Binetter v Commissioner of Taxation

Federal Court of Australia|2011-10-21|Before: Stone J

The application be dismissed.
The plaintiff pay the costs of the first defendant. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 301 of 2011

JUDGE: STONE J DATE: 21 OCTOBER 2011 PLACE: SYDNEY

Application for reinstatement of registration and winding up 3 The companies had been voluntarily deregistered in 2006. Their reinstatement was sought by the Commissioner of Taxation. At the hearing of the Commissioner's application Mr Binetter was given leave to be heard and was represented at that hearing by counsel instructed by Argyle Lawyers. The transcript of the hearing before Jagot J shows that Mr Binetter adduced evidence, cross-examined witnesses and made extensive submissions. The orders sought by the Commissioner were made on 16 December 2010. They were stayed, initially until 17 December and then for 21 days to enable Mr Binetter to file and serve his application for leave to appeal and to be joined as a party to any appeal.

Application for leave to appeal from winding up orders 4 Mr Binetter's application for leave to appeal was dismissed by Perram J on 4 March 2011 on the basis that he did not have standing: Binetter v Deputy Commissioner of Taxation [2011] FCA 184. His Honour held, at [7], that "a director may pursue an appeal against a winding up order in the name of a company if she first obtains leave under s 417A(1A)(d)". Perram J noted, however, that Mr Binetter was not seeking leave under that subsection: Instead, he brings the application for leave to appeal as a third party affected by the orders and, on that application, his status as a director is fortuitous and, one might have thought, irrelevant. 5 Perram J held that as Mr Binetter was not a party to the proceeding before Jagot J he would have standing to seek leave to appeal if he was "aggrieved" or "sufficiently interested". His Honour rejected the submissions made on Mr Binetter's behalf on this point and said at [13]-[15]: Viewed from the individual director's personal perspective, the fact that he is a director of a company does not engage, by itself, any particular interest in the question of whether the company is wound up. Of course, he does have the function of appealing in the company's name against a winding up order, but this function is not a personal interest generating standing. Rather, it is a representative function regulated by s 471A. It follows, in those circumstances, that it is merely the possibility that Mr Binetter may become involved in a liquidator's investigation and its downstream consequences that is said to aggrieve him. I do not think that such an interest suffices. Granted the breadth of the concept of aggrievement, this interest is too remote. If it were sufficient, it would mean that any person who might be examined by a liquidator or subject to such a liquidator's investigation would have standing to seek leave to appeal against a winding up order. The potential for a winding up order to be exposed to such a broad range of putative appellants and the obvious risk that this would pose to the orderly conduct of the winding up mean that mere membership of the class of the potentially investigated cannot suffice for standing purposes. In that circumstance, I do not accept that Mr Binetter has standing to seek leave to appeal.

Mr Binetter's application for leave to appeal from Perram J's orders 6 In a second judgment on 4 March 2011, Perram J determined that Mr Binetter had no right to appeal from the order made earlier in the day and refused to grant a stay of Jagot J's orders for winding up: Binetter v Deputy Commissioner of Taxation (No 2) [2011] FCA 207. His Honour said at [2] - [3] of his reasons: The decision made by me was a decision refusing to grant leave to appeal to the Full Court in the exercise of this Court's appellate jurisdiction. It was, therefore, an exercise of the jurisdiction set forth in s 25(2)(a) of the Federal Court of Australia Act 1976 (Cth). Appeals to the High Court from this Court are regulated by s 33 of the same Act. Section 33(4B)(a) provides relevantly that: An appeal must not be brought to the High Court from a judgment of the Court (whether constituted by a Full Court or a single Judge) in the exercise of its appellate jurisdiction, if the judgment is: (a) a determination of an application of the kind mentioned in subsection 25(2)… The consequence of s 33(4B)(a) is that there is no right to appeal from a decision of the kind given by me this morning. Consequently, there is no proceeding to which the application for a stay could be seen as being incidental. It follows that, in principle, I should refuse the application for a stay.

