Kitto said in Hall v Richards:

“Such an order, though not working an assignment or giving the judgment creditor any proprietary interest in the debt, yet gives him positive rights with respect to it which a creditor having no more than a judgment does not possess; not merely a negative right to prevent the judgment debtor from accepting payments of the debt or disposing of it but positive rights for the recovery of what is owing –

Now there, your Honours, it is submitted is an unquestionable analysis that a garnisher is a secured creditor for the purposes of the Bankruptcy Act and we know from Clyne’s Case from the judgment of Justice Mason in which Justices Aickin and Wilson concurred for the obvious reason that the language is almost identical, the Commissioner, under section 218 is, in effect, in the same position or at least as good a position as a garnisher.

GLEESON CJ:   I notice that you submit that the Full Court of the Federal Court is the final Court of Appeal in taxation matters, subject only to exceptional cases in which a question of fundamental principle arises.

MR NETTLE:   Yes.

GLEESON CJ:   What was the name of that case not long ago in which the Court gave a decision concerning whether a firm of solicitors were liable to tax in respect of a rental concession made?

MR NETTLE:   Montgomery.

GLEESON CJ:   What was the question of fundamental principle that arose in Montgomery?

MR NETTLE:   Whether it was capital or income receipt which was constituted of an amount which was paid to the firm in the usual and ordinary course of its business, notwithstanding that it was an isolated and extraordinary transaction.

GLEESON CJ:   It sounds like a question of the application to the facts of some established principle.

MR NETTLE:   Well, happily, your Honour, someone at least was able to persuade this Court at some stage of the matter that it was otherwise.

GLEESON CJ:   Exactly.  I am just wondering whether this is a proposition which is advanced depending upon whether the Commissioner is the applicant or the respondent.

MR NETTLE:   No doubt, human nature being what it is, one’s view of the matter is likely to vary depending upon which side of the fence one is standing at the time, your Honour.

GLEESON CJ:   That is the adversary system of litigation, Mr Nettle.

MR NETTLE:   Of course. With respect, if I may say so, your Honour’s point is well made. One can always say of something that it does or does not give rise to a question of fundamental principle but, putting that to one side and recognising, with respect, the force of what you say, may I invite you to take this into account. It is now the best part of 20 years since this Court decided unanimously that whatever the nature of a section 218 notice, it puts the Commissioner in the position as good as a garnisher. Twenty years of subsequent courts have followed that as, of course, they are bound to, nor is it now even questioned, as it could not be, the Commissioner is not in the position as good as garnisher.

Moreover, notwithstanding the passage of the Crown Debt (Priority) legislation, there was, in a sense, an avowed expression of tension by Parliament in the refusal of the Harmer Committee recommendations to change legislation to require the Commissioner to give up what was recovered under section 218, which evinces an intention to the extent that one can discern it, that the Commissioners continue to enjoy the position at least as good as a garnisher.

With respect, it is submitted, why should it be otherwise.  It is beyond doubt for the reasons that we have essayed in our outline of argument that a garnisher is a secured creditor for the purposes of the Corporations Law.  It has been held, as your Honours have seen, in the Blackwoods Construction Case by Justice Santow after rigorous analysis that that is so.  The Commissioner’s position here is such that he served the first two notices being the only ones upon which he now relies vastly before the six month relation-back period or even six months before that began to run and at least by the time at which the liquidator was appointed, more than $13 million of the debt had accrued due and payable.

I mean, even if this Court were now to decide that what is created by a section 218 notice is not a hypothecation, does not give rise to a proprietary charge, there is no way, it is submitted, it would reach the view contrary to what has been said by the Court in the past and by earlier English authority that a garnisher is not a secured creditor for the purposes of the bankruptcy provision. Once one gets to that the result for the case is exactly the same.

It is said by our learned friends that there is a subsequent issue of whether or not there was a voidable transaction.  It has been said by courts time and again both by Justice Mansfield at first instance in Smith’s Case and subsequently in Emanuel that it is not a transaction and obviously, it is submitted, it is not.  The whole of the flavour of the voidable transaction legislation is to do with arrangements in which companies or directors of companies actively participate to subjugate the interest of creditors.

