SUPREME COURT OF QUEENSLAND

CITATION: Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea’s Concreting & Anor [2012] QSC 51

PARTIES: HANSEN YUNCKEN PTY LTD

ACN 063 384 056

(Applicant)

IAN JAMES ERICSON TRADING AS FLEA’S CONCRETING

ABN 86 016 599 870

(First Respondent)

and

PHILIP DAVENPORT

(Second Respondent)

FILE NO: BS 7864 of 2009

DIVISION: Trial Division

PROCEEDING: Originating Application

ORIGINATING

COURT: Supreme Court at Brisbane

DELIVERED ON: 14 March 2012

DELIVERED AT: Brisbane

HEARING DATE: 15 December 2011

JUDGE: McMurdo J

ORDER: The application by the Commissioner of Taxation filed on 14 December 2011 is dismissed

CATCHWORDS: TAXES AND DUTIES – ADMINISTRATION OF

FEDERAL TAX LEGISLATION – COLLECTION AND RECOVERY OF TAX – COLLECTION OF AMOUNT FROM THIRD PARTY – Taxation Administration Act 1953 (Cth), Schedule 1 s260-5 – notices – statutory charge created by – where moneys paid into court by recipient of notice – where debt owing be recipient to taxpayer discharged by that payment – whether Commissioner of Taxation entitled to a charge over money in court

Bankruptcy Act 1966 (Cth), s58 Building and Construction Industry Payments Act 2004 (Qld), s29, s30

Corporations Act 2001 (Cth) s 471A, s471B, s471C

Taxation Administration Act 1953 (Cth), Schedule 1 s260-5, s260-15, s260-20

Blacktown Concrete Services Pty Ltd v Ultra Refurbishing & Construction Pty Ltd (in liq) (1993) 43 NSWLR 484, considered

Bond v McClay [1903] St R Qd 1, considered

Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of

Taxation (2009) 239 CLR 346, considered

Clyne v Deputy Commissioner of Taxation (Cth) (1981) 150 CLR 1, considered

Commissioner of Taxation v Government Insurance Office of New South Wales (1992) 36 FCR 314, cited

Emanuel v Bridger (1874) LR 9 QB 286, cited

Federal Commissioner of Taxation v Donnelly (1989) 25 FCR 432, considered

Hall v Richards (1961) 108 CLR 84, cited

Macquarie Health Corp Ltd v Commissioner of Taxation (1999) 96 FCR 238, considered

Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1991] 2 Qd R 197, considered

Tricontinental Corporation Limited Commissioner of Taxation (Cth) (1986) 86 ATC 4, 453, cited

COUNSEL: GW Walsh for Mr Ericson

PG Bickford and M Henry for the Commissioner of Taxation

RN Traves SC with J Sheehan for Holcim (Australia) Pty Ltd

LA Stephens for Mr Stone

ML Grimshaw (Solicitor) for Dr Greinke

AW Carlton-Smith (Solicitor) for Hansen Yuncken Pty Ltd

SOLICITORS: Australian Taxation Office, Legal Services Branch for the Commissioner of Taxation

Forbes Dowling for Holcim (Australia) Pty Ltd

Province Lawyers for Dr Greinke

Hopgood Ganim as town agent for Crawford Legal for Hansen Yunken Pty Ltd

[1] On 4 November 2011, I delivered a judgment which determined the dispute between the applicant (“Hansen Yuncken”) and the first respondent, Mr Ericson. The orders I then made were varied by consent on 5 December 2011. The orders as varied provided for, amongst other things, a payment into court by Hansen Yuncken of an amount of $1,303,193.14. Hansen Yuncken made that payment and several parties, including Mr Ericson, then claimed to be entitled to all or part of the moneys in court. Each of them applied for orders for the payment out of a portion of the funds, save for the Commissioner of Taxation who claimed the entirety.

[2] For the most part, the respective claims involve factual questions which would have to be tried. For example, Holcim (Australia) Pty Ltd (formerly Cemex Australia Pty Limited) (“Holcim”) claims to be a creditor which is secured by a charge over three quarters of any funds received by Mr Ericson from Hansen Yuncken. Mr Ericson disputes Holcim’s claim and in proceedings brought by Holcim, has resisted an application for summary judgment. Accordingly, when the various applications about the moneys in court were before the Court on 15 December, for the most part they could not be determined summarily.

[3] But Mr Ericson then sought an order for the payment out of some of the moneys to him, which was opposed only by the Commissioner of Taxation. His application challenged the Commissioner’s claim to the moneys, upon the basis that it was bound to fail as a matter of law. If that was correct, then even after putting aside sufficient funds to pay each of the other claimants, there would have remained sufficient funds in court to pay the amounts then sought by Mr Ericson. Mr Ericson did not dispute that he was indebted to the Commissioner. But he argued that the Commissioner had no proprietary entitlement to what was, prima facie, his money and that as his arguments raised only legal questions, his application could be determined ahead of the other claims. I heard argument on those questions and reserved my decision.