Mr Binetter's application to Jagot J to set aside winding up orders of 16 December 2010 7 With his prospect of appealing from the winding up orders of 16 December having been foreclosed, Mr Binetter applied to Jagot J to set aside those orders: Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2011] FCA 219. At the hearing Mr Binetter was represented by senior and junior counsel. At [6] of her reasons, her Honour summarised the submissions made in support of Mr Binetter's application: (1) The orders of 16 December 2010 (which have been entered) provide for the reinstatement of the registration of each company (Order 1) and, "[u]pon reinstatement of the registration", for each company's winding-up. (2) Accordingly, the winding-up operates after the reinstatement of the registration of each company. (3) The companies will be directly affected by the winding-up. Accordingly, they are necessary parties to any winding-up order against them. (4) Because the companies did not exist when the orders were made, they could not be joined as parties to the proceedings. (5) It follows that the procedure adopted in the principal proceedings, in which the Deputy Commissioner of Taxation sought orders for both the reinstatement of the registration and the winding-up of the companies, was impermissible. Other cases in which the same procedure has been used were also in error to do so. The only permissible procedure, in such a case, is for consideration of the winding-up application to be deferred pending the reinstatement of the registration of the company. Upon reinstatement of the registration, the company (which will then exist) can be joined as a necessary party and thus heard. (6) The fact that Mr Binetter had the opportunity to raise this issue in the proceedings, but did not do so, is immaterial. The joinder of all necessary parties was the responsibility of the party seeking the orders. In any event, the circumstances are governed by the decision of the High Court in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd; Walker Corp Pty Ltd v White City Tennis Club Ltd (2010) 266 ALR 462; [2010] HCA 19 (the White City Tennis Club case). The principle is that where a court is invited or proposes to make orders "directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined" (at [131]). If an order is made directly affecting the rights of a non-party, the order is not a nullity but the non-party is entitled to have the order set aside (at [137]). This principle operates independently of the capacity to set aside orders which have been entered under the Federal Court Rules (O 35 r 7(2)). (7) In the present case, Mr Binetter had a sufficient interest to be granted leave to appear. He must have the same sufficient interest to seek to have the orders set aside. If not, upon reinstatement of the registration of the companies, no person will be able to perform any function as an officer of the companies without the approval of the Court (ss 471A(1) and 471A(1A) of the Corporations Act 2001 (Cth) (the Corporations Act)). (8) Alternatively, O 35 r 7(2)(a) of the Federal Court Rules applies. References to "party" in that rule should be construed as references to "any necessary party". As such, the orders were made in the absence of a party within the meaning of that section. 8 It can be seen from the submission that, in the main, Mr Binetter's position was based on the assumption that between the order reinstating the deregistered companies coming into effect and the order that on reinstatement of the registration each company was to be wound up, there was an instant of time (scintilla temporis) however slight, such that, on the authority of the High Court's decision in John Alexander's Clubs Pty Ltd, the newly reinstated company had a right to be joined as a necessary party to any application for winding up. 9 Justice Jagot was not persuaded by Mr Binetter's submission and expressed her conclusions at [9]-[14] of her reasons: 9 First, it cannot be the case that "party" in O 35 r 7(2)(a) includes a non-party who was a necessary party. If that were so, "party" would take one meaning in rules other than O 35 r 7(2)(a) of the Federal Court Rules, and another in that rule only. A necessary party to a proceeding is a person "whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon" (O 6 r 8). Such a person includes any person whose rights are directly affected by an order or proposed order in the proceeding (as in the case of Walker Corporation in the White City Tennis Club case). A "party", however, is an actual party to the proceeding. Accordingly, this is not a case where O 35 r 7(2)(a) is engaged. 10 Second, Mr Binetter's submissions appear to overlook the basic fact that the deregistered companies did not exist when the proceedings were heard and determined or at the time the present application was made and heard. 