Commissioner of State Revenue v McCabe

Background to the Administration 11 The background to the current state of affairs can be relevantly summarised as follows. The Comlek business was commenced in 2008 by Mr Michael Donaldson (twenty-second defendant) and Mr Simon Gallagher (twenty-fourth defendant) as an engineering, electrical and labour hire services business to various industries in Queensland. It was operated by a partnership consisting of Donaldson (Mackay) Pty Ltd (Administrators Appointed) ACN 123 470 968 (twentieth defendant) as trustee for the Donaldson Family Trust and Mr Gallagher (later replaced by Simon Gallagher Pty Ltd ACN 143 583 395 (twenty-first defendant)) as trustee for the Gallagher Family Trust, both trusts being registered in 2007 (the Comlek Partnership). 12 In about May 2010, there was a corporate restructure. On 10 May 2010, there was a meeting between representatives of Wilson Ross Accountants, Mr Donaldson, Mrs Rebecca Donaldson (twenty-third defendant), Mr Gallagher and Mr Sean Diljore to discuss the details of that restructure. The following day, Comlek Group Pty Ltd ACN 143 586 967 (second defendant), Comlek Personnel Pty Ltd ACN 143 586 985, Comlek Personnel Alpha Pty Ltd ACN 143 592 652, and Mackay Test & Tag Pty Ltd ACN 143 592 643 (T&T) (sixth defendant) and Simon Gallagher Pty Ltd (both, now, with Administrators Appointed) were registered. Since about 2010, various other companies incorporated from time to time, and as early as January 2007, conducted, or were otherwise in connection with, the Comlek business: (a) Brampton Personnel Pty Ltd Pty Ltd (Administrators Appointed) ACN 160 325 628 (ninth defendant); (b) Cartel MKY Nightclub Pty Ltd (Administrators Appointed) ACN 603 808 037 (fourteenth defendant); (c) Comek Pty Ltd (Administrators Appointed) ACN 155 603 633 (seventh defendant); (d) Comlek Personnel Beta Pty Ltd ACN 150 071 677; (Personnel, Alpha, and Beta are referred to as the Deregistered Entities) (e) Comlek TIC Pty Ltd (Administrators Appointed) ACN 143 729 971 (third defendant); (f) Comlek Engineering Pty Ltd (Administrators Appointed) ACN 609 245 758 (fourth defendant); (g) Daydream Personnel Pty Ltd (Administrators Appointed) ACN 160 325 655 (thirteenth defendant); (h) Donaldson Presto Avenue Trust (Donaldson (Mackay) Pty Ltd as trustee); (i) Donaldson Property Investments Pty Ltd ACN 617 667 580; (j) Donnie Investment Pty Ltd (Administrators Appointed) ACN 655 324 717 (fifteenth defendant); (k) Gallagher Presto Avenue Trust (Simon Gallagher Pty Ltd as trustee); (Donaldson (Mackay) Pty Ltd and Simon Gallagher Pty Ltd, together in their respective capacities as trustees of Donaldson Presto and Gallagher Presto, are referred to as the Presto Avenue Partnership) (l) Hamilton Personnel Pty Ltd Pty Ltd (Administrators Appointed) ACN 160 325 940 (tenth defendant); (m) Hayman Personnel Pty Ltd (Administrators Appointed) ACN 160 325 646 (eleventh defendant); (n) International Switchboard Solutions Pty Ltd (Administrators Appointed) ACN 160 928 781 (ISS) (fifth defendant); (o) Keswick Personnel Pty Ltd (Administrators Appointed) ACN 160 325 959 (eighth defendant); (p) Long Personnel Pty Ltd Pty Ltd (Administrators Appointed) ACN 160 325 968 (twelfth defendant); (Brampton, Hamilton, Hayman, Keswick and Long are referred to as the Island Entities) (q) Nightclub Holdings No 1 Pty Ltd (Administrators Appointed) ACN 603 807 414 (sixteenth defendant); (r) Nightclub Holdings No 2 Pty Ltd Pty Ltd (Administrators Appointed) ACN 603 807 423 (seventeenth defendant); (s) Nomis 2 Pty Ltd ACN 651 907 078; (Donaldson Property (as trustee for the Donaldson Property Trust) and Nomis 2 (as trustee for the Nomis 2 Trust) together are referred to as the Donaldson Nomis Partnership) (t) Sigall Pty Ltd (Administrators Appointed) ACN 137 274 090 (eighteenth defendant); and (u) Sparra Pty Ltd (Administrators Appointed) ACN 136 886 452 (nineteenth defendant). (Various non-operating entities included Sparra, Sigall, Cartel, Donnie Investment, Nightclub 1, and Nightclub 2) 13 As at 21 July 2013, each of the Deregistered Entities had accrued liabilities to pay payroll tax as follows: (a) Personnel was liable to pay payroll tax for the financial year ending 30 June 2011 in the sum of $88,808.09, for the financial year ending 30 June 2012 in the sum of $116,470.14, and for the financial year ending 30 June 2013 in the sum of $96,748.29, with those liabilities totalling $302,026.52; (b) Alpha was liable to pay payroll tax for the financial year ending 30 June 2011 in the sum of $64,980.90, for the financial year ending 30 June 2012 in the sum of $102,806.86, and for the financial year ending 30 June 2013 in the sum of $95,787.42, with those liabilities totalling $263,575.18; and (c) Beta was liable to pay payroll tax for the financial year ending 30 June 2012 in the sum of $86,308.97, and for the financial year ending 30 June 2013 in the sum of $96,956.43, with those liabilities totalling $183,265.40. 14 None of the Deregistered Entities lodged any returns to the Commissioner in respect of payroll tax. Despite each of them having outstanding liabilities for payroll tax as set out above, each was deregistered on 23 September 2013, upon applications dated 18 July 2013 being made by their directors - Mr Gallagher (in respect of Personnel and Alpha) and Mr Donaldson (in respect of Beta). 15 As at 28 September 2022, the total payroll tax liability for the Deregistered Entities, including unpaid tax interest, was $1,483,541.17, comprising: (a) $604,054.66, in respect of Personnel; (b) $524,394.56, in respect of Alpha; and (c) $355,091.95, in respect of Beta. 16 The payroll tax liabilities of the Deregistered Entities were summarised by accounting firm Bell Partners, identifying the amounts set out above, in a document provided to the Administrators on 26 October 2022, over a month before the Administrators were appointed to the Comlek Companies on 5 December 2022. 17 As at 21 July 2021, each of the Island Entities accrued liabilities to pay payroll tax for each of the financial years ending 30 June 2014 to 30 June 2021 inclusive. 18 Despite each of the Island Entities having accrued such liabilities, applications for voluntary deregistration of each of them were lodged with the Australian Securities and Investments Commission (ASIC): (a) for Brampton, the application dated 7 September 2022 indicated as having been signed by Ms Brooke Donaldson (twenty-sixth defendant) was lodged that day; (b) for Hamilton, the application dated 23 August 2022 indicated as having been signed by Mr Donaldson was lodged that day; (c) for Hayman, the application dated 5 September 2022 indicated as having been signed by Mr Donaldson was lodged that day; (d) for Keswick, the application dated 23 August 2022 indicated as having been signed by Mr Donaldson was lodged that day; and (e) for Long, the application dated 22 August 2022 indicated as having been signed by Mr G Gallagher was lodged that day. 19 Various other payroll tax assessments are recorded as having been issued between 15 August 2016 and 21 July 2022 for financial year periods between 1 July 2015 and 30 June 2022. Between 19 August 2016 and 7 November 2022, various of the Comlek Companies paid a total of $993,497.03 in payroll tax. 20 On 26 and 27 September 2022, the Commissioner issued default assessment notices and reassessment notices for each of the Comlek Companies (except Sparra, Sigall, Nightclub 1, and Nightclub 2) and the Comlek Partnership, relating to the financial years ending 30 June 2010 to 30 June 2022 inclusive. The total liability of the Comlek Companies, and the Comlek Partnership, as a result of those assessments, was $10,073,318.28 (the Queensland Revenue Office (QRO) debt). These amounts had not been recorded in the books of the Comlek Companies. 21 Subsequently, on 28 September 2022, the Commissioner issued Notices of Investigation under the Taxation Administration Act 2001 (Qld) (TAA) to Brampton, Cartel, Comek, Engineering, Comlek Group, TIC, Daydream, Donaldson, Hamilton, Hayman, ISS, Keswick, T&T, Sparra, and - on 29 September 2022 and 5 October 2022 - to Sigall and Long, respectively. Those Notices of Investigation asserted that the Comlek Companies formed a "group" for the purposes of Pt 4 of the Payroll Tax Act 1971 (Qld), and stated that the Commissioner had formed a reasonable belief that the said companies had engaged in deliberate tax default and business structuring, in concert with other companies in the group, to avoid detection and payment of payroll tax. Additional Notices of Investigation were issued by the Commissioner on 4 January 2023 to Ms B Donaldson, Mr Donaldson, Mrs Donaldson, Mr G Gallagher, Mr Scott Gallagher (twenty-ninth defendant), Mr Gallagher and Mr Brijesh Sorout (twenty-fifth defendant), alleging their membership of the relevant group, and that they were joint and severally liable. The Commissioner relies on s 51A of the Payroll Tax Act, and s 47 of the TAA as the operative provisions for imposing joint and several liability on each member of the group. 22 On 30 September 2022, the Commissioner issued various point in time and/or enduring garnishee notices under s 50 of the TAA to, relevantly: (a) the National Australia Bank (NAB) in respect of payroll tax debts owed by Brampton, Cartel, Comek, Comlek Group, the Comlek Partnership, the Presto Avenue Partnership, Daydream, Donaldson (ATF Donaldson Presto), the Donaldson Nomis Partnership, Engineering, ISS, Sigall, TIC, and T&T; and (b) Westpac Banking Corporation / St George Bank in respect of the payroll tax debt owed by Sparra. 23 That same day, $70,465.57 was garnished from the bank account of Sparra. On 3 October 2022, the following amounts were garnished from the entities referred to below: (a) $20,372.98 from the ISS bank account; (b) $45,360.27 from the T&T bank account; (c) $337,916.65 from the Comek bank account; (d) $47,616.91 from the Cartel bank account; and (e) $14,487.02 from the Comek Group bank account. 24 On 4 October 2022, the Commissioner sent a Notification of Garnishee Notice, and each of the garnishee notices described above at [22], to each of the entities in respect of which a garnishee notice had been issued. On 5 October 2022 and 7 October 2022, $60,479.89, and $14,653.26 was garnished from the bank accounts of TIC and Engineering, respectively. 25 Subsequently, on 28 November 2022, $2,620.49, $2,062.73, and $5,608.47 was garnished from ISS, T&T and Comlek Group, respectively.

The appointment of the Administrators and the Administration 26 Having received the assessment notices and been subject to the garnishees, the directors of the Comlek Companies sought advice from their then accountants, Bell Partners. In or around October 2022, the directors also engaged Brown Wright Stein Lawyers and PPM Tax & Legal. 27 An attempt was made by Mr Donaldson to take steps to satisfy the assessment notices. On 11 November 2022, he proposed a payment arrangement, pursuant to s 34 of the TAA, whereby certain specified entities would repay an amount of $10,026,780.18 to the Commissioner by monthly repayments of $40,000.00. On 21 November 2022, that proposal was rejected by the Commissioner, on the basis that, inter alia, the monthly repayment amounts were too low. As at that date, the Commissioner stated that the quantum of outstanding liabilities was $9,321,150.11, accounting for payments received by garnishee notices totalling $810,984.24. 28 Upon the Commissioner's refusal to enter into the payment plan, the directors accepted the advice of their accountants and lawyers that the Comlek Companies were likely trading insolvent, and that an administrator needed to be appointed. On 5 December 2022, the directors of each of the Comlek Companies (Mr Donaldson, Mr Gallagher, Mr Sorout, Mr Andrew Gardso, Mrs Donaldson, Ms B Donaldson, Ms Maddison Gallagher (twenty-seventh defendant), Mr G Gallagher, and Mr S Gallagher) resolved to put the companies into administration, pursuant to s 436A of the Corporations Act. 29 On the same day, at a meeting of the Comlek Companies, the Administrators were appointed as voluntary administrators of the Comlek Companies, pursuant to s 436A. It was also resolved that, in the opinion of the directors, the Comlek Companies were insolvent. The same day, the Administrators issued their Initial Report to Creditors, which set out information about the voluntary administration of the Comlek Companies, and the rights of creditors. 30 On 6 December 2022, the Administrators issued a circular to customers which advised of their understanding that a deed of company arrangement was to be proposed by the directors of the Comlek Companies, among other matters. On 6, 7, and 12 December 2022, the Administrators spoke via teleconference with, and met with in person, representatives of the Commissioner. 31 On 15 December 2022, the First Meeting of Creditors was held, to consider, if proposed, the removal and re-appointment of the current administrators, and whether a Committee of Inspection should be appointed for the Comlek Companies (and if so, its membership). Neither resolution passed. On the same day, the Commissioner lodged proofs of debt with the Administrators for each of the Comlek Companies, which were later supplemented by further proofs of debt lodged on 16 December 2022, and which were admitted in full for voting purposes, in the sum of $9,365,924.01. 32 On 11 January 2023, the Administrators issued the Report. It referred to two separate proposals for a deed of company arrangement (the directors' DOCA proposed by Mr Donaldson, and an alternative deed of company arrangement proposed by a key competitor of the Comlek Companies). The Report recommended the directors' DOCA, primarily for the reason that it "[provided] enhanced prospects [for] the ongoing viability of the Companies and continued employment for [their] staff". 33 On 12 January 2023, the Administrators again met via Microsoft Teams with representatives of the Commissioner, Ms Saskia Broekhuizen (Manager, Debtor Enforcement Collections Division - QRO) and Mr Kim Easton (Director, Collections Division - QRO). The Administrators' recommendations were discussed, including as to voting in the Report. 34 On 17 January 2023, the Administrators prepared a cash flow forecast showing a shortfall of $314,760.00 by 13 February 2023, after the Administrators' fees and expenses, being $761,303.00. 35 On 18 January 2023, the day prior to the Second Creditor's meeting: (a) Mr McCabe received an email from Mr Easton, requesting a meeting at 10.30am. He subsequently attended a meeting via Microsoft Teams with Mr Easton, Ms Broekhuizen, and Mr Ben Tyler-Whiteman (Manager, Review and Dispute Resolution Division - QRO). The topics discussed included the QRO's duty to consider the public interest, such that the QRO would be unable to vote in favour of the directors' DOCA. The QRO requested an adjournment of the Second Meeting of Creditors; (b) at 9.13pm, the Administrators sent a letter to the Commissioner, setting out, among other things, the basis upon which it was asserted that the Administrators would exercise their casting vote to enable the passing of the resolution proposing entry into the directors' DOCA. The letter also noted that trading costs were estimated to be $520,000 per week, and invited the Commissioner to provide an indemnity in the amount of $430,000.00 "in order to consider any adjournment of the Second Meeting to 10am (AEST), Monday 23 January 2023" so as "not to prejudice the unsecured creditors and to meet the ongoing costs of the Administration"; and (c) at 10.20pm, the Commissioner responded to the Administrators by letter (the 18 January Letter), setting out the Commissioner's concerns: first, that the return to the Commissioner under the directors' DOCA was unfairly discriminatory; and secondly, that there existed matters concerning public interest and commercial morality that "strongly indicate why it is appropriate for the Companies to be placed into liquidation". The 18 January Letter did not engage with the invitation to provide an indemnity for the consequences of an adjournment, nor was the request for an adjournment reiterated.

The Second Meeting of Creditors 36 On 19 January 2023, at the Second Meeting of Creditors, it was recommended that the directors' DOCA be executed. Reasons for that view were provided at the meeting, consistent with the reasons contained in the Report, which was also tabled at the meeting. Subsequently, creditors voted on a resolution for the Comlek Companies to enter into the directors' DOCA. 37 The Commissioner was the sole creditor who voted against the resolution for all of the Comlek Companies, save in the case of Comlek Group, where three voted against fifty in favour of the resolution. Neither of the two representatives of the Commissioner who were in attendance, Mr Easton, and Ms Melissa Daly, spoke against the directors' DOCA, nor asked any questions, despite Mr McCabe having twice invited questions. 38 The result of that vote was that a majority in number of creditors of each of the Comlek Companies was in favour of the resolution, but a majority in value voted against the resolution. In those circumstances, Mr McCabe exercised his casting vote, having previously discussed the matter with Mr Hayes due to its importance, thereby enabling the resolution to pass. 39 On 9 February 2023, the directors' DOCA was executed by the Administrators and control of the Comlek Companies subsequently reverted to their directors. 40 On the same day, the Administrators called for formal proofs of debt. A circular was issued by the Administrators which, among other things: (a) confirmed that the directors' DOCA had been executed on 9 February 2023; (b) outlined that the operational control of the Comlek Companies had reverted to their directors; and (c) stated that the directors were required to provide a contribution fund of $2.3 million within 45 days of the execution of the directors' DOCA. 41 On 27 February 2023, following correspondence between a representative of the QRO and Mr McCabe, a proof of debt for the QRO was provided to Mr McCabe for the State Penalties Enforcement Registry, to the value of $6,978.00. 42 On 8 March 2023, an amount of $20,362.88 was garnished from the bank account of ISS. 43 On 17 March 2023, the Commissioner commenced these proceedings. 44 Three of the 'Trading Entities' of the Comlek Companies (as defined in the Report) have continued to trade and actively carry on business since the DOCA was entered into - Comlek Group, TIC, and T&T (the Trading Companies). The Trading Companies employ approximately 88 employees across Brisbane, Mackay, and Emerald. The profit and loss summary ending February 2024 for the Trading Companies reveals that they traded profitably to that date, recording a profit of $2,728,824. 45 Since 26 May 2023, and up until 5 April 2024, a total of $805,626.10 in payroll tax has been paid to the QRO, accounting for $12,198.16 in refunds by the QRO for overpayment.

