Deputy Commissioner of Taxation v Dexcam Australia Pty Ltd (inliq) (ACN 007 056 877) [2003] FCAFC 148 (30 June 2003)

Last Updated: 7 July 2003

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Dexcam Australia Pty Ltd (in liq)

(ACN 007 056 877) [2003] FCAFC 148

CORRIGENDUM

DEPUTY COMMISSIONER OF TAXATION v DEXCAM AUSTRALIA PTY LTD (in liquidation) (ACN 007 056 877), DAVID NEIL LOCKWOOD AND KENNETH STEWART SELLERS (as liquidators)

V 460 OF 2002

RYAN, FINN & DOWSETT JJ

30 JUNE 2003 (CORRIGENDUM 3 JULY 2003)

MELBOURNE

GENERAL DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 460 OF 2002

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION APPELLANT
AND:	DEXCAM AUSTRALIA PTY LTD (in liquidation) (ACN 007 056 877) and DAVID NEIL LOCKWOOD and KENNETH STEWART SELLERS (as liquidators) RESPONDENTS
JUDGES:	RYAN, FINN & DOWSETT JJ
DATE OF ORDER:	30 JUNE 2003
WHERE MADE:	MELBOURNE
CORRIGENDUM

In the joint Reasons for Judgment of Ryan and Dowsett JJ each reference to "pre-tax debt" in paragraph 15 thereof should be replaced with the words "pre-deed debt".

I certify that the above paragraph is a true copy of the Corrigendum to the Reasons for Judgment of the Honourable Justices Ryan and Dowsett.

Associate:

Dated: 3 July 2003

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Dexcam Australia Pty Ltd (in liq)

(ACN 007 056 877) [2003] FCAFC 148

TAXES AND DUTIES - where a corporation has entered a deed of administration - whether the Commissioner of Taxation has power to apply credits and interest accrued pursuant to Prescribed Payments System to debt owing by the corporation prior to entry into a deed of administration - whether the Commissioner enjoys priority in insolvent administrations by virtue of s 221YHG Income Tax Assessment Act 1936 (Cth) - whether s 221YHG Income Tax Assessment Act 1936 (Cth) and s 13(1) Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) impliedly repealed or overridden - whether Part VI Income Tax Assessment Act 1936 (Cth) is subject to Chapter 5 of the Corporations Law - interpretation of "an amount payable" in s 221YHG(7) Income Tax Assessment Act 1936 - whether the relations between taxpayer and Commissioner involve any right of set off or cross-claim - whether accounting in the course of that relation can be described as mutual credits, mutual debts or other mutual dealings.

Corporations Act 2001 (Cth) ss 1384, 1400

Corporations Law ss 9, 436A, 439C, 444B, 471B, 471B(a), 471B(b), 474, 478, 553C, 553C(2), 556

Income Tax Assessment Act 1936 (Cth) ss 221, 221A(1), 221F(5), 221F(12), 221F(12)(b)(ii)(A), 221F(12)(b)(ii)(B), 221H, 221P, 221YHG, 221YHG(7), 221YHG(7)(a), 221YHJ, 221YHJ(3) 221YHJ(4), 221YHJ(5), 221YHZD, 221YHZD(3), 221YHZD(4), 221YHZD(5), 221YU, 221YZD, 222ARA

Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) ss 3(2), 13, 13(1)

Bankruptcy Act 1966 (Cth) ss 58, 58(3), 58(3)(a), 82(1)

Insolvency (Tax Priorities) Legislation Amendment Act 1993 (Cth) ss 7, 9, 11, 15

Taxation Debts (Abolition of Crown Priority) Act 1980 (Cth) s 5

Crown Debts (Priority) Act 1981 (Cth) ss 3, 4

Taylor v Commissioner of Taxation (1987) 16 FCR 212 applied

Federal Commissioner of Taxation v Official Receiver [1956] HCA 24; (1956) 95 CLR 300 considered

Clyne v Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1 considered

Commissioner of Taxation v Kavich (1996) 68 FCR 519 considered

Gye v McIntyre [1982] HCA 34; (1990-91) 171 CLR 609 cited

Second Reading Speech in the House of Representatives on 27 May 1993

Explanatory Memorandum to The Insolvency (Tax Priorities) Legislation Amendment Bill 1993

DEPUTY COMMISSIONER OF TAXATION v DEXCAM AUSTRALIA PTY LTD (in liquidation) (ACN 007 056 877), DAVID NEIL LOCKWOOD AND KENNETH STEWART SELLERS (as liquidators)

V 460 OF 2002

RYAN, FINN & DOWSETT JJ

30 JUNE 2003

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 460 OF 2002

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION APPELLANT
AND:	DEXCAM AUSTRALIA PTY LTD (in liquidation) (ACN 007 056 877) and DAVID NEIL LOCKWOOD and KENNETH STEWART SELLERS (as liquidators) RESPONDENTS
JUDGES:	RYAN, FINN & DOWSETT JJ
DATE OF ORDER:	30 JUNE 2003
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be allowed;

2. The orders made by Heerey J on 27 June 2002 be set aside;

3. The application be dismissed;

4. The respondents pay the appellant's costs of the application and of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 460 OF 2002

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION APPELLANT
AND:	DEXCAM AUSTRALIA PTY LTD (in liquidation) (ACN 007 056 877) and DAVID NEIL LOCKWOOD and KENNETH STEWART SELLERS (as liquidators) RESPONDENTS

JUDGES:	RYAN, FINN & DOWSETT JJ
DATE:	30 JUNE 2003
PLACE:	HEARD IN MELBOURNE

REASONS FOR JUDGMENT

RYAN AND DOWSETT JJ:

Background

1 On 11 June 1996, Colin Raymond McDonald ("the administrator") was appointed administrator of Dexcam Australia Pty Ltd ("Dexcam") pursuant to s 436A of the Corporations Law. On 22 July 1996, the creditors of Dexcam resolved, pursuant to s 439C of the Corporations Law, that Dexcam should execute a deed of company arrangement. On 12 August 1996, the administrator, Dexcam and its two directors executed such a deed ("the deed") in accordance with s 444B of the Corporations Law. Dexcam went into liquidation on 27 January 1998. The second- and third-named respondents ("the liquidators") are the liquidators. At first instance it was agreed that by virtue of ss 1384 and 1400 of the Corporations Act 2001 (Cth) ("the Corporations Act"), the provisions of that Act now apply to these proceedings, notwithstanding the fact that the Corporations Law applied when relevant events occurred. The provisions are materially the same. At first instance Heerey J considered that it would be more convenient to refer to the provisions of the Corporations Law. We will adopt a similar course.