11 As to the non-existence of the companies when the orders were made, the deregistered companies were not at that time a person (in the sense of a legal person) at all, let alone a person whose rights were directly affected by the order. The deregistered companies had no legal existence, and thus could not have been joined as parties at any time during the proceedings. As such, the deregistered companies could not have been necessary parties. In order to avoid the consequence of this basic fact of non-existence (and thus the impossibility of the existence of any rights that could be affected, directly or otherwise, by the orders when made), Mr Binetter's submissions focussed on a temporal gap which, it was said, would exist between reinstatement of the registration of the companies and their winding-up (which, by the terms of the order, takes effect "[u]pon reinstatement" of the registration). The order , Mr Binetter submitted, would directly affect the rights of each company from that moment of existence onwards, without the companies being joined to the proceedings in which the order was made as necessary parties. This focus is inappropriate. In the White City Tennis Club case the High Court was concerned with a person, Walker Corporation, the rights of which were directly affected by the order when made. In other words, the person, and the rights which will be directly affected by the order, must exist when the order is made. If the person does not exist and, by reason of that fact, the rights said to be directly affected do not exist, it cannot be said that orders have been or are proposed to be made "directly affecting the rights or liabilities of a non-party" as referred to at [131] of the White City Tennis Club case. It is true that, by reason of the making of the orders, a person will come into existence (the companies on reinstatement of their registration). But this does not attract the principle with which the High Court was concerned in the White City Tennis Club case. 12 Further, and as the Deputy Commissioner of Taxation submitted, the orders provide for the reinstatement of the registration of, and upon that reinstatement, the winding-up of the companies. It is wrong to conceptualise the orders as involving a temporal sequence, as Mr Binetter's submissions assumed. Upon reinstatement, the order is that the companies "be" wound up. That is to say, the orders contemplate that the companies be reinstated and, at the same moment, be subject to the winding-up orders. The orders contemplate that the companies be reinstated with a different status from that which they had before they were deregistered. On this analysis, it is not possible to identify any right of the companies directly affected by the orders when the orders were made. 13 As to the non-existence of the companies at the time this application was made and heard, as the Deputy Commissioner of Taxation pointed out, [137] of the White City Tennis Club case contemplates that the non-party directly affected by the orders is entitled to have them set aside and "is not limited merely to seeking the favourable exercise of a discretion". In this case there is no such "non-party". Mr Binetter's rights were not directly affected by the orders. He was afforded a right to be heard pursuant to a provision enabling leave to be granted to an "interested person". The companies did not exist at the relevant time, and thus were not non-parties the rights of which were directly affected by the orders. Despite Mr Binetter's submissions to the contrary, it is not apparent why he is entitled to have the orders set aside. Mr Binetter's status as an "interested person" pursuant to a rule permitting such persons to be granted leave to be heard in a proceeding does not make him a person whose rights were directly affected by the orders and thus a non-party entitled to have the orders set aside. The present application is by Mr Binetter. As he has no such entitlement, his application must fail. 14 Third, it is not contrary to the interests of justice for Mr Binetter's application to be refused. This submission, as noted, assumes that the orders directly affect the rights of a person who has not been heard. But, for the reasons given, on proper analysis, this is not so. Once it is recognised that the companies did not exist when the orders were made, it is difficult to accept that there is any injustice in the sense Mr Binetter claimed. The fact that former directors and officers of the companies, upon reinstatement of the companies to the register, will not be able to perform any of their functions except with the approval of the Court may be acknowledged. But that is a consequence of the terms of the orders made. The liquidator also appointed pursuant to the orders will be bound to perform functions for the companies. I see no injustice in former directors and officers of a deregistered company, which is ordered to have its registration reinstated and to be wound up on reinstatement, being subject to s 471A(1) of the Corporations Act.