Is the termination of the DOCA in the public interest (445D(1)(g))? 46 As the Commissioner submitted, there is a two-step approach to the application of s 445D(1). First, the Court must be satisfied of at least one of the statutory criteria prescribed in s 445D(1). Secondly, on being so satisfied, the Court must determine, in the exercise of its discretion, whether it is in the interests of creditors as a whole to set aside the DOCA, or whether allowing it to continue is contrary to the public interest. It is at this point that the Court may have regard to factors not expressed in the legislation, but which are, nonetheless, relevant to the exercise of the discretion. 47 The Commissioner put his case squarely as one that should succeed as a matter of public interest, and in the interests of upholding commercial morality. He, therefore, bears the onus of establishing that it is in the public interest that the DOCA be terminated: Decon Australia Pty Ltd v TFM Epping Land Pty Ltd [2022] FCAFC 54 at [68], citing Decon Australia Pty Ltd v TFM Epping Land Pty Ltd (No 2) [2021] FCA 32 at [125] (McKerracher J). 48 The Commissioner has formed the view that there have been deliberate tax defaults and tax evasion. The Commissioner relied on the default assessment and reassessment certificates issued by him to each of the Comlek Companies on 26 and 27 September 2022 to prove the extent of liability of each of the Comlek Companies to pay payroll tax, interest, and penalty tax (as provided for within) and the systemic failure to account for payroll tax. Those default assessments and reassessments are conclusive evidence of the debts relevant to these proceedings: TAA s 132; see Taxation Administration Act 1953 (Cth) Sch 1, s 350-10. However, it was accepted by the Commissioner that the conclusive effect of the certificates does not establish deliberate tax default. 49 On 31 January 2023, the Comlek Companies, through their legal representatives, lodged an Objection with respect to the default assessments, pursuant to ss 63 and 64 of the TAA. The Donaldson Defendants and the Gallagher Defendants did not demur from the Commissioner's contention that an objection to an assessment does not alter the conclusive nature of such certificates: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; 237 CLR 473 at [9], [22], [28]-[29], [33], [40]-[44], [51]-[52] and [55] (Gummow ACJ, Heydon, Crennan and Kiefel JJ). I interpolate, however, that the Objection was not resolved, one way or the other, prior to the commencement of these proceedings some seven weeks later. 50 To the extent that the Commissioner relied on commercial morality, or rather the absence thereof, as the reason why it was in the public interest to terminate the DOCA, these allegations were central. There is an obvious stench to deliberate tax fraud and evasion, which casts a burden on all taxpayers. 51 These proceedings are not, however, brought under the Payroll Tax Act, nor the TAA. The Court was not invited to interrogate whether there has been any actual wrongdoing on the part of the Comlek Companies, or their directors, in respect of their payroll tax liabilities. 52 Rather, the Commissioner submitted that the evidence before the Court "suggests a systemic failure to properly account for and pay, and possibly evade (or deliberately avoid), payroll tax liabilities as far back as 2010" (emphasis added). This submission was made in the face of correspondence between the Commissioner and the Administrators that was in evidence, by which the Commissioner positively asserted there had been deliberate tax evasion by the Comlek Companies. 53 As such, it was submitted that the conduct "may also be found to contravene Corporations Act duties such as the statutory directors' and officers' duties in sections 180-182 of the Corporations Act, as well as liability for trading the Comlek Companies (or some of them) whilst insolvent in contravention of section 588G of the Corporations Act". The Commissioner argued that the conduct that may be found to be in breach of the Corporations Act will escape scrutiny if the DOCA remains on foot and, by extension, subvert the purposes of Pt 5.3A, contrary to the public interest. In these circumstances, and as a statement of what the Commissioner was required to prove in order to show that termination of the DOCA was in the public interest, he relied on the observations of McMurdo J in Re Octaviar Ltd (No 8) [2009] QSC 202; 73 ACSR 139 at [182], subsequently adopted by Beach J in Midland Hwy at [68], citing Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd (2005) 226 ALR 510 at [287]: A winding up will be beneficial from a public interest perspective where investigations and recovery proceedings are likely to be funded and the investigations and appropriate recovery proceedings could realistically lead to the relevant persons who have engaged in the suspect transactions being brought to account. (Emphasis added. Citation omitted.) 54 In the later decision of Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd [2020] FCA 1395 at [410], Beach J said that: … generally speaking, one should not terminate a DOCA and order a company to be wound up if the DOCA will restore the company to financial health and the DOCA does not have the purpose or effect of unjustifiably quarantining third parties from investigation. If the company is trading and it is likely that its business will continue, then unless there are real public interest concerns, termination of a DOCA and causing a company to be wound up are inappropriate outcomes. The interests of creditors should be the primary consideration, but they may be outweighed if the DOCA has a fraudulent or wrongful purpose.

Public interest (and commercial morality) 55 The content of the "public interest" invoked under s 445D(1)(g) does not differ from that which is relevant to the exercise of the Court's discretion under s 445D(1) generally, or under s 447A, nor in respect of the power to set aside the casting vote on a DOCA pursuant to s 75-42 of the IPSC. Accordingly, if "public interest" is the basis on which termination is sought under s 445D(1)(g), there will be little to distinguish as between an application brought under s 445D(1)(g) or s 447A. In Midland Hwy, on the matter of "the [broad] ambit of s 447A", Beach J observed, at [69]: Section 447A can be used to make the orders sought by ASIC, whether or not any element of s 445D could be hypothetically or contingently invoked, although I accept that s 445D(1)(g) is broad and on one view unconstrained, save by its context and s 435A generally, such that this proposition may only be of theoretical interest. But it is correct to say that even if none of the elements of s 445D could be satisfied, the orders sought could still be made under s 447A. 56 In the exercise of the Court's discretion under either s 445D(1) or s 447A, the authorities are agreed that the same factors are relevant to determining the question of "public interest": Bidald at [287]; TiVo Inc v Vivo International Corporation Pty Ltd [2014] FCA 789 at [60]; Midland Hwy at [65]; Adelaide Brighton at [1199], [1231], [1379]; Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd [2023] FCAFC 110 at [72]. 57 The authorities do not, however, disaggregate "commercial morality" and "public interest" - rather, "public interest" includes considerations of commercial morality: Bidald at [287]; TiVo at [60]; Midland Hwy at [68] (emphasis added). To the extent that Besanko J referred to matters relevant to "public interest and commercial morality" in Adelaide Brighton at, for example, [1394], his Honour should not be taken to have expressed a view different from that of Gordon J in TiVo at [60], to which he referred in the paragraph immediately preceding his observations, at [1393], acknowledging the interplay between "the public interest and within that concept considerations of commercial morality". It is unhelpful, therefore, to attempt to discern issues of commercial morality distinct from, and not otherwise encompassed within the notion of, public interest. 58 In Re CSR Ltd [2010] FCAFC 34; 183 FCR 358, Finkelstein J said: [82] There has crept into Australian jurisprudence the view that a court will not confirm a scheme if it is contrary to "public policy" or is not consistent with "commercial morality". A consideration of what is contrary to "public policy" cannot extend beyond considering the interests of members, creditors and persons who in the future might deal with the scheme company or invest in its shares. Their interests are, however, adequately protected by an inquiry whether the scheme is fair or reasonable. So, considerations of public policy seem to add nothing to existing principles. … [84] There is a real problem with "commercial morality" being applied to discretionary decision-making. It suggests the existence of a fixed set of standards by which the community assesses conduct to be legitimate or acceptable. Putting to one side the obvious difficulty which confronts a judge in attempting to discover what are the relevant community standards, the fact is that many so-called standards, when they exist, are not fixed. They are constantly changing. … [86] In my opinion, notions of commercial morality should be jettisoned from the matters to be considered in approving a scheme. It is dangerous to bring to decision-making an ill-defined and largely subjective set of criteria purporting to represent the view of the community when, in reality, no one can be sure of that. (Emphasis added.) 59 With respect, I agree. It invites a search for some level of "moral obloquy", in addition to the factors stipulated in s 445D, read in the context, and having regard to the purpose, of Pt 5.3A. 60 The notion of a court having regard to "commercial morality" when concerned with insolvencies appears to have arisen first in the context of a court's jurisdiction to rescind a receiving order in circumstances where all creditors have consented to the rescission. In Ex parte Hester (1889) 22 QBD 632, in dismissing an appeal he described as "based on the idle notion that the Court is bound by the consents of the creditors", albeit not at a meeting of the creditors but nevertheless after full and open discussion of the rights and interests of the parties, Fry LJ said, at 641: The Court has far larger and more important duties to perform than merely to consider whether the creditors have consented to the rescinding of the order. We are bound in the exercise of our discretion in such a matter, and I think I might almost say in all matters under [the Bankruptcy Act 1883], to take a wider view. We are not only bound to regard the interests of the creditors themselves, who are sometimes careless of their best interests, but we have a duty with regard to the commercial morality of the country. 61 In the subsequent decision of Re Flatau [1893] 2 QB 219 at 223, Lord Esher, who had been a member of the Court in Ex parte Hester, referred to what his Lordship had said in the earlier decision (Ex parte Hester at 693): The Court has gone still further, and I think rightly so, and has said that under the present Bankruptcy Act it will consider not only the whether what is proposed is for the benefit of the creditors, but also whether it is conducive to or detrimental to commercial morality, and to the interests of the public at large, and they will take into consideration the position of the bankrupt with regard to his creditors, and see whether what is proposed will not place his future creditors, who must come into existence immediately, in a position of imminent danger. 62 His Lordship continued, at 223: The meaning of that is that if the debtor has behaved in an unbusinesslike way, or worse, even although his present creditors may be quite satisfied, and no harm can come to them, yet, if he has so acted in business that it is likely he will do again to other creditors what he has done to his present creditors, the Court will not allow the receiving order to be rescinded. All this has to be considered even though all the present creditors are fully satisfied, and are entirely indemnified. 63 These decisions, of course, pre-date any notion of corporate insolvency law, which goes back no further than 1840, when the Governor of New South Wales passed the Absent Debtors Act (4 Vict No 6). That legislation was designed to deal with joint stock companies and permitted the institution of actions at law against one or more of the members of a co-partnership as representative of all the members. This was followed by the Insolvency Act of 1841 (5 Vict No 17), an early attempt to bring companies within the scope of the law of bankruptcy. The first iteration of what is, today, recognisable as corporate insolvency law was the enactment in the United Kingdom of the Joint Stock Companies Winding-up Act of 1844 (7 & 8 Vict c 111). A materially identical statute was subsequently enacted in New South Wales - the Winding-up Act of 1847 (11 Vict No 19): for the legislative history of insolvency law in Australia, see B H McPherson, The Law of Company Liquidation (2nd ed, The Law Book Company, 1980) at 9-22. 64 The decisions in Ex parte Hester and Re Flatau were relied on by Buckley J in Re Telescriptor Syndicate Limited [1903] 2 Ch 174, albeit in relation to a corporate winding-up, not a personal bankruptcy. Buckley J said, at 181, that in exercising the analogous jurisdiction in respect of the winding-up of a company, he considered it desirable "not to assume a different attitude or act upon a different principle" from that articulated by Fry LJ in Ex parte Hester. 65 Subsequent to that decision, the consideration of public interest, including commercial morality, has been one to which courts have had regard in considering whether a court should terminate a winding up. An example is the decision of Barrett J in Metledge v Bambakit Pty Ltd [2005] NSWSC 160. The opposition to the making of an order to terminate the winding up was based on the proposition that "considerations of public interest and commercial morality indicate that [the company] would be in unsafe hands and subject to genuine jeopardy if control of it at director level were restored to [the sole director]": Metledge at [6]. 66 Barrett J identified two factors relevant to commercial morality in this context. First, that as a matter of public policy or commercial morality, the Court "will not countenance the return of an insolvent company to the mainstream of commercial life": Metledge at [31]. Secondly, at [40], in circumstances where the director had made no real attempt to deal conscientiously with his responsibilities that accrued by reason of the making of the winding up order, it would be contrary to commercial morality to restore the management of the company: … either directly or more remotely to someone who, on his own admission, does not appreciate the difference between his own affairs and interests and those of the company, who has been responsible for a failure to maintain proper corporate books and records and who refused to face up to the responsibilities owed by him to the liquidator even after threatened with prosecution and subsequently convicted. 67 The latter factor, which might best be described as a failure of corporate governance, is important and appears to have been adopted by courts when the analogy was extended beyond applications concerning bankruptcies and windings up to applications under Pt 5.3A of the Corporations Act. An early example is the decision in Emanuele v Australian Securities Commission (1995) 63 FCR 54, where the Full Court said, at 69: The fate of the deed, and of the company, on an application under s 445D or 445G rests with the Court. The powers of the Court under these sections are discretionary, and are to be exercised having regard both to the interests of the creditors as a whole, and in the public interest. An analogy may be drawn between the powers of the Court arising under these sections and the power of the Court to refuse a stay of a winding-up order considered in Re Data Homes Pty Ltd [1972] 2 NSWLR 22 at 26 where Mason JA (as he then was), in whose judgment Holmes and Hardie JJA agreed, said: "It has been held here and in the Supreme Court of Victoria that, in considering an application under s 243 of the Companies Act 1961 (Cth), the Court should have regard, not merely to the interests of creditors, but also to the public interest, including the question of whether the granting of a stay would be detrimental to commercial morality: Re Denistone Real Estate Pty Ltd [1970] 3 NSWLR 327; Re Mascot Home Furnishers Pty Ltd [1970] VR 593…" (Emphasis added.) 68 The case of Re Mascot Home Furnishers concerned applications to stay proceedings in an insolvency and applications for approval of schemes of arrangement. Having accepted the views of Buckley J in Re Telescriptor Syndicate, Gillard J refused to stay the liquidation proceedings or to sanction the schemes in relation to the relevant companies, which his Honour described as being "hopelessly insolvent", and whose business had ceased at least a year prior to the applications, stating, at 597: Whatever may be said in relation to approving schemes under s 181, the most potent influence, in my view, when considering what should be done under s 243 is that the Court's initial approach should be that hopelessly insolvent companies should be wound up. No countenance should by exercising powers under s 243 be given to any suggestion that the Court was condoning or encouraging persons in our commercial community to carry on business activities in a company which was handicapped by a heavy burden of indebtedness and thereby unable to pay its debts in full at any given period. 69 In respect of a similar application in Re Denistone, Street J referred to Lord Esher's affirmation in Re Flatau that the Court will consider whether what is proposed is "conducive or detrimental to commercial morality", "the interests of the public at large", "the position of the bankrupt with regard to his creditors", and "whether what is proposed will not place his future creditors … in a position of imminent danger": Re Denistone at 330. His Honour continued: Speaking generally, the staying of proceedings in a winding-up in a situation where a company is clearly insolvent is not consistent with the due preservation of the policy of the legislation and of the law that, in the public interest, an insolvent company ought to be wound up. 70 No invocation of commercial morality, as distinct from the public interest in having the law applied in accordance with legislative policy, was thought necessary by his Honour, presciently pre-empting the decision in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355. 71 The relevance of Project Blue Sky to invocations of commercial morality was made clear by the Full Court in Re CSR, that case being concerned with a proposal by the applicant, CSR Ltd, to demerge its various businesses in order to create two new companies. The demerger involved a reduction in the capital of the company and a scheme of arrangement between the company and its existing shareholders. At first instance, the primary judge dismissed the application for orders pursuant to s 411(1) of the Corporations Act for the convening of a meeting of shareholders to consider a scheme of arrangement, on the basis that she could not be satisfied that the scheme was consistent with "commercial morality": CSR Limited, in the matter of CSR Limited [2010] FCA 33 at [4]. 72 One of the grounds upon which the decision was appealed at first instance was that the "primary judge acted on a broad view of 'public policy' or 'commercial morality' without articulating the particular aspects of public policy or commercial morality relevant to the discretion in s 411(1)": Re CSR at [33]. In allowing the appeal, Keane CJ and Jacobson JJ observed, at [51], that "the particular content of 'public policy' or 'commercial morality' relevant to the exercise of the discretion in s 411(1) of the [Corporations] Act is to be discerned from the text and subject matter of the Act", citing Project Blue Sky at [69]-[70] and Attorney-General (Cth) v Alinta Ltd [2008] HCA 2; 233 CLR 542 at [147]. Whilst observing that the broad policy of the Corporations Act is that a company must use its capital for business purposes, and not simply return it to shareholders, their Honours observed that the policy is not pursued single-mindedly and, rather, expressly contemplates that reductions of capital may occur for the benefit of shareholders in certain circumstances. Consequently, their Honours framed the issue in the following way, at [54]: For the purposes of the present case, the terms of s 256B(1)(b), 1324 and (1B) of the Act provide clear guidance as to how far the Act goes in its insistence upon the policy that the capital of a company must be preserved. The "public policy" or "commercial morality" which informs s 256B and its analogues is concerned with the interests of shareholders and creditors. This was explained by Professor Ford: "So long as the reduction will not prejudice creditors or shareholder the court is not concerned with any ulterior purpose for which the reduction is being made …" (Ford, Company Law (1974) p 159). 73 None of the foregoing should be taken to suggest that there is never cause for a court to search for and have regard to underlying societal norms and values, but when the Parliament has spoken and when, as in this case, the process is one of statutory interpretation, the words of the statute "must be read with a recognition of their social context": James Allsop, "Conscience, Fair-dealing and Commerce - Parliaments and the Courts" in Tim Bonyhady (ed), Finn's Law (The Federation Press, 2016) 92 at 99-100. 74 The intersection between statutory language and the fundamental values and norms that underpin commercial transactions was squarely before the High Court in Australian Securities and Investments Commission v Kobelt [2019] HCA 18; 267 CLR 1. The Court in that case was concerned with the statutory standard of unconscionability in s 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), which "gives statutory expression to the equitable concept of unconscionable conduct" within the meaning of the unwritten law but, by reason of s 12CB, does not confine that concept to conduct that is remediable on that basis by a court exercising jurisdiction in equity: Kobelt at [82]-[83], per Gageler J. 75 Although Gageler J regretted his prior use of the "arcane terminology" of "moral obloquy" in Paciocco v Australia & New Zealand Banking Group Ltd [2016] HCA 28; 258 CLR 525 at [188] (Kobelt at [91]), his Honour nevertheless said that what he meant to convey by the reference was, at [92]: that conduct proscribed [by 12CB of the ASIC Act] as unconscionable is conduct that is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience. (Emphasis added.) 76 In Kobelt, Keane J also observed, at [119]: The legislative choice of "unconscionability" as the key statutory concept, rather than less morally freighted terms such as "unjust", "unfair" or "unreasonable", confirms that the moral obloquy involved in the exploitation or victimisation that is characteristic of unconscionable conduct [as understood in equity] is also required for a finding of unconscionability under s 12CB. 77 Turning, then, to the text, context, and purpose of Pt 5.3A of the Corporations Act. 78 Parts 5.3A and 5.7B of the Corporations Act, which established the voluntary administration and insolvent trading regimes, respectively, were introduced by the Corporate Law Reform Act 1992 (Cth), subsequent to the General Insolvency Inquiry (ALRC Report No 45, 1988) (the Harmer Report). The Explanatory Memorandum to the Corporate Law Reform Bill 1992 (Cth) (EM) said, at [14]: The reforms to be effected in implementing recommendations of the Harmer Report (Part 4) are many and varied. Their overall aim, however, is to make Australia's corporate insolvency laws operate more efficiently and effectively than they have done in recent years. 79 Pt 5.3A was described in the EM as being "[o]f particular importance". The EM stated, at [15]: The aim of that scheme is to save companies and businesses which are experiencing solvency difficulties, rather than destroy them in the way the current law all too often does. 80 The key elements of the proposed procedure for voluntary administration of insolvent companies under Pt 5.3A were said to be, at [22]: • allowing directors to appoint an independent administrator; • allowing the administrator up to 35 days to develop a proposed scheme of arrangement for consideration by the company and its creditors; • giving force to the arrangement if the creditors and the company support it; • giving protection to the rights of creditors by: o enabling a committee of creditors to require information from the administrator; o enabling creditors to vote to replace an administrator; o allowing a creditor secured over the whole or substantially the whole of the company's assets a short period during which the creditor may elect to enforce the security, notwithstanding the appointment of an administrator; o requiring the court to ensure the adequate protection of any creditors in certain situations; o providing that a secured creditor who considers that a scheme is oppressive to challenge the scheme in court; • where the administrator or the meeting of creditors concludes that the company should be wound up, providing for a smooth and efficient transition to a winding up process. 81 The Full Court of the Court of Appeal in Kalon Pty Ltd v Sydney Land Corporation Pty Ltd (No 2) (1998) 26 ACSR 593 at 596 noted that s 445D "must be read together" with s 435A. That provision sets out the Object of Pt 5.3A, as follows: 435A Object of Part The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company. 82 In describing the Object of the Part, the EM explained, at [448]: The insertion of the new Part is primarily designed to redress concerns that Australia's current corporate insolvency laws are inflexible and that they too easily and too often lead to the liquidation of companies, when some such companies could have been saved. 83 The EM also identified, at [538], "an important theme of the proposed new Pt 5.3A" that "directors are to be encouraged, in a variety of ways, to take the earliest possible action to tackle solvency difficulties". 84 Division 11 of Pt 5.3A deals with the variation, termination, and avoidance of a DOCA. Section 445D(1) provides: 445D When Court may terminate deed (1) The Court may make an order terminating a deed of company arrangement if satisfied that: (a) information about the company's business, property, affairs or financial circumstances that: (i) was false or misleading; and (ii) can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed; was given to the administrator of the company or to such creditors; or (b) such information was contained in a document that accompanied a notice of the meeting at which the resolution was passed; or (c) there was an omission from such a document and the omission can reasonably be expected to have been material to such creditors in so deciding; or (d) there has been a material contravention of the deed by a person bound by the deed; or (e) effect cannot be given to the deed without injustice or undue delay; or (f) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be: (i) oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or (ii) contrary to the interests of the creditors as a whole; or (g) the deed should be terminated for some other reason. 85 Section 447A is found in Division 13, and confers powers on the Court to make orders as to how Pt 5.3A is to operate. It relevantly provides: 447A General power to make orders (1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. (2) For example, if the Court is satisfied that the administration of a company should end: (a) because the company is solvent; or (b) because provisions of this Part are being abused; or (c) for some other reason; the Court may order under subsection (1) that the administration is to end. 86 The EM described the power in s 447A as "a very general power to make orders about how proposed Pt 5.3A is to operate in relation to a particular company": at [620]. By contrast, in relation to the 'catch-all' provision that is s 445D(1)(g), the EM stated, at [602]: Proposed paragraph (1)(g) will allow termination where the Court considers the deed should be terminated for some other reason. It would not be appropriate to try to circumscribe more precisely the Court's powers to terminate a deed in exceptional circumstances but, having regard to the width of the previous paragraphs in proposed subsection (1), it is anticipated that the Court's power under proposed paragraph (1)(g) would be exercised at most very rarely. 87 The examples proffered in the Harmer Report of public policy reasons which may lead a court to terminate a deed were, at [123]: • the proposal has a fraudulent or wrongful purpose • the terms of an arrangement do not comply with the companies legislation generally (for example, the deed of company arrangement must not contain a provision indemnifying an insolvency administrator for wrongful action in administering the deed) • the deed contemplates that the company would, after the arrangements set out in the deed had been carried out, continue commerce in an insolvent financial condition. 88 Contrary to the proscription of unconscionable conduct in the ASIC Act, nothing in s 445D or s 447A can be construed as requiring an inquiry into any higher standard of commercial behaviour than that which is already identified as falling outside relevant norms of conduct and, therefore, contrary to the public interest: material falsity or material omission, material contravention of the deed, injustice or undue delay in enforcing the deed, oppression, unfair prejudice, unfair discrimination, or contrariness to the wishes of the creditors as a whole. To the extent that "some other reason" is relied upon to set aside a deed, the reason will be assessed in the context of the statutory language used in s 445D and by reference to the purpose of the provision, being to preserve businesses, subject to any deed of arrangement's not being contrary to the interests of the creditors as a whole. A deed that evidences a fraudulent, wrongful, or illegal purpose, consistent with the types of behaviour identified in s 445D, will obviously fall outside the relevant norms of conduct identified in that section as being reasons for termination of such a deed.