2 Pursuant to cl 1.1 of the deed, "Participating Creditor" meant:

"... those Creditors whose Debt would be admissible to proof as a creditor of the Company had the Company been wound up pursuant to Part 5.6 of the Law on the Commencement Date with the exception of the Non Participating Creditors".

3 The commencement date was 11 June 1996. Clause 4 made provision for payment by the company to the administrator of the following amounts:

® $50,000 on the date of execution;

® $100,000 on or before 31 December 1996;

® $150,000 on or before 30 June 1997;

® $150,000 on or before 31 December 1997; and

® $100,000 on or before 30 June 1998.

Such moneys were to be applied in payment of liabilities incurred by the administrator, the administrator's remuneration and expenses, and debts owed to priority creditors, with any balance to be distributed rateably amongst other creditors. Clause 13 provided:

"13. COMPROMISE OF DEBTS AND RELEASE

13.1 Discharge of Debts

The Participating Creditors accept their entitlements under this Deed in full satisfaction and complete discharge of all debts or claim(s) which they have or claim to have against the Company as at the Commencement Date and each of them will, if called upon to do so, execute and deliver to the Company such forms of release of any such claim as the Administrator requires.

13.2 Claims Extinguished

Upon the Administrator paying to the Participating Creditors their entitlement pursuant to this Deed, all debts or claims, demands, proceedings, causes of action in relation to or in connection with their debts or claims whether present or future, actual or contingent, due or which may become due by the Company as a result of anything done or omitted by or on behalf of the Company before the Commencement Date and each claim against the Company as a result of anything done or omitted by or on behalf of the Company before the Commencement Date are extinguished.

13.3 Bar to Participating Creditor's Claims

This Deed may be pleaded by the Company against any Participating Creditor in bar of any debt or claim not admitted or established under this Deed and a Participating Creditor (whether the Participating Creditor's debt or claim is or is not admitted or established under this Deed) must not, before the termination of this Deed:-

13.3.1 take or concur in the taking of any step to wind up the Company or; (sic)

13.3.2 except for the purpose and to the extent provided in this Deed, institute or prosecute any legal proceedings against the Company in relation to any debt incurred or alleged to have been incurred by the Company before the Commencement Date; or

13.3.3 take any further steps (including any step by way of legal or equitable execution) in any proceedings pending against the Company at the date hereof; or

13.3.4 exercise any right of set-off or cross-action to which the Participating Creditor would not have been entitled had the Company be wound up at the Commencement Date; or

13.3.5 commence or take any further step in any arbitration against the Company or to which the Company is a party."

4 Clause 14 provided for termination of the deed on payment in full of the amounts owed to participating creditors or in the event of default by Dexcam. Clause 15 provided:

"Notwithstanding the provisions of Clause 13.2, the claims of a Creditor of the Company with respect to a debt admissible to proof pursuant to the provisions of this Deed shall, in the case of the termination of this Deed prior to the payment to such Creditor of its full entitlement under this Deed, be extinguished only to the extent of the payment actually made by the Administrator to it. The Creditor shall be at liberty to enforce payment of the balance of the unpaid claim against the Company in a court of competent jurisdiction and in the event of the liquidation of the Company, to prove in such liquidation for the amount of the Creditor's claim which remains unpaid. PROVIDED HOWEVER, that in the event of the termination of this Deed prior to the payment to a Creditor of its full entitlement under this Deed, the Company shall only be permitted to plead this Deed as a bar to any action by a Creditor, to the extent of the amount of the Creditor's claim actually paid by the Administrator to the Creditor prior to the termination of this Deed."

5 Dexcam failed to make the payment due on 31 December 1997. The administrator gave appropriate notice, and the deed was terminated on 13 January 1998. Dexcam went into liquidation on 27 January 1998. Most, if not all, of the presently relevant events occurred before the deed had been terminated.

6 The appellant was a creditor of Dexcam and, as such, a participating creditor within the meaning of the deed. In these reasons, we will distinguish between the appellant Deputy Commissioner of Taxation and the entity referred to in relevant legislation as the Commissioner of Taxation ("the Commissioner"). Whilst the appellant's conduct is the subject matter of the proceedings, it will be more convenient, in considering the powers conferred upon the Commissioner by legislation, to refer to that entity rather than to the appellant. Whilst the deed was in force, the appellant submitted a proof of debt to the administrator in the amount of $715,328.38, being moneys allegedly owing prior to 11 June 1996 ("the pre-deed debt"). This amount was primarily made up of deductions by Dexcam from the wages and salaries of employees on account of their tax liabilities, which deductions had not been remitted to the Commissioner as required by the Income Tax Assessment Act 1936 (Cth) ("the Assessment Act"). This system of deduction and remission was known as the "Pay As You Earn" system or "PAYE". Amounts deducted were often described as "group tax". The amount of the proof also included amounts payable pursuant to subpars 221F(12)(b)(ii)(A) and (B) of the Assessment Act. Such amounts were, in effect, penalties. A first interim dividend was paid to the appellant pursuant to the deed.

7 In April 1997, Dexcam lodged an income tax return for the year ended 30 June 1995, claiming to be entitled to a credit pursuant to the "Prescribed Payments System" ("the PPS") in the amount of $155,163.00. In May 1997, Dexcam lodged a return for the year ended 30 June 1996, claiming a PPS credit for that year in the amount of $158,760.00. At or about the same time, Dexcam also lodged income tax returns for the year ended 30 June 1993 (claiming a PPS credit in the amount of $9,663.00) and for the year ended 30 June 1994 (claiming a PPS credit in the amount of $62,144.00). The claims were accepted by the appellant. The PPS was established by Pt VI, Div 3A of the Assessment Act. It was not unlike the PAYE system in that a person who was liable to pay another person, ("the contractor"), for work performed, was required to deduct an amount on account of the potential tax liability of the contractor and remit that amount to the Commissioner. While the PAYE system concerned the tax liability of employees, the PPS concerned the tax liability of independent contractors. If the amount deducted from payments to a particular contractor exceeded the contractor's tax liability for the year in question, that contractor was entitled to a credit, the amount of which would bear interest pursuant to the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) ("the Tax Interest Act").