[4] On 1 March 2012, by an order in the Federal Magistrates Court, Mr Ericson was made bankrupt. Nevertheless, there remains the question for determination, which is whether the Commissioner of Taxation has an entitlement to all or any of the funds in court. That is a matter upon which the other claimants have an interest, at least some of whom supported Mr Ericson’s argument for, in effect, the summary dismissal of the Commissioner’s application.

[5] To further explain the various claims to this money and the arguments about the Commissioner’s position, it is necessary to set out the relevant history. Hansen Yuncken was the head contractor for a project at Cairns, for which it engaged Mr Ericson as a subcontractor. A dispute arose between them and Mr Ericson served on Hansen Yuncken a payment claim under the Building and Construction Industry Payments Act 2004 (Qld) (“the Payments Act”). The amount claimed was $4,803,866.60. Hansen Yuncken disputed the claim in its entirety. Mr Ericson made an adjudication application. The adjudicator upheld his claim in full, by a decision dated 2 July 2009. By s 29 of the Payments Act, if an adjudicator decides that the respondent is required to pay an adjudicated amount, the respondent must pay the amount to the claimant on or before the relevant date as defined in s 29(2), which in this instance was five business days after the service of the adjudicator’s decision on Hansen Yuncken.

[6] Section 30 of the Payments Act provides that if a respondent fails to pay the whole or any part of the adjudicated amount under s 29, the applicant may procure an adjudication certificate which, according to s 31, may be filed as a judgment for a debt, and may be enforced, in a court of competent jurisdiction. But it is by s 29 that a respondent becomes liable to pay the adjudicated amount. There was a debt which became due and owing by Hansen Yuncken to Mr Ericson in consequence of the adjudicator’s decision and without the need for an adjudication certificate.

[7] On 23 July 2009, Hansen Yuncken was granted an interlocutory injunction restraining Mr Ericson from taking any steps to obtain an adjudication certificate “or otherwise enforcing the Adjudication Decision” until further order. That order was made upon the undertaking of Hansen Yuncken to provide to the Registrar two bank guarantees to secure amounts of $1,658,325.78 and $3,157,750.82. Those amounts totalled the adjudicated amount. The provision of not one but two bank guarantees is explained by a claim which was then made by the Commissioner of Taxation.

[8] On 15 September 2008, the Commissioner had issued a notice to Hansen Yuncken under s 260-5 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (“the TAA”). The amount there said to be owing by Mr Ericson to the Commissioner was that figure of $1,658,325.78. A practical consequence of the interlocutory injunction was that the Commissioner received nothing in response to his notice until, as I will discuss, last December. It was apparently accepted by the Commissioner that Hansen Yuncken was not obliged to pay any of the amount claimed by the Commissioner’s notice whilst the interlocutory injunction was in force, because whilst the injunction restrained any action to recover the debt (which thereby would have involved the enforcement of the adjudication decision) there was no debt which was due to Mr Ericson.

[9] On 28 November 2008, the Deputy Commissioner of Taxation commenced proceedings in this Court against Mr Ericson seeking payment of a larger sum which included the amount of its then s 260-5 notice. In those proceedings, on 11 July 2011 it was ordered by consent that Mr Ericson pay to the Deputy Commissioner an amount of $4,306,415.71.

[10] In my judgment delivered on 4 November 2011, I did not make any orders for the payment of money. Rather, there were orders to restrain Mr Ericson from taking steps to enforce the adjudication decision, either wholly or in part, depending upon what was thereafter paid to him by Hansen Yuncken. I ordered that upon its paying to Mr Ericson by 25 November 2011 a sum of $2,363,619.29 and interest on that sum, Mr Ericson would thereafter be permanently restrained from taking any steps to obtain the adjudication certificate or otherwise enforcing the adjudication decision and the bank guarantees would be unconditionally released. I made an alternative order for the contingency that those moneys were not paid by 25 November 2011. In that event, Mr Ericson was to be restrained from recovering more than that amount of $2,363,619.29 together with interest. No debt arose from that judgment. Nor was there an immediate impact upon the operation of the interlocutory injunction, which was to continue to operate until 25 November 2011 when, under the first of my orders, it was to be replaced with a permanent injunction in the same terms or under the alternative order, it was to be set aside.

[11] Accordingly, immediately after my judgment of 4 November 2011, it remained the position that there was a debt, according to s 29 of the Payments Act, from the adjudicator’s decision but that it was not a debt which was presently due and payable to Mr Ericson, because he was restrained from recovering it.

