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High Court of Australia |
THE COMMONWEALTH v. CIGAMATIC PTY. LTD. (IN LIQUIDATION) [1962] HCA 40; (1962) 108 CLR 372
Constitutional Law (Cth)
High Court of Australia
Dixon C.J.(1), McTiernan(2), Kitto(3), Taylor(4), Menzies(5), Windeyer(6) and
Owen(7) JJ.
CATCHWORDS
Constitutional Law (Cth) - Powers of Commonwealth and States - Companies - Liquidation - Debts due to Crown in right of Commonwealth - Prerogative right to priority of payment - Power of State to control or abolish priority - Debts due to Commonwealth for sales tax and postal charges - Sales Tax Assessment Act (No. 1) 1930-1953 (Cth), s. 32 - Post and Telegraph Act 1901-1961 (Cth) - Companies Act, 1936-1960 (N.S.W.), ss. 199, 282, 297.
HEARING
Sydney, 1962, March 29; April 2; August 2. 2:8:1962DECISION
August 2.2. In the first instance the Commonwealth rests its claim on the right at common law of the Crown to priority of payment when in any administration of assets debts of equal degree due to the Crown and due to subjects of the Crown come into competition. This right arose from the sovereignty of the Crown and was accordingly expressed in terms of prerogative but it is today one of the fiscal rights of government and of course it clearly attaches to the Commonwealth. The claim of the Commonwealth in the present case resting on this right is, however, denied on the ground that by force of the State Companies Act it is excluded. This conclusion is doubtless supported, if not completely at all events to no inconsiderable degree, by the judgments of the majority in Uther v. Federal Commissioner of Taxation [1947] HCA 45; (1947) 74 CLR 508 , but it seems to me now as it seemed to me then to imply a fundamental proposition about the power of legislatures of the States which ought not to be entertained. The proposition that is implied is that an exercise of State legislative power may directly derogate from the rights of the Commonwealth with respects to its people. It is a proposition which must go deep in the nature and operation of the federal system. There can be no doubt as to the nature or the source of the right of the Commonwealth in an administration of assets to be paid in preference to subjects of the Crown if there is a competition among debts of equal degree. It springs from the nature of the Commonwealth as a government of the Queen. Therefore to treat those rights as subject to destruction or modification or qualification by the legislature of a State must mean that under the Constitution there resides in a State or States a legislative power to control legal rights and duties between the Commonwealth and its people. Indeed in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 Rich J. actually says : "In so far as the right of the Crown in the right of the Commonwealth to rank as a preferential creditor is based merely on the prerogative of the Crown as such, I see no reason why the State legislature cannot validly abridge or abolish it just as it could any other Crown prerogative of this sort" (1947) 74 CLR, at p 523 . Except by adopting such a doctrine I cannot see how it could be thought that State legislative power could directly deprive the Commonwealth of the priority to which it is entitled under the law derived from the prerogative. Believing, as I do, that the doctrine thus involved is a fundamental error in a constitutional principle that spreads far beyond the mere preference of debts owing to the Commonwealth, I do not think we should treat Uther's Case [1947] HCA 45; (1947) 74 CLR 508 as a decisive authority upon that question which we should regard as binding. It is not a question, as it appears to me, of interpreting some positive power of the State over a given subject matter. It is not a question of making some implication in favour of the Commonwealth restraining some acknowledged legislative power of the State. If you express the priority belonging to the Commonwealth as a prerogative of the Crown in right of the Commonwealth, the question is whether the legislative powers of the States could extend over one of the prerogatives of the Crown in right of the Commonwealth. If, as in modern times I think it is more correct to do, you describe it as a fiscal right belonging to the Commonwealth as a government and affecting its Treasury, it is a question of State legislative power affecting to control or abolish a federal fiscal right. It is not a question of the authority of the power of a State to make some general law governing the rights and duties of those who enter into some description of transaction, such as the sale of goods, and of the Commonwealth in its executive arm choosing to enter into a transaction of that description. It is not a question of the exercise of some specific grant of power which according to the very meaning of the terms in which it is defined embraces the subject matter itself : for it is not the plan of the Constitution to grant specific powers to the States over defined subjects. It is, I think, a question which cannot be regarded as simply governed by the applicability of the principles upon which Melbourne Corporation v. The Commonwealth [1947] HCA 26; (1947) 74 CLR 31 depended. In truth it imports a principle which if true would apply generally with respect to the legal rights of the Commonwealth in relation to its subjects. I do not speak of legal rights which are the immediate product of federal statute