Federal Commissioner of Taxation v Card [1963] HCA 52; (1963) 109 CLR 177 (19 November 1963)

HIGH COURT OF AUSTRALIA

COMMISSIONER OF TAXATION v. CARD [1963] HCA 52; (1963) 109 CLR 177

Income Tax (Cth)

High Court of Australia
Dixon C.J.(1), McTiernan(2), Taylor(3), Menzies(4) and Owen(5) JJ.

CATCHWORDS

Income Tax (Cth) - Deductions made by company from wages of employees - Not paid to Commissioner - Appointment of receiver by equitable mortgage - Only asset of company valueless equity of redemption - Whether receiver personally liable to pay deductions - Action by Commissioner against receiver to recover amount of deductions - "trustee" - "control of his property has passed to a trustee" - Income Tax and Social Services Contribution Assessment Act 1936- 1956 (Cth), ss. 6 (1), 221P*.

HEARING

Sydney, 1963, August 12, 13; November 19. 19:11:1963
APPEAL from the Supreme Court of New South Wales.

DECISION

November 19.
The following written judgments were delivered:-
DIXON C.J. In my opinion this appeal should be dismissed. I accept the had the advantage of reading. (at p181)

McTIERNAN J. The Commissioner of Taxation brought this action in the Supreme Court of New South Wales against Malcolm Charles Card to recover from him the sum of 3,317 pounds 6s. 0d. He died and the action proceeded against the executrix of his will. The action was founded on s. 221P. of the Income Tax and Social Services Contribution Assessment Act 1936-1956 (Cth). This section consisted of two sub-sections: "(1) Where an employer makes a deduction for the purposes of this Division, or purporting to be for those purposes, from the salary or wages paid to an employee and fails to deal with the amount so deducted in the manner required by this Division, or to affix tax stamps of a face value equal to the amount of the deduction as required by this Division, as the case may be, he shall be liable, and where his property has become vested in, or where the control of his property has passed to, a trustee, the trustee shall be liable, to pay that amount to the Commissioner. (2) Notwithstanding anything contained in any other Act or State Act, an amount payable to the Commissioner by a trustee in pursuance of this section shall have priority over all other debts, whether preferential, secured or unsecured". A third sub-section was added to these provisions by s. 24 of Act No. 35, 1959 - "(3) Where a trustee, being the trustee of the estate of a bankrupt or the liquidator of a company that is being wound up, is liable to pay an amount to the Commissioner in pursuance of this section, the last preceding sub-section does not operate so as to make that amount payable in priority to any costs, charges or expenses of the administration of the estate or of the winding up of the company (including costs of a creditor or other person upon whose petition the sequestration order or the winding up order, if any, was made and remuneration of the trustee) that are lawfully payable out of the assets of the estate or of the company except where, in the case of the winding up of a company, the Crown in right of a State or any other creditor is entitled to payment of a debt by the liquidator in priority to all or any of those costs, charges and expenses and has not waived that priority". (at p182)

2. Section 6(1) of the Principal Act provides: "In this Act, unless the contrary intention appears - 'trustee' in addition to every person appointed or constituted trustee by act of parties, by order, or declaration of a court, or by operation of law, includes - (a) an executor or administrator, guardian, committee, receiver, or liquidator; and (b) every person having or taking upon himself the administration or control of income affected by any express or implied trust, or acting in any fiduciary capacity, or having the possession, control or management of the income of a person under any legal or other disability:". The Full Court of the Supreme Court gave its decision in the action on a special case. Briefly the facts established by the special case are these. Australian Electric Steel Limited was liable under s. 221P. to pay to the Commissioner an amount of 3,317 pounds. This company was compulsorily wound up and Mr. Card was appointed liquidator. The Commonwealth Bank was equitable mortgagee of the company's assets but its liabilities to the Bank greatly exceeded the value of the assets. The Bank, pursuant to the provisions of the deed of mortgage, appointed Mr. Card as receiver of the company. The liquidation did not result in the realization of any money for paying the company's debts. The deed of mortgage provided that a person appointed as receiver of the company would have extensive powers both as receiver and as manager: and that in the exercise of these powers he would be the agent of the company, not of the Bank. The Bank granted Mr. Card cash credit to carry on the company's undertaking and he paid out of his account as receiver 4,363 pounds. The payments made to him as receiver amounted to 1,359 pounds. (at p182)