[12] On the same day as that judgment was given, the Commissioner served a further notice under s 260-5 upon Hansen Yuncken. It was described as an amended notice, that is to say an amendment of the notice which was given in 2008. The total amount payable to the Commissioner was there said to be $4,306,415.71, being the amount of the judgment debt in his favour.

[13] Correspondence then passed between lawyers for the Commissioner, Hansen Yuncken, Mr Ericson and Holcim. On 17 November, Hansen Yuncken’s lawyers wrote to a lawyer employed by the Australian Taxation Office, proposing that Hansen Yuncken make a payment into court. They wrote:

“While our client does not wish to take any steps that might amount to non-compliance with the Amended Garnishee Notice [the amended notice under 260-5] there is uncertainty in relation to our client’s obligations under it in the event that it complies with the first of the orders made by His Honour on 4 November 2011. It is at least arguable that a payment in compliance with that order would not give rise to an obligation to pay moneys in response to the Amended Garnishee Notice. This appears to be the position being asserted on behalf of Holcim. We do not necessarily agree with that position but accept that it is arguable. We note the indemnity that is available to our client under section 260-15 in Schedule 1 of the Act. However, that section would not apply if the position being asserted by Holcim is correct. …

As you would appreciate, our client will not wish to be drawn into a dispute over who is rightfully entitled to the moneys payable under His Honour’s decision. In particular, it does not wish to place itself in a situation where it pays moneys to the ATO in circumstances where it is not required to and thereby attracts a claim from Mr Ericson, Holcim or Mr Walsh [Mr Ericson’s counsel, who had claimed a lien over moneys payable to Mr Ericson]. In these circumstances, we have been instructed to seek orders allowing Hansen Yuncken to discharge its obligations to pay moneys to Mr Ericson by making a payment into Court.”

The ATO replied on 22 November 2011 as follows:

“Whilst we acknowledge the existence of the other claims with respect to the moneys the subject of the order of His Honour Justice McMurdo dated 4 November 2011, it is our view that there can be no dispute in relation to your client’s obligation to comply with the Notice issued under section 260-5 of Schedule 1 of the Taxation Administration Act 1953 (‘the TAA 53’) on 15 September 2008 (‘the 260-5 Notice’).

In the circumstances, without any admission as to the validity of the arguments put forward by Holcim and Mr Walsh in relation to the Notice issued under section 260-5 of Schedule 1 of the TAA 53 on 4 November 2011 (‘the Amended s260-5 Notice’) and on the basis that all his rights with respect to the Amended s 260-5 Notice be reserved, the Commissioner is agreeable to the following:

1. your client comply with the Amended s 260-5 Notice to the extent of $1,658,325.78 being the amount of the s 260-5 Notice; and

2. the balance of the moneys owed to Mr Ericson be paid into Court pending further order.

The Commissioner does not intend to oppose your client’s foreshadowed application to offset its costs against the balance of the moneys owed to Mr Ericson.

We note that this matter has been listed for hearing before Justice McMurdo this Friday 25 November 2011. In the circumstances, the Commissioner intends to appear and seeks leave to intervene.

” A similar letter was written by the ATO to the lawyers for Holcim.

[14] It was in those circumstances that the orders made on 4 November were varied by consent on 25 November. During the hearing on 25 November, I was told of the proposal to make a payment to the Commissioner of the amount claimed in the 2008 notice and to pay the balance of what was to have been paid to Mr Ericson, instead into court. A solicitor appearing for the Commissioner said that he agreed to that course. However, Hansen Yuncken said that it did not wish to make those payments before the expiry of the time for an appeal against my judgment of 4 November 2011. Hansen Yuncken was not minded to appeal but it was concerned that Mr Ericson would appeal, in which case it would cross appeal seeking to set aside the whole of the adjudicator’s decision. It was concerned that it should not find itself in a position where, in the meantime, it had paid these moneys to the Commissioner. Therefore Hansen Yuncken sought an extension of the time for making the payment, which was described in my order of 4 November, from 25 November until after the expiry of the appeal period. For that reason, it was then ordered that the date be varied to 6 December 2011. The application to further vary the order of 4 November, to provide for payments to the Commissioner and into court in lieu of a payment to Mr Ericson, was adjourned to 5 December 2011.

[15] There was no appeal against the judgment of 4 November. When the matter returned on 5 December, as requested by Hansen Yuncken I made orders which varied the orders of 4 November, to provide for payments to the Commissioner and into court instead of to Mr Ericson. There was a further variation, because of Hansen Yuncken’s concern that it would not be able to recover its costs from Mr Ericson. It was permitted to withhold $400,000, in effect, as security for its costs. As varied, the first of the orders became as follows:

“1. Upon the applicant paying to the first respondent by 6 December 2011 an amount which is the total of $2,363,619.29 and interest on that sum from 13 June 2009 in the agreed amount of $597,899.63 (such amount being calculated by reference to s 67P of the Queensland Building Services Authority Act 1991 (Qld) in the agreed amount of $1,025,775.83 less the amounts of $27,876.20 and $400,000.00), such payment to be made by paying into court the amount of $1,303,198.14 and paying the Commissioner of Taxation the amount of $1,658,325.78:

(a) the first respondent will be restrained thereafter permanently from taking any steps to obtain an adjudication certificate or to otherwise enforce the adjudication decision of the second respondent;

(b) the Registrar will unconditionally release to the applicant any bank guarantee provided under orders of 23 July 2009 or 6 December 2010.”