The matters said to favour termination in the public interest 89 The Commissioner contended that, in this case, the "other reason" for the termination of the DOCA is that its continuation is detrimental to the interests of the public generally and to commercial morality. The Commissioner submitted that the following circumstances establish the said detriment: (a) The extent of the payroll tax debt and grouping of the Comlek Companies; (b) The systemic failure to account for payroll tax; (c) The Comlek Companies' accountants' involvement in the failure to so account; (d) The likelihood that the Comlek Companies were insolvent much earlier; (e) The misuse of the Pt 5.3A process; and (f) The matters that may be revealed, and actions taken, by further investigation. 90 In the circumstances of the case, it is appropriate for (a), (b), (c), (d) to be addressed cumulatively, and (e) and (f) separately.

The extent of the debt; alleged systemic failure; involvement of accountants; date of insolvency 91 The Commissioner's central contention is that the directors of the Comlek Companies permitted those companies to trade, for more than a decade, without declaring and paying the full extent of the payroll tax for which those entities were liable. Further, the Commissioner contended that the Deregistered Entities had accrued a tax liability and were then deregistered, and that applications for deregistration of the Island Entities were made for the purpose of avoiding accrued tax liabilities. In effect, the Commissioner contended that tax fraud and alleged phoenixing were a reason to terminate the DOCA. 92 However, the Commissioner eschewed that these proceedings concern breaches of Queensland Revenue laws (as defined in s 6 of the TAA). Consequently, the first two circumstances (being (a) and (b) above) are matters upon which no findings can be made without the application of those laws, and as to which this Court was not invited to make any findings beyond accepting the conclusive nature of the amounts recorded in the assessment certificates: see [48] above. Further, without making findings as to whether there was a systemic failure to account for payroll tax, nor can findings be made about any alleged responsibility on the part of the Comlek Companies' accountants - who, it must be observed, were not party to these proceedings, and so have not been heard on the issue. Similarly, "the likelihood that the Comlek Companies were insolvent much earlier", as contended, cannot be determined without the precise and careful application of the Payroll Tax Act, and the resolution of the outstanding Objection. Again, all parties, including the Commissioner, expressly disavowed that it was necessary in these proceedings for the Court to determine the date on which the Comlek Companies became insolvent, and I have proceeded on that basis.

What might be revealed by further investigation; will the conduct escape scrutiny? 93 In the circumstances described, and as the defendants submitted, it seems more than likely that the investigations which could lead to, at least some of the persons responsible, including the directors and accountants, being brought to account for an alleged "systemic failure to properly account for and pay, and possibly evade (or deliberately avoid), payroll tax liabilities as far back as 2010" could be undertaken by the Commissioner by his own decision to investigate. 94 Nevertheless, the Commissioner submitted that it was necessary for a liquidator to investigate breaches by the directors of the obligations arising as a result of ss 286 and 334(1) of the Corporations Act in relation to the keeping of records, their duties under ss 180-183, and their duties connected with insolvent trading under s 588G. This was said to be because of the civil penalty and disqualification consequences flowing from such breaches: Corporations Act ss 1317E, 1317H, 206C. It was also submitted that an important obligation on the part of a liquidator requires that he or she to report to ASIC if, inter alia, it appears to the liquidator that a past or present officer may have been, inter alia, guilty of an offence: Corporations Act s 533. The lodging of a report with ASIC enables a liquidator to bring prosecutions, in the event that ASIC chooses not to do so: Corporations Act s 534. 95 In opening submissions, Senior Counsel for the Commissioner indicated that the Commissioner was "prepared to give an undertaking" in an initial amount of $500,000 to fund a liquidator's investigations into, and report to creditors about the affairs of, each of the Comlek Companies. This offer came as a surprise to the Administrators, the Donaldson Defendants, and the Gallagher Defendants. No terms of the offer were disclosed, and no actual undertaking was in fact given. The purpose of making such an offer on the first morning of the trial was unclear. In the course of the cross-examination of Mr Richard Jolly (Director, Review and Dispute Resolution Division - QRO), it emerged that he was aware that the Commissioner had decided in early April 2024 to make such an offer. However, prior to the Commissioner's opening submissions on 22 April 2024, the existence of the proposed undertaking was unknown to the Court or to the defendants. In all the circumstances, it does not assist the Commissioner's case.