3. The ground of the action was that while Mr. Card was receiver he was, as such, a trustee for the purposes of s. 221P. and the control of the company's property had passed to him. The Commissioner relied on s. 221R. to sue and recover from him the amount of 3,317 pounds in respect of which the company was in default under s. 221P. Mr. Card's position as receiver depended upon the provisions of the deed of equitable mortgage executed by the company in favour of the Bank. The company by the deed charged all its existing and future assets - called "the mortgaged premises" - with payment of its liabilities to the Bank. It was provided by the deed that the Bank would have power to appoint a receiver to enforce the security and that the receiver would be agent of the company only; and that any person appointed as receiver pursuant to its provisions would have the extensive powers enumerated in the deed; the nature of the powers was such that a receiver exercising them would be both a manager and a receiver. In the case of In re Manchester and Milford Railway Co.; Ex parte Cambrian Railway Co. (1880) 14 Ch D 645, at p 653 there is an explanation by Jessel M.R. of the difference between the functions of a receiver and those of a manager in the strict sense of each term. The powers of a receiver under the deed were of the kind ordinarily incident to the position of a receiver for a mortgagee or a debenture holder appointed under an instrument of mortgage. (at p183)

4. The definition of "trustee" in s. 6(1) does not necessarily determine what that term means whenever it is used in the Act. The application of the definition is qualified by the words "unless the contrary intention appears". It is apparent from the provisions of s. 24 of Act No. 35, 1959, which became sub-s. (3) of s. 221P. of the Principal Act that Parliament always intended that the "trustee of the estate of a bankrupt" or "the liquidator of a company that is being wound up" would be a trustee for the purpose of s. 221P.; and that a debt payable by a trustee under that section would be payable out of the estate of the employer concerned, if an individual, and out of the assets of the employer if the employer is a company. It is also clear that the Parliament in referring to a receiver in bankruptcy and a liquidator of a company, had in mind par. (a) of the statutory definition of "trustee" in s. 6(1), which includes "receiver" and "liquidator". The Court in Fox's Case [1956] HCA 63; (1956) 96 CLR 370, at p 383 said that the definition of "trustee" in s. 6(1) is wide enough to include the official receiver in bankruptcy. (at p183)

5. The word "receiver" in the definition of "trustee" is not defined. Paragraph (a) of the definition would appear to be composed on the basis that "trustee" is intended to include a class of persons concerned with the administration of property, whether the estate of a person or the assets of a company. The position of a person to whom any of terms in par. (a) applies can be assimilated to that of a trustee, In Black & Co.'s Case (1872) LR 8 Ch App 254, at p 262 and In re Oriental Inland Steam Company; Ex parte Scinde Railway Co. (1874) LR 9 Ch App 557, at p 559, a liquidator was described as a "statutory trustee". In my view a trustee for the purpose of s. 221P. is a person who is a trustee or receiver in bankruptcy of the estate of an employer in default under the section, or the liquidator of a company which is an employer in that situation, or some other person within the definition of "trustee" who is concerned with the administration of the estate of such an employer. Sub-section (2) of s. 221P. would appear to be enacted on that basis. This sub-section is a direction to a "trustee" whose duty it is to administer the property of an employer, for purposes of the payment of debts, of his debts or for that and other purposes. Mr. Card's position depended upon the provisions of the deed of mortgage. He was receiver and manager of the mortgaged assets of the company for the Bank and agent for the company in the course of the exercise of his powers as receiver or manager. His primary duty under the deed was to the Bank as mortgagee; if a surplus arose in his hands after he paid his costs and expenses as receiver, together with all moneys due to the Bank and secured by the equitable mortgage, the surplus would, under the deed, be payable to the company. The provisions of s. 215 relate to liquidators, receivers for debenture holders and a class of agents. Any person in one of these classes is in sub-s. (1) called a "trustee" specially for the purpose of s. 215. (at p184)

6. I think that the words "his property" in s. 221P. mean all the employer's property. Langdale M.R., said in Jones v. Skinner (1835) 5 LJ Ch 90: "'Property' is the most comprehensive of all the terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have". The words "his property" in sub-s. (1) of s. 221P. mean in the case of an individual who is an employer in default his estate, and in the case of a company who is an employer in default its assets. The section does not, in my opinion, apply to a trustee of a part of the employer's property whether the employer is an individual or a company. It contemplates a trustee who has the administration of all estate or assets of an employer to whom s. 221P. applies. (at p184)