[16] Those orders were made without objection by Mr Ericson, the Commissioner, Holcim, or Mr Ericson’s former counsel (Dr Greinke) and solicitor (Mr Stone), each of whom was represented in court when the orders were made. At the same time, the application was made on behalf of Mr Ericson for moneys to be paid out of court. That application was adjourned to 8 December 2011.

[17] Hansen Yuncken made those two payments, respectively to the Commissioner and into court, on 6 December.

[18] When the matter returned on 8 December, there were applications by the Commissioner and Dr Greinke for payment out of all or part of the moneys in court. The matter was adjourned until 15 December, by which time there were also applications for moneys to be paid out to Holcim and Mr Stone.

[19] Each of the claimants, including the Commissioner, asserts an entitlement to a charge over the moneys in court. The Commissioner’s case is that its charge results from its service of the s 260-5 notice on 4 November 2011. It was argued for the other claimants (save perhaps for Dr Greinke) that there is no charge in favour of the Commissioner, from the service of a s 260-5 notice, upon a debt owed by the recipient of the notice to the taxpayer or, at least, upon the proceeds from the payment of that debt, which in this case were the moneys in court.

[20] Section 260-5 of the TAA relevantly provides as follows:

“260-5 Commissioner may collect amounts from third party Amount recoverable under this Subdivision

(1) This Subdivision applies if any of the following amounts (the debt) is payable to the Commonwealth by an entity (the debtor) (whether or not the debt has become due and payable):

(a) an amount of a tax-related liability;

(b) a judgment debt for a tax-related liability;

(d) an amount that a court has ordered the debtor to pay to the Commissioner following the debtor’s conviction for an offence against a taxation law.

Commissioner may give notice to an entity

(2) The Commissioner may give a written notice to an entity (the third party) under this section if the third party owes or may later owe money to the debtor.

Third party regarded as owing money in these circumstances

(3) The third party is taken to owe money (the available money) to the debtor if the third party:

(a) is an entity by whom the money is due or accruing to the debtor; or

(b) holds the money for or on account of the debtor; or

(d) has authority from some other entity to pay the money to the debtor.

The third party is so taken to owe the money to the debtor even if:

(e) the money is not due, or is not so held, or payable under the authority, unless a condition is fulfilled; and

(f) the condition has not been fulfilled. How much is payable under the notice

(4) A notice under this section must:

(a) require the third party to pay to the Commissioner the lesser of, or a specified amount not exceeding the lesser of:

(i) the debt; or

(ii) the available money; or

(b) if there will be amounts of the available money from time to time - require the third party to pay to the Commissioner a specified amount, or a specified percentage, of each amount of the available money, until the debt is satisfied.

When amount must be paid

(5) The notice must require the third party to pay an amount under paragraph (4)(a), or each amount under paragraph (4)(b):

(a) immediately after; or

(b) at or within a specified time after; the amount of the available money concerned becomes an amount owing to the debtor.

Debtor must be notified

(6) The Commissioner must send a copy of the notice to the debtor. …”

[21] Schedule 1 of the TAA further provides as follows:

“260-15 Indemnity

An amount that the third party pays to the Commissioner under this Subdivision is taken to have been authorised by:

(a) the debtor; and

(b) any other person who is entitled to all or a part of the amount;

and the third party is indemnified for the payment.”

260-20 Offence

(1) The third party must not fail to comply with the Commissioner’s notice.

(2) The court may, in addition to imposing a penalty on a person convicted of an offence against subsection (1) in relation to failing to pay an amount under the notice, order the person to pay to the Commissioner an amount not exceeding that amount.”

[22] In Macquarie Health Corp Ltd v Commissioner of Taxation , the Full Court of the Federal Court (Hill, Sackville and Finn JJ) summarised the effect of notices given under the like terms of what was then s 218 of the Income Tax Assessment Act 1936 (Cth):

“[80] Once it is accepted that Donnelly should be followed, subject to further arguments as to the effect of the Taxpayer’s winding up, certain conclusions follow:

(i) The service of the s 218 notices on the Debtors created an interest in the nature of a statutory charge over any debts then due by the Debtors to the Taxpayer. The charge was created notwithstanding that the amounts due to the Taxpayer were not payable until a future date.