The present application 10 Mr Binetter filed the present application on 16 March 2011; it is yet another attempt to have Jagot J set aside the winding up orders, this time in the names of the two companies. It is an application by Mr Binetter as director of the companies for leave to make applications in the name of the companies. As noted at [2] above, leave is required where, as here, the companies are in liquidation. Mr Binetter seeks leave to bring: an application in proceedings NSD 41 and 44 of 2010 ("the original proceedings") to set aside orders 3, 4 and 5 dated 16 December 2010 winding up the companies and appointing Max Donnelly as liquidator ("the winding up orders") … 11 The originating process also seeks, as an alternative, that there be a case stated for consideration by a Full Court pursuant to s 25(6) of the Federal Court of Australia Act, namely, "Whether the companies are entitled to have the winding up orders set aside on the basis that they were not parties to the proceedings". Mr Binetter also seeks leave to bring an appeal from any order of the Court "refusing to set aside the winding up orders and an appeal from the winding up orders including any necessary leave applications". 12 At the hearing of the present application Mr Binetter put the arguments that had been rejected by Jagot J, however he also submitted that in the absence of legislative authority the Court has no power to wind up a company while that company is deregistered. It may be accepted that the court has no power to make orders in respect of a nonexistent entity whether it be an unincorporated association as in Maritime Services Board of New South Wales v Australian Chamber of Shipping [1977] 1 NSWLR 648, or a dissolved company as in CTG Pty Ltd v Yamamori (Hong Kong) Pty Ltd (1992) 10 ACSR 534. There is some support for Mr Binetter's submission as to the power to wind up a deregistered company in obiter comments of the English Court of Appeal: see In re Pinto Silver Mining Company (1878) 8 Ch D 273 at 283 per James LJ, 284 per Cotton LJ and Thesiger LJ at 285. That leaves, however, the question of whether there is any such legislative authority in the Corporations Act. Mr Binetter submitted that since the express authority that existed prior to 1 July 1998 was repealed by Company Law Review Act 1998 (Cth) there was no legislative sanction for such action. 13 The express authority to which Mr Binetter referred was, prior to 1 July 1998, provided under s 574(1) of the Corporations Act. Referring to a notice required to be published advising of the proposed deregistration of a company, s 574(1) stated: At the end of the time mentioned in a notice sent by the Commission under subsection 572(2) or (3) or published under subsection 573(5), the Commission may, unless cause to the contrary is previously shown, by notice in writing published in the Gazette, cancel the registration of the company and, on the publication in the Gazette of the last-mentioned notice, the company is dissolved, but: (a) the liability (if any) of every officer and members of the company continues and may be enforced as if the company had not been dissolved; and (b) nothing in this subsection affects the power of the Court to wind up a company the registration of which has been cancelled. 14 The Company Law Review Act 1998 (Cth), s 393 repealed Division 8 of Part 5.6 of the Corporations Act in which s 574 was to be found. It inserted a new Chapter 5A dealing with the deregistration and transfer of registration, of companies. It was submitted, however, that the new provisions did not include any authority such as was previously found in s 574(1)(b). 15 Chapter 5A includes s 601AH which provides for the reinstatement of companies that have been deregistered. It provides in subsections (2) and (3): (2) The Court may make an order that ASIC reinstate the registration of a company if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a former liquidator of the company; and (b) the Court is satisfied that it is just that the company's registration be reinstated. (3) If the Court makes an order under subsection (2), it may: (a) validate anything done between the deregistration of the company and its reinstatement; and (b) make any other order it considers appropriate. 16 A note to subsection (b) gives as an example that "the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2)". While the Acts Interpretation Act 1901 (Cth) s 13(3) provides that such a note is not part of the Act this does not preclude a note giving guidance, as clearly it is intended to do. In the absence of an order such as is postulated in the note, the property of the company would, on reinstatement revest in the company and not in ASIC: s 601AH(5). If the court order could not take effect until after reinstatement (by however short a time) then an order in the terms given in the example could never have effect, as it would be the company that would have to transfer the property not ASIC. Such guidance as may be obtained from the example suggests that reinstatement and winding up may take place contemporaneously and not in a defined order as submitted by Mr Binetter. 17 Since the 1998 amendments there is at least one instance of an order for the winding up of a deregistered company being made at the same time as an order for the company's reinstatement. In Melluish v Underwood Development Pty Ltd [2004] NSWSC 429 Barrett J held that the court may reinstate a company for the sole purpose of putting it into immediate liquidation. The application in that case was brought by the trustee in bankruptcy of John Michael Higgins and also of his wife, Diane Jean Higgins. Mr Higgins had been the sole director and secretary of Underwood Development Pty Ltd and he and Mrs Higgins were the sole shareholders. The purpose of the proposed liquidation was to enable assets, which as a result of the deregistration were vested in ASIC, to be distributed among creditors. 