7. The power of Mr. Card as a receiver under the deed in the present case was to receive and manage the undertaking and assets of the company charged with the payment of its liabilities to the Bank. The whole of the undertaking and assets were expressed to be subject to the mortgage. But the company's equity of redemption was not a part of the company's property of which Mr. Card was receiver and manager. This interest happened in the present case to be of no monetary value. I think it is true nevertheless that the control of all the property of the company did not pass to Mr. Card because he could not be receiver or manager of its equity of redemption; as receiver of the company he was not a trustee who incurred any liability under s. 221P. to pay the amount of 3,317 pounds to the Commissioner or any part of it. The decision of the Full Court of the Supreme Court of New South Wales is, in my opinion, correct. The appeal should be dismissed. (at p185)

TAYLOR J. This appeal arises out of an action by the appellant to recover moneys of the description specified in s. 221P. of the Income Tax and Social Services Contribution Assessment Act 1936- 1956. The action was brought against the executrix of the will of Malcolm Charles Card who, on 22nd February 1955, was appointed a receiver of a company known as Australian Electric Steel Limited by the Commonwealth Trading Bank. As appears from the case stated the appointment was made pursuant to an equitable mortgage given by the company to the bank on 26th April 1951. Mr. Card was also the liquidator of the company pursuant to an order of the Supreme Court of New South Wales made on the day before his appointment as receiver. At that time the company was indebted to the Commissioner in the sum of 3,317 pounds 6s. 0d. as and for deductions made from the salaries and wages of its employees pursuant to the provisions of Div. 2 of Pt VI of the Act and which it had failed to pay to the appellant. (at p185)

2. In the Supreme Court the matter came before the Full Court by way of case stated under s. 55 of the Common Law Procedure Act and by the case the following questions were raised for the opinion of the Court: "1. Whether the control of the property of the company passed to the deceased as receiver of the company within the meaning of s. 221P. of the Income Tax and Social Services Contribution Assessment Act 1936-1956; 2. Whether the deceased as such receiver as aforesaid was bound to pay the said amount claimed by the plaintiff notwithstanding that all the assets of the company, including any moneys received by him were subject to the said equitable mortgage and that the company's equity of redemption therein was of no value; 3. Whether the deceased as such receiver as aforesaid was bound to pay the said amount claimed by the plaintiff notwithstanding that all the moneys received by him as receiver amounted in all to one thousand three hundred and fifty-nine pounds sixteen shillings and six pence (1,359 pounds 16s. 6d.) and that the payments made by him as receiver amounted to the sum of four thousand three hundred and sixty-three pounds nine shillings and eleven pence (4,363 pounds 9s. 11d.), and 4. Whether the plaintiff is entitled to recover from the defendant the sum of three thousand three hundred and seventeen pounds six shillings (3,317 pounds 6s. 0d.) or any part thereof and if so, what part". The first and fourth of these questions were answered in the negative and the Court found it unnecessary to answer the second and third questions. In the result the claim of the appellant failed and he now brings this appeal to this Court. (at p186)

3. It is not too much to say that even a cursory examination of s. 221P. reveals a number of difficulties both of interpretation and application. Its present form is the product of amendment from time to time and it is of some importance to see how it has developed. Division 2 of Pt VI - providing for the collection of income tax by instalments - was first introduced into the Act in 1940 (Act No. 65 of 1940). But this Division did not include any counterpart of s. 221P. This first appeared in a new Div. 2 substituted by Act No. 63 of 1947. In the new Division s. 221P. appeared in the following form: "(1) Where an employer makes a deduction for the purposes of this Division, or purporting to be for those purposes, from the salary or wages paid to an employee and fails to deal with the amount so deducted in the manner required by this Division, or to affix tax stamps of a face value equal to the amount of the deduction as required by this Division, as the case may be, he shall be liable, and where his property has become vested in a trustee, the trustee shall be liable, to pay that amount to the Commissioner. (2) Notwithstanding anything contained in any other Act or State Act, an amount payable to the Commissioner by a trustee in pursuance of this section shall have priority over all other debts, whether preferential, secured or unsecured". No doubt in its original form the section contemplated the passing of an employer's property to his legal personal representative or, upon bankruptcy, to the trustee in bankruptcy. But there may be some doubt whether it was couched in appropriate language to provide for the latter contingency (See Stapleton v. Federal Commissioner of Taxation [1955] HCA 58; (1955) 93 CLR 603, at p 619) But it is clear that it had no application to winding-up proceedings in the case of a company or to the case of a receivership for neither upon the appointment of a liquidator nor a receiver would the property of the employer "become vested" in either. However, the section was amended in 1951 (Act No. 44 of 1951) by the insertion in sub-s. (1) after the words "vested in" of the words "or where the control of his property has passed to" and no doubt the amendment was sufficient to bring liquidators within the purview of the section. But the contention here, of course, is that it was also wide enough to cover the case of a receiver. However before proceeding to discuss the contention it is not without importance to observe that in 1959 there was a further amendment to the section. By Act No. 85 of that year a further sub-section was added in the following terms: "(3.) Where a trustee, being the trustee of the estate of a bankrupt or the liquidator of a company that is being wound up, is liable to pay an amount to the Commissioner in pursuance of this section, the last preceding sub-section does not operate so as to make that amount payable in priority to any costs, charges or expenses of the administration of the estate or of the winding up of the company (including costs of a creditor or other person upon whose petition the sequestration order or the winding up order, if any, was made and remuneration of the trustee) that are lawfully payable out of the assets of the estate or of the company except where, in the case of the winding up of a company, the Crown in right of a State or any other creditor is entitled to payment of a debt by the liquidator in priority to all or any of those costs, charges and expenses and has not waived that priority". (at p187)