8 The appellant subsequently assessed the income tax payable by Dexcam for the 1993 tax year at $5,218.98, for the 1994 tax year at $8,814.63 and for the 1995 tax year at $202,066.59. She also assessed additional tax payable in the amount of $500.00. For the 1996 year she assessed tax payable as nil, with additional tax of $90.00 for late lodgement. In summary, Dexcam was entitled to PPS credits and had tax liabilities as follows:

Year-ended	PPS credit	Assessed tax	Additional tax
30 June 1993	$9,663.00	$5,218.98
30 June 1994	$62,144.00	$8,814.63
30 June 1995	$155,163.00	$202,066.59	$500.00
30 June 1996	$158,760.00	Nil	$90.00

9 In addition Dexcam also owed the appellant the amount of the pre-deed debt, less the amount of the interim dividend. As we have observed, interest accrued on the amounts of the PPS credits. The appellant purported to apply the PPS credits and interest accrued thereon against the various assessments and the outstanding part of the pre-deed debt. The appellant claimed so to apply the PPS credits (but not the interest) in reliance upon s 221YHG of the Assessment Act which provided:

"(1) Subject to this section, the amount of a credit to which a person is entitled by virtue of this Division is a debt due and payable to that person by the Commissioner on behalf of the Commonwealth.

(2) Where, in a case to which none of subsections (3), (4) and (4A) applies, a person is entitled to a credit under s 221YHF, the Commissioner shall -

(a) if the amount of the credit does not exceed the tax payable by the person under an assessment in relation to the year of income in which the deductions to which the credit relates were made - apply the amount of the credit in payment or part payment of that tax; and

(b) if the amount of the credit exceeds the tax payable - apply -

(i) so much of the amount of the credit as does not exceed the tax in payment of the tax; and

(ii) so much of the excess as does not exceed the amount of any other tax payable by the person in payment or part payment of that other tax."

10 The term "tax payable" was defined in subs 221YHG(7) as follows:

"... a reference to tax payable by a person other than a trustee is a reference to an amount payable by the person to the Commonwealth under, or by virtue of, this Act; ...."

11 Subject to the liquidators' submissions as to the meaning of the expression "tax payable", the amounts of the various assessments fell within the definition.

12 As to the application of interest payable pursuant to the Tax Interest Act, subs 13(1) provided that the Commissioner might apply any interest payable to a person under the relevant Parts of the Act " ... in ... discharge of a liability of the person to the Commonwealth". Pursuant to subs 3(2) "liability of a person to the Commonwealth" included any liability arising under an Act administered by the Commissioner. All relevant amounts claimed by the appellant arose under Acts which were so administered.

13 On 3 July and 9 October 1997 the appellant submitted amended proofs of debt which took into account the purported application of the PPS credits and interest. The administrator did not accept either of them, nor did he consent to the withdrawal, reduction or variation of the first proof. On 12 August 1997 the administrator paid a second interim dividend.

The issues for determination

14 The liquidators claim that the appellant had no power or authority so to apply the PPS credits and interest, submitting that she was obliged to pay those amounts to the administrator and in return, take the benefit to which she was entitled pursuant to the terms of the deed. The liquidators claim to be entitled to the PPS credits and interest. In argument the parties tended to focus upon the validity of the appellant's conduct, having regard to the terms of the deed which was still in place when that conduct occurred. It seemed to be implicit in much of the argument that, if the liquidators' submissions concerning the appellant's conduct at that time were correct, then it would follow that the liquidators are now entitled to recover the amounts in question. We wonder whether that proposition is strictly correct. We would have thought that, after termination of the deed, the parties' mutual rights and obligations were regulated by the general law, including the relevant tax legislation and the Corporations Law. It may be, however, that the arguments concerning the validity of the appellant's conduct whilst the deed was in force are at least closely related to those concerning the liquidators' claim to the PPS credits and interest after such termination.

Section 221YHG of the Assessment Act

15 There are two aspects to the liquidators' submissions concerning s 221YHG. The first is that the amounts included in the pre-tax debt were not "tax payable" for the purposes of s 221YHG. As we have previously observed, the pre-tax debt was made up of unremitted group tax payable to the Commissioner pursuant to subs 221F(5) and penalties payable pursuant to subs 221F(12). According to par 6 of the statement of agreed facts, Dexcam's liability had arisen prior to 11 June 1996. If so, then the amounts owing pursuant to subs 221F(5) were payable before the date of the proof of debt, namely 21 August 1996, whichever paragraph of that subsection applied. The balance of the pre-deed debt was owing pursuant to subs 221F(12). The only available reading of subs 221F(12) is that the prescribed amounts were immediately payable or, alternatively, were payable on demand. Demand was made no later than at the time of lodgement of the proof of debt on 21 August 1996. Thus all of the pre-deed debt was payable pursuant to the Assessment Act on 21 August 1996. All such amounts were payable to the Commonwealth pursuant to subs 221YHG(7).

16 In order to understand the balance of the liquidators' submissions concerning s 221YHG, it is necessary to consider the decision of this Court in Taylor v Commissioner of Taxation (1987) 16 FCR 212. That decision was concerned with alleged inconsistencies between provisions of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") and those of the Assessment Act. Taylor became a bankrupt on 30 June 1980 and was discharged on 30 June 1985. On 28 June 1985, the Commissioner issued notices of assessment of tax for the years ended 30 June 1982 and 30 June 1983, showing amounts due to Taylor for those years. Such credits represented the excess of PAYE deductions made by his employer in each year and remitted to the Commissioner, over his tax as assessed for that year. At that time s 221H of the Assessment Act provided that, where the amount of PAYE deductions remitted by the employer in any year exceeded the tax payable by the relevant employee in respect of that year, the employee was entitled to a credit. However the Assessment Act also provided that the Commissioner, "... shall ... credit so much of that sum as is required in payment of ... any other tax payable by the employee, and pay to the employee an amount equal to any excess; ... ." Pursuant to s 221A(1), the term "tax payable by the employee" was defined to mean:

"... income tax ... that is or may become due and payable by an employee under an assessment ... made or to be made on a return that he has furnished ... or under an assessment ... made or to be made in default of any such return; ... ."

The Commissioner applied the excess against Taylor's tax liability for the year ended 30 June 1980. Taylor argued that his income tax liability for that year had been a debt provable in his bankruptcy and was therefore no longer recoverable. The following passage from the joint judgment of Woodward and Northrop JJ (at 215) discloses the provision of the Bankruptcy Act which was said to be inconsistent with s 221H of the Assessment Act:

"The applicant's contentions were based on the Bankruptcy Act. Under that Act, upon a debtor becoming a bankrupt, the property of the bankrupt vests in the Official Trustee, or, in the appropriate case, a registered trustee, and thereupon a creditor's right to sue the bankrupt for the recovery of a debt is, subject to some exceptions not presently relevant, converted into a right to share in the distribution of the estate of the bankrupt which has vested in the trustee. His right to share depends upon the creditor having a debt provable in bankruptcy and proving that debt in conformity with the provisions of the Bankruptcy Act. Thus, s 58(3) provides:

`58(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor -

(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.'"