What has been investigated? 96 Pt 7 of the TAA confers on the Commissioner broad powers to compel persons to give (either orally or in writing) information in the person's knowledge about a stated matter. 97 Section 140 of the TAA contains the offence provision for an executive officer and relevantly provides: 140 Liability of executive officer--particular offences committed by corporation (1) An executive officer of a corporation commits an offence if - (a) the corporation commits an offence against an executive liability provision; and (b) the officer did not take all reasonable steps to ensure the corporation did not engage in the conduct constituting the offence. Maximum penalty-the penalty for a contravention of the executive liability provision by an individual. (2) In deciding whether things done or omitted to be done by the executive officer constitute reasonable steps for subsection (l)(b), a court must have regard to - (3) whether the officer knew, or ought reasonably to have known, of the corporation's conduct constituting the offence against the executive liability provision; and (4) whether the officer was in a position to influence the corporation's conduct in relation to the offence against the executive liability provision; and (5) any other relevant matter. (6) The executive officer may be proceeded against for, and convicted of, an offence against subsection (1) whether or not the corporation has been proceeded against for, or convicted of, the offence against the executive liability provision. (Emphasis added.) 98 An executive officer of a corporation is defined in Sch 2 to the TAA to mean: A person who is concerned in or takes part in the management of the corporation, regardless of the person's designation and whether or not the person is a director of the corporation. 99 There is little doubt that the definition of executive officer is sufficiently broad to include the Comlek Companies' accountants. 100 Section 140(5) of the TAA specifies which provisions of the Revenue laws are executive liability provisions, and which includes s 93 of the Payroll Tax Act. It provides that: Any person who, by any wilful act, default or neglect, or by any fraud, art or contrivance whatever, avoids or attempt to avoid payroll tax or mental health levy imposed under this Act, shall be guilty of an offence. Maximum penalty - 20 penalty units and treble the amount of payroll tax avoided or attempted to be avoided and treble the amount of mental health levy avoided ot attempted to be avoided. 101 According to the Notices of Investigation that were in evidence, it appears that the Commissioner did, in fact, commence his own investigations. On 28 and 29 September 2022, and 5 October 2022, the Commissioner issued Notices of Investigation to the Comlek Companies, which indicated, inter alia, that the Comlek Companies were under investigation pursuant to Pt 7 of the TAA in relation to their liability for payroll tax, and that a 'Mr Fox' had been appointed as investigator under s 80 of the TAA. The Notices of Investigation stated, relevantly: Deliberate tax default The Commissioner has formed a reasonable belief that, for all periods of payroll tax liability and group membership, you: • knew of your payroll tax obligations • knew that you (either individually or as a group member) had breached the payroll tax wages threshold • deliberately structured your business, in concert with other group members, so as to avoid detection by the Commissioner of your liability for payroll tax • deliberately moved the employment of employees to other group employers so that the wages paid by you and other corporate employers did not separately breach the payroll tax threshold • avoided the payment of payroll tax. 102 The Notices of Investigation also stated: What happens next? I will contact you in the week commencing 10 October 2022 to answer any questions you may have. I will also discuss documents, information, meetings or interviews I may require as part of my investigation and timeframes for your provision/scheduling of such. If needed, please feel free to contact me prior to this time. (Emphasis added.) 103 On 28 October 2022, the QRO declined to provide further information to the representatives of the Comlek Companies, in response to a request dated 11 November 2022. Subsequent to further correspondence from the Comlek Companies dated 23 November 2022, the QRO noted, relevantly, by its letter dated 25 November 2022: Until such time as reassessments are made, the current assessments stand, and your clients are required to comply with their statutory obligations… …I also note that further investigation conducted by my colleague, Russell Fox, may result in reassessments increasing your clients' liability for tax. (Emphasis added.) 104 On 28 November 2022, an application on behalf of the Comlek Companies was lodged under the Right to Information Act 2009 (Qld), requesting that the QRO provide certain documentation relevant to the default assessments. That request was refused and has been upheld, on a preliminary basis, by the Queensland Office of the Information Commissioner. 105 By the terms of the Notices of Investigation issued to certain directors and ex-directors on 4 January 2023, informing them that were under investigation under Pt 7 of the TAA, there was no allegation of deliberate tax default made against any of the individuals, unlike the notices issued in respect of the Comlek Companies. Each was, however, told similarly that Mr Fox: … will contact you in February 2023 to answer any questions you may have. I will also discuss documents, information, meetings or interviews I may require as part of my investigation and timeframes for your provision/scheduling of such. If needed, please feel free to contact QRO prior to this time. (Emphasis added.) 106 There was no evidence that Mr Fox made any contact with the Comlek Companies, or the directors and ex-directors, in either October 2022, or in February 2023. Moreover, there is no evidence that the QRO has progressed any further investigations despite the Commissioner's correspondence of 4 January 2023. 107 Neither of the lay witnesses called for the Commissioner - Mr Jolly and Ms Jessica Cliffe (Acting Team Leader Debt Resolution - QRO) - was able to say who made the decision to commence these proceedings. Neither could assist the Court with any information as to the nature and extent of the investigations that had, in fact, already taken place, or which remained to be undertaken. Mr Fox did not give evidence, despite the evidence of Mr Jolly that Mr Fox still worked for the QRO. Mr Jolly and Ms Cliffe were also unable to say whether there had been any follow up with the persons to whom the Notices of Investigation had been issued, in the terms specified in those notices. Nor could Mr Jolly rule out the possibility that the Commissioner was waiting until the conclusion of these proceedings before recommencing any investigations. 108 That is not to say that Mr Jolly and Ms Cliffe did not give their evidence honestly. They were placed in the unenviable position of being asked to produce affidavits which annexed internal documents, the relevance of which to the actual matters in dispute they knew nothing about. It remained unexplained why, as people holding senior roles, they agreed to do so. Neither Mr Jolly nor Ms Cliffe was the author of the 18 January Letter (conveying the results of the investigations said to have been undertaken), was involved in the day-to-day running of the litigation, or was even responsible for the preparation of their own affidavits. In fact, of the six people within the Commissioner's office who did have some responsibility for the matter, none was called to give evidence, and none had reporting lines to Mr Jolly or Ms Cliffe in relation to this matter. Mr Jolly had no communication with any of those people about how the Commissioner should have voted at the Second Meeting of Creditors. The Court is entitled to expect that, even when evidence is being given on affidavit to adduce documentary evidence, the deponent has a working understanding of the documents and the case advanced. This is especially so when it is apparent from cross-examination that those who did have such knowledge could have been readily called by the Commissioner. More can, and ought reasonably, be expected of the Crown. 109 The Commissioner's conclusion that the Comlek Companies, certain directors and accountants committed deliberate tax defaults, evaded tax, and misled the Commissioner, is said to be supported by a series of email communications between Mr Donaldson, Mrs Donaldson, Mr Gallagher and the Comlek Companies' employees and former accountants. Troublingly, Mr Jolly could not confirm that the selection of emails exhibited to his affidavit, and from which the Commissioner asked the Court to infer that they were indicative of "a deliberate, conscious or reckless avoidance of the consequences of the grouping provisions by certain directors of the Comlek Companies and their accountants", comprised the totality of the communications between the Comlek Companies' accountants and directors. The communications exhibited are dated from 12 October 2011 and 17 November 2014. Taken as a whole, those communications are a relatively anodyne collection of messages between the directors and their accountants in which payroll tax issues are mentioned and reference is made to both the transfer of employees from Personnel, Alpha, and Beta to the Island Entities, and the deregistration of the former entities. The most damning appears to be an email of 19 September 2013 between two accountants, in which one says, "directors are only different to avoid PRT grouping". 110 Taking that phrase at its highest, it is not illegal to minimise tax liability. In Cridland v Federal Commissioner of Taxation (1977) 140 CLR 330, in the context of s 260 of the Income Tax Assessment Act 1936 (Cth), Mason J, with whom all other members of the High Court agreed, said at 338-339: It was recently decided in Mullens v. Federal Commissioner of Taxation that even if a transaction has been entered into for the purpose of diminishing a taxpayer's liability to tax by securing to the taxpayer a benefit or advantage conferred by a specific provision of the Income Tax Assessment Act, e.g. an allowable deduction, which but for the transaction would not have accrued to the taxpayer, the transaction will not be caught by s. 260 if it satisfies the provision in question. [After setting out passages from Mullens] … The decision in the Mullens Case and the passages from the judgments to which I have referred show that the principle which underlies the Keighery Case is not as narrow as the primary judge supposed it to be. It is not confined to cases in which the Act offers two alternative bases of taxation; it proceeds on the footing that the taxpayer is entitled to create a situation by entry into a transaction which will attract tax consequences for which the Act makes specific provision and that the validity of the consequences is not affected by s. 260 merely because the tax consequences which it attracts are advantageous to the taxpayer and he enters into the transaction deliberately with a view to gaining that advantage. (Footnotes omitted. Emphasis added.) 111 Similarly, in Federal Commissioner of Taxation v Westraders Pty Ltd (1980) 144 CLR 55 at 60-61, Barwick CJ said: Parliament having prescribed the circumstances which will attract tax, or provide occasion for its reduction, or elimination, the citizen has every right to mould the transaction into which he is about to enter into a form that satisfies the requirement of the statute. It is nothing to the point that he might have attained the same or similar result as that achieved by the transaction into which he in fact entered by some other transaction, which, if he had entered into it, would or might have involved him in a liability to tax, or to more tax than that attracted by the transaction into which he in fact entered. Nor can it matter that his choice of transaction was influenced wholly or in part by its effect on his obligation to pay tax. Of course, the transaction must not be a pretence obscuring or attempting to supplant some other transaction into which in fact the taxpayer had earlier entered. Again, the freedom to choose the form of transaction into which he shall enter is basic to the maintenance of a free society. 112 To the extent that the grouping provisions under Pt 4 of the Payroll Tax Act permit the organisation of companies in particular ways, and to the extent that the Commissioner seeks to establish any wrongdoing, it is presumed that the manner in which the Comlek Companies organised their grouping was in accordance with the advice provided, legitimately, by the accountants and/or lawyers, or at least - consistent with what was admitted by Mr Gallagher in his affidavit, and by Mr Donaldson in cross-examination - the advice relied on by the directors. Mr Gallagher deposed to "[relying] heavily on accounting advice to ensure compliance with regulatory obligations including payroll tax" (emphasis added). Similarly, by his affidavit, Mr Donaldson deposed to "consistently [relying] on the accountants and lawyers for the Comlek companies to provide advice and recommendations on things such as corporate structure of the business, preparation of financial statements, and lodgement of tax returns" (emphasis added). The Commissioner challenged neither Mr Donaldson's evidence that he relied on the advice of his accountants with respect to the payment of payroll tax (as did Mr Gallagher), nor his reasons for putting the Comlek Companies into voluntary administration and proposing the directors' DOCA. In any case, the evidence before this Court of the conduct in question falls short of proving the fraud alleged. 113 Should the Commissioner wish to continue with his investigations, the DOCA does not prevent him from doing so. The Commissioner is statutorily empowered to continue with an investigation, armed with powers that are not just compulsory, but require an examinee to give evidence under oath. Further, those powers are not dependent upon the Court's fiat, unlike those of a liquidator: Corporations Act ss 596A and 596B. 114 Despite there being no evidence of the scope and nature of any investigations by the Commissioner, the results of the investigations said to have been undertaken were conveyed to the Administrators by the 18 January Letter. It set out the considerations the QRO thought "may be relevant" in considering "the public interest and commercial morality": • Queensland Revenue Office has undertaken an investigation into the payroll tax liabilities of the Companies under Part 7 of the Taxation Administration Act 2001 (Qld) and determined that the Companies have committed deliberate tax defaults under that Act in relation to their liabilities for a period between 2010 and 2022 on the basis that there has been evasion of tax, and that the Commissioner has been deliberately misled or was caused to be misled. • As a result, the Commissioner has imposed maximum penalties and interest in relation to the assessments where appropriate, on the basis of the deliberate tax defaults. • In your report, you agree with the Companies' directors' advice that the main reason for the failure of the Companies is the payroll tax assessments. In this regard, the Queensland Revenue Office's view is that the reasons the Companies have failed is that they engaged in evasion of tax, failed to pay their tax liabilities as they arose, resulting in default assessments and reassessments with the imposition of significant penalties and interest. • Payroll tax is a self-assessed tax regime, which relies on and requires taxpayers to correctly assess their liability to tax, lodge returns and pay their liabilities as required. The integrity of the payroll tax framework relies in part on the Queensland Revenue Office applying the law against taxpayers who engage in deliberate, serious non-compliance such as the tax evasion engaged in by the Companies. To approve a DOCA which would allow the Companies to avoid the consequences of their actions, and pay as little as 7.8 cents in the dollar, up to an estimated maximum of 17 cents in the dollar, to the State would undermine the integrity of the taxation framework. • The Companies have avoided paying significant amounts of payroll tax over more than a decade, in circumstances where competitors with payroll tax liabilities (who complied with their tax obligations) were at a material disadvantage, with a higher cost base than the Companies. In these circumstances, the Companies may have been able to secure tendered work with more competitive quotes, allowing the Companies to grow at the expense of the competitors who complied with their tax obligations. • In addition, it is important to note that, contrary to your belief that the Companies were only insolvent 'upon the crystallisation of the QRO debt in November 2022', payroll tax debts accrue from the due date for payment after each period return is required to be lodged. It is only the penalty tax which becomes liable upon assessment. The primary tax and unpaid tax interest were liable for payment each month from when each of the respective Companies became liable. This liability is a debt owed to the State. On this basis, and considering the joint and several liabilities of the Companies, the Companies were likely insolvent from a much earlier date, which would need to be properly investigated. • In circumstances where the Companies may have traded while insolvent for a significant period of time (and certainly a significantly longer period of time that is disclosed in your report), it is in the public interest that the solvency of the Companies be properly investigated and an opportunity provided for claims of trading while insolvent to be pursued. In addition, where the directors have allegedly engaged in evasion of tax and caused the Companies to commit deliberate tax defaults, it is also appropriate that investigations be carried out into the directors' performance of their duties, and action to be taken against them for any breaches, as appropriate. These matters are more properly investigated fully by a liquidator who can consider any claims which may arise. • The investigations into the affairs of the Companies and their directors are ongoing, and prosecution under the tax laws remains an option. (Emphasis added.) 115 The 18 January Letter makes the following assertions: (1) The Commissioner has undertaken an investigation into the Comlek Companies. (2) The investigation has led him to conclude that the Comlek Companies have: (a) committed deliberate tax defaults under the TAA; (b) evaded tax; and (c) deliberately misled the Commissioner, or caused the Commissioner to be misled. (3) The Commissioner has imposed maximum penalties and interest on the basis of said deliberate tax defaults. (4) The Comlek Companies have obtained a competitive advantage over their competitors who have paid payroll tax. (5) The primary tax and unpaid tax interest were liable for payment each month from when each of the respective companies became liable, hence the companies were likely insolvent from a much earlier date. (6) Investigations are ongoing and prosecution under the tax laws remains an option. 116 This was the first unequivocal assertion of deliberate tax evasion. It was said to have been arrived at after an investigation was undertaken by the QRO. There was, however, nothing in the evidence before the Court to suggest that the Comlek Companies, the directors, or any of the relevant advisors, had been informed at an earlier date that the investigations by the Commissioner had been concluded, and that those investigations had revealed any deliberate tax evasion. 117 Two things need to be said about the assertions contained in the 18 January Letter. First, the Commissioner relies on the assertions contained therein as a reason why it is in the public interest, and would be contrary to commercial morality, to allow the DOCA to remain on foot, although the Commissioner submitted it was not necessary for the Court to make any findings of actual wrongdoing on the part of the Comlek Companies, their directors, or their accountants. Secondly, the unequivocal character of the assertions made by the Commissioner in the 18 January Letter begs the question of what, ultimately, remains for the Commissioner to investigate?

What more needs to be investigated that would be shielded by the DOCA? 118 The 18 January Letter conveys the Commissioner's unequivocal position that his investigations have established, sufficiently for his purposes, the liability for payroll tax, interest and penalty tax as stipulated in the assessment notices. He has also expressed his view that prosecution remains an option. Whatever might be left for the Commissioner to continue to investigate will not be impeded by the DOCA. As foreshadowed, however, what the Commissioner hopes to achieve further by the appointment of a liquidator to the Comlek Companies, from the point of view of a State Commissioner of Revenue, is not entirely clear. It should be recalled at this juncture that the Commissioner's functions under the TAA are stipulated in these terms: 8 Commissioner's functions (1) The commissioner is responsible for the administration and enforcement of the tax laws. (2) Also, the commissioner may perform the functions of a State taxation officer under the Taxation Administration Act 1953 (Cwlth), part IIIA. 119 The Commissioner's powers are set out under s 9. 9 Commissioner's powers (1) The commissioner has the powers given under the tax laws. (2) In addition, the commissioner has the power to do all things necessary or convenient to be dome for performing the commissioner's functions. (3) Without limiting subsection (2), the commissioner may engage the consultants and contractors the commissioner considers necessary for the performance of the commissioner's functions. 120 Of course, it cannot be doubted that the Commissioner's powers extend to bringing an application under s 445D(1) as a creditor of a company. What needs to be considered in the present case, however, is whether it is necessary that an application be brought, and whether the Commissioner has established that the appointment of a liquidator is in the public interest. 121 The Commissioner submitted that, having raised serious allegations of blameworthy conduct, the broader range of powers bestowed on a liquidator under the Corporations Act, particularly the power of a public examination, warrant the termination of the DOCA on the grounds of public interest and commercial morality. The Commissioner did not, however, submit that he was prevented from exercising his various powers, including that to prosecute, under the TAA. 122 It is also important to appreciate that the Commissioner has not alleged any "suspect transactions" or other conduct on the part of the Comlek Companies, the directors or the accountants that may breach the Corporations Act, unrelated to the unpaid payroll tax: see Midland Hwy at [68]. To that extent, the circumstances may be distinguished from those with which Perram J was concerned in Deputy Commissioner of Taxation v TMPL (No 3) [2011] FCR 1403; 289 ALR 69. In considering whether to grant relief under s 445D(1)(e) and (g), his Honour said, at [134]: In this case, the deed of company arrangement is a device by which [the sole director] and his associated companies are avoiding scrutiny of a number of highly questionable transactions the net result of which is to allow [one of the companies] to walk away from a tax debt of $19,551,033.77 paying nothing. The public interest demands that what has been done with [that company] be brought out into the light. 123 The Commissioner submitted that the following matters, all of which relate directly to the unpaid payroll tax, may be revealed by an investigation conducted by a liquidator: (1) A claim against the directors for breach of their duties in respect of the systemic failure to pay payroll tax (ss 180-182); (2) A claim against the directors for insolvent trading because payroll tax liabilities had accrued (s 588G); (3) Potential action against the directors for improper payment of dividends to the extent any were paid during the period the Comlek Companies had liabilities for payroll tax; (4) Action against the directors for failing to properly keep books and records including by recording the payroll tax debts; (5) A claim against the accountants for involvement in the breach of the directors' duties; and (6) Sanctions that "may follow" from any of the above five matters. 124 The explanation offered by the Commissioner for his preference to outsource further investigations to a liquidator is the "public" nature of examinations conducted by liquidators. Despite the "fundamental differences" between investigations that may be undertaken by the Commissioner, and those by a liquidator, to the extent that the Commissioner wished to bring these matters into the light, he has done so by commencing these proceedings. He also submitted that investigations that "may be undertaken" by a liquidator "will examine all potential corporate wrongdoing, not just matters pertaining to … payroll tax" and "may ultimately result in proceedings being commenced to recover assets for the benefit of creditors, not just the Commissioner" (emphasis added). While I accept that the report of a liquidator under s 533 is more rigorous than that of an administrator under s 438D, I am not persuaded that any need for further scrutiny of the Comlek Companies by a liquidator, as distinct from the Commissioner, arises on the evidence. 125 Additionally, the non-payment of payroll tax and the allegations made by the QRO against the Comlek Companies have already been reported by the Administrators to ASIC. As referred to in the Commissioner's submissions, ASIC has its own powers to bring civil penalty proceedings and proceedings for disqualification orders against the directors, even in respect of a company that is subject to a deed of company arrangement: Elliot v Australian Securities and Investments Commission [2004] VSCA 54. I accept that it is not the role of ASIC to investigate tax avoidance, but its powers would necessarily be enlivened, were the Commissioner to succeed with proceedings under the TAA. 126 Moreover, to the extent the Commissioner submitted that his offer to fund a liquidator's investigations supports the termination of the DOCA, that submission cannot be accepted. Bearing in mind that there must be a "not unrealistic prospect" that a return to creditors on a winding up may be "better than under the [DOCA]" (Britax Childcare Pty Ltd v INFA Products Pty Ltd [2015] FCA 848; 115 ACSR 322 (Burley J) at [93]), the Commissioner's preparedness to fund such investigations, only up to an initial amount of $500,000, goes nowhere to proving that there would be improved prospects of recovery by a liquidator, particularly in circumstances where no "suspect transactions" are in evidence, nor is there proof that the Administrators' investigations were, in any way, inadequate: Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2011] FCA 178 at [209] (Dodds-Streeton J). Accordingly, it cannot be considered a case where "any actual recoveries … depend on a liquidator obtaining the funding to sue" (cf. Bidald at [291]). In any event, the Commissioner seemed to concede that the return to creditors generally would be worse under a winding up. He submitted that in any subsequent liquidation he "would likely receive either the same, or a better, return", but "creditors other than the Commissioner would receive … less" than under the DOCA (emphasis added). 127 Further, assuming the sum of any undertaking will be repaid in settling the costs and expenses in any winding up as a priority payment under s 556 of the Corporations Act, it will inevitably have the effect of running down any funds available to other creditors. While the Commissioner submitted the investigations funded by this undertaking "may reveal … matters in the public interest", it is neither clear how other creditors would benefit, nor how such investigations can be in the public interest, where not only would they involve expenditure of taxpayer money in the absence of evidence of improved prospects of recovery on a liquidation, but it could later add to the total costs imposed on creditors. 128 The Commissioner's assertion that the conduct of the Comlek Companies and the directors that may breach the Corporations Act will be shielded from scrutiny unless the DOCA is terminated cannot be accepted.