and so protected by s. 109 of the Constitution. But because it imports such a principle I think we ought not to give effect to the view taken in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 that s. 297 of the Companies Act, 1936 of New South Wales operated directly to nullify the priority to which the Commonwealth might have been entitled. I shall not recapitulate the reasons against this conclusion which I gave in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 . But I should add that in that case the view was rejected that, assuming that s. 297 could not operate of its own legislative force to deprive the Commonwealth of its right to priority (an assumption, of course, which I think is completely correct), yet Pt X of the Companies Act, 1936 established a definite plan of winding up of which s. 297 formed a part and that the Crown in right of the Commonwealth could either stand outside the plan altogether and enforce its claim independently of the winding up or else at its election could come in voluntarily but on terms of accepting the whole plan. That would mean that the Commonwealth must come in on the footing that it accepted the plan as an entirety including the order of priority set out in s. 297. (at p378)
3. In a unitary system it seems that the Crown, if not bound directly by the companies legislation, has not been considered to be in this position. And there is no sound ground for treating the question as any different when the question is between the Crown in right of the central authority in a federal system and the plan of liquidation set up by one of the other political units in the system ; at all events there is no reason for departing from the view expressed in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 upon that matter. Nor is there any compelling reason for reconsidering the views expressed by the majority in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 concerning the meaning and effect of s. 32 of the Sales Tax Assessment Act (No. 1) 1930-1953. But I have had the advantage of reading the judgment prepared by Taylor J. on the subject of the operation of such a provision and the many statutes passed under the taxation power as incidental thereto which contain provisions in a like form. The inconsistency of operation which on their face they appear to exhibit in the case of a liquidator of an insolvent company owing taxes of two or more different descriptions if he holds assets insufficient to pay more than one description of tax, arises from the unqualified terms in which they are expressed. But I would not resolve that difficulty by treating the statutory provisions as impliedly repealing one another in order of date. That appears to me to be contrary to the intention of the statutes. The inconsistency occurs only in the actual operation of the statutes and then only when in one liquidation more than one of the statutory provisions applies and the assets are insufficient to meet the demands of both statutes. In such a case I would rather imply a duty to hold the assets to meet both or all demands pari passu. After all, ultimately the creditor is the same, viz. the Crown in right of the Commonwealth, and at bottom the question is simply of the proper application, so to speak, among the accounts of the Commonwealth of the fund the liquidator must hold. However, it may be said that on the view adopted by the majority of the Court in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 , all the liquidator need do under the provisions is to hold the assets or fund until from other sources of authority the proper application of the same be ascertained or determined. Certainly what is shown by the judgment of Taylor J. makes it manifest that the operation of these various statutory provisions as an entirety calls for the consideration of the Legislature. (at p379)
4. It is perhaps unnecessary to add that the postal charges are not affected by any such statutory provision. (at p379)
5. For the foregoing reasons I would simply overrule the demurrer. (at p380)
McTIERNAN J. In Uther's Case [1947] HCA 45; (1947) 74 CLR 508 the validity of ss. 199 (3), 282 and 297 (1) (d) of the Companies Act, 1936, of New South Wales, was called into question on the ground that these sections were beyond the constitutional power of the State. The Court decided that it is within the constitutional competence of a State to restrict or abolish the prerogative right of the Crown in right of the Commonwealth to payment of debts due to it in priority to all other debts of equal degree, in legislation relating to the winding up of companies. These sections are legislation of that kind. In the present case, the Commonwealth of Australia and the Commissioner of Taxation of the Commonwealth of Australia join in asking the Court to overrule this decision. If it is not overruled, the decision stands in the way of these plaintiffs succeeding in the present case. Uther's Case [1947] HCA 45; (1947) 74 CLR 508 was fully argued before six Justices of this Court ; four explicitly decided to uphold the constitutional power of a State legislature to enact the kind of legislation in question. For my part, I implicitly agreed in that view, although I decided in favour of the defendant Commissioner of Taxation because I regarded the question in issue to be one of inconsistency between valid state and federal law, the federal law being s. 31 of the Sales Tax Assessment Act (No. 1) 1930-1942 and s. 28 of the Pay-roll Tax Assessment Act 1941-1942. (at p380)