17 The prohibition in subs 58(3) applied only to a "provable debt", which term was defined in subs 82(1) of the Bankruptcy Act as follows:

"Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy."

Thus it was argued that to permit the Commissioner to apply the excess against tax for the 1980 tax year would be inconsistent with the prohibition contained in subs 58(3)

18 Jenkinson J observed at 222:

"The case for the applicant (taxpayer) rested on two general grounds. It was submitted ... that, because the tax assessed in respect of the year ended 30 June 1980 was a debt provable in his bankruptcy, that tax could not be regarded as `payable by' him, for all the rights and remedies which would have been available to his creditor had been taken away by his bankruptcy and the creditor had in lieu thereof only a right of proof against his bankrupt estate, not a right to payment of the tax. It was further submitted that what the respondent had done in purporting to credit $2,224.39 in payment of the tax assessed was to enforce a remedy against the property of the bankrupt in respect of a provable debt, contrary to the provisions of ... the Bankruptcy Act 1966 (Cth)."

19 Jenkinson J considered that the relevant provisions of the Assessment Act established a specific regime applicable to wage-earners, separate from, and not subject to, the operation of the Bankruptcy Act. His Honour then referred (at 223) to the following observations by Fullagar J in Federal Commissioner of Taxation v Official Receiver [1956] HCA 24; (1956) 95 CLR 300 at 323, concerning the nature of a similar statutory refund regime:

"The scheme involves the imposition of duties upon a particular class of taxpayers, upon their employers, and upon the commissioner. The scheme is such that it is inevitable that, at the end of a financial year, it will be found that some taxpayers of that class have paid too much tax, so that a refund to them is necessary. It is prima facie very unlikely that, when such a refund comes to be made, it should be intended that the commissioner should have to concern himself with such things as assignments, charges, bankruptcies or executions, with questions of validity and questions of priority. From the point of view of the legislature it is all a matter between the commissioner and the taxpayer, and the improbability of such an intention is increased by the direction of official secrecy which is contained in s.16 of the Act."

20 These remarks apply fairly to the s 221YHG scheme. Jenkinson J continued at 223-4:

"The submissions ... emphasised the contention that a provable debt could not be described as `payable'. As was said in Clyne v Deputy Commissioner of Taxation ..., the `effect of the bankruptcy ... is that the debtor is no longer obliged to pay his creditors; indeed he is disabled from doing so'. But in the phrase in s 221H(2)(b), `any other tax payable by the employee', there is not signified only an immediately enforceable obligation to pay. So much is clear, in my opinion, from the terms of the definition of the phrase `tax payable by the employee', in s 221A(1). The phrase should, in my opinion, be understood as comprehending an obligation, imposed on an employee by the income tax legislation, which an assessment quantifies, whether or not the obligation has become enforceable in consequence of the arrival of the date specified by s 204(1), and whether or not the obligation has been suspended by the operation of bankruptcy legislation.

...

The money deducted by the employer loses its identity upon payment into the Consolidated Revenue Fund. It was not any property of the applicant bankrupt which was made the subject of the processes carried out by the respondent ... in obedience to the commands expressed in s 221H(2)(b). If there had remained `any excess', within the meaning of that expression in s 221H(2)(b), the payment to the applicant directed by that section would have been, not of money the property of the applicant before payment, but of money payable out of the Consolidated Revenue Fund under the authority of ... the Taxation Administration Act ... .

...

It was submitted, ... that the right of the applicant to receive `an amount equal to any excess', within the meaning of that phrase in s 221H(2)(b), was a chose in action, and so property of the applicant. It is unnecessary to express an opinion on the submission. If its correctness be assumed, yet the processes of crediting which the respondent undertook on 28 June 1985 did not in my opinion amount to the enforcing of a remedy against that property. Those processes were part of the statutorily prescribed steps by which the value of the chose in action was to be ascertained. In this particular case the taking of those steps produced the result that the chose in action was disclosed to be of no value and its existence thereupon terminated."

21 Taylor's first argument (that the debt was not "payable" and therefore could not be recouped from PAYE deductions in later years) failed because the amount was relevantly payable according to the Assessment Act. That the payment may have been suspended by the Bankruptcy Act was not relevant. His second argument (that of inconsistency between subs 58(3) of the Bankruptcy Act and s 221H of the Assessment Act) failed because the Assessment Act, in effect, prescribed a "code" for the application of overpaid PAYE deductions. Woodward and Northrop JJ agreed generally with these reasons. It may be that the two arguments merely state the same proposition in different ways.

22 There is one arguably material difference between the relevant legislation in Taylor and s 221YHG. The relevant provision in Taylor expressly treated "tax ... that ... may become due and payable" as "tax payable". Subsection 221YHG(7) did not do so. It rather defined tax payable as "an amount payable" to the Commonwealth pursuant to the Assessment Act. Jenkinson J treated that provision as being of some significance. In the present case the liquidators point out that the Assessment Act did not extend the meaning of the expression "amount payable" in s 221YHG to include amounts not immediately payable. It is said that, absent such an extension, the expression "amount payable" meant an amount which the relevant debtor was immediately liable to pay. It is then submitted that, if such liability was suspended by the operation of the laws relating to insolvency, the amount was not "payable" for the purposes of subs 221YHG(7). It is said to follow that Taylor does not apply.

23 In support of these propositions, the liquidators refer to various cases in which a distinction has been drawn between taxes which are "due" and those which are "payable", the most significant of which are Clyne v Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1 and the subsequent decision in Commissioner of Taxation v Kavich (1996) 68 FCR 519. Clearly, an amount may be due although it is not yet payable, in the sense that the time at which payment is legally required has not arrived. As Clyne and Kavich demonstrate, such a distinction has been accepted for the purposes of the Assessment Act. However any presumption as to the meaning of a term must yield to the context in which it appears. See Clyne, per Gibbs CJ at 10 and per Mason J at 15. For present purposes the question is whether or not the reference in sub s 221YHG(7) to "... an amount payable by the person to the Commonwealth under, or by virtue of, this Act; ..." included such an amount, the recovery of which was barred by a deed executed pursuant to the Corporations Law or by any provision of that Law. The test prescribed by subs 221YHG(7) required only that the amount be payable "... under, or by virtue of ..." the Assessment Act, leading us to conclude that, if such amount had become payable pursuant to the terms of that Act, then it was an amount to which the subsection applied, regardless of the operation of any other legislation. This is consistent with the approach adopted in Taylor.

