Ford v Commissioner of Taxation, in the matter of Careers Australia Group Limited - [2022] FCA 1420 - FCA 2022 case summary — Zoe

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Ford v Commissioner of Taxation, in the matter of Careers Australia Group Limited

[2022] FCA 1420

Federal Court of Australia|2022-11-25|Before: O'Bryan J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2022-11-25

Before

O'Bryan J

Source

Original judgment source is linked above.

Judgment (34 paragraphs)

[1]

A. On 25 May 2017, the first plaintiff, Martin Francis Ford, was appointed as administrator of Careers Australia Group Limited and certain of its subsidiaries (collectively, the Group). The Group includes the plaintiff companies in this proceeding and the plaintiff companies in proceeding VID 749 of 2021 (collectively the Plaintiff Companies). On 30 June 2017, Martin Francis Ford was appointed as liquidator of the Group (the Liquidator). B. Orders in substantially the same terms have been made in proceeding VID 749 of 2021.

[2]

Discovery

By 30 November 2022, the plaintiffs give non-standard discovery pursuant to r 20.15 of the Federal Court Rules 2011 (FCR) of all documents relevant to the solvency (including, for the avoidance of doubt, the financial position) of each of the Plaintiff Companies and the Group in the period from 1 July 2016 to 25 May 2017 (excluding any documents discovered to date in the proceeding pursuant to the Orders made on 30 September 2021 by Registrar Farrell).
By 30 November 2022, the defendant and the respondent give non-standard discovery to the plaintiffs of all documents relevant to the solvency (including, for the avoidance of doubt, the financial position) of each of the Plaintiff Companies and the Group in the period from 1 July 2016 to 25 May 2017, excluding in respect of the respondent: (a) documents produced to the plaintiffs in Federal Court proceeding no. NSD 1381 of 2020 by the respondent; and (b) emails to, from, CC or BCC an email address ending: (i) "@careersaustralia.edu.au"; (ii) "@asm.edu.au"; (iii) "@workstar.com.au"; (iv) "@globallearnings.support.com"; or (v) "@acae.edu.au".

[4]

Reference Process 9. Shaun Fraser of McGrathNicol is appointed referee (Referee). 10. Pursuant to s 37P(2) and/or s 54A of the Federal Court of Australia Act 1976 (Cth): (a) the questions set out in Annexure A to this Order (Relevant Questions) are referred to the Referee for the purposes of the Referee conducting an inquiry into the Relevant Questions (Reference) and providing a report to the Court stating, with reasons, the Referee's opinion on the Relevant Questions (Report); (b) the Reference will commence on 20 March 2023 (Commencement Date); (c) by 24 March 2023, the plaintiffs are to provide to the Referee (with a copy to the other parties to the Reference): (i) a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and (ii) any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions; (d) by 28 April 2023, the defendant and the defendants in proceeding VID 749 of 2021 (either jointly or separately) are to provide to the Referee (with a copy to the other parties to the Reference): (i) a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and (ii) any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions; (e) each party to the Reference must do all things required of the party by the Referee to enable the Referee to form an opinion about the Relevant Questions, and not wilfully do, or cause to be done, any act to delay or prevent the Referee forming an opinion (see FCR 28.65(8)); (f) the Referee is to implement such process for conducting the Reference as will, without undue formality or delay, enable a just, efficient, timely and cost-effective resolution of the Reference and allow completion of the Report, including, as the Referee considers it appropriate or necessary: (i) the making of inquiries to a person/entity on notice to the other parties (whether by telephone, videoconference or in writing); and (ii) the making of such directions to a party as the Referee considers appropriate for the conduct of the Reference on notice to the other parties (including but not limited to, directions to the parties to produce copies of any such documents, which the Referee considers will assist him to conduct the Reference); (g) without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate for the Referee to obtain a submission from any party, the Referee may make any direction the Referee considers appropriate in relation to such submissions on notice to the other parties (and provide a copy of that direction and the said party's submissions to the other parties to the Reference); (h) without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate and on notice to the parties, the production of documents may be compelled by direction of the Referee to a party or, in relation to a non-party, following issue of a subpoena by the Court (on application) returnable before the Referee; and (i) any evidence provided to the Referee by the parties or any third party must be provided: (i) orally on oath or affirmation; or (ii) in writing by way of affidavit. 11. The Referee is not bound to conduct the Reference in accordance with the rules of evidence. 12. The Referee may submit any question arising during the Reference in relation to the inquiry for the decision of the Court and shall thereafter conduct the Reference with any answer or direction by the Court.