2. I am not prepared to agree that it is an absolute proposition that the Commonwealth enjoys under the Constitution immunity from State legislation on a matter which is within the residue of legislative power left after the grant of power which s. 51 of the Commonwealth of Australia Constitution Act grants to the Parliament with respect to the subjects enumerated therein - the winding up of companies is, of course, an example of such State legislation. But I think this question is not one which should again be canvassed in this case, and the decision in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 , even though it is debatable, should not be struck down. I feel urged by a number of reasons not to review that decision in the present case. The first is one of a practical kind: the winding up of companies has for some fifteen years proceeded in reliance on the validity of that decision, and its reversal might have a disturbing effect in business circles. Mr. Williams in his able argument gave a number of instances illustrating this point. A second reason seems to me to be compelling : when the present case was being argued, it was pointed out as the fact was, that the Companies Act, 1936 as amended was about to expire and a new Act had been passed to take its place ; the latter was in fact proclaimed as from 1st July 1962. The new Act is uniform with the Companies Acts passed by other States and includes, of course, provisions parallel, if not in identical terms, with the legislation of New South Wales which was in dispute in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 . The "new uniform Companies Act", as it has been called, is the product of consultations which went on for a long time between the States and the Commonwealth. The order of priority of debts is obviously an important feature of the new Companies Act of each of the States which has passed it : it occurs in s. 292 (1) of the New South Wales Act. A decision overruling Uther's Case [1947] HCA 45; (1947) 74 CLR 508 would result in the disruption of this order of priorities. In my view, the decision should not be overruled without hearing the Attorneys-General of the States. It is within the constitutional power of the Commonwealth to enact legislation giving debts due to the Commonwealth the priority which the Commonwealth thinks fit if it is dissatisfied with the order of priority accorded such debts under State law. In Uther's Case [1947] HCA 45; (1947) 74 CLR 508 , it was decided that s. 32 of the Sales Tax Assessment Act does not require the liquidator to pay sales tax in preference to other debts. It is within the constitutional power to amend that section so that it would require the liquidator to give preference to the tax. In all the circumstances, it seems to me that it would be a sound exercise of the Court's discretion to decline to review Uther's Case [1947] HCA 45; (1947) 74 CLR 508 . I think that the demurrer should be allowed. (at p381)
KITTO J. I agree that the demurrer should be overruled. I have nothing to add to the reasons of the Chief Justice and my brother Menzies, which I have had an opportunity of reading. (at p381)
TAYLOR J. This is a demurrer to a statement of claim by which the plaintiffs seek declarations that, in the winding up of the defendant company, they are entitled to be paid certain amounts for sales tax and postal charges in priority to the unsecured creditors of the company. The company is in the course of being wound up pursuant to an order of the Supreme Court of New South Wales and the individual defendant is the liquidator thereof. The unsecured creditors of the company are not represented in the proceedings and the declarations which are sought ought not to be made in their absence. However, having come to the conclusion that the demurrer ought to be allowed I shall state as briefly as I may the reasons which have led me to that conclusion. (at p382)
2. At the outset of the argument it became apparent that the plaintiffs wished us to reconsider the decision of this Court in In re Foreman & Sons Pty. Ltd.; Uther v. Federal Commissioner of Taxation [1947] HCA 45; (1947) 74 CLR 508 in which it was held that, in a winding up pursuant to the Companies Act, 1936 (N.S.W.), the prerogative right of the Crown in right of the Commonwealth to be preferred to other creditors of the same degree was restricted by the provisions of ss. 199, 282 and 297 of that Act. The first of these sections provided, inter alia, that the provisions of Pt X of the Act relating to the remedies against the property of a company, the priorities of debts and the effect of an arrangement with creditors should bind the Crown. Section 282 provided that, subject to the provisions of the Act as to preferential payments, the property of a company should, on its winding up, be applied in satisfaction of its liabilities pari passu whilst s. 297 specified the order of priority in which certain debts should be paid. It is unnecessary that these latter provisions should be set out in full but, allowing for the fact that s. 297 was designed to deal with the winding up of companies whereas s. 84 of the Bankruptcy Act 1924-1959 (Cth) is designed to deal with administration in bankruptcy, there is a marked similarity between each set of provisions in so far as they relate to debts falling within the first three classes prescribed by