24 The second argument advanced in Taylor was of inconsistency between the Bankruptcy Act and the Assessment Act. We do not understand the liquidators to assert inconsistency in the present case. Indeed, in their written submissions they are at pains to avoid any such suggestion. Obviously, having regard to the decision in Taylor, it would be difficult for them to argue that any such inconsistency should be resolved in a way which would be favourable to them. Rather, the liquidators seek to distinguish Taylor by submitting that the Insolvency (Tax Priorities) Legislation Amendment Act 1993 (Cth) ("the amending Act") effectively led to the Commissioner having the same rights and obligations in an insolvent administration as had any other unsecured creditor. This argument assumes that the combined effect of the deed and the Corporations Law was to relieve the Commissioner of the obligation to apply the PPS credits as prescribed in s 221YHG. We are by no means sure that such an assumption is correct. Argument focused upon cl 13.3 of the deed and s 553C of the Corporations Law. However, other provisions of the Corporations Law may also have been relevant. The Corporations Law provision most nearly analogous to s 58 of the Bankruptcy Act was s 471B which provided:

"While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

(a) a proceeding in a court against the company or in relation to property of the company; or

(b) enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes."

25 Other relevant sections were s 474, which required the liquidator to take possession of the company's property, and s 478 which authorized the application of such property in discharge of the company's obligations. Of these provisions, cl 13.3.4 of the deed and ss 471B and 553C of the Corporations Law were the most relevant for present purposes.

26 It appears to have been accepted in Taylor that the Commissioner's obligation to apply funds pursuant to the relevant section constituted enforcement of a "remedy" for the purposes of par 58(3)(a) of the Bankruptcy Act. However, we doubt whether exercise of the obligations imposed by s 221YHG could be described as beginning or proceeding with "enforcement process in relation ... [to the company's] property" for the purposes of par 471B(b) of the Corporations Law. The expression "enforcement process" seems more appropriate to describe execution than the process prescribed by s 221YHG. This is especially so in view of the reference to "a proceeding in a court against the company or in relation to property of the company; ..." in par 471B(a). The word "property" is defined in s 9 of the Corporations Law as:

"... any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action;".

Dexcam's "rights" under s 221YHG may have been "property" for the purposes of s 471B, although the decision in Federal Commissioner of Taxation v Official Receiver (supra, especially at 310-311 per Williams J and 333-4 per Fullagar J, Dixon CJ concurring) might suggest otherwise. The extent of any such right was limited by the duty conferred upon the Commissioner otherwise to apply the relevant amounts. One would normally construe s 221YHG as a whole, leading to the conclusion that Dexcam's rights were subject to the Commissioner's statutory duty. This is simply another way of describing the approach taken in Taylor. We doubt whether s 471B, given its fullest effect, would have operated to remove the duty imposed by s 221YHG.

27 The liquidators submit that cl 13.3.4 of the deed and s 553C of the Corporations Law also operated to relieve the Commissioner of that duty. Section 553C was, in form, an enabling, not a prohibitive, provision. It authorized "set-offs" which would not otherwise have been available. In the absence of a provision such as s 553C, s 471B would have prevented a person who had mutual dealings with a company from recovering any debt owed to him or her. He or she would still have been obliged to pay debts owed to the company and then to prove for his or her own claim in the insolvent administration, ranking with other unsecured creditors. The purpose of a section such as s 553C appears from the judgment of the High Court in Gye v McIntyre [1982] HCA 34; (1990-91) 171 CLR 609 at 618-9, as does the broad range of transactions to which it might apply. Subsection 553C(2) provided that:

"A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent."

28 The liquidators pleaded that s 553C did not apply to the appellant's purported application of funds, presumably upon the basis that she had knowledge of the company's insolvency at all relevant times. As much appears to have been admitted in the agreed statement of facts (par 22). However, if the s 553C regime is broad enough to apply to contingent "debts", including tax "debts" (as suggested in Gye v McIntyre at 624, and again subject to the doubts expressed in Federal Commissioner of Taxation v Official Receiver), then the present tax debts arose contingently long before the commencement of the administration or the winding-up. We doubt whether the appellant had knowledge of insolvency in those early stages. It seems probable that the admission was intended to relate to all times after commencement of the administration. In any event, we doubt whether the appellant either gave or received credit in assessing tax liability or in acting pursuant to s 221YHG. It is not necessary to take this matter further as we were told in the course of argument that the appellant had eschewed any reliance upon s 553C. It is also difficult to see how that section can assist the liquidators.

29 Sub-clause 13.3.4 of the deed bars those bound by it from exercising rights of set-off or cross-action which would not have been available to them in a winding-up. It is submitted that in a winding up, s 553C would have relieved the appellant of the duty imposed by s 221YHG. We have already expressed doubt as to whether s 471B or s 553C would have had that effect. In any event, the effect of the deed could not have survived its termination. In summary, we are by no means satisfied that the Corporations Law operated to negate he effect of s 221YHG of the Assessment Act, even assuming that the said Law had paramountcy over that provision. Nonetheless, we assume such effect and turn to consider whether the amending Act conferred paramountcy upon the Corporations Law. We commence with a number of observations concerning insolvent administration.

Priority in insolvent administration

30 The administration of an insolvent estate usually involves three distinct steps, namely:

[Yuml] identification and collection of assets;

[Yuml] identification of creditors and amounts owing; and

[Yuml] application of the assets in discharge of debts.

31 In identifying the available assets and liabilities, two relevant situations are frequently encountered. The first is a claim by a secured creditor to a charge over some, or all of the assets of the estate. Prima facie, such a creditor is entitled to enforce its rights against the relevant property. If that property is insufficient in value to meet the secured debt, then the creditor may generally prove for the balance in the insolvency. If the property is worth more than the debt, then the excess is available to be distributed to the unsecured creditors of the insolvent estate. The second situation concerns mutual debit and credit transactions between the insolvent debtor and a third party. Insolvency legislation usually deals specifically with this situation. For present purposes, s 553C of the Corporations Law did so, as did sub-cl 13.3.4 of the deed. Broadly speaking, if the set-off of debits and credits demonstrates that the third party is a net creditor of the estate, then he or she may prove for the balance. If he or she is shown to be a net debtor, then the balance is an asset of the insolvent estate.