4. The substantive provisions of the section may be compared with the provisions of s. 221, which establishes a specified priority in bankruptcy and winding-up administrations for income tax liabilities and with those of s. 216, which imposes an obligation upon the trustees of the estate of a deceased taxpayer who has escaped "full taxation in his lifetime by reason of not having made full complete and accurate returns". The Commissioner is given the same powers and remedies against the trustees in respect of the taxable income of the taxpayer as he would have against the taxpayer if he were still living and the amount of any tax payable by the trustees is made a first charge on all the taxpayer's estate in their hands. But the effect of these sections is limited to liabilities for income tax and does not extend to liabilities of the character with which s. 221P. deals. No doubt, however, it was thought that some priority should be given to the Commissioner with respect to liabilities of the latter character and, probably, it was in these circumstances that s. 221P. found its origin. (at p188)

5. It is the appellant's contention that, in the language of the section, a receiver appointed pursuant to a mortgage or debenture, is, by definition, a trustee and, further, that he is a trustee to whom control of the mortgagor's property passes. But even assuming this proposition to be correct it is clear that the operation of the section cannot be taken to extend to all cases of receivership. I say this because the condition for the operation of the section is that "the control of his (i.e. the employer's) property has passed to a trustee" and the condition can, in no sense, be said to be satisfied where the mortgage or debenture under which the receiver is appointed charges only some part, and not the whole, of the employer's property. However, it is asserted by the appellant that, in terms, the section does operate where, as here, the receiver is appointed pursuant to a debenture which charges the whole of the employer's property. (at p188)

6. On this view the question immediately arises as to how the section operates in such circumstances and on this aspect of the argument several views have been advanced. Initially, it is asserted that the section operates to impose an independent liability on the receiver and irrespectively of whether any assets come under his control. At the other end of the scale it is contended that liability attaches, at least, to the extent of assets coming under the control of the receiver at the time of his appointment. Finally, it is submitted that liability attaches to the full extent of the assets coming under the control of the receiver during the course of the receivership. (at p188)

7. The first of these contentions was but faintly urged and may be summarily rejected. It is, I think, about as clear as it could be both from the character of the provision and from the terms of sub-s. (2) that the liability which the section purports to impose upon the trustee to whom the section applies is an obligation to pay out of property of the employer coming to his hands. If it had been intended by the section to impose an independent liability upon the trustee irrespectively of whether any assets come to his hands it would have been quite inapt to seek to impose the obligation as one "having priority over all other debts whether preferential, secured or unsecured". Obviously, what the section contemplates and intends is a liability on the part of the trustee to pay the amount in question out of a fund. Further I should have little doubt that if the section purported to impose upon the trustee an obligation to discharge the employer's debt to the Commissioner out of his own moneys and irrespectively of whether any property came to his hands, the section would be beyond power. I see no reason to doubt that the power to make laws with respect to taxation does not extend to the enactment of a provision which, without more, simply requires that A shall discharge B's debt to the Commissioner. A further difficulty - which it is not out of place to mention here - arises when one comes to consider closely the provisions of sub-s. (2). It seems to proceed on the basis that when the property of an employer, or some part of it, is subject to a mortgage and the "property" of the employer has become vested in a trustee, such as a trustee in bankruptcy or a legal personal representative, the trustee secures such a title to the mortgaged property as will enable him to deal with it as if it were unencumbered and as if the mortgagee, in order to secure payment, must rely upon the trustee to pay him. But it is unnecessary in this case to elaborate upon the difficulties to which this notion gives rise. (at p189)