Does the DOCA subvert the purposes of Pt 5.3A? 129 The Commissioner contended that the conduct of the Comlek Companies and their directors after the assessment notices were issued in September 2022 is a misuse of the Pt 5.3A process, relying on the observations of Derrington J in Canstruct Pty Ltd v Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) (No 4) [2024] FCA 112 at [183]: The avoidance of an unwanted indebtedness is not an appropriate purpose for a DOCA. No aspect of Pt 5.3A is designed to permit a company to use the DOCA process to rid itself of a liability, merely to restart operations in an almost identical position to the pre-DOCA state save for the existence of the erstwhile debt. In that sense, the DOCA in the present case was entered into to achieve a purpose which was alien to the objects of Pt 5.3A. That is more than sufficient to warrant setting both the administration and the DOCA aside. 130 It is not controversial to note, however, that Project Sea Dragon is not on all fours with the present case. In that case, as was submitted by the defendants: (i) there was a deliberate isolation of one creditor, Canstruct, which was singled out for radically different treatment as compared with other creditors. Canstruct received a miniscule dividend whereas other creditors were paid 100 cents in the dollar. That is not the present case. Although there is a differentiation between the dividend payable to the QRO as compared with the other creditors, the differential is nowhere near as stark as that in Project Sea Dragon. Moreover, under the DOCA, the QRO will receive 60% of the pool, subject to any statutory priorities. (ii) Canstruct had a debt that was the subject of an adjudication determination in its favour pursuant to the Construction Contracts (Security of Payments) Act 2004 (NT). There was, therefore, no real possibility that Canstruct's debt would be adjudicated for anything other than its full amount. Notwithstanding the conclusive evidential character of the assessments, the amounts remain under objection by the Comlek Companies. The QRO did not attempt to prove precisely which amounts were payable and at what particular time over the past 12 years, positively disavowing that there was any need to do so in the present proceedings, noting on several occasions how "complicated" that exercise would be. (iii) the Seafarms group of companies (of which Project Sea Dragon was a subsidiary) was in a position to pay the debt to Canstruct; however, it chose not to and sought to take advantage of its corporate structure (being the limited liability company of its subsidiary, which had no assets) to avoid paying the debt. There is no suggestion in the present case that the Comlek Companies, or the directors, were otherwise able to pay the QRO debt in full. The evidence, however, also tended to show that the Comlek Companies were not attempting to avoid paying the debt. To the contrary, the directors attempted to satisfy the liability by the offer to the QRO of entry into a payment plan. (iv) the Seafarms group of companies would continue to trade and carry on business regardless of whether the deed was set aside - essentially because Project Sea Dragon was a special purpose vehicle - such that there was no detriment to employees, creditors, suppliers, customers, or other stakeholders as a consequence of setting aside the DOCA. In the present case, and at the time of trial, the evidence is that, if the DOCA is terminated, the Trading Companies that are currently trading profitably (albeit only by the compromise of the QRO debt) will be jeopardised, more than 80 people employed by those businesses will lose their jobs, and other creditors are likely to receive a lower return at an unpredictable time in the future. 131 The unchallenged evidence of the Donaldson Defendants and the Gallagher Defendants is that they were unaware of any debt to the QRO until they received the assessment notices in September 2022, and became aware that funds were being garnished from the Comlek Companies' bank accounts. Mr Donaldson deposed that he sought tax and legal advice as a result of the assessments and garnishees and, on 11 November 2022, made an offer to pay the full amount of the QRO debt (at the time, $10,026,780.18) by equal monthly instalments of $40,000, to be revisited when the Commissioner has completed the investigation and made any reassessments. The Commissioner's somewhat disingenuous rejection of that offer, on the basis that it would take 19 years to pay off the debt, was immediately disabused by letter from PPM to the QRO, dated 23 November 2022, confirming the proper basis for the offer. In this respect, the circumstances of this case also differ from those in TMPL (No 3), where it was the debtor's position that there was to be no payment of the tax debt at all. 132 By letter to PPM dated 25 November 2022, the QRO reiterated its rejection of the proposed payment plan stating that "[u]ntil such time as reassessments are made, the current assessments stand, and your clients are required to comply with their statutory obligations". The rejection having been reiterated; it was at this point that Mr Donaldson received advice from his accountants that he was "likely trading insolvent" and took steps towards putting the Comlek Companies into voluntary administration. It is difficult to understand how, having been made an offer to enter into a repayment plan (albeit one that was subject to a proper further investigation and potential reassessments), the Commissioner maintains the position that the step taken at that point by the Comlek Companies and the directors amounted to a misuse of Pt 5.3A. 133 Mr Donaldson's evidence was that, in late November 2022, shortly after the rejection of his offer was reiterated by the QRO, he met with Mr McCabe, who explained to him the process of voluntary administration. Mr Donaldson took steps, together with other directors, to appoint the Administrators. Indeed, he did so on 5 December 2022, in respect of several of the companies. By his affidavit, Mr Donaldson's unchallenged evidence was as follows: [51] I resolved to appoint administrators not to avoid investigations into the company's tax affairs or frustrate the recovery of tax by the QRO but instead because: (a) the companies were insolvent (while QRO claimed to be owed about $10 million) and I did not want to have personal liability for the companies' debts moving forward; (b) I wanted to give the Comlek businesses a chance to survive (and to avoid employees losing their jobs unnecessarily); and (c) I followed the advice of Bell Partners. … [53] I put forward the DOCA proposal which was broadly along the following lines: (a) there would be a payment to all creditors including the QRO (whose debt was disputed); (b) control of the trading companies would return to the directors, being: i. me, in respect of the following trading companies: Comlek Group, Comlek TIC, Comek, Mackay Test & Tag (as Simon [Gallagher] had resigned as a director in October 2021 from these companies); ii. Andrew Gardso, in respect of Comlek Engineering (as Simon [Gallagher] had resigned as a director in October 2021); and iii. Brijesh Sorout, in respect of International Switchboard Solutions; and (c) the trading companies would continue in operation: i. allowing existing contracts to be performed; and ii. preserving employment for the employees. [54] When thinking about the DOCA proposal to be put to creditors, I took into account: (a) that I wanted the businesses to continue in operation; (b) that I was concerned about saving the jobs of the employees; (c) being able to provide ongoing service to our customers into the, future; (d) that the QRO debt was disputed (and because the liability came out of the blue for me, I wanted to make sure that if the amount was not actually owing to the QRO in the total amount then I wanted to ensure that the companies had the opportunity to go through the legal channels to dispute it (if that was appropriate)); (e) the claim by QRO included penalties and interest, unlike other claims of creditors; (f) that QRO had already garnisheed money from the bank accounts in the two months leading up tb the appointment of the voluntary administrators (and QRO has continued to garnish amounts after the date of the DOCA); and (g) that there were a number of trade creditors, particularly in the Mackay region, that it was important to pay to ensure the businesses would continue to support the Comlek businesses into the future. These trade creditors are critical for the business to ensure Comlek Group in particular is able to supply materials for particular jobs along with the logistics of getting these materials to customer mine sites given the great distances involved, often many hours by road. [55] It was for these reasons that the deed fund was divided such that QRO received the largest share of the deed fund (60% of the total) but the balance was to be paid among trade creditors and other creditors. 134 It is apparent that the various matters which Mr Donaldson said he considered in proposing the DOCA are entirely aligned with the purpose of Pt 5.3A. He provides explicit reasons as to why the proposal maximises the likelihood of as much of the Comlek business as possible continuing in existence. He also explains that part of his reasoning was to preserve the Comlek Companies' ability to continue to dispute the QRO debt. 135 As to the latter matter, however, the Commissioner submitted that, objectively, the DOCA did not preserve any such dispute. Rather, it was alleged to mean that Mr Donaldson unilaterally chose the amount of the debt that would be paid, with the remainder being, as far as the Comlek Companies were concerned, "wiped away". The Commissioner submitted that this amounts to a reduction in the total of the QRO debt from $9,365,924.01 to an amount between $730,542.07 and $1,629,670.78. There would be some force in that submission were the QRO an ordinary trade creditor, but it is not. What is perfectly clear, however, is that the Comlek Companies are not in a position to pay an approximately $10 million debt, and have lodged a genuine objection to the assessment notices. It is not the least bit difficult to accept Mr Donaldson's evidence, as he deposed, that he was "[shocked]" to discover the alleged debt. There is no evidence whatsoever that the QRO has ever sought to engage with the Comlek Companies over the 10 years preceding the issue of the assessment notices in September 2022, such that any personnel of the Comlek Companies would have any inkling that such a debt had accrued over that period. That said, the fact that the DOCA might compromise the debt said to be owing at the date when it is carried into effect will, as I have already observed, have no impact at all on the QRO's pursuit of any criminal or civil penalties it might wish to advance, should it maintain and prove its allegation of serious tax evasion. 136 Further, notwithstanding the clear reasons articulated by Mr Donaldson for proposing the DOCA in the terms he did, the Commissioner submitted that what had been proposed by Mr Donaldson needed to be seen: "in the light of the more than 10 years of outstanding and payable amounts of payroll tax"; "in the context of an administration process which occurred over Christmas, where, as is commonly known, most of Australia is on summer holidays"; and "in the context of an administration which started with an intent for the directors to make a DOCA proposal and ended with that proposal being accepted, against the vote of the majority unrelated creditor". With the relevant events viewed in light of these contextual features, the Commissioner submitted that this conduct, coupled with the suggestions of deliberate tax evasion and default, is the type of conduct which makes a liquidation appropriate in the public interest. 137 I am unable to follow the logic of such a submission, and reject it.