32 In applying the available assets to meet the debts of the estate, the trustee, liquidator or administrator will firstly pay certain creditors who are said to have "priority". Section 556 of the Corporations Law established such a regime, as did cl 5 of the deed. In our experience, the term "priority" is used in this area to describe the position of such creditors. The term is not usually used to describe either the position of a secured creditor or that of a creditor who is entitled to set off mutual credits and debits. We do not suggest that the present problem can be resolved by the assignment of technical meanings to such words. However, we suspect that the liquidators' argument assumes that the word "priority" in certain extrinsic material (used in aid of construction) had a broader meaning than that intended. We will consider that material at a later stage.

The Commissioner's priority

33 Before 1980, the Commissioner enjoyed priority in insolvent administrations. See the Assessment Act as at 31 October 1979, at s 221. This meant that, once the assets of an insolvent estate had been identified, the Commissioner's debt ranked ahead of those of other unsecured creditors. This position was substantially altered by the Taxation Debts (Abolition of Crown Priority) Act 1980 (Cth), which repealed s 221 with effect from 1 November 1979. (See s 5.) In the following year, s 3 of the Crown Debts (Priority) Act 1981 (Cth) abolished any prerogative right of the Crown to priority in insolvency. Thereafter, such a prerogative right was to be subject to State laws concerning the order of payment of debts, avoidance of preferences and compromises and arrangements. Section 4 of that Act exempted express priority provisions (then contained in 221P and 221YU of the Assessment Act) from the effect of s 3. Sections 221P and 221YU dealt respectively with unremitted group tax and unremitted deductions by a trustee of withholding tax, matters still dealt with in Part VI. Those sections had not been repealed in 1979 and, although they created statutory, rather than prerogative priority, it was apparently thought advisable that it be made clear that they were not affected by the Crown Debts (Priority) Act. When, in 1983, Division 3A was inserted into Part VI of the Assessment Act, it included s 221YHJ which also contained a priority provision. Section 4 of the Crown Debts (Priority) Act was amended to include s 221YHJ as a section exempted from the operation of s 3 of that Act. In 1986 s 221YHZD was inserted into the Assessment Act as part of the new Division 3B of Part VI, dealing with natural resource payments and royalties. That section also contained an express priority provision. Once again, s 4 of the Crown Debts (Priority) Act was amended accordingly. The priority provisions in ss 221P, 221YU, 221YHJ and 221YHZD expressly conferred upon the Commissioner priority over other creditors. In other words, they conferred priority in the narrower sense described above.

The amending Act

34 The liquidators submit that the amending Act has effectively repealed or overridden the operation of s 221YHG of the Assessment Act. Broadly speaking, the purpose of the amending Act appears to have been to facilitate the collection of moneys deducted on account of tax liabilities as prescribed in the various divisions of Part VI of the Assessment Act. As part of that exercise, it also abolished the priority previously enjoyed by the Commissioner pursuant to ss 221P, 221YU, 221YHJ and 221YHZD of the Assessment Act. Section 7 amended s 221P so that from 30 June 1993, at the latest, unremitted group tax was not recoverable from a trustee (which term included a liquidator). Section 9 similarly amended s 221YHJ with respect to deductions made prior to 1 June 1993. Section 11 amended s 221YHZD, and s 15 amended s 221YU. The effective dates of these amendments differed, presumably to reflect the different accounting regimes prescribed in the various divisions of Part VI. That has no present significance. The amending Act did not purport to amend s 221YHG. For reasons which are not immediately obvious, the amending Act also amended s 4 of the Crown Debts (Priority) Act to refer to subss 221YHJ(3), (4) and (5) and 221YHZD(3), (4) and (5) rather than to ss 221YHJ and 221YHZD as it previously had done. There appears to be a typographical error in the reproduction of the amending Act in the 1993 sessional volume in that the amendment to s 4 of the Crown Debts (Priority) Act, which is to be found in the schedule, refers to the deletion of a reference to s 221YZD rather than s 221YHZD. As far as we can ascertain, s 4 has never referred to s 221YZD. Nothing turns on this.

35 Notwithstanding the absence of any express amendment to s 221YHG, the liquidators submit that certain extrinsic material demonstrated an intention to abrogate the Commissioner's duty to act as prescribed in that section. In their written submissions they assert at par 2.16 that:

"The priority of the Commissioner for the payment of tax debts in the winding up of companies or in the bankruptcy of individuals was done away with completely in 1993."

36 After referring to the amending Act, the submission continues:

"The stated purpose of that legislative change was to ensure that the Commissioner would be treated in the same manner as other unsecured creditors in the administration and winding up of companies."

37 To support these propositions, reference is made to the second reading speech in the House of Representatives on 27 May 1993 (Parliamentary Debates p 1124) and the relevant explanatory memorandum at pp 13-14 and pp 45-46. The speech did not support the liquidators' propositions. It was that of Mr Gear, the then Assistant Treasurer. He said, relevantly:

"The Bill will amend several laws including the income tax legislation and the Corporations Law. It contains the measures foreshadowed in the joint statement by the Treasurer (Mr Dawkins) and the former Attorney-General on 2 December 1992. Those measures included abolishing the existing priority of the Commissioner of Taxation for debts in relation to certain unremitted amounts which become payable after 30 June 1993. (Emphasis added). They also included measures to enable the commissioner to recover the unremitted amounts more quickly through an estimation process and to encourage directors to face emerging problems as soon as possible."

38 The Assistant Treasurer continued:

"The commissioner's priority currently applies to amounts deducted by employers from the salary or wages of their employees, and deductions of a similar nature, where those deductions are not paid to the commissioner. The commissioner's priority ranks debts for those deductions above all other debts of a person or company in a bankruptcy or insolvency. The Bill will remove the commissioner's priority for debts in respect of those deductions, as well as certain other deductions such as those made from prescribed payments under the prescribed payments system."

39 Clearly, the Assistant Treasurer was referring to the express priority provisions to which we have referred. Similarly, at pp 13-14, the explanatory memorandum, under the heading "Background to the legislation", said:

"Sections 221P, 221YHJ, 221YHZD and 221YU of the Income Tax Assessment Act 1936 (Assessment Act) currently give the Commissioner priority over all other creditors (whether preferential, secured or unsecured) of a person, including a company, in the recovery of certain unremitted amounts when the person becomes a bankrupt or when a company is placed into liquidation or receivership.

The main debts are those which arise when:

® tax instalment deductions, made from salary or wages under the pay as you earn (PAYE) arrangements; or

® deductions, made from prescribed payments under the prescribed payments system (PPS);

are not remitted to the Commissioner in accordance with the Assessment Act."