8. The second contention on this aspect of the case was, in part, the product of the appellant's argument and, in part, that of the argument presented by the respondent and, in effect, it asserts that the liability of the receiver will be limited to the extent of the assets coming to his hands or under his control at the time of his appointment. But I can see no reason for supposing that it was intended that in case of bankruptcy or a winding-up administration the liability of the trustee should be so limited. The trustee in bankruptcy and liquidators may, and frequently do, continue to carry on businesses for the purposes of winding up and it was no doubt with this in mind that the special provisions of sub-s. (3) of s. 221P. were enacted. (at p189)

9. For my part I am of the opinion that the liability of a trustee to whom the substantive provisions of the section apply is to be measured, subject only to the provisions of sub-s. (3), by the extent of the assets coming to his hands during the course of the relevant administration so that, if the section applied to Mr. Card as a receiver the liability would be measured by the extent of the assets coming under his control during the course of the receivership. Indeed, his liability would be greater as a receiver than it would have been as a liquidator because in the latter capacity he would have had the degree of protection afforded by sub-s. (3). But, in my view, the appointment of Mr. Card as receiver did not attract the operation of s. 221P. That section, in my opinion, is designed to operate only in the case of a trustee in whom an employer's property becomes vested or to whom control of that property passes for the purpose of some form of general administration. So much is, I think, clear from the fact that it contemplates a form of administration in which debts will be paid in accordance with an established order of priority out of a fund constituted by the employer's property. Further, it is, I think, clear that a receiver is not a trustee to whom, within the meaning of the section, control of the employer's "property" passes. In the case of bankruptcy the property which passes to the trustee in bankruptcy is the property of the bankrupt and, in the case of a winding-up, the property, control of which passes to the liquidator, is the property of the company. If, in either case, the assets which would otherwise be affected are subject to a mortgage, the "property" which will vest in the trustee in bankruptcy or which will pass to the control of the liquidator will be the interest of the company in the mortgaged assets. But in the case of a receiver control of the interest of the mortgagor does not pass to him and in no sense can he deal with it. It may, perhaps, be said, in a general sense that the physical control of the mortgaged assets passes to him but it passes to him only for a very limited purpose, that is for the purpose of enabling him to satisfy the mortgagee's debt. This, in no sense, represents an assumption of control over the mortgagor's interest in the assets. In such a case the property of the mortgagor is not, in law, the property in an unencumbered state; it is the property, subject as it is to the mortgage and it constitutes an interest somewhat in the nature of an equity in redemption. In the case of a trustee in bankruptcy or a liquidator in winding-up proceedings this is the only interest which will, or control of which will, pass but, in no sense, does control of such an interest pass to a receiver. I should add that I regard the provisions of sub-s. (3) of s. 221P., with its noticeable and, apparently, deliberate failure to make any provision for the costs, charges and expenses of a receivership, as a clear indication that the section was not thought or intended to apply to the case of a receiver. (at p190)

10. The reasons which I have given conform substantially with those expressed by the Full Court and, accordingly, I am of the opinion that the appeal should be dismissed. (at p190)

MENZIES J. The decision of the Full Court of the Supreme Court of New South Wales under appeal was to the effect that a receiver of the whole of a company's property appointed by the holder of a charge over its undertaking and assets cannot be regarded as a trustee for the purposes of s. 221P. of the Income Tax and Social Services Contribution Assessment Act, because that section only covers trustees, as defined in s. 6, to whom one particular kind of control passes upon appointment. Thus their Honours said that the section applies only to a trustee having "a control of the same character as that which is exercised by, for example, a trustee in bankruptcy over the property of the bankrupt vested in him for the purposes of winding up the bankrupt's affairs by the distribution of his assets amongst the general body of his creditors. This is something more than a control in the mere sense of being empowered, for example, to take possession of, or to sell, the assets. It imports a purpose in whose execution the 'trustee' has control also of the distribution of the proceeds amongst creditors, being obliged to form his own conclusion, subject only to review by the appropriate Court, as to whose claims should be admitted and with what order of priority and as to how the respective claims of secured and unsecured creditors are to be adjusted". With great respect to their Honours, I am not able to share this view of the section. It seems to me that when in 1951 s. 221P. was amended to extend its application to include trustees to whom control of the property of what I shall call a defaulting employer passes as well as trustees in whom property of a defaulting employer vests, the section then applied whenever there is a trustee as defined - including a receiver - to whom control of the property of a defaulting employer has passed, whatever be the nature of that control, so long as it is sufficient to enable the trustee to resort to the property of the defaulting employer for the purpose of meeting the obligations imposed by the section. I have not been able to find any satisfactory reason why the word "control" in the section should regardless of the description of the trustee, always mean what it would mean in relation to one particular description of trustee. Prima facie the word "trustee" in the section would apply to any one of the twelve or so descriptions of persons to be found in the definition of "trustee" in s. 6. Thus, to take one example, the word "trustee" in the section might mean a person having the control or management of the income of a person under any legal or other disability. The position of such a trustee is totally unlike that of a trustee in bankruptcy but that seems to afford no reason why a person having the control or management of the income of a defaulting employer should not, to the extent of the income which he controls or manages, be bound by s. 221P. to meet the defaulting employer's obligations in respect of unaccounted for amounts deducted by the defaulting employer from the wages of employees. Similarly it seems to me that if a receiver of the undertaking and assets of a company appointed by the holder of a charge does obtain such control of the property of a defaulting employer as enables him to dispose of it, there is no reason why the obligations imposed by s. 221P. upon trustees should not rest upon him merely because his duties and responsibilities are different from those of a trustee in bankruptcy, for by virtue of what a receiver does in the exercise of the control which he obtains, the Commissioner could be wholly defeated - for example, the whole property of the company including, say, a bank account not depleted by withdrawal of what should have been paid to the Commissioner could be got in and paid to the debenture holder. To deny that the section can apply to one description of trustee as defined because the control of property which passes to him is different from the control which passes to another description of trustee as defined would, I think, elevate the position of the latter description of trustee to be the norm for the application of the section to exclude trustees to whom it could otherwise readily enough apply. For this I can find no warrant. (at p192)