[20]

Reference Process 9. Shaun Fraser of McGrathNicol is appointed referee (Referee). 10. Pursuant to s 37P(2) and/or s 54A of the Federal Court of Australia Act 1976 (Cth): (a) the questions set out in Annexure A to this order (Relevant Questions) are referred to the Referee for the purposes of the Referee conducting an inquiry into the Relevant Questions (Reference) and providing a report to the Court stating, with reasons, the Referee's opinion on the Relevant Questions (Report); (b) the Reference will commence on 20 March 2023 (Commencement Date); (c) by 24 March 2023, the plaintiffs are to provide to the Referee (with a copy to the other parties to the Reference): (i) a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and (ii) any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions; (d) by 28 April 2023, the defendants and the defendant in proceeding VID 238 of 2020 (either jointly or separately) to provide to the Referee (with a copy to the other parties to the Reference): (i) a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and (ii) any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions; (e) each party to the Reference must do all things required of the party by the Referee to enable the Referee to form an opinion about the Relevant Questions, and not wilfully do, or cause to be done, any act to delay or prevent the Referee forming an opinion (see FCR 28.65(8)); (f) the Referee is to implement such process for conducting the Reference as will, without undue formality or delay, enable a just, efficient, timely and cost-effective resolution of the Reference and allow completion of the Report, including, as the Referee considers it appropriate or necessary: (i) the making of inquiries to a person/entity on notice to the other parties (whether by telephone, videoconference or in writing); and (ii) the making of such directions to a party as the Referee considers appropriate for the conduct of the Reference on notice to the other parties (including but not limited to, directions to the parties to produce copies of any such documents, which the Referee considers will assist him to conduct the Reference); (g) without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate for the Referee to obtain a submission from any party, the Referee may make any direction the Referee considers appropriate in relation to such submissions on notice to the other parties (and provide a copy of that direction and the said party's submissions to the other parties to the Reference); (h) without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate and on notice to the parties, the production of documents may be compelled by direction of the Referee to a party or, in relation to a non-party, following issue of a subpoena by the Court (on application) returnable before the Referee; and (i) any evidence provided to the Referee by the parties or any third party must be provided: (i) orally on oath or affirmation; or (ii) in writing by way of affidavit. 11. The Referee is not bound to conduct the Reference in accordance with the rules of evidence. 12. The Referee may submit any question arising during the Reference in relation to the inquiry for the decision of the Court and shall thereafter conduct the Reference with any answer or direction by the Court.

[29]

Introduction 1 The first plaintiff is the liquidator of Careers Australia Group Limited (CAG) and certain of its subsidiaries (collectively, the Careers Group). The liquidator has commenced two proceedings in this Court seeking to recover moneys for the benefit of the creditors of CAG and the subsidiaries of CAG that are the plaintiffs in the two proceedings (plaintiff companies): proceeding VID 238 of 2020, which I will refer to as the Preference Proceeding, and proceeding VID 749 of 2021, which I will refer to as the Directors Proceeding. An outline of the allegations in the two proceedings was given in my previous judgment, Ford v Commissioner of Taxation, in the matter of Careers Australia Group Limited (in liq) (No 2) [2022] FCA 1151 (Ford No 2). 2 In Ford No 2, I concluded that (at [44]-[46]): 44 … the next step that should be taken in both proceedings is the completion of discovery by all parties on the issue of insolvency. I have not received submissions concerning the time required by the parties to complete that step or an appropriate form of orders. I will therefore direct the parties to confer and provide agreed or, failing agreement, competing orders to give effect to my conclusions regarding discovery. 45 Following the completion of discovery by all parties on the issue of insolvency, the next step that should be taken is the referral of the question of insolvency of the plaintiff companies, as alleged by the plaintiffs in their pleadings, to a suitable referee for inquiry and report. Prior to the case management hearing, the plaintiffs provided draft orders for a referral. However, the defendants did not direct detailed submissions to the form of those orders. Also, the timing of the referral will be dependent on the completion of discovery on the issue of insolvency. In the circumstances, I will direct the parties to confer in relation to the following matters concerning the referral: (a) the selection of a referee; (b) the questions to be answered; and (c) the date on which the reference is to commence and the date by which the referee is to report, and provide agreed or, failing agreement, competing orders to give effect to my conclusions regarding a referral. 46 The orders proposed by the parties should include the following requirements: (a) that the parties will seek to agree a statement of agreed facts to be provided to the referee at the commencement of the reference; (b) that evidence must be given to the referee either orally on oath or affirmation or in writing by affidavit, but the referee is not bound to conduct the reference in accordance with the rules of evidence; (c) that the referee and the parties have liberty to apply to the Court for further directions in respect of any matter in relation to the reference; and (d) that the referee may submit any question arising on the reference for the decision of the Court and provide alternative opinions which depend upon how the Court determines any question submitted to the Court. 3 In accordance with the orders made on 28 September 2022, the parties have conferred about orders for discovery and referral of the question of insolvency. Between 28 October 2022 and 3 November 2022, the parties filed competing forms of orders and brief submissions indicating their respective positions. 4 The parties are agreed as to the form of discovery orders in both proceedings, which are in materially the same terms. On 3 November 2022, the third, fourth, fifth, eighth and eleventh defendants in the Directors Proceeding notified the Court of an amendment to order 2(b) in the Directors Proceeding which had been agreed as between the plaintiffs and those defendants. My understanding is that the plaintiffs agreed generally in respect of that amendment, which narrows the range of documents to be discovered by the defendants in both proceedings, and that amendment has been made to the orders. 5 The parties disagree about certain aspects of the orders for referral of the question of insolvency: the identity of the proposed referee, the form of questions for determination by the referee, and certain of the orders governing the referral procedure. The parties have filed and served competing forms of proposed orders and written submissions. I have resolved the areas of disagreement as explained below. 6 I note that, on 3 November 2022, the Court published the Referee and Assessor Practice Note which provides guidance on the Court's practice and procedure relating to orders of referral and orders for the appointment of an assessor, including the standard terms of such orders. The parties did not have the benefit of that practice note when preparing their proposed orders and submissions. I consider that the orders proposed by the parties are consistent with the standard form of orders annexed to the practice note.