40 On p 14, reference was again made to those specific sections including, with respect to PPS, subss 221YHJ(3), (4) and (5). The memorandum then continued:

"In their joint Press Release on 2 December 1992, the Treasurer and the Attorney-General announced that the Commissioner's priority was to be abolished.

As a result of the amendments proposed, debts due to the Commissioner, arising as a result of a failure to remit amounts deducted, will be treated in a similar manner to debts payable to other unsecured creditors."

41 These passages demonstrate a clear intention to amend the express priority provisions. However (as is pointed out in the liquidators' outline of argument) at p 45 of the explanatory memorandum, in dealing with consequential amendments to the Corporations Law, it was said that:

"The proposed amendments to the Corporations Law are relatively minor and technical and support measures to be included in the Assessment Act. Broadly, they seek to put the Commissioner in the same position as other creditors, so that the Commissioner has clear access to all the remedies enjoyed by other creditors. Amendments to the Bankruptcy Act 1966 (Bankruptcy Act), the Crimes (Taxation Offences) Act 1980 and the Crown Debts (Priority) Act 1981 are purely consequential."

42 Under the heading "Background to the legislation", the memorandum, after repeating the first two sentences from the extract just quoted, continued:

"The abolition of the Commissioner's priority is essential for the smooth and efficient operation of the proposed voluntary scheme of administration under the new insolvency provisions of the Corporations Law introduced by the Corporate Law Reform Act 1992. These provisions are due to commence in June this year."

43 Part of the above extract found its way into his Honour's reasons. As we have observed, it referred to the amendments to the Corporations Law rather than to the amendments to the Assessment Act. One might have expected internal consistency within the memorandum, but the inconsistency is obvious. Clearly enough, it was the earlier part of the explanatory memorandum, related specifically to the Assessment Act, which explained the purpose of the proposed amendments to that Act. That purpose did not require the repeal of s 221YHG or the termination of its continued operation. That the section was not amended demonstrates that Parliament's intention was more accurately reflected in the explanatory memorandum as it referred to the Assessment Act than as it referred to the Corporations Law. In our view, the word "priority" in the explanatory memorandum bore the more common, and narrower meaning to which we have referred above.

44 The liquidators also argue that the adoption of s 222ARA supported their submissions. When introduced, that section provided:

"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."

45 It has since been amended to reflect the adoption of the Corporations Act in place of the Corporations Law. Chapter 5 of the Corporations Law dealt with insolvent administration, as does ch 5 of the Corporations Act. The adoption of s 222ARA demonstrates an intention that, in the event of inconsistency between ch 5 and Part VI of the Assessment Act, Part VI was to prevail. Subsection 222ARA offers no support for the liquidators' submissions.

46 It follows that Taylor should be applied by analogy to s 221YHG. The amount of any PPS credit was to be applied, first, in discharge of any tax payable pursuant to an assessment for the year of income in which the relevant deductions were made. If the amount of the credit exceeded the amount of such assessment, then the balance was to be applied in payment of any other tax payable by the person in question, or in part payment thereof. By virtue of subs 221YHG(7)(a), "tax payable" included any amount payable by that person to the Commonwealth under, or by virtue of the Assessment Act. It therefore included unremitted group tax and penalties which were included in the pre-deed debt. It also included tax assessed for other years of income, provided that it had become payable pursuant to the Assessment Act.

Section 13 of the Taxation Interest Act

47 Subsection 13(1) of the Taxation Interest Act permitted the application of interest "in total or partial discharge of a liability of" the relevant taxpayer to the Commonwealth. Subsection 3(2) provided that reference to "... a liability of a person to the Commonwealth is a reference to a liability of a person to the Commonwealth arising under, or by virtue of, an Act of which the Commissioner has the general administration." The liquidators point out that, pursuant to s 13, the Commissioner had a discretion to apply interest in payment of a liability to the Commonwealth, whereas under s 221YHG, the prescribed application was mandatory as was the relevant provision in Taylor. This is said to be a basis for distinguishing that decision.

48 In Taylor the question was whether tax ceased to be "payable" for the purposes of the set-off provision where it was either provable in the bankruptcy, or made unrecoverable by express provisions of the Bankruptcy Act. Section 13 does not require that a relevant debt be "payable", referring rather to "a liability ... to the Commonwealth". That term is defined in subs 3(2) as "a liability of a person to the Commonwealth arising under or by virtue of an Act of which the Commissioner has the general administration." The word "liability" carries a broader meaning than do the words "tax payable". A liability may well not be immediately payable. See Taylor at 218. In common parlance, a debt does not cease to be a "liability" merely because the debtor's estate is being administered in insolvency. In any event, the rationale of the decision in Taylor is simply that the relevant provision of the Assessment Act was concerned only with whether a relevant amount was "payable" for the purposes of that Act. Quite clearly, s 13 was concerned with the liabilities created by a particular class of legislation, of which the Assessment Act was a member and the Corporations Law was not.

49 The Taxation Interest Act prescribed a mechanism for dealing with interest accruing pursuant to its terms. Clearly, the Commissioner had the option of applying any such interest to other tax debts before accounting to the taxpayer for it. In that sense, the amount of the credit was not payable to the taxpayer until the Commissioner had decided whether or not to exercise the option. The observations of Fullagar J in Federal Commissioner of Taxation v Official Receiver (supra) should be applied by analogy to the s 13 scheme in the same way as they were applied in Taylor.

Orders

50 The appeal must be allowed and the orders below set aside. The application should be dismissed. The appellant should have the costs of the application and of this appeal.

I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan and Dowsett.

Associate:

Dated: 30 June 2003

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V460 OF 2002

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION APPELLANT
AND:	DEXCAM AUSTRALIA PTY LTD (in liquidation) (ACN 007 056 877) and DAVID NEIL LOCKWOOD and KENNETH STEWART SELLERS (as liquidators) RESPONDENTS

JUDGES:	RYAN, FINN & DOWSETT JJ
DATE:	30 JUNE 2003
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

FINN J:

51 I have had the advantage of reading the judgment of Ryan and Dowsett JJ with whose conclusions and proposed orders I agree. There are, though, several brief comments I would wish to add. The first concerns the alleged implied repeal of the advantage in insolvent administrations conferred on the Commonwealth via the Commissioner of Taxation ("the Commissioner") by s 221YHG of the Income Tax Assessment Act 1936 (Cth) ("the Assessment Act").