2. Because in the absence of a contrary intention a receiver such as we are concerned with here is a trustee for the purposes of the section and because I cannot find any contrary intention appearing in the section, the general enquiry I find myself obliged to make is whether there passes to a receiver appointed by the holder of a charge over the whole of the undertaking and assets of a company any control of the company's property that would enable him to resort to that property for the purpose of meeting the payment which the section, where it applies, requires. Whether any such control passes depends primarily upon the instrument of charge but material company law provisions cannot be disregarded. (at p192)

3. The statutory provisions actually relevant to the receivership with which this case is concerned are ss. 335-340 of the Companies Act, 1936 (N.S.W.) as amended to 1955 which are to be found most conveniently in the Companies Act, 1936-1957 as reprinted. None of these provisions bear closely upon our problem and for present purposes s. 337(3) is alone worth mentioning. It provides that a receiver entering into possession of any assets of a company for the purpose of enforcing a charge shall "be liable for debts incurred by him in the course of the receivership or possession for services rendered, goods purchased or property hired, leased, used or occupied". It is to be observed that it was not until 1961 that it was provided by s. 196 of the Companies Act of that year that when a company is not being wound up and a receiver is appointed on behalf of the holders of debentures secured by a floating charge, certain debts which in a winding up would be preferential debts "shall be paid out of any assets coming to the hands of the receiver . . . in priority to any claim for principal or interest in respect of the debentures". Had the section been in force some slight modification of the Full Court's description of the responsibilities of a receiver would have been necessary. (at p193)

4. Turning now to the charge given by the company to the Commonwealth Bank of Australia - for which the Commonwealth Trading Bank of Australia was in due course substituted - it appears that the charge operated as a fixed charge on specified property and a floating security over all other assets. The bank was given authority at any time when money secured became payable to appoint a receiver "of the mortgaged premises or any part thereof" and the receiver was given wide powers including powers "to take possession of collect and get in the whole or any part of the mortgaged premises", "to give effectual receipts for all moneys and other assets which may come to the hands of the receiver in exercise of any power", "to sever . . . fixtures . . . and sell them", "enforce specific performance of . . . contracts" and "to bring or defend any . . . legal proceedings". These powers were for the purpose of realizing the company's property to pay the bank. (at p193)

5. When the bank on 22nd February 1955 - the day after the commencement of the liquidation of the company - appointed a receiver of the company's property pursuant to the charge, it seems to me that he thereby obtained in a very real sense control of the whole of the company's property. He was, of course, appointed for the very purpose of his doing so. It is true, as was argued for the respondent, that the control over the company's property which passed to the receiver on his appointment was in a sense fuller than that which the liquidator had, for the bank's charge imposed a limit upon the liquidator's control whereas the receiver's control was not so limited, but I do not read s. 221P. as implying that the control which passes to a trustee must always pass directly from the defaulting employer; it is enough if control of the defaulting employer's property passes to a trustee. I have therefore reached the conclusion that the receiver appointed by the bank was a person to whom control of all the property of the company passed as a trustee within the meaning of s. 221P. One matter referred to in argument may be mentioned in passing. Here it is not necessary to determine whether the section applies where something less than the whole of a defaulting employer's property vests in a trustee or control of something less than the whole of a defaulting employer's property passes to a trustee but, if this point were to become important, it would have to be remembered that something less than the whole of the property of a bankrupt defaulting employer would vest in his trustee - Bankruptcy Act, s. 91 - and it is such a trustee that the Full Court has regarded as the pattern of every trustee to whom the section applies. (at p194)