Has the Commissioner discharged his onus in relation to the public interest in terminating the DOCA? 138 In so far as it is contended by the Commissioner that the public interest in terminating the DOCA is enlivened by the combination of the extent of the payroll tax debt, coupled with the systematic failure to account for payroll tax, and the involvement of the accountants in such failure, I reject that contention. What public interest undoubtedly exists in relation to potential tax evasion by the Comlek Companies is satisfied by the investigations already said to have been undertaken by the Commissioner, by any further investigations the Commissioner may wish to undertake, and by the remedies available to the Commissioner for breaches of the Revenue laws. 139 I am bound to accept that the assessment notices are conclusive evidence that the amount and all the particulars of the assessment are correct (TAA s 132(1)), including the assessment notices in respect of the Deregistered Entities and the Island Entities. Therefore, I find that the Comlek Companies are indebted to the Commissioner in an amount that currently exceeds $10 million. I am also bound to accept that the fact the Comlek Companies have lodged an objection to the assessments does not diminish their indebtedness established by the assessment notices: Broadbeach at [9], [22], [28]-[29], [33], [40]-[44], [51]-[52] and [55]. 140 As I have acknowledged, however, there is no dispute between the parties that the assessment notices are not, and cannot be, conclusive evidence of any tax evasion. The Commissioner was equivocal as to whether he was, in fact, alleging deliberate tax defaults and tax evasion. Although such an allegation was made in the 18 January Letter, and maintained in the Commissioner's closing submissions, the Commissioner in opening submissions framed his case on the basis that "there are serious allegations or matters raised by a creditor of blameworthy conduct, blameworthy deliberate acts or omissions". 141 For the following reasons, I am unable to conclude that, from the extent of the debt, the alleged systemic failure to account for payroll tax and the alleged involvement of the accountants in any such a failure, there is sufficient evidence to support a finding of deliberate tax defaults and evasion, or even to raise a serious question to be investigated by a liquidator. 142 First, as has already been observed, the Commissioner called no witness who could explain the nature and extent of the investigations he had undertaken which had led to the conclusion of serious tax evasion on the part of the Comlek Companies. Given that the powers available to the Commissioner extend to executive officer[s], which would include the accountants in question, I infer that whatever investigations were undertaken could have included investigations into the Comlek Companies' accountants' involvement in the alleged failure to account for payroll tax. Were that not the case, the Commissioner could have called evidence to explain why a liquidator was required. He did not. 143 Secondly, none of the allegations of wrongdoing asserted in the 18 January Letter were put to Mr Donaldson, Mrs Donaldson, or Mr Gallagher. Mr Donaldson gave unchallenged evidence that he relied on accountants and lawyers for advice on matters involving the corporate structure of the businesses, preparation of financial statements, and lodgement of tax returns. I accept that evidence. He also gave unchallenged evidence that he did not become aware that the QRO had issued a number of assessments for unpaid payroll tax until after funds were garnisheed from the Comlek Companies' bank accounts in October 2022. He deposed the alleged debt to the QRO of approximately $10 million "came as a complete shock". Similarly, Mr Donaldson was not asked any questions in cross-examination about whether there was any phoenixing activity with respect to the deregistration of Personnel, Alpha, or Beta in 2013, or the initial steps taken to deregister the Island Entities, for the alleged purpose of evading payroll tax. 144 Mrs Donaldson, similarly, gave unchallenged evidence by her affidavit that "when the accountants gave advice, then [she] followed that advice … the accountants were the experts in that field". Her assertion that she first became aware of action by the QRO when the garnishee notices were served was also unchallenged. 145 Mr Gallagher's evidence was that he always believed the Comlek Companies were solvent and all creditors were paid when required. He deposed to being aware that several of the companies were paying payroll tax but that he "had very limited knowledge of payroll tax obligations" and "relied on expert accounting advice in the regard and believed the appropriate amount of payroll tax was being paid". Again, this evidence was unchallenged, and I accept it. 146 Thirdly, I do not accept that, on their face, the email communications between Mr Donaldson, Mrs Donaldson, Mr Gallagher and the Comlek Companies' employees and former accountants, which refer to payroll tax obligations, suggest any systemic attempt to engage in tax evasion. Again, neither the content of these emails, nor their underlying purpose, was put to either of Mr and Mrs Donaldson, or Mr Gallagher. When coupled with Mr Jolly's inability to confirm whether the series of emails in evidence constituted the "universe" of documents that may have been relevant to this issue, I find that the emails say nothing at all about any possibility that the Comlek Companies were engaging in deliberate tax evasion. 147 Fourthly, the Commissioner's apparent preparedness to negotiate in respect of Mr Donaldson's offer to enter into a payment plan in settlement of the QRO debt is inconsistent with his having also formed the view that the Comlek Companies had engaged in serious tax evasion over the previous decade. 148 Fifthly, no evidence was adduced to support the Commissioner's assertion that the Comlek Companies had, by the DOCA or otherwise, gained a competitive advantage over their competitors. Simply outlining their primary payroll tax liability between 2010 to 2022 does not provide a sufficient basis from which I can infer that any such advantage actually materialised. 149 Sixthly, although it must be accepted that the Comlek Companies are indebted to the Commissioner for in excess of $10 million, the Commissioner's submission, in the context of public interest considerations, that the Comlek Companies have "not contributed to State funds", must be rejected. The evidence discloses that, in fact, since August 2016, there were payments of payroll tax by the Comlek Companies, totalling $993,497.03. It is also relevant to observe that the substantive failure to contribute to State funds is in an amount of approximately $3 million. The balance of the QRO debt is comprised of interest and penalties. That a balance of approximately $7 million was able to accrue over a decade without the alleged tax defaults and evasion having been brought to the attention of the Comlek Companies before September 2022 is inexplicable, and the Commission made no attempt to explain it, other than to rely on the "self-assessment" feature of payroll tax. 150 The Commissioner submitted that it was incumbent on the Donaldson Defendants and the Gallagher Defendants to adduce evidence in chief that was responsive to the Commissioner's allegations, and asked the Court to infer that their failure to do so gave rise to the inference that any explanation of the evidence that is before the Court that could have been given by Mr Donaldson, Mrs Donaldson, or Mr Gallagher would not have assisted them: Blatch v Archer (1774) 1 Cowp 631; 98 ER 968. It is, however, difficult to speculate as to what further evidence they might have been expected to adduce, given their already straightforward evidence as to: when they first became aware of the QRO debt; and the absence of any suggestion of nefarious practices in the emails exhibited to Mr Jolly's affidavit. In any event, the issue of whether or not there has been deliberate tax defaults and tax evasion is a matter wholly within the Commissioner's knowledge: Swain v Waverley Municipal Council [2005] HCA 4; 220 CLR 517 at [17], [151]-[155]. 151 As to the Commissioner's contention that it is in the public interest that the DOCA be terminated because of the likelihood that the Comlek Companies were insolvent much earlier, I reject that contention. There is, of course, a real possibility that Comlek Companies were insolvent earlier than September 2022. Whether or not that is so depends, however, on the resolution of the Objection, which will involve the application of the grouping provisions in Pt 4 of the Payroll Tax Act, and the Commissioner's consequent calculations of interest and penalty tax. Once again, these are wholly matters within the purview of the Commissioner. They are, however, not matters in relation to which a liquidator is typically expert. As such, the appointment of a liquidator is unlikely to resolve the question of the precise date of insolvency without specialist payroll tax advice. 152 Even if there were an earlier date of insolvency, the question which must then be asked is whether it is in the public interest for a liquidator to pursue an insolvent trading claim in light of the evidence as to the available pool of assets. The investigations undertaken by the Administrators revealed there was an amount of approximately $465,000 in unencumbered assets available to a liquidator to meet any claims. No insurance policy could be called upon - the Comlek Companies Directors and Officers Policy expressly excluded insolvent trading. Subject to the possibility of an undertaking, in fact, being offered by the Commissioner on terms that were acceptable, the approximate amount of $465,000 would be the only amount available to cover the costs of the liquidator conducting the investigations, examinations, obtaining legal advice, and running any litigation. Although, as discussed further below, the Commissioner challenged the Administrators as to the accuracy of their conclusion as to the available assets, Mr Donaldson, Mrs Donaldson, and Mr Gallagher were not cross-examined as to their assets. I am not persuaded that the possibility of a liquidator's establishing an earlier date of insolvency, so as to pursue insolvent trading claims, in the face of approximately $465,000 of unencumbered assets available to pay such claims, serves the public interest. As the Full Court of Appeal said in Vero Insurance Pty Ltd v Kassem [2011] NSWCA 381 at [178] (Campbell, Young and Meagher JJA): Although the public interest is a relevant matter, unless there is strong prima facie evidence of directors' substantial wrongdoing, there is little purpose in a liquidator conducting investigations and examining directors in a case where there is no great likelihood of monetary recovery. Indeed, it would be an abuse of process to permit such a course merely to satisfy a creditor who felt itself betrayed. 153 For similar reasons, the public interest is unlikely to be served by any further investigations (including, as I have stated, those that would be subject to the Commissioner's offer to fund) over and above those which have already been undertaken by the Commissioner, or which remain available to the Commissioner. 154 Finally, if there were any evidence of the misuse of the Pt 5.3A process, it could well be in the public interest to terminate the DOCA and allow a liquidator to pursue a range of investigations. The Commissioner has not, however, established any misuse of the process. Mr Donaldson gave uncontradicted evidence as to his reasoning for approaching the Administrators and pursuing a voluntary administration. He was not cross-examined as to his motive. 155 In addition to the matters identified by the Commissioner as justifying termination of the DOCA on public interest grounds, there are a range of other factors which courts have taken into account when considering whether allowing a DOCA to continue is contrary to the public interest. 156 Examples of such factors include: whether the effect of the DOCA is to allow an insolvent company to continue to be in a position to trade (Bidald at [289]); whether the DOCA allows a director to avoid public examination and the possibility of clawback litigation (Bidald at [290], citing Re Data Homes at 26 and Emanuele at 69); whether, having regard to the size of the dividend, and/or the prospects of preference or uncommercial transaction or insolvent trading recoveries, an investigation is called for (Bidald at [291]); whether the application is brought by a creditor whose debt is disputed (Bidald at [295]); whether there has been delay in bringing the application (Bidald at [298], citing Re Carey Builders Pty Ltd (1997) 23 ACSR 754 and Khoury v Zambena (1997) 23 ACSR 344 at 352); whether the fact that details given to creditors at the meeting, although not as well presented as they should be, is necessarily sufficient to set aside the DOCA (Khourey at 352-3, citing Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139); whether the DOCA is to effect a purpose which cannot be effected under the law such as altering the priority of the Commissioner of Taxation without his consent (Khourey at 352-3, citing Federal Commissioner of Taxation v All Suburbs Car Repairs Pty Ltd [1994] FCA 1393; 14 ACSR 753); whether the DOCA has some unfair consequential effect on the rights of the creditors or a section of them (Khourey at 352-3, citing Winterton Constructions Pty Ltd v M A Coleman Joinery Co Pty Ltd (1996) 20 ASCR 671, in which case the plaintiff was not notified that a DOCA was contemplated and, if the claim had been considered, the mutual set-off provisions would have applied to it); and whether there has been some unconscionable conduct such as making side deals with certain creditors (Khourey at 352-3, citing Wood v Laser Holdings Pty Ltd (1996) 14 ACLC 801, in which case debts had been purchased to secure proxies such that, although the debts appeared to be held by eleven separate creditors, they were all held by the one purchaser). 157 In the present case, I consider that the following circumstances are relevant to the overall assessment of whether it is contrary to the public interest to allow the DOCA to continue. First, and fundamentally, on the evidence before the Court, the Trading Companies are presently solvent and have been trading solvently for approximately one year and three months, since the DOCA was voted upon. To the extent that one can discern the meaning of "public interest" from the statute, it is clearly not in the public interest to wind up solvent companies and make in excess of 80 employees redundant. To the contrary, that would be anathema to Pt 5.3A. 158 Secondly, there was no evidence proffered by the Commissioner as to how the payroll tax debt was permitted to escalate to almost $10 million before the Comlek Companies were informed that they had apparently been in default for almost a decade, and consequently, had accrued interest and penalty tax representing approximately 70% of the QRO debt. The explanation was lacking. Some was called for. 159 Thirdly, the debt is disputed. The directors were not cross-examined as to the legitimacy of the Objection. 160 Fourthly, having communicated to the Administrators on 18 January 2023, the day before the Second Meeting of Creditors, his request for an adjournment of that meeting, the Commissioner did not, in fact, pursue that request, despite having two officers present at the meeting. 161 Fifthly, the Commissioner did not table the 18 January Letter at the Second Meeting of Creditors, in which he raised the allegations of serious tax evasion, and which he now complains were not put to the creditors at the Second Meeting of Creditors. If the Commissioner's views as to the conduct of the Comlek Companies were as he asserted in the letter, informed by the investigations he said had been completed, there was ample opportunity to convey those views at that time. 162 Instead, and sixthly, the Commissioner waited until almost two months after the Second Meeting of Creditors to commence these proceedings. 163 Seventhly, although the proposed return to the Commissioner was estimated to be between 7.8 and 17.4 cents in the dollar as compared with the estimated return to all other admitted participating creditors of between 16.9 and 37.8 cents in the dollar, the share of the pool payable to the Commissioner was 60%. 164 In the circumstances, the Commissioner has not discharged his onus of establishing that the public interest is a reason why the DOCA ought be terminated within the meaning of s 445D(1)(g).

Was there false or misleading infoRmation or omissions? 165 The principles relevant to whether information is false or misleading within the meaning of s 445D(1)(a) (and, by necessary operation, s 445D(1)(b)), and whether there was a material omission from a report or statement within the meaning of s 445D(1)(c), were summarised by the Full Court in Sino Group at [62]: (1) The test for whether information is false or misleading or contains a material omission is determined objectively. (2) The inquiry is directed to the adequacy of the information presented to creditors to enable their decision-making, not to the intention or conduct of any person who provides the information. (3) It is the objective quality of the information that is assessed, not whether anyone was in fact mislead. (4) The inquiry is directed to the information available at the date of the hearing and is not limited to the information available at the time the information was produced. (5) Estimates as to recoverability may be misleading in circumstances where no qualifying information or doubt is expressed as to the recoverability of the certain amounts, notwithstanding that a creditor may appreciate that the information is merely an estimate or prediction. (6) Estimates of liability that are not close to the actual liability later revealed may be false or misleading for the purposes of s 445D(1)(a). (7) Where an estimate of a liability is represented to be "likely to arise in the future" and that figure ultimately proves to be far too low, the estimate may be false or misleading where based on an incorrect and material particular or by reason of an omission of a material particular. (8) An omission which can reasonably be expected to have been material to creditors in deciding to vote in favour of execution of a DOCA may justify terminating a DOCA under s 445D(1)(c). (9) Section 445D(1)(c) is to be understood in the context of an administrator's statutory and other duties to make investigations and inquiries. (10) Sections 445D(1)(a) and (c) each require that the information or omission is of a kind that can reasonably be expected to have been material to creditors in deciding whether to vote in favour of executing a DOCA. (11) In the context of s 445D(1)(a), "material" means something which was relevant and did affect, or might have affected, the outcome (being the decision to execute the DOCA). By extension, in the context of s 445D(1)(c), "material" means something which was relevant and might have affected the outcome. (12) The information or omission need not reasonably be expected to be material to all creditors, but it must affect a sufficient number. (13) The test of materiality is objective. (14) In deciding whether the materiality test is satisfied, all the information about the company's business, property, affairs or financial circumstances that has been found to be false or misleading, or to have been omitted, should be considered collectively. 166 The materiality test in s 445D(1)(a) does not require creditors to have made a different decision. Rather, the question is whether the matter is material "in deciding whether to vote in favour of the resolution that the company execute the deed". In Bidald, Campbell J at [165] observed that "material" means "something which was relevant and did affect, or might have affected, the outcome". Similarly, in Project Sea Dragon, Derrington J at [235] observed that "[w]hilst the misleading statements must be of a quality that they can reasonably be expected to have been relevant and might have affected the outcome, that is the limit of any causality".

The expert evidence 167 Each of the Commissioner, the Administrators and the Donaldson Defendants had obtained expert opinions on a range of questions, contained in respective expert reports from Mr John Park (for the Commissioner), Mr Quentin Olde (for the Administrators) and Mr Robert Hutson (for the Donaldson Defendants) (together, the Experts). Each of the Experts is an insolvency practitioner with experience acting as administrators in various administrations. By Order of 6 September 2023, I ordered a conclave of the Experts to be convened on 18 September 2023 and a Joint Expert Report to be completed and filed with the Court by 9 October 2023. 168 On the fourth day of the trial, immediately prior to the Experts being called, Senior Counsel for the Administrators objected to the receipt of the entirety of Mr Park's Report, filed on 14 July 2023 (the Park Report), essentially on three bases. The first was that the evidence was irrelevant to the case being put by the Commissioner, namely claiming that the DOCA should be set aside and liquidators be appointed to the Comlek Companies. Mr Park's ultimate conclusion that the Administrators ought to have adjourned the Second Creditors Meeting, performed further investigations, and delivered a further report had no bearing on whether, had there been another meeting, the creditors would have voted differently. In any event, in so far as Mr Park gave an opinion that the casting vote had been exercised inappropriately by Mr McCabe, that was not a matter that had been put to Mr McCabe in cross-examination, nor was it a matter about which Mr Park had been asked to give an opinion in his letter of instructions dated 7 June 2023. Secondly, Senior Counsel submitted that the relevant opinions expressed in the Park Report were ultimately matters for the Court to decide. Thirdly, much of the material in the Park Report was unrelated to the case as pleaded. 169 The Joint Expert Report was said to be similarly tainted because Mr Olde and Mr Hutson engaged with each of the matters canvassed in the Park Report. 170 The Donaldson Defendants and the Gallagher Defendants supported the submissions made on behalf of the Administrators. 171 Counsel for the Commissioner pressed for the expert evidence to be admitted, by analogy with the decision of Allsop CJ in Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2007] FCA 1828; 245 ALR 14 at [27], on the basis that the experts were qualified to provide their perspective on "what are or are not omissions in the true sense of the word" based on their extensive experience conducting administrations. 172 Given the point in time at which the objection to the expert evidence was raised, and the fact that the Experts had since participated in the conclave, evidently without any objection, I admitted the expert reports, subject to their ultimate relevance to the issues to be determined. As those issues have eventually crystallised, I do not consider the expert evidence to be relevant to the necessary findings of fact, and I have had no further regard to it. It is, therefore, unnecessary to make any findings in relation to the contested issues amongst the Experts, or as to their demeanour and credibility.

What was said to be false or misleading, or omitted? 173 The Commissioner's case, in respect of false or misleading information or omissions (ss 445D(1)(a)-(c)) evolved somewhat from that which had been identified in the Amended Concise Statement. By the third day of the trial, following a request by Senior Counsel for the Administrators, the Commissioner identified the following matters to be those relied upon under s 445D(1)(a)-(c) as objectively false or misleading information or a material omission: 1 Matters relating to payroll tax: (a) the nature and extent of the payroll tax liability; (b) the Deregistered entities and the Island Entities; (c) the allegation of a deliberate tax default - the failure to adjourn the meeting; (d) the 438D report; and (e) garnishee notices. 2 Matters regarding the insolvency of the Companies and any insolvent trading claim: (a) the date of insolvency; and (b) the extent of the directors' assets. 3 Matters regarding the books and records. 174 I will address these matters in the order identified by the Commissioner.

Nature and extent of the payroll tax liability 175 As to the nature and extent of the payroll tax liability, the Report identified: [2.2] Reasons for the Companies difficulties … The Directors have advised that the main reason for the Companies' difficulties and our appointment was the inability to meet the ~$10M claim received from the Queensland Revenue Office (QRO), in respect to outstanding payroll tax liabilities across the Group entities from 2010 to 2022 in the amount of ~$3M, plus penalties and interest since 2010. … [7.3.3] QRO In around late September 2022, the QRO issued a claim for ~$10M on the Companies in respect to outstanding payroll tax liabilities across the Group entities from 2010 to 2022, which includes penalties and interest since 2010. Each of the Companies is jointly and severally liable for the QRO debt pursuant to the grouping provision of the QLD payroll tax legislation. The Directors' [sic] dispute the quantum of the claim and we understand they intend on lodging an objection on or prior to 31 January 2023. The QRO has lodged a Proof of Debt in the administration of each entity in the Group in the amount of $9.4M. … 176 At various points in the Report, the Administrators indicated their view that the QRO debt "crystallised" in (and therefore, that the Comlek Companies may have been insolvent from) November 2022. 177 The Commissioner's complaint appeared to come down to criticism that, by the conclusion above in respect of the QRO debt crystallising in November 2022, the Report was "objectively incorrect", and as a result, misleading, because it omitted that: the issuing of assessment notices evidence a statutory debt, and payroll tax liability is not rightly described as a claim; liability for the primary payroll tax liability (to the extent they formed a payroll tax group) arose on 21 July 2022, not in September 2022 or November 2022; liability in respect of interest for unpaid taxes arose as and when the interest accrued; liability in respect of penalty tax arose only on the issuing of the assessment notices; and each member of the payroll tax group was jointly and severally liable for each financial year. The consequence of this failure, it was contended, was objectively misleading, in dealing with interest and penalty tax together, and would tend to suggest to creditors that the time at which the liability arose was all the same across the Comlek Companies, and that it arose in November 2022. 178 I am unable to accept that the manner in which the QRO debt was presented to the creditors was, in a material way, misleading. The QRO does not dispute its own debt. The QRO did not seek to correct anything about the Administrators' statements as to the debt in the lead up to, or at, the Second Meeting of Creditors. No evidence was led to suggest that the nature and extent of the debt as presented in the Report was wrong. Mr McCabe's evidence was that there was insufficient time to obtain advice about the various components of the payroll tax debt. Even if that advice had been obtained, it would make no difference to the quantum of the debt that was due and owing consequent upon the issuance of the assessment notices. 179 In any event, the Administrators admitted the QRO's proof of debt in full, and the DOCA proposal was that the QRO would receive 60% of the DOCA fund. How the debt was broken up internally as between primary tax, interest, and penalty tax cannot be said to be something that "can reasonably be expected to have been relevant and might have affected the outcome": see Project Sea Dragon at [235].

The Deregistered Entities and the Island Entities 180 The Commissioner also complained that the Report omitted the facts that: the Deregistered Entities were deregistered in 2013, at a time when each had accrued payroll tax liabilities; the Island Entities (which were the employment entities for the Comlek business) were incorporated in 2013; and applications were made by the directors of five of the six Island Entities for their deregistration in 2022, at which time, each had accrued payroll tax liabilities. 181 The relevance of these omissions was not entirely clear, except perhaps to cast a shadow of impropriety over the directors of the Deregistered Entities and the Island Entities. The financial statements of the Island Entities, exhibited to Mr McCabe's affidavit, revealed that those companies had not traded in the 2022 financial year and had no known creditors. The Commissioner did not lead any evidence as to what his inquiries had revealed about the courses of conduct identified by this complaint. Mr Donaldson, Mrs Donaldson, and Mr Gallagher were not cross-examined about these entities, including the reasons for the deregistration of the Deregistered Entities, the incorporation of the Island Entities, and the application for deregistration of the Island Entities. 182 The Report identified that the Island Entities were also jointly and severally liable for the QRO debt. Whether or not some of the companies of the Comlek business had been deregistered over 9 years ago with existing liabilities for which the Comlek Companies, as a group, remained liable, could not have any material impact on the proposal to vote in the DOCA.