52 Notwithstanding the apparent inconsistency in the explanatory memorandum for the Insolvency (Tax Priorities) Legislation Amendment Bill 1993 to which Ryan and Dowsett JJ have referred, the clear purpose of that legislation was to abolish the priority enjoyed by the Commonwealth conferred by ss 221P, 221YHJ, 221YHZD and 221YU of the Assessment Act. The particular taxation debts dealt with in those sections had been identified specifically by the Australian Law Reform Commission ("the ALRC") in its Report No 45, "General Insolvency Inquiry", vol 1, para 733 as "the only debts due to the Crown in right of the Commonwealth which are accorded priority": emphasis added. The ALRC recommended the abolition of that priority (para 741). And the 1993 Tax Priorities Amendment Act abolished it by specific reference to the four sections referred to above. Insofar as concerned priority of debts, there was nothing in the language of that amending legislation itself or in the joint statement of the Treasurer and the Attorney-General of 2 December 1992 foreshadowing the proposed abolition of the Commissioner's priority, to suggest a legislative purpose beyond those four sections. As Mr Williams, the member for Tangney, indicated in debate on the second reading in the House of Representatives, the legislation "in effect implemented" the ALRC's recommendation: Parliamentary Debates, vol 188, pp 1131-1132 (27 May 1993).

53 Secondly, s 221YHG (as it stood at the relevant time) was one of a family of similarly structured provisions of the Assessment Act that required the Commissioner to apply various tax credits in payment of other tax or designated debts of the person otherwise entitled to those credits, with any credit balance being a debt due and payable by the Commissioner to that person: see Assessment Act, s 220AZC, s 221H, s 221YE, s 221YHG, s 221YHZL and s 221ZY. The object of these various provisions was of an accounting character. It required striking a balance of account between the taxpayer and the Commissioner before a credit (if any) became due and payable to a taxpayer. Whether most of these provisions (including s 221YHG) were properly to be described as creating a right of statutory set off rather than a species of running account: cf Meagher, Gummow and Lehane, Equity: Doctrines and Remedies para 37-010 (4^th ed); need not be inquired into for present purposes. I would say, though, that the formula used in s 221YHG(1) ("Subject to this section") suggests that a credit only became a debt due and payable if, after application of the credit in the manner prescribed by the section, a balance remained. The two notable features of the family of provisions to which I have referred were (i) the respective accounting obligations these sections imposed were absolute ones, no discretion being given as to whether or not the sections ought be applied; and (ii) the sections were unconcerned with whether or not the taxpayer was solvent.

54 Even if s 221YHG had stood alone in the scheme of the Assessment Act, I would not have concluded that the 1993 Tax Priorities Act altered it in any presently relevant way. Given that it in fact belonged to a family of like provisions, I am strengthened in the view that if Parliament had intended to amend these provisions (which had not previously been identified as priority provisions for insolvency purposes) it would have done so expressly.

55 I should add that I do not consider that s 222ARA assists the taxpayer in its submissions. This provision subordinates the Corporations Law to the Assessment Act in the event of inconsistency, not vice versa.

56 The position in relation to the application of interest payable under the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) ("the Interest Act") is somewhat more complex. Section 13(1) of that Act provides:

"The Commissioner may apply an amount of interest payable under Part IIB, Part III or Part IIIA to a person in total or partial discharge of a liability of the person to the Commonwealth."

57 Unlike s 221YHG of the Assessment Act, this provision appears to confer a limited right of set off on the Commonwealth that is exercisable by the Commissioner. I distinguish the Commonwealth and the Commissioner for the obvious reason that no personal rights or liabilities of the Commissioner are affected by the exercise of the power vested in her. This is notwithstanding that the antecedent interest liability created by the Interest Act is "payable by the Commissioner": see ss 8A, 8E, 19 and 12A; and see generally Federal Commissioner of Taxation v Official Receiver [1956] HCA 24; (1956) 95 CLR 300 at 311-312, 324.

58 The liabilities to the Commonwealth that the interest payable could be used to discharge in whole or in part were not at large. Section 3(2) of the Act defines "a liability of a person to the Commonwealth" to be:

"a liability of the person to the Commonwealth arising under, or by virtue of, an Act of which the Commissioner has the general administration."

I will for convenience describe such liabilities as "taxpayer related" liabilities.

59 The short question raised in this appeal is whether s 553C of the Corporations Law or para 13.3.4 of the deed of company arrangement could preclude the Commissioner from electing to exercise the s 13(1) power of "set off" in the manner in which she did. That section and that paragraph are set out in those reasons of Ryan and Dowsett JJ. I will not repeat their terms here though I will note that both circumscribe a creditor's right of set off where a company is insolvent or has entered into a deed of company arrangement. The Commissioner (on behalf of the Commonwealth) was a participating creditor of the respondent, Dexcam Australia Pty Ltd ("Dexcam"), for the purposes of the deed. She was as such bound by it: Corporations Law s 444D(1); save to the extent that she had overriding statutory duties and powers that were inconsistent with or operated to the exclusion of provisions of the deed.

60 My own view is that, within its limited sphere, the Interest Act had an exclusive operation. I do not consider that the particular discretion given the Commissioner was one which, by virtue of general provisions in the Corporations Law, was able to be fettered by any deed of company arrangement that was made binding on the Commissioner. I do not consider that the Parliament would have intended that the limited and specific power given by the Interest Act to extinguish taxpayer related liabilities to the Commonwealth was to have been qualified by the Corporations Law such that it would be comprehended by a deed such as Dexcam's.

61 The Interest Act power was one power in the complex of powers and duties (such as s 221Y HG of the Assessment Act) of the Commissioner in a scheme which permitted or required the "rationalisation" (to use a neutral word) of the various debts and credits of the taxpayer and the Commonwealth in the Commonwealth-taxpayer relationship. That scheme gave a central responsibility to the Commissioner. To adapt the words of Fullagar J in Federal Commissioner of Taxation v Official Receiver, at 323, it is very unlikely in this setting that it was intended that the Commissioner in exercising her s 13(1) power (no less so than in discharging her s 221 YHG duty) should have to concern herself with such things as deeds of arrangement and insolvencies and with questions of power and validity.

62 The Commissioner was put in a position to exercise a power that would extinguish a tax-related debt in whole or in part. The propriety of her exercise of that power may have been able to be challenged in appropriate proceedings by way of judicial review. But the power itself was not, and was not able to be, circumscribed by Dexcam's deed. That deed operated subject to the power.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Associate:

Dated: 30 June 2003

Counsel for the Appellant:	C M Maxwell QC with S P Gardiner
Solicitor for the Appellant:	Australian Government Solicitor
Counsel for the Respondents:	B J Shaw QC with S A Glacken
Solicitor for the Respondents:	Middletons Lawyers
Date of Hearing:	8 November 2002
Date of Judgment:	30 June 2003