6. The conclusion which I have already stated does not decide this case; it does no more than pave the way for the consideration of further substantial difficulties, the first of which is the operation of an incredibly ill-drawn section, viz. s. 221P. The first problem of construction is the meaning of the phrase "to pay that amount to the Commissioner" at the end of sub-s. (1). The words "that amount" refer back to the words "the amount so deducted" and would, if the words of the section were to be construed literally, require payment of the full amount deducted even if part had been paid to the Commissioner pursuant to s. 221F.(5) or notwithstanding that tax stamps to the value of part of the amount deducted had been affixed pursuant to s. 221G.(1)(b), for the employer would have failed "to deal with the amount so deducted in the manner required by this Division, or to affix tax stamps of a face value equal to the amount of the deduction as required by this Division". This could hardly have been intended and common sense dictates that the words "that amount" should be regarded as referring to the difference between the amount deducted and what was dealt with in the manner required or the face value of the stamps affixed as required so that the obligation would be to pay what had not been used for the purpose for which the deduction was made. It would seem, moreover, whatever the words used might mean literally, that the Commissioner should only receive "that amount" once, whether from the defaulting employer or a trustee, and the section should be so understood. So construed, there would then be no reason why the obligation of a defaulting employer should not be a personal liability to pay the Commissioner to which s. 221R. would apply. It seems unlikely, however, that it was intended to lay upon a trustee a personal obligation to pay, whether or not there became vested in him or subject to his control property of the defaulting employer from which to meet the payment to the Commissioner, and the provisions of sub-s. (2) of s. 221P. which give the amount payable by a trustee "priority over all other debts, whether preferential, secured or unsecured" - that is "other debts" of the defaulting employer - indicate that the obligation of a trustee under sub-s. (1) is to pay by reference to a fund constituted by the property of a defaulting employer which has become vested in or has passed under the control of the trustee. This is how I construe s. 221P. (1) and (2) and, so construed, I do not think any question arises as to its valid application to a trustee such as the receiver here, for in my opinion it is not beyond the power of the Commonwealth to require the receiver of a company's property to pay to the Commissioner moneys deducted by the company from employees' wages pursuant to Div. 2 of Pt VI of the Act and wrongly retained by the company and to do so in priority to other debts, including the debt of the debenture holder appointing the receiver. It is common practice to postpone the claims of debenture holders to other liabilities imposed upon receivers - e.g. Companies Act, 1961, s. 196 - and where amounts deducted from the wages of employees for tax have gone to swell the company's assets rather than Commonwealth revenue, I see no reason why Commonwealth power should not extend to enforcing the payment of what has been wrongly retained by the company as the first obligation of a trustee in whom the property of the company thereafter vests or to whom control of the property of the company thereafter passes. (at p195)

7. In this case, therefore, the obligation which s. 221P. imposed upon the receiver was to pay to the Commissioner 3,317 pounds 6s. 0d., the amount which the defaulting employer had deducted but had failed to pay over, but only out of the property of the defaulting employer which passed under the receiver's control or perhaps only to the extent of the value of that property. In this case it does not matter which of these constructions is adopted because the evidence does not show that the receiver obtained control of any property of the defaulting employer that was of any value. It might be that there were some book debts but, if so, this, as it was conceded in argument, was not sufficiently proved. It follows that, in the circumstances, it cannot be decided that s. 221P. imposed any obligation upon the receiver to pay anything to the Commissioner. (at p195)

8. For the reasons which I have given I think the order appealed from was correct and the appeal should be dismissed. (at p195)