Allegation of deliberate tax default - failure to adjourn the meeting 183 As to the allegation of deliberate tax fraud and the failure to adjourn the meeting, the first (and principal) observation to be made is that a failure to adjourn a meeting cannot, on any view, amount to an objectively false or misleading statement or a material omission. However, matters such as an allegation of deliberate tax evasion on the part of the Comlek Companies are necessarily matters which can reasonably be expected to be material to creditors. The possibility of serious tax default was raised, albeit obliquely, by the reference to penalty tax having been assessed. On its own, that is unlikely to have caused creditors to conclude that serious tax evasion, as opposed to mere default, was being alleged. However, creditors were also told that the QRO, as the largest creditor, had voted against the DOCA and considered that Pt 5.3A was being used by the directors for an improper purpose. The creditors were also told that if the DOCA was approved and executed, the QRO had put the Administrators on notice that it "may apply to the Court to review the exercise" of Mr McCabe's casting vote and/or to have the DOCA set aside under s 445D of the Corporations Act (emphasis added). 184 I interpolate that the use of the word "may", rather than "will", is likely to have left creditors with the impression that matters were perhaps not quite as serious as had been actioned by the Commissioner had detailed in the 18 January Letter. Nevertheless, I am of the view that the fact that the Commissioner had made such serious allegations in writing to the Administrators was a matter that should have been disclosed to the creditors expressly. Mr McCabe, quite candidly, admitted as much in his evidence. That is not to say, however, that he was obliged to table the 18 January Letter. He was constrained in that regard by the confidentiality obligations imposed upon him by s 111 of the TAA. He could, however, have been less circumspect about explaining why the QRO had taken the view that it had. The allegations were matters that might reasonably have affected the outcome of the Second Meeting of Creditors.

The 438D reports 185 The Commissioner contended that the reference to s 438D in the Report in terms that said, "[b]ased on our investigations to date, we have not lodged any report pursuant to Section 438D", was misleading because of the information in the 18 January Letter. However, it will be recalled that the Report was dated 11 January 2023. It is uncontroversial, therefore, that the Administrators were first informed on 18 January 2023 at 10.20pm that the Commissioner alleged deliberate tax defaults. Without time to perform any further investigations of their own overnight, it would not be reasonable to expect the Administrators to have given any further information as to the possibility of a lodging a s 438D report with ASIC. In any event, and as Mr McCabe admitted in examination-in-chief, the Administrators lodged various s 438D reports to ASIC on 10 and 16 October 2023. There was no challenge by the Commissioner to the accuracy of those 438D reports.

The garnishee notices 186 The final matter raised by the Commissioner said to relate to payroll tax is the omission in the Report of any information that the Commissioner may be a secured creditor, because he had a statutory lien by way of the garnishee notices issued prior to the administration of the Comlek Companies. The consequence of such an omission was said to be that, if the Commissioner was a secured creditor who voted against the DOCA, he would not be bound by it, and the whole QRO debt would remain payable. 187 This is an extraordinary submission for two reasons. First, the Commissioner submitted that this Court did not need to resolve whether the Commissioner remains a secured creditor. The Court was nevertheless urged to find that "the information to creditors was either wrong or there was an omission, in the sense of alerting creditors that the Commissioner may have been secured". Needless to say, I am not prepared to find that the information was materially incorrect, or that there was a material omission, without interrogating the legal basis for such a finding. 188 Secondly, in the 18 January Letter, the Commissioner wrote to the Administrators in unequivocal language stating that the QRO is "an unsecured creditor of the [Comlek] Companies". Contrary to cl 13.5 of the directors' DOCA, stating that secured creditors "will not be entitled to receive any distributions out of the Deed Fund", the QRO nevertheless proceeded to vote on it, exercising a right only available to unsecured creditors. Further, it is the Commissioner's case that the DOCA has the effect of "wiping" the debt allegedly owed to him. That submission cannot stand together with the submission that the debt is secured and, therefore, survives the DOCA. In my view, by his conduct, the Commissioner has waived any right to assert that he was a secured creditor. 189 In any event, I do not accept that, as a matter of law, the QRO is a secured creditor at large. As submitted by the Donaldson Defendants and the Gallagher Defendants, the QRO's rights were limited to the benefit of the attachment of the monies held by the Comlek Companies in their bank accounts, prior to the appointment of the Administrators. Otherwise, the QRO's debt is to be treated in the same way as any other unsecured creditor of the Comlek Companies. All that the garnishee notices achieved was to create a statutory right in the nature of a lien conferring the right in the QRO to prevent the NAB and Westpac from paying over the amount of the debt, the subject of the garnishee notices, to the Comlek Companies: Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197; Blacktown Concrete Services Pty Ltd v Ultra Refurbishing & Construction Pty Ltd (in liq) (1998) 43 NSWLR 484 at 496; Macquarie Health Corp Ltd v Commissioner of Taxation (1996) 96 FCR 238 at [116]. The rights acquired by a garnishor are not comparable to equitable proprietary rights in property. Consequently, a garnishor does not acquire a proprietary interest in the relevant debts: Secure Funding Pty Ltd v Bettini [2011] NSWSC 557 at [20]; Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea's Concreting [2012] QSC 51 at [35]-[37].

Matters regarding insolvency and any insolvent trading claim

Incorrect assessment of the date of insolvency 190 The Commissioner submitted that, because the Report did not accurately identify the nature and extent of the payroll tax debt, and was, therefore, objectively misleading, either the date of insolvency set out in the Report, being November 2022, or the admitted earlier date of insolvency, being September 2022, "is most likely incorrect". 191 I have already found that the nature and extent of the payroll tax debt as described in the Report was not materially false or misleading. The Report accurately stated the amount of the debt owed to the Commissioner. I do not accept that the precise date of insolvency would reasonably have affected the outcome of the vote on the DOCA. In any event, each of the parties in these proceedings disavowed any suggestion that the Court was required to make a finding as to the date of insolvency. The Commissioner himself did not proffer an earlier date. In circumstances where the date of insolvency might be a month or two earlier than that put forward in the Report, or even several years earlier, it is neither possible nor appropriate to find that either proposed date of insolvency in November 2022 or September 2022 was materially false or misleading.

Extent of the directors' assets 192 I am fortified in the conclusion I have reached in relation to the immateriality of the date of insolvency when considering the extent of the directors' assets. The Report revealed that the Administrators had only been able to identify an approximate amount of $465,000 in unencumbered assets which would be available to meet any claims for insolvent trading: 9.5 Director's [sic] personal financial position As part of our investigations into the Director's personal financial position, we conducted searches with Land Titles Offices in NSW and Queensland with respect to properties owned by the Directors. Our investigations have identified that the Directors of the Trading Entities hold a number of properties in QLD. Although estimated to be worth $3.7M (based on RP data searches where available), all properties are subject to mortgage, are jointly held (for the entities with larger potential insolvent trading claims) and have varying levels of entitlement (the lowest being a 1/10 holding). We wrote to the Directors of all companies requesting that they complete statements of personal financial position, disclosing all of their assets and liabilities. Based on the statements of personal financial position received to date, we estimate the total assets available to be $465K, noting that there are a number of sole directors across the Trading Entities and the varying levels of the potential insolvent trading claims across those entities. We are not in a position to further verify the value of the asset position of the Directors at this stage. A liquidator (if one is appointed), would conduct further investigations and / or public examinations in this regard. We are not aware of any further assets owned by the Directors. 193 The Commissioner submitted that, viewed objectively, the information regarding the directors' assets was incorrect or misleading. This was said to be because: no explanation was provided as to how the estimate of the directors' financial position was arrived at; it did not explain how many directors of the total number of directors responded to Mr McCabe's request to provide details of their assets and liabilities; and it was incorrect to state that the Administrators were not aware of any further assets owned by directors. 194 As to the first complaint, an explanation was, in fact, given. The Report said the estimate had been arrived at through RP data searches where available and was "[b]ased on the statements of personal financial position received to date". The Report explains, as is the case without compulsory powers in the convening period, that the Administrators, as at the date of the Report, "were not in a position to further verify the value of the asset position of the Directors …". Similarly, the second complaint relates to statements that are hedged with uncertainty and which indicate to creditors that the Administrators have not received responses from all directors. The Report explains that a liquidator, if appointed, would be able to conduct, inter alia, further investigations and/or public examinations in respect of those matters. The third complaint criticises the final sentence of section 9.5 of the Report ("[w]e are not aware of any further assets owned by the Directors"). That criticism, firstly, ignores the fact that Mr Gardso's property was included in the total estimate of $3.7 million, albeit with no information as to its degree of encumbrance. The criticism is also directed at the apparent omission of Mrs Donaldson's property from the estimate, which she deposed was purchased for $2.4 million in July 2023, but was likely mortgaged in the sum of $1.345 million as at September 2023. As has already been observed, this evidence was not challenged. 195 None of the directors were cross-examined about their own assets nor in relation to their knowledge of the assets of any other director. There was, in short, no credible evidence that the sum arrived at by the Administrators as being potentially available to meet any insolvent trading claims was materially false or misleading.

Matters regarding the books and records 196 The Commissioner submitted that there are two errors with the Administrators' statement in the Report that "[t]aking into consideration the books and records available to us, it is our preliminary opinion that the Companies maintained sufficient books and records in accordance with Section 286 of the Act" (emphasis added). 197 First, if the financial statements only date from 2019, they would not accord with s 286 of the Corporations Act, because they did not span 7 years. The Commissioner asserted that financial statements from 5 December 2015 at the latest were required to be produced in order to satisfy s 286. The difficulty with that submission is that s 286 does not specifically require "financial statements" to be retained for 7 years. Section 286(2), however, requires "financial records" to be retained for 7 years after the transactions covered by the records are completed. "[f]inancial records" are defined in s 9 of the Corporations Act to include: (a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, and vouchers; and (b) documents of prime entry; and (c) working papers and other documents needed to explain: (i) the methods by which financial statements are made up; and (ii) adjustments to be made in preparing financial statements. 198 Appendix H to the Report provided creditors with a summary of the individual financial statements for each of the Comlek Companies (where available). The Administrators reported that they had been provided with (amongst other things): • Access to accounting software (MYOB EXO, MYOB Account Right and Xero); • Access to SIMPRO project management system; • Externally prepared financial statements; • Bank statements; • Contracts; and • Workpapers. 199 It is tolerably clear that the preliminary opinion expressed in relation to compliance with s 286 was based on more than just the financial statements. For that reason, I do not accept the Commissioner's submission that the statement was materially misleading, because the Administrators qualified their opinion in admitting they were only provided with financial statements from 2019. 200 The second error to which the Commissioner points is that the books and records did not record the Commissioner's total and currently payable payroll tax liability as set out in the assessment notices, nor did they properly record the primary payroll tax or unpaid interest liabilities of the Comlek Companies as they became due. Despite the Commissioner's submission that the absence of any record of the payroll tax liability in the management accounts meant that the statement in respect of s 286 was materially misleading, the Report recorded, "[w]e note the Queensland Revenue Office payroll tax claim has not been recorded in the management accounts at the date of our appointment". The creditors could not have been misled about the fact that the liability had not been recorded in the management accounts. As to whether that fact necessarily meant the Comlek Companies had not maintained sufficient books and records in accordance with s 286, Mr McCabe said, in cross-examination: It depends on when you assess the payroll tax is due and payable, and if that's on the 28 September when the default assessment notices were issued, I would have expected the company's accountant, Bell Partners, to have updated the accounts for the year end 30 June 2023 and potentially prior years. 201 Mr McCabe was then asked by Senior Counsel for the Commissioner about the assessments with due dates of 26 or 27 September 2022. MS WHEATLEY: And with a due date of 26 or 27 September 2022, you would have expected, as at the date of your appointment of 5 December 2022, for those liabilities to be recorded in the accounts of the books and records of the companies, wouldn't it? WITNESS: Depending on how quickly the accountant entered them, yes. But I would imagine for a debt like this, which is not a month-to-month invoice that is received, this would be something the external accountant would probably assist the company with to enter it into the books, and whether that goes in the financials at year-end or whether it goes in the management accounts is a question for the company and the company's accountant. 202 Mr McCabe gave evidence that it was not possible within the time provided by the Pt 5.3A scheme to properly understand how the payroll liability ought to have been reflected in the books and records. His understanding was that it was the triggering of the default assessment notice that gives rise to the debt being due and payable. Mr McCabe went on to explain: WITNESS: There was no objections to that, at the creditor's meeting. MS WHEATLEY: No. Thank you. So it's complicated. There are different components to the payroll tax debt. That's right, isn't it? WITNESS: There is, yes. MS WHEATLEY: But you didn't get any advice about those components or when they might be due and payable before issuing your second report to creditors; is that right? WITNESS: We didn't have time. That's correct. 203 No evidence was given that unequivocally explained how, and at what point in time, the various components of the payroll tax liability ought to have been included in the books and records of the Comlek Companies, assuming of course that the Comlek Companies were aware of that liability prior to September 2022, as to which the unchallenged evidence was that they were not. Even if the payroll tax liability ought to have been included in the books and records for the purpose of compliance with s 286, the Administrators' preliminary opinion that the books and records were sufficient, cannot be materially misleading, in light of the unequivocal statement in the Report that it had been omitted. 204 Section 286 provides as follows: 286 Obligation to keep financial records (1) A company, registered scheme, registrable superannuation entity or disclosing entity must keep written financial records that: (a) correctly record and explain its transactions and financial position and performance; and (b) would enable true and fair financial statements to be prepared and audited. The obligation to keep financial records of transactions extends to transactions undertaken as trustee. Period for which records must be retained (2) The financial records must be retained for 7 years after the transactions covered by the records are completed. (3) A person commits an offence if the person contravenes subsection (1) or (2). (4) A person commits and offence of strict liability if the person contravenes subsection (1) or (2). 205 The section creates an offence of strict liability for failing to keep financial records in accordance with it. These proceedings, however, are not criminal proceedings. It would be a grave thing to make any finding of non-compliance in such circumstances, particularly where the Commissioner has not proved that there has been any breach of s 286. Indeed, to the contrary, Mr Jolly's affidavit annexes copies of the financial statements from 30 June 2016 of Brampton, Cartel, Comek, Engineering, Comlek Group, TIC, Daydream, Hamilton, Hayman, ISS, Keswick, Long, T&T, and Sparra. It is not said whether those companies also retained those records, and simply did not give them to the Administrators. 206 Ultimately, the most that can be said, as is stated in the Report, is that the Administrators asserted that they were provided with books and records from 2019 onwards. That, in no way, proves that earlier financial records were not retained by the Comlek Companies, nor that the Administrators were unaware of the existence of books and records which predated 2019.

There was a material omission; the exercise of the discretion 207 For the reasons given, the Commissioner has not discharged his onus of establishing there were false and misleading statements in the Report within the meaning of ss 445D(1)(a) and 445D(1)(b). The Commissioner has, however, discharged the onus of establishing that there was a material omission within the meaning of s 445D(1)(c), being the failure to inform the creditors of the Commissioner's allegation of deliberate tax defaults and tax evasion on the part of the Comlek Companies. 208 Nevertheless, for the reasons I have already given in relation to whether the DOCA should be terminated on public interest grounds, I decline to exercise my discretion to terminate the DOCA.

