Can I pay my Tax Bill with a Promissory Note via Bills of Exchange Act?

Saturday , 13, August 2016 Leave a comment

CASE : Woods vs Australian Taxation Office & Ors [2016] QDC 198

In the present case, an attempt was made to distinguish the procedure from that in Atkinson and Walsh by resort to promissory notes rather than the stratagem of a bill of exchange. However, I do not accept that the delivery of the notes was a valid exercise:

(a) Section 95 of the Act provides that, with some exceptions, the Act, as it relates to bills of exchange, applies with necessary modifications to promissory notes. By s 95(2) of the Act, in applying those provisions, the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first endorser of a note shall be deemed to correspond with the drawer of an accepted bill payable to the drawer’s order; however the notes in this case were not endorsed. The normal rules of acceptance are removed by s 95(3)(b); however validity by delivery is provided for, a matter to which I shall return;

(b) The notes sent to the third defendant were not truly promissory notes within the meaning of the Act. A promissory note is defined in s 89(1) of the Act as an unconditional promise in writing made by one person to another, signed by a maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to or to the order of a specified person, or to the bearer. In the present case, the notes were said to be payable on demand but also at a fixed future time, namely on 3 December 2015 at 10.45 am and 10.50 am respectively. I interpret this to be an engagement to pay, not on demand, but at a fixed future time, and the time of payment was limited to one minute, or, at best, in respect of the first note, perhaps five minutes. It was to be redeemed at the plaintiff’s unilaterally chosen (and apparently inconvenient) location, reminiscent of the situation in Wilmink as Trustee for the Bengarra Trust v Westpac Banking Corporation [2014] FCA 872. It was submitted by the third defendant, and not contested by the plaintiff, that the documents were not given to the third defendant until 3 December 2015. Thus, the notes were not unconditional promises in writing to pay on demand nor were they to pay at a determinable future time. There is no evidence that they were given to any relevant officer of any of the defendants at a time prior to 10.45 am and 10.50 am on 3 December 2015;

(c) This is particularly so when regard is had to s 90 of the Act. Delivery of the note is necessary. The note is inchoate and incomplete until delivery thereof to the payee or bearer. It is not pleaded, and on the evidence the notes were not delivered at any time prior to the “future time” when payment was required.


In any case, I do not accept that the unilateral delivery of a promissory note, as occurred here, was a payment of a tax related liability within the meaning of regulation 18 of the Taxation Administration Regulations 1976 (Cth). The regulation requires payment of the liability, not a promise to pay; and a promissory note is not a method approved by the Commissioner for payment. The third defendant had not agreed to the discharge the tax liability in this eccentric way; nor, as the third defendant submits, could he have, consistently with regulation 18(1).

In any case, the problems with the purported procedure may be more basic. The payment of an obligation by promissory note would normally be pursuant to an agreement of a contractual kind. There was nothing contractual about the relationship between the  defendants and the plaintiff. The third defendant is the collector of tax, a statutory obligation.

Woods v Australian Taxation Office & Ors [2016] QDC 198


Published via The Organized Pseudolegal Commercial Argument

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