[32]

Counsel assisting the referee 17 The plaintiffs, supported by the third, fourth, fifth, eighth and eleventh defendants in the Directors Proceeding, have proposed that junior counsel be appointed to assist the referee (to the extent necessary) in the conduct of the reference. The Commissioner, supported by the first, second, sixth, seventh, ninth, tenth and twelfth defendants in the Directors Proceeding, oppose the making of an order to that effect. 18 The plaintiffs submit that the reference has the potential to raise legal issues relevant to the solvency of the plaintiff companies that are not straightforward, so as to warrant the appointment of junior counsel. One such matter is the nature and timing of any obligation to refund monies to the Department of Education. While the orders will enable the referee to navigate any legal issues by referring a question to the Court for determination and/or by expressing alternative conclusions in his or her report, the assistance of junior counsel may assist the referee to consider and engage those options if necessary, including to communicate effectively with the Court if required. The plaintiffs further submit there is no "harm" in appointing junior counsel to assist the referee where it is up to the referee to decide whether to use that assistance, and the proposed costs of junior counsel are capped at a relatively modest sum of $50,000 (half of which sum is to be borne by the plaintiffs). 19 The Commissioner submits that, having regard to the extensive experience of the referee, it is difficult to envisage what role and assistance counsel could sensibly add to the reference. Whether any of the plaintiff companies was insolvent is a question of fact that is well within the expertise and experience of an insolvency practitioner. Consequently, any counsel involvement would result in added unwarranted cost and may potentially interfere with the referee's ability to conduct the reference in the manner he sees fit. 20 Paragraph 2.11 of the Court's Referee and Assessor Practice Note states that: Depending upon the complexity of the proposed inquiry, when appointing a subject matter referee, the Court may appoint an independent barrister to provide assistance to the referee to ensure: (a) the referee's report addresses the correct questions and is expressed in such a way as to maximise its usefulness; and (b) the inquiry is conducted in accordance with the requirements of procedural fairness. 21 I accept the submissions of the plaintiffs that, in the circumstances of this case, orders enabling the referee to utilise the assistance of junior counsel are likely to be beneficial to the conduct of the reference. I accept that the determination of the insolvency questions may require certain legal issues to be resolved. While the referee will be able to refer any such questions to the Court for resolution, I agree with the plaintiffs that junior counsel may be able to assist the referee in framing the issues and considering the best option for addressing them. The fees will be capped at a modest level. In my view, the likely benefits outweigh the cost.

Ford v Commissioner of Taxation, in the matter of Careers Australia Group Limited

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Judgment (34 paragraphs)

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Legislation Cited (3)

Cases Cited (1)

Cited By (1)