the Companies Act. None of these classes comprehends any debt owing to the Crown in right of the Commonwealth. But the next class prescribed by the Companies Act consists of - "all land tax and income tax assessed or to be assessed under any Act or Commonwealth Act due from the company at the relevant date and having become due or to become due and payable within twelve months next preceding that date, or to become due and payable thereafter and not exceeding in the whole one year's assessment". The corresponding class prescribed by the Bankruptcy Act is - "all municipal or other local rates due from the bankrupt at the date of the order of sequestration and having become due and payable within twelve months next preceding that date ; and all assessed land tax and income tax, assessed under any Act or State Act prior to the date of the order of sequestration and not exceeding in the whole one year's assessment ; and in repayment of any advance made to the bankrupt, or in payment of any amount owing by the bankrupt, for goods supplied to him, under any Act or State Act or law of a Territory relating to or providing for the improvement, development or settlement of land, or the aid, development or encouragement of mining". Neither provision purports to confer any priority with respect to any other form of so-called Crown debt, either State or federal. Finally, it should be observed that by s. 5 (3) of the Bankruptcy Act the provisions of the Act relating to the remedies against the property of a debtor, the priorities of debts, the effect of a composition or scheme of arrangement, and the effect of an order of discharge, shall, except as otherwise expressly provided, bind the Crown as representing the Commonwealth or any State. The Act is expressed to apply to all debtors "but a sequestration order shall not be made against any corporation, or against any partnership, association or company registered under any Commonwealth or State Act which provides for the winding-up thereof" (s. 5 (1)). The direct result of the decision in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 is that the Commonwealth is bound by the State prescribed rules as to priorities in a winding up pursuant to a State Act. Conversely, it would seem that, in a bankruptcy administration a State is bound by the rules prescribed by the Bankruptcy Act and, as appears, the Commonwealth is expressly bound. That being so, there can be no doubt that the rules as to priority in which debts shall be paid in a bankruptcy administration, pro tanto, displaces the prerogative rights of the Crown to be preferred to other creditors of the same degree (cf. Food Controller v. Cork (1923) AC 647 ). (at p383)
3. In Uther's Case [1947] HCA 45; (1947) 74 CLR 508 the claim to priority was rested, first of all upon the prerogative right of the Crown to be preferred to subjects being creditors of equal degree. It is said to be "an incontrovertible rule of law, that where the King's and the subject's title concur, the King's shall be preferred" (R. v. Wells (1807) 16 East 278, at p 282 (104 ER 1094, at p 1096) ) and that "Except so far as the Legislature has thought fit to interfere, the rule is one of universal application, and perhaps not unreasonable, when it is considered that, after all, it only means that the interests of individuals are to be postponed to the interests of the community" (New South Wales Taxation Commissioners v. Palmer (1907) AC 179, at p 182 ; Food Controller v. Cork (1923) AC, at p 660 ; and see also Uther's Case (1947) 74 CLR, at pp 514, 525, 527 ). Secondly, the respondents in the lastmentioned case founded their claim on s. 32 of the Sales Tax Assessment Act (No. 1) 1930-1942 and s. 30 of the Pay-roll Tax Assessment Act 1941-1942. These provisions were in similar terms and I quote s. 32 of the firstmentioned Act : "(1) Every person who is liquidator of any company which is being wound-up and which is, or on or after the first day of August, One thousand nine hundred and thirty has been, a manufacturer or wholesale merchant, shall, within fourteen days after he has become liquidator of that company, give notice in writing to the Commissioner of his appointment as liquidator. (2) The Commissioner shall, as soon as practicable thereafter, notify to the liquidator the amount which appears to the Commissioner to be sufficient to provide for any tax which then is or will thereafter become payable by the company - (2A.) The liquidator - (a) shall not without the leave of the Commissioner part with any of the assets of the company until he has been so notified ; (b) shall set aside out of the assets available for the payment of the tax, assets to the value of the amount so notified, or the whole of the assets so available if they are of less than that value ; and (c) shall, to the extent of the value of the assets which he is so required to set aside, be liable as trustee to pay the tax. (2B.) If the liquidator fails to comply with any provision of this section (or fails as trustee duly to pay the tax for which he is liable under the last preceding sub-section), he shall, to the extent of the value of the assets of which he has taken possession and which are, or were at any time, available to him for the payment of the tax, be personally liable to pay the tax, and shall be guilty of an offence. Penalty : Not less than One pound or more than Fifty pounds. (3) Where more persons than one are appointed liquidators