(ii) The Notices were also effective to create a statutory charge over any debts coming into existence (whether or not payable immediately) after the date of service, but before commencement of the winding up.

(iii) To the extent the Commissioner was entitled to a statutory charge over debts due by the Debtors to the Taxpayer, s 471C of the Corporations Law preserves the Commissioner’s right to realise or enforce the charge notwithstanding the winding-up of the Taxpayer.

(iv) The Liquidator cannot invoice s 474(1) of the Corporations Law to take control of debts subject to the statutory charge in favour of the Commissioner.”

The Court was there referring to an earlier decision of the Full Federal Court in Federal Commissioner of Taxation v Donnelly .

[23] That passage from Macquarie Health Corp , appears to well support the Commissioner’s argument here, which is that he became entitled to a statutory charge over the debt to be paid by Hansen Yuncken to Mr Ericson and, in turn, to the proceeds from the payment of that debt as they were paid into court. In Macquarie Health Corp , the Commissioner had served three notices upon debtors of the taxpayer, the last of which was served after the commencement of the winding up of the taxpayer. Subsequently, the taxpayer, the liquidator, the Commissioner and the debtors made an agreement by which the bulk of the debts became due and payable on a later date and under which the amount of the debts was paid into court. It was held that the Commissioner was entitled to the amount claimed by the first and second notices, and was entitled to that amount from the moneys which had been paid into court. That was so although when the notices had been served, there had been no debts then due by the debtors to the taxpayer. The notices were also held to be effective to create a charge over any debts coming into existence after the date of service of the notice but before the commencement of the winding up.

[24] The Full Court there discussed the decision of the High Court in Clyne v Deputy Commissioner of Taxation (Cth) , where the contest was between the Commissioner and a purported assignee from the taxpayer of debts constituted by bank term deposits which had been held by him. The assignee, who was the second appellant, argued that she became entitled to the term deposits, unaffected by a s 218 notice which had been given to the bank. The five members of the Court agreed that the appeal should be dismissed but for different reasons. Only Brennan J said that the service of the s 218 notice resulted in an assignment of the debts, which were constituted by the bank deposits, to the Commissioner by way of a statutory charge. The other members of the Court reached the same conclusion by holding that s 218 had the effect of preventing the taxpayer from assigning the debt, or otherwise dealing with it, in a way which would prevent compliance with the notice by the bank when the term deposits matured. Counsel for the Commissioner in that case had conceded that the service of a s 218 notice did not create a charge over, or an interest in, the debts. The correctness of that concession was expressly doubted by Mason J (with whom Aickin and Wilson JJ agreed), whilst Gibbs CJ made no reference to the point. In concluding that there was a statutory charge in favour of the Commissioner, Brennan J distinguished the Commissioner’s position “from a garnishor of a debtor who obtains no proprietary interest in the debt owing to the judgment debtor, though he may obtain execution against the garnishee”. Brennan J continued:

“But even a garnishor is not defeated by the judgment debtor’s assignment of the debt after service of the garnishee order nisi, for a judgment debtor loses the right to assign his debt free of the garnishee order once the order nisi is served. … The taxpayer’s right to assign free of the requirement in the notice is likewise lost when the notice is given.”

[25] In Macquarie Health Corp , the liquidator argued that a s 218 notice was analogous to a garnishee order, which was said to “not necessarily suggest that s 218 creates a charge, since a garnishee order does not effect an assignment of the property of the garnishee”. But the Court concluded that this and other arguments fell short of demonstrating that the majority decision in Donnelly was plainly wrong and should not be followed.

[26] In Donnelly , it was necessary to consider the nature of the Commissioner’s entitlement which resulted from a s 218 notice, in order to determine whether the Commissioner was a “secured creditor” for the purposes of s 58(5) of the Bankruptcy Act 1966 , which would empower the Commissioner to deal with the debts the subject of his notice notwithstanding the taxpayer’s subsequent bankruptcy. The terms “secured creditor” was relevantly defined to include a person holding “a mortgage, charge or lien on property of the debtor” as security for a debt due to him or her from the debtor.

[27] Hill J, who was a member of the Court in Macquarie Health Corp , was also one of the majority of the Full Court in Donnelly , where he compared the effect of a s 218 notice with garnishee proceedings. He said that there was a striking similarity between the two, which was critical to his conclusion that the Commissioner was a secured creditor. Hill J reasoned as follows:

“A notice under s 218 is not itself a garnishee order although as Mason J in Clyne’s case remarked it is certainly very similar to such an order. Particularly, in my view it confers upon the Commissioner not merely the negative right to prevent the taxpayer from accepting payment of the debt or disposing of it, but positive rights, namely a right to give a valid receipt and discharge for the money (s 218(4)): the payment being deemed by that section to have been made under the authority of the taxpayer and there is conferred upon the Commissioner the further right in the event of default or failure to comply with a s 218 notice to apply to the court for an order requiring the convicted person to pay to the Commissioner an amount which the convicted person has refused or failed to pay. Thus the similarity between the s 218 notice and garnishee order is indeed most striking and in my opinion it follows that for the purposes of the Bankruptcy Act there is created in the Commissioner by virtue of the service of the s 218 notice a charge so that the Commissioner becomes for the purposes of bankruptcy law a secured creditor.”