18 In considering whether it was "just" that the deregistered company be reinstated, Barrett J said that this question should be considered in conjunction with the question whether the company should be wound up. His Honour said, at [8]: The real issue is whether the Company should be taken out of the state of legal non-existence it currently occupies and put into a position where it again exists but with its affairs under the control of a liquidator. 19 It would seem that Mr Binetter's argument that there must be a moment in time between the reinstatement order taking effect and the operation of the winding up order was not put to Barrett J. Nevertheless it appears that his Honour contemplated that the orders would take effect at the same time so that it would be a company in liquidation that would be reinstated. 20 It seems to me that there is an anthropomorphic fallacy in the submissions on this point; they equate deregistration of a company with the death of a person. The company is a legal not a physical entity. Its deregistration is the consequence of the Court's orders; just as the Court's orders can effect a change in the legal status of the company so also can its orders reverse that change by an order for reinstatement and winding up. There is no reason why a temporal sequence should be attributed to the orders that the company be reinstated and wound up. The submission that unless this is so a company has no opportunity to oppose a winding up order assumes that which it seeks to prove. 21 Counsel for Mr Binetter, Ms R Seiden, submitted that s 601AH(5) provides that when a company is reinstated "it is deemed to come back in existence in the form it was in before it was deregistered". That is not, in fact, what the section says. It states: If a company is reinstated, the company is taken to have continued in existence as if it has not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim. 22 It can be seen that the section provides for continuity of existence not continuity of form however, in the absence of any contrary order, continuity in form would follow reinstatement. For example, in Ramantanis v G & M Excavations (2004) 22 ACLC 22 the Supreme Court of New South Wales held that a company that had been in liquidation at the time it was deregistered continued in liquidation on reinstatement. In relation to the position of liquidator, Barrett J observed that the reinstatement of the company might well be insufficient to reinstate automatically the liquidator who held office at the time of deregistration. His Honour held at [8]: As a matter of policy, however, a pre-existing and undischarged liquidator should resume office upon reinstatement of registration. Section 601AH(3)(b) empowers the court to make "any other order it considers appropriate", when making an order for reinstatement. I consider that that provides a suitable means of dealing with a situation where, as here, a liquidator was in office at the time of deregistration. 23 In JP Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] 167 FCR 212 at [7]-[9] I discussed the conflicting authorities on the question of automatic reinstatement of a liquidator. In [10] I expressed my preference for the construction propounded by Barrett J in Ramantanis and Donmastry Pty Ltd v Albarran (2004) 49 ACSR 745 over that in Brownlie v TTPM Pty Ltd (2003) 21 ACLC 1,204. In Ramantanis the court was satisfied by the evidence that in each case the person who was the liquidator at the time the company was deregistered had agreed to continue as liquidator on reinstatement. The orders for the liquidator to continue were made at the same time as the order for reinstatement. There was no suggestion that on reinstatement the company was without a liquidator even for an instance. In fact the court took care to ensure that all details concerning the continuity of the liquidator, such as consent, were attended to before making the orders. 24 Prior to the 1998 amendments s 574(3) of the Corporations Act was the equivalent of the present s 601AH(2). It gave the court power to order the reinstatement of a deregistered company on the application of a person aggrieved. Section 574(5) provided: In an order under subsection (3), give such directions and make such provisions (including directions and provisions relating to the retransfer of property vested in the Commission under section 576) as seem just for placing the company and all persons in the same position, so far as possible, as if the company's registration had not been cancelled. 25 This section has been replaced by the broader (and more succinct) provision in s 601AH(3). The power granted to the Court in that section is not fettered by particular purposes. It is only necessary for the Court to be satisfied that any order is appropriate. In that context specific reference to the court's power to direct the transfer of property is not necessary. In my view it is open to the Court to make orders such as those made by Jagot J so long as the Court is satisfied as to the appropriateness of the orders. 26 In her reasons published on 16 March 2011 Jagot J gave details and careful consideration to the arguments put by senior counsel on behalf of Mr Binetter. There is absolutely no reason to doubt that her Honour was satisfied that the orders made were appropriate nor is there any reason why this Court should reach a contrary conclusion.