I mean, it is, with respect, nonsensical to suggest that because the Commonwealth Parliament decrees by legislation that the Commissioner should be able to serve a notice which puts him in a position at least as good as garnisher that he should somehow now be subverted to a position which is not as good as a garnisher.

Your Honours, might I also, with respect, remind you in harking back to something the Chief Justice said that this is not the first time that application has been made to this Court for a grant of special leave to have this question ventilated at this high place.  Twice before, at least, this Court has refused such applications as we have outlined below, particularly in Norgard where all of the arguments, perhaps not as eloquently but in substance the same, were advanced in support of the application to say what had gone before was incorrect to adjudge them as having held that there was some sort of proprietary interest created.  This Court rejected the application in that case because it took the view, as with respect it should have, that the matter was so clear as not to warrant its attention.

There is also this to consider:  in each of those earlier applications the Canadian decisions were thrown up too in support of them.  They were not regarded by this Court as sufficiently persuasive to change the view which had been expressed by this Court for the best part of 20 years, nor should they be.

If one looks at them, each of them is concerned with cases which are vastly different.  One of them says that there is a charge created.  The others are to do with cases in which the notice which was served by the Commissioner was served either after the six‑month period began to run or after there had been an assignment of the debt or after the liquidator had appointed.  Each of them, it is submitted, is nihil ad rem and that is toto with the case of the New Zealand case.  I mean, nothing in them, even if you took the time or had the time and the industry to consider them closely, would be calculated or likely to lead you to the view that what has been said in the past is wrong.

Your Honours, we submit that if it is true, and it should be seen to be, that this Court has authoritatively laid down even on the most restricted interpretation of the ratio in Clyne’s Case that the Commissioner is to be equated to the position of a garnisher, it follows irresistibly that the Commissioner is a secured creditor for the purposes of the bankruptcy provisions and thus for the purposes of section 471C of the Corporations Law. Once that point is reached, whatever might be said, which would, of course, with respect, be of interest, by your Honours in a subsequent appeal about the true juridical nature of the interest which is created by a section 218 notice, it would do nothing to alter the outcome of the case.

Even then, if it be true to say that the question of whether or not a 218 notice creates a proprietary interest is one which gives rise to a question of fundamental public importance or principle of general application, it is equally true, it is submitted, to say that it is not a question which arises in this case for in the end, regardless of how it might be decided, the result will be the same.  What matters to the Commissioner and thus, with respect, what matters to the Court ultimately in the determination of the outcome of this case is whether the Commissioner is a secured creditor for the purpose

of the bankruptcy provision and, with respect, it cannot be gainsaid against a background of 130 years of authority, that he is not.

If your Honours please, in our submission, the application for leave ought be refused.

GLEESON CJ:   Mr Jackson?

MR JACKSON:   Your Honours, may I say two things? The first is that the notices were notices given before but the money was paid after the liquidation and if it be – I make the assumption for the moment – that a security does not arise from the operation of section 218 then the situation is, as we have submitted earlier, the money is paid to the Commissioner but it has to be treated as part of the assets of the company for the purposes of the liquidation.

The second thing that I wanted to advert to is our learned friend’s contention in relation to the garnishee order and if one goes to what is said in Donnelly 25 FCR at page 456, when one comes to the paragraph commencing in the middle of the page after the discussion of garnishee orders and so on, what your Honours will see is that the basis seems to be the existence of section 218, or the fundamental basis, seems to be the ability to give the “receipt and discharge for the money” under section 218(4). What we would seek to say is that if one starts without any a priori view about it but looks at the terms of the statute, the terms of the statute are fairly eloquent in saying precisely what the rights and remedies given are.

GLEESON CJ:   In this matter the Court is of the view that there are insufficient prospects of success of an appeal to warrant a grant of special leave and the application is refused with costs.  We will adjourn to reconstitute for the next matter.

AT 10.12 AM THE MATTER WAS CONCLUDED