The other member of the majority in Donnelly , Lockhart J, agreed that a s 218 notice created a charge. Like Hill J, he referred to a series of single judge decisions to that effect, including a decision of Carter J in this Court in Tricontinental Corporation Limited v Commissioner of Taxation (Cth) .

[28] In that passage, Hill J was careful to limit his characterisation of the Commissioner’s entitlement to the context. The Commissioner had a charge “for the purposes of the Bankruptcy Act ” and was a secured creditor “for the purposes of bankruptcy law”. However, that reasoning might not be applicable outside the context of a bankruptcy or company liquidation.

[29] Section 260-5 deals expressly with property in the form of debts to be paid by a recipient of a notice to the taxpayer. It provides the Commissioner with certain rights and imposes certain obligations upon the recipient, as well as restricting the taxpayer in dealing with its property in the debt. But it does not expressly impose a charge, at least a charge in the sense of providing the Commissioner with some proprietary interest in that debt. If the debt is paid other than in accordance with the notice, there are potential consequences for the recipient as prescribed by s 260-20. But there is no provision which is to the effect that the Commissioner then becomes entitled to the ownership of the moneys in the hands of that payee.

[30] The Commissioner’s argument is that the rights, obligations and restrictions which are expressly imposed by the statute have the legal result that there is a charge by which the Commissioner has a proprietary interest in the debt so that, if the debt is paid to someone other than the Commissioner, the money in the hands of the payee is the property of the Commissioner. That argument does not have any substantial support from Donnelly . Rather, the striking similarity between such a notice and a garnishee order, as described by Hill J, would all but compel a contrary conclusion.

[31] More recently, in Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation , the High Court said that a notice under s 260-5 operates in the manner in which a garnishee order operates to attach a debt, as to which the Court set out this passage from the judgment of Kitto J in Hall v Richards :

“Such an order, though not working an assignment or giving the judgment creditor any proprietary interest in the debt, yet gives him positive rights with respect to it which a creditor having no more than a judgment does not possess; not merely a negative right to prevent the judgment debtor from accepting payment of the debt or disposing of it, but positive rights for the recovery of what is owing on the judgment, namely a right to give a valid receipt and discharge for the money, and a right in case of non-payment to obtain execution against the garnishee: In re Combined Weighing and Advertising Machine Co .”

[32] In Hall v Richards , a judgment creditor entered a caveat against the land of the judgment debtor, as he was entitled to do under a provision of the Real Property Act 1886 (Tas), which provided that the practice, procedure and mode of dealing with a caveat entered under that provision were the same as if the judgment creditor claimed an estate or interest in the judgment debtor’s land. The question was whether the judgment creditor was, by lodging a caveat under that provision, a “secured creditor” for the purposes of the Bankruptcy Act 1926 -1958 (Cth), which (again) was as it has been and is defined to mean a person holding a mortgage, charge or lien over the property of the debtor, or any part thereof, as security for a debt due to him from the debtor. The judgment creditor argued that he held either a lien or a charge. It was in this context that Kitto J described the nature of a garnishee order, so as to distinguish it from the caveator’s position in that case. Immediately after that passage, Kitto J said:

“To turn to the case of the appellants is to see the contrast at once. The entry of their caveat gave them no new positive rights. It ensured that they would have time in which to exercise against the land in question the right, which they possessed antecedently, to enforce their judgment by means of a fi fa ; but that is all. That was a right, incidentally, which by force of s 92 must come to an end on the bankruptcy of the judgment creditor; and in that fact alone there is a formidable answer to the whole of the appellants’ contention in the case. But let that be put aside. The appellants had no other right or remedy for the recovery of their money out of the land than any other judgment creditor had. The legal effect of the caveat, as has often been said of caveats under the ordinary caveat provisions of Torrens legislation, was that of a statutory injunction, serving merely to keep property available in case the judgment creditor should wish to have execution against it; and it is clear on the authorities abovementioned that to apply the term ‘lien’, or even the term ‘charge’, to anything which has no greater effect than that is to depart from the terminology of the Bankruptcy Act .”