or required by law to carry out the winding-up, the obligations and liabilities attaching to a liquidator under this section shall attach to each of such persons : Provided that where any one of such persons has paid the tax due in respect of the company being wound up the other person or persons shall be liable to pay that person each his equal share of the amount of the tax so paid. (4) Nothwithstanding anything contained in this section, all costs, charges and expenses which, in the opinion of the Commissioner, have been properly incurred by the liquidator in the winding up of a company, including the remuneration of the liquidator, may be paid out of the assets of the company in priority to any tax payable in respect of the company. (5) Nothing in this section shall limit the liability of a liquidator under section sixty-nine of this Act in respect of any transactions, acts or operations effected or done by him as liquidator in respect of any goods." The first two sub-sections of this section were substituted for their original counterparts in 1936 and it may not be unimportant to notice that in its original form the section contained no such provision as sub-s. (4), and sub-s. (1) thereof required the liquidator, in terms, to "set aside such sum out of the assets of the company as appears to the Commissioner to be sufficient to provide for any tax that then is or will thereafter become payable". In its ultimate form s. 32 of the Sales Tax Act came into force on 7th December 1936 and s. 30 of the Payroll Tax Assessment Act came into operation on 2nd May 1941. (at p385)
4. The respondents' claim in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 was wholly rejected. As to s. 32 of the Sales Tax Assessment Act a majority of the Court took the view that in directing a liquidator to set a prescribed sum aside out of the assets available for the payment of the tax, it did not operate to disturb the established order of priority. But it is worthy of note that the original section required the sum to be set aside out of the assets of the company and some change of verbiage was, no doubt, thought necessary because of the introduction (in 1934) of sub-s. (4) which subordinated the sales tax owing to the costs, charges and expenses which, in the opinion of the Commissioner, had been properly incurred by the liquidator in the winding up and which provided expressly that such charges might be "paid out of the assets of the company in priority to any tax payable in respect of the company". It is implicit in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 that the same view was taken concerning s. 30 of the Pay-roll Tax Assessment Act and although I think that the grounds upon which this view was entertained are open to criticism there are, in my opinion, other reasons why, if the case were to be decided now, we should reach the same ultimate conclusion. I should add, however, that I do not subscribe to a number of general observations made in that case concerning the interaction of federal and State laws and functions but on the views which I have formed my disagreement concerning these matters does not lead me to think that the demurrer in this case should be overruled. (at p385)
5. The decision in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 has stood for some sixteen years and during this period it has regulated the respective rights of parties in winding-up administrations and, no doubt, the uniform Companies Acts of the various States which have been enacted recently were framed on the view that Uther's Case [1947] HCA 45; (1947) 74 CLR 508 authoritatively settled the substantial question with which it dealt. These are cogent matters for consideration in determining whether we should disturb the decision but if it is to be reconsidered then both the constitutional question with which the Court was then concerned and the effect of s. 32 of the Sales Tax Act are open to re-examination. (at p385)
6. For myself, I entertain the view that the substantial effect of s. 32, as it stood at the time of that decision, was to require a liquidator, out of the assets of the company, to pay sales tax in priority to all debts other than those specified in sub-s. (4). In justification of this view I find it unnecessary to do more than refer to the observations of Dixon J. (as he then was) in Uther's Case (1947) 74 CLR, at pp 532-534 . His Honour discussed at some length the form in which the section stood at that time and, although he found it unnecessary for the purposes of deciding the case, to express any final opinion concerning the effect of the section, he called attention "to considerations affecting the question" of its construction. These considerations, in my view, lead to the conclusion that the effect of the section was as I have already stated. Further - if the enactment of s. 32 in its original form be ignored for the moment - the section in the form which it assumed in 1936 must, to the extent to which it provided a statutory priority in such cases, be taken to have displaced the Crown's prerogative right to priority in relation to the payment of such imposts (Attorney-General v. De Keyser's Royal Hotel [1920] UKHL 1; (1920) AC 508 ; and Food Controller v. Cork (1923) AC 647 ). Indeed the effect of the section extended somewhat beyond this for, to the extent to which it purported to establish priority for outstanding sales tax, it denied the like right to any other Crown debt. Upon this view concerning the effect of the section the claim to priority in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 in respect of sales tax depended, as in the present case, wholly and solely upon the provisions of s. 32. But when we bear in mind that the first two sub-sections of s. 32 had been enacted in 1930 in what has been said to be a somewhat wider form there may be some ground for the contention that the prerogative right was, pro tanto, abrogated at that time and that, whatever the effect of s. 32 was in the form which it assumed in 1936, the prerogative right was not revived by the repeal then of the first two sub-sections of the original provision (Acts Interpretation Act 1901-1957, s. 8, and cf. Craies on Statute Law, 5th ed. (1952) p. 323). (at p386)