Section 471A(1A)(d) - the approval of the Court 27 As mentioned above, Mr Binetter may not exercise a function or power as an officer of either company without the approval of the court: subsections 471A(1) and 471A(1A). The matters relevant to the exercise of the Court's discretion will depend on the nature of the action that an applicant for approval wishes to pursue. "It would be a mistake to encrust the court's discretion with one-size-fits-all rules for the conditions that must attach to any approval given by the court" : HVAC Constructions (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd (2002) 44 ACSR 169 at [43].

Prejudice to creditors 28 The matters relevant where an applicant seeks leave in order to set aside a winding up order were considered in Lane Cove Council v Geebung Polo Club Pty Ltd (No 2) (2002) 41 ACSR 15. Justice Barrett was concerned that if leave were given creditors might be prejudiced as a result of the costs of proceedings. A similar concern as to the solvency of the subject company was expressed by Warren J in Rodgers v CJS Panels Pty Ltd [2001] VSC 470. 29 In Lane Cove v Geebung Barrett J commented at [10], that the applicant before him had not shown that if leave were given "pursuit of the substantive application by the company would avoid relevant prejudice". His Honour observed that: It would be inappropriate for the funds of the company to be applied in meeting the costs of these proceedings unless the outcome as that the winding up did not continue and the regime presided over by the liquidator for the benefit of creditors came to an end. 30 Justice Barrett accepted that the prejudice with which he was concerned could be addressed other than by proof of solvency. In this case Mr Binetter has agreed to fund the proceedings and to pay any adverse costs order. No evidence was adduced as to his financial position and his ability to meet such obligations however if the other criteria for a grant of leave were met it should be possible to attach sufficient conditions (such as a satisfactory undertaking to the Court perhaps secured by guarantees) to any grant of leave to resolve this difficulty and ensure that there would be no prejudice to creditors in permitting the proceeding to be commenced. As I have concluded that other factors weigh against an exercise of discretion in favour of approving the action Mr Binetter wishes to take it is not necessary to consider this issue further.