As to the position of a garnishor, Kitto J referred to Emanuel v Bridger where, under an identical definition of “secured creditor”, a garnishor was held to be a secured creditor for the purposes of a bankruptcy. Kitto J said of that case:

“The judgment creditor was held to be a ‘secured creditor’ for two reasons: first, the making of a garnishee order, the Court held, resembled rather an actual seizure of goods under a fi fa than a mere delivery of a fi fa to the sheriff; and secondly, the word ‘charge’ which was considered to have a wider meaning than ‘lien’, was held sufficient to comprehend rights acquired by a judgment creditor upon the making of a garnishee order in his favour.”

[33] It was submitted by at least some of the claimants here that the High Court’s description, in Bruton Holdings , of a s 260-5 notice operating like a garnishee order, together with its reference to Hall v Richards , should be understood as a rejection of the view that such a notice creates anything in the nature of a charge. That submission cannot be accepted. It was the analogy between a s 260-5 notice and a garnishee order, as confirmed in Bruton Holdings , which was the basis for the conclusion in Donnelly that the Commissioner holds a “charge” for the purposes of the Bankruptcy Act . But that is not to say that there is a charge in the sense of an ownership of the debt which is the subject of the Commissioner’s notice. That passage in Bruton Holdings indicates otherwise.

[34] Of the many questions in Macquarie Health Corp , one was whether the Commissioner was a “secured creditor” as that term is used in s 471C of the Corporations Act . Section 471B of that Act provides that 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 continue with a proceeding against the company or in relation to its property or with an enforcement process in relation to such property. That is qualified by s 471C which provides that nothing in s 471B (or s 471A) affects a secured creditor’s right to realise or otherwise deal with the security. The Full Court’s reasoning on this question is summarised in the passage which I have set out above at [21]. Just as the service of a s 218 notice made the Commissioner entitled to a security for the purposes of the bankruptcy law in Donnelly , so it made him a secured creditor for the purposes of s 471C. Again, the statement by the High Court in Bruton Holdings , upon which the claimants now rely, does not cast doubt upon the correctness of that reasoning, but instead supports it. It may be noted that in Bruton Holdings , the High Court referred to both Donnelly and Macquarie Health Corporation without criticism.

[35] It must be accepted then that the service of a s 260-5 notice confers upon the Commissioner what has been described as a statutory charge over the relevant debt. But that is not sufficient to dispose of the present contest, because it is a charge in a limited sense and, in particular, it is not a charge which provides the Commissioner with a proprietary interest in the subject debt.

[36] It is clear that the garnishor does not enjoy a proprietary interest in the relevant debts. To the statements by Kitto J in Hall v Richards (set out above at 32) and Brennan J in Clyne v Deputy Commissioner of Taxation (referred to above at 24), there may be added on this point the judgments of Santow J in Blacktown Concrete Services Pty Ltd v Ultra Refurbishing & Construction Pty Ltd (in liq) and McPherson SPJ (as he then was) in Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) . McPherson SPJ there referred to what he described as the “ambiguities of language” in the terms ‘secured creditor’ and ‘charge’, as they have been interpreted in bankruptcy, referring to the judgment of Griffith CJ, sitting in the Full Court of this Court in Bond v McClay .

[37] Therefore, although the Commissioner was for some purposes the holder of a statutory charge over what was to be paid by Hansen Yuncken to Mr Ericson, that was not what Griffith CJ in Bond v McClay described as a “proprietary charge”. It conferred no proprietary interest in that debt. Consequently, when that debt was extinguished, the Commissioner could claim no proprietary entitlement to what was paid to extinguish that debt, that is to say the moneys now in court.

[38] The debt owed to Mr Ericson became extinguished as follows. As I have said, this was a debt which was in consequence of the adjudication and the operation of s 29 of the Payments Act. The effect of the interlocutory injunction made in 2009 was to temporarily restrain its recovery. That restraint was not immediately affected by the orders which were made in my judgment of 4 November 2011. For the time being, the interlocutory injunction remained in place, as it did upon the variations to those orders which were made on 25 November and 5 December 2011. By the orders as so varied, Mr Ericson was to become permanently restrained from taking any steps to enforce the adjudication decision if by 6 December Hansen Yuncken paid the moneys referred to in paragraph 1 of the orders. When Hansen Yuncken made those payments, Mr Ericson became immediately and permanently restrained from enforcing what would have remained of the debt. Hansen Yuncken’s payment to the Commissioner was a part payment of what had been the debt owed to Mr Ericson. Hansen Yuncken’s payment into court was also regarded as a part payment. But most importantly, the consequence of those payments was that Hansen Yuncken was completely discharged. It was no longer a person who owed, or might owe, money to Mr Ericson because he was then unconditionally and permanently restrained from enforcing the adjudication decision.

[39] Hansen Yuncken has undertaken to make a further payment, depending upon the outcome in relation to its costs of the proceedings. But the source of the obligation to make that payment, if and when it is made, would be Hansen Yuncken’s undertaking and not what had been the debt from the adjudication decision. There was no submission for the Commissioner to the effect that his notice would have an operation upon moneys, if any, which Hansen Yuncken becomes liable to pay pursuant to that undertaking given to the Court. The present debate concerns the impact or otherwise of the Commissioner’s notice upon the moneys which are now in court.