Is the DOCA unfairly discriminatory? 209 As to the Commissioner's complaint that the DOCA is "unfairly discriminatory" against it within the meaning of s 445D(1)(f)(i), its basis is said to be threefold. First, the proposed return to the Commissioner was estimated to be between 7.8 and 17.4 cents in the dollar, as compared with the estimated return to all other admitted participating creditors of between 16.9 and 37.8 cents in the dollar. Although the estimated returns as between the Commissioner and the other admitted creditors differed, his overall share of the available pool was 60%, in circumstances where the Administrators admitted proofs of the Commissioner's debt in its entirety, and where the assessments remained the subject of unresolved objection. 210 Secondly, the Commissioner is the majority creditor in value, who voted against entry into the DOCA. The second reason proffered goes nowhere towards establishing that the DOCA is "unfairly discriminatory". Rather, it is no more than a statement of fact. To assert simply that the largest creditor by value did not get its own way does not establish unfair discrimination. 211 Thirdly, the Commissioner submitted that all creditors, other than the QRO, were better off under the DOCA than they would be in a liquidation, and that, consequently, the DOCA unfairly discriminated against the Commissioner. 212 In determining whether a DOCA is unfairly discriminatory (or unfairly prejudicial), courts have regarded factors such as: the object of Pt 5.3A; the interests of creditors, the relevant company and the public; the comparable position of the creditor in question on a winding up, compared with their position under the DOCA; and additional relevant factors, including the status of all creditors under the DOCA, the existence of a collateral benefit to the shareholders, and the whole effect of the DOCA itself: TiVo at [54], cited in Sino Group at [66]. 213 The first reason advanced by the Commissioner seeks to invoke the principle of pari passu distribution. The pari passu principle can be traced back to s 2 of Henry VIII's Statute of Bankrupts 1542 (34 & 35 Henry 8 c.4), under which the assets and debts of a bankrupt were to be identified and appraised, and the assets sold: … for a true satisfaction and payment of the said creditors; that is to say, to every of the said creditors, a portion, rate and rate alike, according to the quantity of their debts … 214 In Goode on Principles of Insolvency Law (5th ed, Kristin van Zwieten, Sweet & Maxwell, 2018) at [8-02], the principle of pari passu distribution is explained in the following terms: The most fundamental principle of insolvency law is that of pari passu distribution, all creditors participating in the common pool in proportion to the size of their admitted claims. … The principle is based on the notion that losses should be borne by unsecured creditors equally: as the Supreme Court has recently put it, the statutory provisions for rateable distribution embody "the fundamental principle of equality" [citing Re Lehman Bros (International) Europe (in administration) (No 4) [2017] 2 WLR 1497 at [20] per Lord Neuberger (with whom Lords Kerr and Reed agreed)]. 215 As is made clear in this passage, the rationale for a pari passu distribution is to ensure that losses in an insolvency are borne equally. The concept is relevant to the distribution of a pool of assets. A DOCA puts in place what Finkelstein J referred to in Commonwealth v Rocklea Spinning Mills Pty Ltd [2005] FCA 902; 145 FCR 220 at [28], as a "de facto winding up", such that: there is usually no reason to depart from the manner of distribution that would apply in an actual winding up. A departure from the winding up model is likely to be unjust or unfair. (Emphasis added.) 216 That does not mean, however, that there will never be circumstances in which a departure from the winding up model, leading to differential treatment of creditors, is neither unjust nor unfair. Finklestein J pointed to two matters in particular which might justify the differential treatment of creditors under a DOCA. The first is where the company is not the source of the funds that will go to creditors. The justification for this exception is that funds provided by a third party under a deed "would not be available to creditors in a winding up and there is no good reason why all creditors should be better off under a deed": Rocklea Spinning Mills at [29]. The personal guarantees given by individuals who are no longer directors, referred to in [224] below, are relevant in this context. The second justification is where the purpose of the deed is to keep the company solvent. His Honour said, relevantly, at [30]: When the object of the deed is to preserve the company's business, the legislation does not assume that the creditors will be paid in full. To the contrary Pt 5.3A assumes that it might often be necessary to extinguish by composition or bar certain claims. And it makes no assumption that the creditors will be treated equally or that they will be given the same priority as in a winding up. The reason it makes no such assumption is that the equal treatment of creditors or the maintenance of priorities when there is not enough money for everyone can easily thwart the attempt to revive an ailing company. 217 The Commissioner submitted that no relevant justification was put forward by the Administrators as to why there was a differential return as between the Commissioner and the other creditors. Although it is true that no express rationale is to be found in the Report, it is relatively plain how the directors arrived at the 60:40 split. As is referred to in the Report, the directors' ROCAP disclosed "other ordinary unsecured creditor claims of $6.5 million". That figure represents 40% of the total amount of $15.9 million in outstanding debt, when account is taken of the $9.4 million said to be owed to the QRO. 218 Further, unlike any other creditor, the QRO has received $631,748.43 pursuant to its garnishees: that is, it has received 100 cents in the dollar for a portion of the QRO debt. 219 Relevantly, Mr Donaldson's reasons for proposing the DOCA in the form presented to creditors have already been set out above: see [133] above. 220 The principles relevant to determining whether a DOCA is unfairly prejudicial or unfairly discriminatory against one or more creditors were stated by McKerracher J in Decon at [202]: (a) Part 5.3A of the Corporations Act assumes that the creditors are best placed to judge their interests so a setting-aside will not be ordered lightly; (b) the mere fact that a creditor is prejudiced by the operation of the deed is not a sufficient reason to terminate a deed. The mere existence of the deed procedure usually means that some creditors will gain something and some creditors will lose something out of the arrangement; (c) the test under s 445D(1)(f)(i) is not merely discrimination or prejudice, but unfair discrimination or unfair prejudice. Some degree of discrimination is not necessarily unfair. Thus, it is clear that a DOCA may provide for differential dividends among creditors. Part 5.3A does not require a pari passu distribution. What is required is a better return to creditors than an immediate winding up. That object is met if some creditors are better off than in a winding up and none are worse off under the DOCA than they would be under a winding up; and (d) when deciding whether a deed unfairly prejudices or discriminates against a creditor or group of creditors, consideration must be given to what those purportedly prejudiced creditors would receive, or would be likely to receive, on a winding up, and the reasonableness of any conclusions reached by the administrator on that question. (Citations omitted. Emphasis added). 221 His Honour continued, at [203], by explaining how the Court determines what is unfairly discriminatory: (a) there must be reasonable grounds for differentiation between creditors of an equal class (for example, ordinary unsecured creditors) that accord[s] with the object and spirit of Pt 5.3A. Circumstances may exist where certain creditors must be paid in full to ensure their continued support for the company to allow it to continue to trade; (b) there will be circumstances when ordinary commercial common sense will demand, in the case of priority creditors, a loss of priority and, in the case of unsecured creditors, some degree of discrimination; (c) where a deed proposes to preserve the company to achieve the objects of Pt 5.3A of the Corporations Act, there should be no expectation of equal treatment of unsecured creditors where such treatment would defeat that purpose; (d) ultimately, if there is no prima facie evidence of misfeasance, concealment or a materially inadequate preliminary examination, and the DOCA offers both real financial benefits credibly estimated on preliminary investigation to exceed those available on liquidation, and indirect or collateral benefits from the survival of the company's business; and no worthwhile avenues for further recovery in liquidation are identified, a major creditor's curiosity or preference for further exploration of speculative claims is unlikely to render termination of the DOCA in the interests of the creditors as a whole. (Citations omitted. Emphasis added.) 222 The Report stated the Administrators' reasons for recommending a vote in favour of the DOCA. Those reasons included: • greater certainty of the continuation of the business and retention of all 140 employees; • payment of the entire Deed Contribution in one payment within 45 days of execution; and • continues the employment of all employees and minimises redundancy claims which have a priority claim over unsecured creditors. 223 The Administrators also advised that the DOCA provided a better return than the mid-point range of the estimated liquidation scenario. The Report stated: Based on our preliminary investigations since 5 December 2022, we estimate possible returns to creditors in the various individual liquidation scenarios could range from Nil up to 16.8 cents in the dollar within 2 to 3 years, subject to timing of any public examinations and litigation (noting that no return to creditors would be anticipated for the majority of the Companies). 224 The Deed Contribution was a cash contribution of $2.3 million funded by a chattel mortgage and a debt factoring facility entered into by Donaldson Mackay Pty Ltd (in its own right and as trustee of the Donaldson Family Trust) and Simon Galagher Pty Ltd (in its own right and as trustee of the Gallagher Family Trust). The facility was guaranteed by Mr Donaldson, Mrs Donaldson, Mr Gallagher, Comlek Group, T&T, ISS, Engineering, TIC, Sigall, and Sparra, with Scottish Pacific Business Finance Pty Limited. Comlek Group has also entered into a debtor financing facility with FactorONE, a division of Scottish Pacific, with a limit of $4 million. It, too, has been guaranteed by several parties. 225 Self-evidently, there is no certainty as to the potential quantum of any recovery in a liquidation. There is insufficient evidence to establish that any creditor, including the Commissioner, would be worse off under the DOCA than in liquidation. What evidence there is suggests that most creditors will indeed be better off under the DOCA and so, as explained by Sifris J in Eco Heat (Vic) Pty Ltd v Syndicate Forty Four Pty Ltd (Subject to Deed of Company Arrangement) [2018] VSC 156 at [57], where: the return under the DOCA is not insubstantial or token and the public interest and commercial morality issues are unlikely to translate into a cause of action realistically worth investigating and pursuing, the scale may tip in favour of retaining the DOCA. 226 I am not satisfied that the Commissioner has discharged his onus of establishing that the DOCA is unfairly discriminatory within the meaning of s 445D(1)(f)(i) of the Corporations Act.

Should the DOCA be terminated under ss 445D or 447A? 227 For the reasons given above, the Commissioner has not discharged the onus of establishing that there is a reason, within the meaning of s 445D(1)(a), (b), (f) or (g), why the DOCA should be terminated. For the same reasons, the Commissioner has not established that there is "some other reason" why the administration should end, within the meaning of s 447A(2)(c). 228 The Commissioner has established that there was a material omission in the Report, being that the Commissioner had asserted in writing that, after investigating, he had concluded that the Comlek Companies had committed deliberate tax defaults and engaged in evasion of tax. Nevertheless, for the reasons given, I do not consider that it is in the interests of creditors as a whole to set aside the DOCA and I decline to do so.

Should the casting vote be set aside? 229 The Commissioner submitted that, should the Court decline to terminate the DOCA, the Court should nonetheless set aside the exercise by Mr McCabe of his casting vote in favour of the DOCA at the Second Meeting of Creditors. 230 The Commissioner relies on s 75-42 of the IPSC, which provides relevantly: 75-42 Creditors' resolution passed because of casting vote - Court review Application of this section (1) This section applies if: … (a) the resolution is passed because the person presiding at the meeting exercises a casting vote. Application to the Court (2) A person…may apply to the Court for an order setting aside or varying the resolution, but only if: (a) the person voted against the resolution in some capacity (even if the person voted for the resolution in another capacity); or … Court may make orders (3) On application under subsection (2) and (3), the Court may: (a) By order set aside or vary the resolution; and (b) If it does so - make such further orders, and give such directions as it sees fit. (4) On and after the making of an order varying the resolution, the resolution has effect as varied by the order. 231 It is accepted that the substantial similarity between the terms of s 75-42 and the provision of the Corporations Act which it replaced (the now-repealed s 600B), supports the application of the principles developed in relation to s 600B to the scope and operation of s 75-42: Adelaide Brighton at [1223].

The exercise of a casting vote 232 In Deputy Commissioner of Taxation v Wellnora [2007] FCA 1234; 163 FCR 232, Lindgren J, citing Neill LJ in R v Bradford Metropolitan City Council; ex parte Corris [1981] 3 All ER 156 at 160, said at [214]: A person who has a second or casting vote is clearly under a duty to exercise it honestly and in accordance with what he believes to be the best interests of those who may be affected by the vote. Subject to this, however, it seems to me that the person presiding at a meeting is fully entitled to use his vote as he thinks fit. (Emphasis added.) 233 In Adelaide Brighton, after reiterating the statement of principle identified by Lindgren J, and the formulation as to the Court's approach adopted by Barrett J in Plumbers Supplies v Firedam Civil Engineering [2011] NSWSC 325, at [41]-[42], Besanko J said, at [1228]: An administrator must act honestly and have regard to the best interests of the creditors. The administrator must appropriately consider and weigh the considerations that a reasonable and prudent insolvency practitioner would consider to be relevant. 234 Besanko J further observed, at [1230]: The courts have made it clear that there is no general presumption or rule in favour of a majority creditor or the majority in value. The fact that a majority creditor or the majority in value opposed and oppose the DOCA is a relevant consideration, but it is not decisive. 235 The matters identified by the authorities, which the Court will consider when reviewing the exercise of the casting vote by an administrator, were listed by Besanko J at [1229]: (1) whether the proposed DOCA is opposed by a major creditor, especially when there is a large proportion between the major debt and other debts; (2) whether the proposed DOCA is supported by the directors, in circumstances where it will deliver some advantage to them; (3) whether creditors who voted in favour of the proposed DOCA will be prejudiced if the Court sets aside the resolution; (4) whether the administrator carried out adequate investigations before exercising the casting vote; and (5) whether the administrator's report contained misleading information.

Matters in favour of setting the casting vote aside 236 The Commissioner submitted that, in substance, there are two critical factors that the Court should weigh in favour of setting the casting vote aside: (a) the matters of public interest and commercial morality, as pleaded by the Commissioner; and (b) the information provided to creditors containing the allegedly false and misleading statements and omissions. 237 The Commissioner submitted that, when weighing these matters against the possibility that the DOCA may result in the continuation of the Comlek business, the Court should "steadily [bear] in mind" whether Mr McCabe's opinion at the time of exercising the casting vote was directed to a course of action that was in creditors' interests: see Adelaide Brighton at [1411]. 238 For the same reasons that have led to my findings above on the matters of public interest and commercial morality, and the alleged false and misleading statements and omissions, neither factor raised by the Commissioner is sufficient in this case to warrant setting aside the casting vote. 239 Further, the Commissioner has neither presented any evidence to establish, nor was there any suggestion, that Mr McCabe's decision-making process in exercising the casting vote was dishonest or not for a proper purpose in accordance with what he believed was in the best interests of the creditors as a whole. That decision-making process, and Mr McCabe's subjective state of mind, were not challenged in cross-examination. Rather, the unchallenged evidence was that Mr McCabe considered his exercise of the casting vote by discussing the prospect of exercising the vote with Mr Hayes on 19 January 2023, prior to the Second Meeting of Creditors, in circumstances where he had communicated to the QRO why the DOCA would provide a better return for creditors than liquidation, the Commissioner was not prepared to provide an indemnity for the Administrators' consideration of adjourning that meeting, and where no adjournment was pursued by the Commissioner at the Second Meeting of Creditors. 240 The Commissioner has not, on the evidence, satisfied the Court that the exercise of the casting vote should be set aside, and I decline to do so.

Disposition 241 In the context of the scheme established by Pt 5.3A of the Corporations Act for the voluntary administration of companies, the Commissioner has not demonstrated that, in the circumstances of this case, it is in the public interest for the DOCA to be terminated, nor for the Administrators' casting vote to be set aside, nor indeed for the Comlek Companies to be wound up and for liquidators to be appointed. The Trading Companies are presently trading profitably, current payroll tax obligations are being met, and approximately 88 people are gainfully employed. The Commissioner has other means by which to pursue his grievance with the Comlek Companies. 242 It is therefore appropriate that the Commissioner's application be dismissed, with costs. 243 By correspondence received on behalf of the parties by my Associate on 20 June 2024, the parties requested that, regardless of the outcome of the proceeding, it would be appropriate for the Court to grant an interim stay of the Orders to allow any unsuccessful party to consider their position in relation to filing an appeal. Such a course is appropriate in a case such as this, where the position of the unsuccessful party at first instance would be irrevocably altered were a stay not granted. Accordingly, I will order that the Orders are to be stayed until 7 days after the expiry of the appeal period, unless extended, being the terms of the stay sought by consent. I will also grant liberty to apply. I certify that the preceding two hundred and forty-three (243) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.

Associate: Dated: 21 June 2024 SCHEDULE OF PARTIES QUD 99 of 2023 Defendants Fourth Defendant: COMLEK ENGINEERING PTY LTD (ADMINISTRATORS APPOINTED) ACN 609 245 758 Fifth Defendant: INTERNATIONAL SWITCHBOARD SOLUTIONS PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 928 781 Sixth Defendant: MACKAY TEST & TAG PTY LTD (ADMINISTRATORS APPOINTED) ACN 143 592 643 Seventh Defendant: COMEK PTY LTD (ADMINISTRATORS APPOINTED) ACN 155 603 633 Eighth Defendant: KESWICK PERSONNEL PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 325 959 Ninth Defendant: BRAMPTON PERSONNEL PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 325 628 Tenth Defendant: HAMILTON PERSONNEL PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 325 940 Eleventh Defendant: HAYMAN PERSONNEL PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 325 646 Twelfth Defendant: LONG PERSONNEL PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 325 968 Thirteenth Defendant: DAYDREAM PERSONNEL PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 325 655 Fourteenth Defendant: CARTEL MKY NIGHTCLUB PTY LTD (ADMINISTRATORS APPOINTED) ACN 603 808 037 Fifteenth Defendant: DONNIE INVESTMENT PTY LTD (ADMINISTRATORS APPOINTED) ACN 655 324 717 Sixteenth Defendant: NIGHTCLUB HOLDINGS NO 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 603 807 414 Seventeenth Defendant: NIGHTCLUB HOLDINGS NO 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 603 807 423 Eighteenth Defendant: SIGALL PTY LTD (ADMINISTRATORS APPOINTED) ACN 137 274 090 Nineteenth Defendant: SPARRA PTY LTD (ADMINISTRATORS APPOINTED) ACN 136 886 452 Twentieth Defendant: DONALDSON (MACKAY) PTY LTD (ADMINISTRATORS APPOINTED) ACN 123 470 968 Twenty First Defendant: SIMON GALLAGHER PTY LTD (ADMINISTRATORS APPOINTED) ACN 143 583 395 Twenty Second Defendant: MICHAEL DONALDSON Twenty Third Defendant: REBECCA DONALDSON Twenty Fourth Defendant: SIMON GALLAGHER Twenty Fifth Defendant: BRIJESH SOROUT Twenty Sixth Defendant: BROOKE DONALDSON Twenty Seventh Defendant: MADDISON GALLAGHER Twenty Eighth Defendant: GLEN GALLAGHER Twenty Ninth Defendant: SCOTT GALLAGHER