INCOME TAX: BANKING ATTACHMENT OF MONEYS IN CUSTOMER'S ACCOUNT TO SATISFY TAX LIABILITY-RELATIONSHIP BETWEEN BANKER AND CUSTOMER: LEGAL CHARACTER OF MONEYS IN CURRENT ACCOUNT DISTINGUISHED FROM THOSE IN SAVINGS ACCOUNT: WHETHER COMPLIANCE WITH COMMISSIONER'S DEMAND CONSTITUTES DEFENCE TO ACTION FOR WRONGFULLY DISHONOURING CHEQUE
COMMONWEALTH BANK ACT 1911, ss. 5, 6, 40: INCOME TAX ASSESSMENT ACT 1915, s. 50A
The Secretary to the Treasury has forwarded for advice the following memorandum of the Chief Accountant of the Commonwealth Bank:
I attach hereto copy of letter which has been received by us from the Federal Commissioner of Taxation, by which you will see that he seeks practically to attach a balance of a Savings Bank account with us for the purpose of payment of income tax.
I shall be glad if you will request the Solicitor-General to advise under what liability the Bank stands in this regard, and I would point out that in the case under notice the depositor has a Savings Bank passbook and it is quite competent for him to go to any of our Savings Bank branches or agencies and withdraw the money.
Though we are quite prepared to assist the Commissioner of Taxation in every way within our powers, it is very necessary that we should be fully cognisant of our legal position in matters of this nature. In the event of an account in the general banking department being attached by the Commissioner in this way I should like to know under what liability the Bank would be if, in attempting to protect the Commissioner, it were to dishonour the customer's cheque; in such case would the customer have an action against the Bank for wrongful dishonour, or would the notice from the Taxation Commissioner protect the Bank from such an action?
The letter from the Commissioner of Taxation was addressed to: The Manager, Commonwealth Bank of Australia, Sydney, N.S.W., and omitting formal parts, was as follows:
TAKE NOTICE THAT whereas I have been unable to collect the tax from A.B., I hereby, in pursuance of the powers vested in me under section 50A of the Income Tax Assessment Act 1915-1918, appoint you to be his agent for the purposes of this Act, and I hereby require you to deduct from any payment which is or will become due by you to the aforesaid A.B. such an amount as will be sufficient to pay the tax set out in the attached notice of assessment, and to pay the amount to me forthwith.
Section 50A of the Income Tax Assessment Act 1915-1918 provides as follows: 50A (1) Where the Commissioner is of opinion that it is difficult to ascertain the whereabouts of a taxpayer or to collect the tax from him, the Commissioner may by notice in writing (a copy of which shall be posted to the last known place of address of the taxpayer) declare any person, local authority, corporation, board, commission or body making payments or owing money to the taxpayer to be his agent and may require the agent-
- to deduct from any payment which is or will become due to the taxpayer such an amount as will be sufficient to pay the tax which the Commissioner may assess to be paid by the taxpayer; and
- to pay the amount to the Commissioner forthwith, and for any default in so doing the agent shall be liable, in addition to the tax, to a penalty not exceeding Five pounds.
(2) For the purpose of this section 'tax' includes 'additional tax' required to be paid in accordance with this Act.
By sections 5 and 6 of the Commonwealth Bank Act 1911-1914, the Commonwealth Bank of Australia is established and created a body corporate with perpetual succession and a common seal. The Bank is, therefore, as a corporation, liable to be declared the agent of a taxpayer under section 50A of the Income Tax Assessment Act.
The notice of the Commissioner set forth above was, however, addressed to the Manager of the Bank, and purports to appoint the Manager of the Bank the agent of the taxpayer.
Halsbury, Vol. 8, p. 303, says that: 'Notice to an individual who happens to be a member of a corporation aggregate is not equivalent to notice to the corporate body (Steward v. Dunn (1844) 1 Dow. & L.642, 649)'. That is, a notice in order to bind the corporation, must be addressed to the corporation itself in its corporate name. In the present case, the Manager is not a member of the corporation, but merely an officer of the corporation, and in the absence of any statutory provision that service of the notice on the Manager is to be deemed service on the Bank, the Bank, in my opinion, is not bound by the notice.
Apart from the question of the validity of the notice, the question for determination is as follows:
Is the Commonwealth Bank, if declared the agent of a taxpayer under section 50A of the Income Tax Assessment Act, liable to pay to the Commissioner from moneys standing to the credit of the taxpayer-
- in his current account; and
- in his Savings Bank account,
such amount as will be sufficient to pay the tax owing by the taxpayer?
In other words are moneys standing to the credit of a taxpayer in his current account and Savings Bank account with the Commonwealth Bank 'payments which are or will become due to the taxpayer'?
Grant on Banking, 6th edn, 1911, at p. 3 says that:
The legal relation of a banker and customer in their ordinary dealings in money is simply that of debtor and creditor ... if the customer opens an account and deposits money, the customer is the creditor; and the amount deposited or advanced can be recovered in an action for money lent, the deposit or advance creating a common law debt . . .
The Statute of Limitations runs against this debt as against any other simple contract debt; and if there has never been any payment of the principal, or interest, or some other acknowledgment by the banker satisfying the provisions of the Act, subsequently to the first deposit, for six years, the right to recover the sum deposited will be barred by the statute. The case would be different if the money were paid in under a special contract, by which the giving notice of withdrawal was a condition precedent to the bank's liability to repay the money, for then the statute would only commence to run from the day when such liability accrued. As regards moneys standing to the credit of a taxpayer in his current account with the Commonwealth Bank, they are, in my opinion, payments which are due from the Bank to the taxpayer, and the Bank is, in respect thereof, liable to comply with the requirement of the Commissioner of Taxation made in a valid notice under section 50A.
As regards moneys deposited in the Savings Bank, section 40 of the Commonwealth Bank Act 1911-1914 provides that a depositor is only entitled to withdraw those moneys after giving the prescribed notice. According to Grant, the Bank is, therefore, not liable to repay those moneys until the proper notice is given; that is, the payment is not due to the depositor until he has given the required notice. If the depositor gives notice of withdrawal, the amount to which the notice relates should of course be paid to the Commissioner of Taxation and not to the taxpayer.
I am of opinion that-
- the Commonwealth Bank, if declared the agent of the taxpayer under section 50A of the Income Tax Assessment Act 1915-1918, is liable to pay to the Commissioner of Taxation, from moneys standing to the credit of the taxpayer's current account, such amount as will be sufficient to pay the tax owing by the taxpayer, and if the Bank, in order to comply with the requirements of the Commissioner is compelled to dishonour the taxpayer's cheque, the notice from the Commissioner would protect the Bank from any action brought by the taxpayer for wrongful dishonour; but
- the Bank is not so liable in respect of the Savings Bank account of the taxpayer, unless the taxpayer gives the required notice of withdrawal.
[Vol. 16, p. 239]