I know my limits as a mere practicing accountant and would never dare question the ability of a Federal Court Judge to properly apply the law. And when two out of three Federal Appeal Court Judges agree on a decision, it is all the more likely to be correct.
And yet, a recent decision of the Appeal Court while no doubt technically correct, from the layman’s point of view seems impractical and absurd.
What happened was that the Tax Office issued a garnishee notice in relation to a debtor who was selling real property. The garnishee notice was addressed to the buyer and told him to pay any monies payable to the taxpayer to the Tax Office. Given that the mortgages registered on the title secured debts greater than the sale price, to most of us it would seem clear that on completion nothing would become payable to the vendor. That is all funds would go to satisfy the mortgagees.
But the Court reasoned that, in the seconds between the release of mortgages being handed over and before the settlement cheques were exchanged, there was an instant when the vendor became entitled to the sale proceeds. The dissenting Judge said that he thought that in that instant the mortgagees became entitled to an equitable charge over the funds, so that in fact the taxpayer never had any entitlement.
As mentioned above I would not dare to question the Court but the dissenting judgment certainly gives an outcome which makes sense to business people.
Ref (2012) FCAFC 122 31 August 2012.