In a majority 2:1 decision, the Full Federal Court allowed the Commissioner’s appeal from a 2011 decision in the Federal Magistrates Court in which the Commissioner’s garnishee notice was set aside regarding a property transaction.
The transaction in this case involved a property owned by a Mrs Bassili over which she granted a mortgage to a company (as second mortgagee). She became bankrupt, but prior to that had entered into a contract to sell the property to a person who was the trustee of a family trust.
Mrs Bassili owed a tax debt to the Commissioner. The Commissioner became aware of the contract and issued garnishee notices to Mrs Bassili’s solicitors. An impasse between the mortgagees of the property was resolved, but excluded the Commissioner. The trustee effectively stepped into the shoes of the second mortgagee as far as the disputed sum (of $75,508.64) was concerned.
The Commissioner sought to enforce the notice to the purchaser of the property in respect of moneys due by it to Mrs Bassili under the contract for sale of the land. The land was subject to a pre-existing registered mortgage securing a debt due by the taxpayer to the mortgagee.
At first instance, in Tang & Anor v Bassili & Ors [2011] FMCA 544, the Court held that the Commissioner’s notice to the purchaser did not operate to garnishee moneys due by the purchaser in respect of funds applicable to the discharge of the mortgage.
The majority of the Full Federal Court held that the purchasers of the property (from Mrs Bassili) came under a contractual obligation to tender the whole of the purchase price, including the $75,508.64 owing to the Commissioner, when Mrs Bassili offered an unencumbered title to the purchasers. It said it is at that point that the purchasers’ obligation to pay the Commissioner under s 260-5 became absolute. Therefore, the majority said by reason of s 260-15, a payment to the Commissioner would, in effect, be sufficient (as against Mrs Bassili) to satisfy the purchasers’ obligations under their contract.
Dissenting, Siopis J held that the appeal should be dismissed.
However, the majority upheld the appeal and held that the Commissioner was entitled to the sum of $75,508.64.
(FCT v Park [2012] FCAFC 122, Full Federal Court, Siopis, Jessup and Katzmann JJ, 31 August 2012.)
[LTN 170, 3/9]