7. However, it is unnecessary to pursue this question for the formula appearing in the section has been consistently used in Commonwealth legislation. Section 26 of the Flour Tax Assessment Act 1933-1934 and s. 25 of the Flour Tax Assessment Act 1934-1935 expressly adopted s. 32 of the Sales Tax Assessment Act (No. 1) 1930-1934 and s. 26 of the Wool Tax Assessment Acts 1936 contains provisions similar to those originally to be found in s. 32 of the Sales Tax Assessment Act (No. 1). Further, nine different Sales Tax Assessment Acts came into operation on the same day and each of these Acts after the first adopted s. 32 of the No. 1 Act. Whilst these provisions purported to remain in force it might well have been impossible - if each had full force and effect - for a liquidator to comply with each of them. But the matter is now further complicated for many later statutes have adopted the same formula. I do not pretend to give a full list of these later statutes but s. 27 of the Stevedoring Industry Charge Act 1947 made similar provision. As already appears, so did s. 30 of the Pay-roll Tax Assessment Act 1941-1942 and like provisions are to be found in s. 35 of the Wool (Contributory Charge) Assessment Act 1945, s. 12 of the Wool Tax Assessment Act 1952 and s. 27 of the Tobacco Charges Assessment Act 1955. And to add to the general confusion s. 221 of the Income Tax and Social Services Contribution Assessment Act - introduced by Act No. 22 of 1942 and amended by Act No. 6 of 1946 - purported, in relation to outstanding income tax, to alter the order of priority both in relation to administrations in bankruptcy and winding-up administrations. In respect of administrations of the latter character the section provided that "notwithstanding anything contained in any other Act or State Act . . . the liquidator of a company which is being wound-up shall apply the assets of a company in payment of tax due under this Act . . . in priority to all other unsecured debts". This provision was subject to a proviso that where, under the law of any State, relating to payment of debts on the winding-up of a company, debts of the classes specified in paragraphs (a), (d) or (e) of sub-s. (1) of s. 84 of the Bankruptcy Act 1924-1933 are preferred to all unsecured debts due to the Crown in the right of that State, debts of those classes may also be paid in priority to any tax due under the Act. (at p387)
8. The first observation which I wish to make concerning these matters is that I am unable to see how so many provisions in the form of s. 32 can stand together. How can a liquidator who finds that the company which he is winding up is liable to pay, for instance, sales tax under the No. 1 Act and under the No. 5 Act and, in addition, pay-roll tax and charges under the Tobacco Charges Assessment Act, comply with each of the several statutory requirements that he shall, in effect, treat the impost with which each statute deals as entitled to absolute priority ? Or, if the company's assets are insufficient to meet the aggregate of the outstanding taxes how can he observe the provisions of any one of the relevant statutes without failing to observe the others ? In my view, where one statute provides, in effect, that sales tax shall be paid out of the assets of a company in liquidation in priority to all other debts and a later statute makes precisely similar provisions with respect to pay-roll tax, the first provision must be taken to be impliedly repealed. Further, as I have already said, the repeal would not revive the prerogative right to priority in respect of sales tax and, indeed, could not do so in the face of the express requirement that pay-roll tax shall be paid in priority to all other unsecured debts. (at p388)
9. The next observation which I wish to make is concerned with s. 221 of the Income Tax and Social Services Contribution Assessment Act. In terms it conditionally subordinates income tax in the scale of priorities to debts of the classes specified in pars. (a), (d) and (e) of sub-s. (1) of s. 84 of the Bankruptcy Act where the claim for income tax is made in a winding up. This means that debts within those classes may be paid in priority to income tax in a winding up in New South Wales. But income tax must be paid in priority to all other unsecured debts including, of course, sales tax and charges due under the Post and Telegraph Act so that taxes and charges of the latter character are also subordinated to unsecured debts of the character specified in paragraphs (a), (d) and (e). This, again, is in direct conflict with s. 32 of the Sales Tax Assessment Act and furnishes another reason for thinking that that section has lost all its force. (at p388)