[40] The debt owed by Hansen Yuncken to Mr Ericson having been extinguished, there is no apparent basis for the Commissioner to be entitled to the funds in court.

Within the TAA, there is no expressed entitlement to moneys which can be identified as having been paid by the recipient of a notice in full or part satisfaction of the debt. And there is no basis for implying such an entitlement, notwithstanding that it might be regarded as serving the purposes of the s 260-5 process. The argument for the Commissioner did not seem to go that far: rather, it was made upon the premise that once the Commissioner is seen to be the holder of a “charge” in some sense , he should be seen as having a proprietary interest in the property the subject of the charge and, thereby, in any other property into which it could be traced.

[41] The Commissioner’s argument is said to be supported by the judgment of Wilcox J in Commissioner of Taxation v Government Insurance Office of New South Wales , where a notice pursuant to s 218 was given to the respondent insurer in relation to a judgment debt which had been recovered by the taxpayer in a personal injuries claim. When the GIO was about to pay the amount of the judgment to the taxpayer, the Deputy Commissioner obtained an order restraining the payment until further order of the Court. In a subsequent hearing, at which the Deputy Commissioner, the GIO and the taxpayer were represented, the Court made orders, at their joint request, which included an order that the damages be paid into court to await the consideration of questions as to the efficacy of the Deputy Commissioner’s notice.

On a subsequent hearing, when those matters were debated, the taxpayer’s counsel made a submission which was shortly disposed of by his Honour in this way:

“Counsel submits that Mr Daoui’s verdict moneys could no longer be subject to the s 218 notice because they have been paid into court; a s 218 notice may not be issued against a court. This submission is scarcely worth comment. The notice was issued before the moneys were paid into court. Upon issue it charged such moneys as might become payable in the future by the GIO to Mr Daoui. Moneys having become payable, and a dispute having arisen, by consent they were paid into court to await a determination as to who was entitled to them, the Deputy Commissioner or Mr Daoui. The payment into court neither created new rights nor derogated from existing rights...

That passage was not essential for his Honour’s conclusion. On the appeal by the Commissioner to the Full Court the point was not raised in argument or discussed within the judgments. The Full Court there held that the s 218 notice did not oblige the GIO to pay the Commissioner rather than the taxpayer, because by the time he had obtained his award against the GIO, he had been discharged from bankruptcy with the consequence that his previous tax debt had been discharged.

[42] That passage from the judgment of Wilcox J does not provide significant support for the Commissioner’s argument here. It far from appears that it was a case where, upon the payment into court, the judgment debt in favour of that taxpayer was discharged. In the present case, it is the fact that the debt has been extinguished which is the fundamental obstacle to the Commissioner’s case. Further, it plainly appears that the arguments before Wilcox J did not address the nature of the charge arising from a s 218 notice, and whether it was a charge which gave the Commissioner a proprietary interest.

[43] The Commissioner was permitted to deliver written submissions, after the hearing, as to the existence of any authority which supported this notion of tracing into the funds resulting from the payment of the subject debt. Apart from that passage from the judgment of Wilcox J (which was argued at the hearing), no authority was cited. But counsel for the Commissioner pointed out that in Macquarie Health Corp , the Commissioner was able to have recourse to moneys which had been paid into court in the enforcement of his notice. It appears that it was simply accepted that those funds should be available to the Commissioner in the event that he overcame the many arguments of the liquidator which would have had him relegated to the ranks of the unsecured creditors. The likely explanation is that, again, in that case the payment into court did not have, at least so clearly as in this case, the consequence of extinguishing the subject debt or debts.

[44] Therefore, I have concluded that in the particular circumstances of this payment into court, the Commissioner has no entitlement to the funds. Because he had no proprietary interest in the debt, he cannot claim an proprietary entitlement to what was paid in part discharge of the debt, unless the statute so provides. It does not so provide, expressly or by implication.

[45] The Commissioner agreed to this payment into court, no doubt upon the understanding that it would not prejudice his position. His agreement was accompanied by an express reservation of his rights. But of course that was not to provide him with rights which the statute had not conferred.

[46] The Commissioner’s application for the payment of the moneys in court, which was filed on 12 December 2011, cannot succeed and must be dismissed. As I have said, the other claims involve factual questions which will have to be litigated. Mr Ericson sought the payment of certain sums which, when aggregated with the claims apart from that of the Commissioner, still amounted to less than the moneys in court, so that those other claimants would not have been affected by those orders. As Mr Ericson has now become bankrupt, it is for his trustees to decide whether to pursue that or some other application in relation to the moneys in court.