OWEN J. The respondent to this appeal is the executrix of the will of one Malcolm Charles Card (whom I shall call the "deceased") who died after the institution of an action for debt brought against him by the appellant to recover the sum of 3,317 pounds 6s. 0d. alleged to have become due to it from the deceased in the following circumstances. Over a period a company called Australian Electric Steel Ltd. (to which I shall refer as the "company") had deducted sums amounting to 3,317 pounds 6s. 0d. from the salaries and wages of its employees under Div. 2 of Pt VI of the Income Tax and Social Services Contribution Assessment Act 1936- 1956 but had failed to pay the amounts so deducted to the appellant as required by the provisions of that Division. Thereafter, on 21st February 1955, an order was made for the winding up of the company and the deceased was appointed liquidator. The company was then indebted to the Commonwealth Bank in the sum of 47,555 pounds secured by an equitable mortgage by way of floating charge over the whole of its undertaking and assets and, on 22nd February 1955, the deceased was appointed by the Bank as receiver under the provisions of the mortgage. In his capacity as receiver he received payment of certain moneys amounting to 1,359 pounds 16s. 6d. Some of the moneys so received may have been debts due to the company at the time of the deceased's appointment as receiver but this does not clearly appear. By 14th June 1957 when the deceased's appointment as receiver was terminated the company's indebtedness to the Bank stood at 56,466 pounds. None of the assets subject to the charge was realized by the deceased and at all times the company's equity of redemption was valueless. The amount claimed represents the total deductions made by the company from its employees' wages for which it had failed to account to the appellant and the latter sought in these proceedings to impose upon the deceased - and now seeks to impose upon his estate - personal liability to pay this amount or, in the alternative, the sum of 1,359 pounds 16s. 6d. being the amount of moneys which came into his hands during his receivership. The claim is based upon s. 221P. (1) and (2) of the Income Tax and Social Services Contribution Assessment Act which are in the following terms: "(1) Where an employer makes a deduction for the purposes of this Division . . . from the salary or wages paid to an employee and fails to deal with the amount so deducted in the manner required by this Division . . . he shall be liable, and where his property has become vested in, or where the control of his property has passed to, a trustee, the trustee shall be liable, to pay that amount to the Commissioner. (2) Notwithstanding anything contained in any other Act or State Act, an amount payable to the Commissioner by a trustee in pursuance of this section shall have priority over all other debts, whether preferential, secured or unsecured." By s. 6 of the Act, "trustee" is defined to include a receiver unless the contrary intention appears. (at p196)

2. The real question seems to me to be whether the section imposes upon a receiver appointed by a mortgagee holding a security over the whole of an employer-mortgagor's assets a personal obligation to make good to the Commissioner a debt due to him by the mortgagor arising from the fact that the latter has failed to account for wage tax deductions made from the wages of its employees. For the Commissioner it was contended that such an obligation is imposed and that a "trustee" to whom the section applies is bound to discharge it, although he may have some right to reimburse himself out of the property of the employer which vests in him or passes under his control. If this is correct, it seems to me to be immaterial to enquire what was the value, if any, of the property of the employer which vested in the "trustee" or passed under his control. That would be a relevant consideration only as between "trustee" and employer after the "trustee" had met the obligation which, so it is said, the section imposes upon him. It is for this reason that I find difficulty in understanding the alternative submission put forward on behalf of the appellant that it is at least entitled to recover from the respondent the sum of 1,359 pounds 16s. 6d. That claim, it seems to me, impliedly concedes that whatever obligation is imposed upon a "trustee" is not a personal obligation but one which merely requires him to satisfy the employer's debt out of the employer's property which vests in him or passes under his control. However that may be, the wide proposition for which the appellant contends is to me a startling one and if it be correct, it raises a serious question as to the validity of the section. In the Supreme Court their Honours took the view that a receiver appointed by a mortgagee was not one of the classes of "trustees" to which the section refers and thus disposed of the case in favour of the respondent. The reasons which led them to that conclusion have much weight but I prefer to decide the case on the assumption that a receiver is a "trustee" within the meaning of the section. In my opinion, however, the section is not to be construed as imposing any liability upon a "trustee" to answer for the employer's debt to the Commissioner except out of property belonging to the employer which has vested in him or passed under his control. The true obligation which it imposes is one which does no more than require the "trustee" to discharge the liability out of the property of the employer which vests in him or passes under his control and, it may be, discharge that liability in priority to all other liabilities. That this is the proper construction of the provision seems to me to find support in sub-s. (2) which proceeds upon the basis that there is property of the employer which has vested in or passed under the control of the "trustee" and which is available to discharge, wholly or in part, the employer's liabilities. Further support for the construction which I place upon the section is to be found in the fact that no provision is made whereby the "trustee" is given any right of reimbursement out of the property of the employer which vests in him or passes under his control. (at p198)

3. Turning then to the facts of the present case, the only property of the company which passed to the control of the deceased was valueless. The Bank's security covered the whole of the employer's undertaking and assets and the property of the company consisted merely of a worthless equity of redemption. There was therefore never any property of the company out of which its obligations, secured or otherwise, could be met. (at p198)

4. Accordingly the appeal should be dismissed. (at p198)

ORDER

Appeal dismissed with costs.