Prima facie case - the likelihood of success 31 The second matter to be considered, as in any case where leave is required to commence proceedings, is the utility of such an order, in other words the likelihood of any such proceeding meeting with success. Justice Burchett's formulation of this criterion in respect of an application for leave to appeal in Sharp v Deputy Commissioner of Taxation (Cth) (1988) 88 ATC 4,184 at 4,186, was approved by the Full Federal Court in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. Adapting his Honour's formulation to the present application the test is whether in all the circumstances, the decision of Jagot J is attended with sufficient doubt to warrant its being reconsidered. 32 As a practical matter this probably requires me to give some consideration not only to the proposed application that Jagot J set aside her winding up orders but also to whether, if that application were refused an appeal would have any prospect of success. In my view neither application has sufficient prospect of success to warrant reconsideration. 33 In her reasons of 11 March 2011, Jagot J has already dismissed an application by Mr Binetter to set aside her winding up orders. Should a similar application be brought in the name of the companies the same issues as are there discussed would again arise. I have already explained why I would reject the submissions that were put on behalf of Mr Binetter in that application as well as some of the additional submissions made in the present application: see [12]-[26]. 34 It was submitted, however, that if the application were to be brought in the names of the companies other matters would be raised. The companies would contend that her Honour erred in holding that there was a prima facie case that the companies were insolvent. Her Honour based that conclusion on her finding, at [35], that each of the companies had "substantial tax related liabilities that it cannot pay" and added: The tax liabilities are contingent in the sense that they accrue on service of the notices of assessment and are subject to objection under Pt IVC of the Taxation Administration Act. The evidence discloses the Commissioner's intention to serve the notices of assessment as soon as the orders for reinstatement take effect. On service the tax liabilities will become present debts of the companies to the Commissioner. Sections 175 and 177 of the Income Tax Assessment Act will also operate. Further, and as the Commissioner submitted: - (i) there is no likelihood of any payment being made to discharge the tax liabilities outside the liquidation, (ii) there are substantial issues about the offshore transactions which are appropriate for investigation by a liquidator, (iii) apart from the tax liabilities, there is no evident business purpose for the companies to exist, and (iv) the former directors opposed the reinstatement of the registration of the companies. 35 It is submitted that Jagot J did not apply a commercial test of solvency and, while her Honour considered the actions that the Commissioner might take, such as serving notices of assessment, she did not adequately consider the significance of the actions that Mr Binetter said that the companies would take. In particular the companies would "make an application to defer the due date pursuant to s 255-10 of the Taxation Administration Act 1953 ("TAA") or an application to defer recovery proceedings under s 255-5 of the TAA". Justice Jagot, it was submitted, did not take into account that the Commissioner was obliged to consider an application to defer the due date and "by deferring the due date the tax liability would not be due and payable until the new date". 36 This submission appears to assume that any application to defer the due date would be successful. The assumption is not justified and until the Commissioner agreed to a new date the original date would stand. In contrast, as Jagot J held at [5] of her reasons the contingency for the Commissioner is the service of the notices of assessment "which is practically certain to occur". Further, her Honour observed at [13]-[15], 13 I accept that the evidence Gary Binetter adduced is not irrelevant to the statutory conditions specified in s 601AH(2) of the Corporations Act. Nevertheless, and as the Commissioner submitted, neither the scheme of the taxation legislation nor the practical reality of the Commissioner's intention to serve the notices of assessment may be disregarded. There is not a mere possibility of service on reinstatement of the registration of Advance and Civic. The Commissioner intends to serve the notices as required in order to complete the process of assessment. Deregistration of each company is preventing the Commissioner from completing the exercise of these statutory functions. This circumstance, of itself, is sufficient to establish the Commissioner as a person aggrieved by deregistration of Advance and Civic. Moreover, the Commissioner is a contingent creditor of each company. The contingency is service of the notices of assessment. On service, the Commissioner's assessments will be conclusive but for the opportunity the taxpayer will have to exercise rights of objection, review and appeal under Pt IVC of the Taxation Administration Act. The exercise of those rights is also contingent on reinstatement of the registration of the companies. 14 The companies, on reinstatement, may well have a case for the making of objections under Pt IVC of the Taxation Administration Act. However, and as recognised in Pilarinos v Australian Securities and Investment Commission (2006) 24 ACLC 775; [2006] VSC 301 at [22]-[27] it is often not appropriate in an application for reinstatement to go into factual matters which may be the subject of dispute. The Commissioner did not have to prove the debt underlying the assessments or disprove the evidence adduced by Gary Binetter disputing any such underlying debt in order to be a person aggrieved. The Commissioner declined to engage in these issues of proof in these proceedings, relying instead on the assessments and the statutory provisions to establish his status as a contingent creditor and person aggrieved by deregistration of Advance and Civic. I accept the Commissioner's submissions in this regard as follows: The Court is not required to close its eyes to the circumstance that, but for their deregistration, Advance and Civic would have been served with notices of assessment after the conclusion of the audits in 2009 and that, if they are reinstated, they will (save to the extent that a s 601AH(3) order may validate earlier service on Advance) in fact be served with notices of assessment. In either such case, it is uncontroversial that ss 175 and 177(1) will be fully operative, and preclude challenge to the assessed tax liabilities save through [Taxation Administration Act] Part IVC. Their existence and the legislative scheme of which they are part, including the onus that rests on a taxpayer under [Taxation Administration Act] s 14ZZK or s 14ZZO in a review or appeal under [Taxation Administration Act] Pt IVC, make it inappropriate to require proof aliunde by the Commissioner of the correctness of the assessment or to make findings about it such as to deny the Commissioner status as a "person aggrieved". Acceptance of Mr Binetter's submission would undermine the legislative policy and purpose of [Income Tax Assessment Act] 1936 ss 175, 175A and 177(1). 15 Further, and as the Commissioner submitted, the companies lodged nil returns under the self-assessment procedures for the relevant tax years. The onus of disproving fraud or evasion would be on the taxpayer not the Commissioner in any objection, review or appeal (McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263). 37 It is worth noting that notwithstanding the assertions that the companies are not insolvent, there is no evidence that either company has assets of any value. The assertions of solvency are based on tenuous predictions about actions that might be taken by the company. Finally, the above extracts from Jagot J's reasons show that the issues were considered in detail. Her Honour's conclusions are based on clear and cogent reasoning and, in my view, there is little likelihood that they would be reversed on appeal.

Risk of injustice 38 Mr Binetter submits that there is a significant risk of injustice if he is not granted leave to bring proceedings in the name of the companies. He claims that in such case there would be no interested party with rights to appeal the winding up orders or the orders refusing to set them aside. I am not persuaded by this submission. The account of the background to the present application shows that Mr Binetter has been given the opportunity to be heard at a hearing in which the issues were fully canvassed. He was represented by competent counsel and, in the second application to Jagot J by both senior and junior counsel. The issues have again been considered in respect of the present application. With minor exceptions no new arguments have been raised. The exception is the argument in respect of the repealed s 574(1) of the Corporations Act. For reasons given at [16]-[25] I have found no merit in this argument. 39 The application must be dismissed. There is no reason why costs should not follow the event and Mr Binetter pay the costs of the first defendant. I shall so order. I certify that the preceding thirty nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Company Law Review Act 1998(Cth)s 373

While the Acts Interpretation Act 1901(Cth)s 13(3)

Corporations Act 2001(Cth)ss 471A(1), 471A(1A)(d), 574, 601AH

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