10. Acceptance of the views which I have expressed would lead, inevitably, to judgment for the defendant on the demurrer. But even if it be thought that they are open to doubt it is clear enough that the provisions to which I have referred are productive of an alarming degree of confusion and the resultant situation calls urgently for some general legislative action to prescribe what may be thought to be an appropriate degree of priority in windingup administrations under State laws with respect to so-called Crown debts in right of the Commonwealth. To overrule Uther's Case [1947] HCA 45; (1947) 74 CLR 508 would, in my view, be merely, to add to the general confusion and, in the circumstances, I think we should decline the plaintiffs' invitation to review that decision. (at p388)
MENZIES J. In two earlier cases this Court has had to consider the effects of legislation such as s. 32 of the Sales Tax Assessment Act (No. 1) and on each occasion it has been decided that such a provision does not confer upon the Commonwealth priority for tax due in the winding up of a company under New South Wales Companies Acts. In the first case - Federal Commissioner of Taxation v. Official Liquidator of E. O. Farley Ltd. [1940] HCA 13; (1940) 63 CLR 278 - it was held that although the Commonwealth and the State of New South Wales were each entitled to priority for Crown debts over a company's unsecured creditors, as between the Commonwealth and the State there was equality because neither s. 32 of the Sales Tax Assessment Act nor a similar provision in the Income Tax Assessment Act operated to give priority to debts owing to the Commonwealth over those owing to the State. The basis of the decision was that the sections in question did not deal with priorities ; thus Latham C.J. said : "The statutory provisions operate in aid of any priority which may exist according to law, but they do not purport to create any priority" (1940) 63 CLR, at p 290 . In the later case - Uther's Case (1947) 74 CLR 508 - the majority of the Court (Latham C.J., Rich, Starke and Williams JJ.) held that neither s. 32 of the Sales Tax Assessment Act nor a similar provision in the Pay-roll Tax Assessment Act conferred any statutory right to prior payment of taxes due. I do not think that this Court should now depart from what has twice been expressly decided upon a question which is no more than one of the construction of Commonwealth legislation. Because s. 32 of the Sales Tax Assessment Act does not establish any priority at all, it can be altogether disregarded. (at p389)
2. In Uther's Case [1947] HCA 45; (1947) 74 CLR 508 , however, the majority of the Court also decided that, in the absence of legislation giving the Commonwealth priority for taxes due, it was within the constitutional competence of the Parliament of New South Wales to restrict or abolish the prerogative right of the Crown in right of the Commonwealth to payment of debts due to it in priority to other debts of equal degree. Dixon J. dissented. I have come to the conclusion that the dissenting judgment was correct and the Commonwealth Constitution does not permit a State parliament to deprive the Crown in right of the Commonwealth of its prerogative rights. In so far as Uther's Case [1947] HCA 45; (1947) 74 CLR 508 decided to the contrary it should, in my opinion, be overruled. In justification for this conclusion I cannot do more than express my assent to the dissenting judgment of Dixon J. on the point in question. Were the matter not one of vital constitutional importance I would have been disposed to accede to the plea of stare decisis, notwithstanding the diversity of the paths whereby the members of the Court who constituted a majority arrived at their conclusion, but on such a fundamental matter a "clear conviction must find expression in the appropriate judgment", to use the language of Viscount Simonds in Attorney-General for Australia v. The Queen (1957) AC 288, at p 323 ; (1957) 95 CLR 529, at p 548 . (at p389)
3. In this case we have to decide whether the Commonwealth has priority in a New South Wales liquidation for sales tax and for postal charges over debts owing to unsecured creditors. The debts owing to the Commonwealth are Crown debts and the Commonwealth, independently of any legislation asserting priority, is entitled to priority over unsecured debtors unless the New South Wales Companies Act has effectively taken away the Commonwealth's common law priority. My opinion that it is beyond the power of the State of New South Wales to bind the Commonwealth by provisions of the Companies Act relating to the priority of debts in the winding up of insolvent companies leaves the Commonwealth's priority by virtue of the prerogative intact. (at p390)
4. The defendant's demurrer to the statement of claim seeking a declaration that the Commonwealth is entitled to priority should therefore be overruled. (at p390)
WINDEYER J. I accept as a correct statement of constitutional principle what the Chief Justice has said in his judgment in this case which I have read, and what he said in Uther's Case [1947] HCA 45; (1947) 74 CLR 508 on the same subject. I therefore agree that this demurrer should be overruled. (at p390)
OWEN J. I agree with the reasons for judgment of Menzies J. which I have had an opportunity of reading. (at p390)
ORDER
Demurrer overruled.
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