Hall (as liquidator of Reynolds Vineyards Pty Ltd) v Commissoner of Taxation

Supreme Court of NSW|2004-10-11|Before: Barrett J, Finkelstein J, Austin J, Santow J

Reported Decision : 51 ACSR 169 (2004) 22 ACLC 1495

CITATION : Hall (as liquidator of Reynolds Vineyards Pty Ltd) v Commissoner of Taxation [2004] NSWSC 950 HEARING DATE(S) : 11/10/04 JUDGMENT DATE : 11 October 2004

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order for payment

FILE NUMBER(S) : SC 2685/04 COUNSEL : Mr R A Dick - Plaintiffs Ms E Whan, Solicitor - Defendant SOLICITORS : Blake Dawson Waldron - Plaintiffs Australian Government Solicitor - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

2685/04 - HALL & ANOR (AS LIQUIDATORS OF REYNOLDS VINEYARDS PTY LIMITED) v COMMISSIONER OF TAXATION

1 By an originating process filed on 4 May 2004, the liquidators of Reynolds Vineyards Pty Ltd claimed an order pursuant to s.588FF(1) of the Corporations Act 2001 (Cth) that the defendant, being the Commissioner of Taxation, pay to that company the sum of $77,750. By a statement of claim subsequently filed on 10 September 2004, the liquidators' claim was pleaded in paragraphs 14 to 19 (as well as a concluding paragraph 20 which, for immediate purposes, may be left to one side). The basis of the claim so pleaded was that the payment of $77,750 by the company to the Commissioner was an unfair preference within the meaning of s.588FA and an insolvent transaction within the meaning of s.588FC, so that it constituted a voidable transaction within the meaning of s.588FE(2) grounding a claim under s.588FE. 2 By a defence filed on 17 December 2004, the Commissioner admitted paragraphs 14 to 19 inclusive of the statement of claim, being the paragraphs which pleaded the claim in the way I have briefly described. The situation is thus one in which the defendant Commissioner has formally conceded all the elements which together go to make up the claim for an order under s.588FF. This includes, of course, the element as to the company's insolvency at the relevant time: see s.588FC. 3 The liquidators contend, and the Commissioner does not dispute, that these admissions constitute a sound basis for the making of the order the liquidators seek. 4 There has been a difference of opinion in decided cases on whether the required ingredients may, in cases of this kind, be supplied by admission or concession. The question arises because of the introductory words of s.588FF(1): "Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of s.588FE…"

The difference of opinion relates to the content of the requirement that the court be "satisfied" that a transaction is a "voidable transaction". 5 The decision of Finkelstein J in Crosbie (as liquidator of Trollope Silverwood & Beck Pty Ltd) v Commissioner of Taxation (2003) 130 FCR 275 proceeded on the basis that a requirement that the court be "satisfied" on this or any other matter could not be met merely by accepting and giving effect to an admission or concession. His Honour's view was that the words "is satisfied" impose upon the court a duty to make positive inquiry and to base its decision on the underlying circumstances as proved by evidence. In taking that approach, Finkelstein J did not accept what he considered to be the substance of two earlier decisions, being the decision of Austin J in Cadima Express Pty Ltd v Deputy Commissioner of Taxation (1999) 157 FLR 424 and that of Santow J in SJP Formwork (Australia) Pty Ltd v Deputy Commissioner of Taxation (2000) 34 ACSR 604. Finkelstein J considered that each of these supported the proposition that the jurisdictional condition could be met by a consent or concession. He said that the two earlier decisions were "patently wrong". 6 The matter was next considered by Austin J in Dean-Willcocks (as liquidator of SJP Formwork (NSW) Pty Ltd) v Commissioner of Taxation (No 2) (2004) 49 ACSR 325. His Honour pointed out that Finkelstein J had taken a mistaken view of the actual decision in each of Cadima and SJP Formwork: "I respectfully disagree with Finkelstein J that the two cases are authorities for any proposition about the efficacy of consent orders under s 588FF. The former case was about the appointment of a receiver to initiate a damages claim on behalf of the company. In the latter case, the question was whether an order under s 588FF was defective because it required payment to "the plaintiffs" rather than the company alone. In each case consent orders had previously been made under s 588FF, as recorded in the judgments, but no issue was raised about the fact that the orders had been by consent, and the cases proceeded on the assumption that the orders had been regularly made. As far as I am aware, there was no authority on the consent order point before the Crosbie case was decided." 7 Austin J went on to endorse, and to give comprehensive reasons in support of, the proposition that a court may be "satisfied", for s.588FF(1) purposes, on the basis of admissions alone. At the same time, his Honour emphasised that care needs to be taken in cases where an admission may adversely affect a person who is not an immediate party to the proceedings in which the admission is made. 8 Subsequently, in Cooper (as liquidator of Wanted Worldwide (Australia) Ltd) v Commissioner of Taxation [2004] FCA 1063 (19 August 2004), Lander J, confronted by conflicting decisions of first instance judges, reviewed the matter in some detail and concluded that he should follow Austin J's decision in Dean-Willcocks (as liquidator of SJP Formwork (NSW) Pty Ltd) v Commissioner of Taxation (No 2) rather than Finkelstein J's decision in Crosbie (as liquidator of Trollope Silverwood & Beck Pty Ltd) which he concluded was "plainly wrong". Lander J also said: "In my opinion, the proper construction of s 588FF would allow parties to agree on all of the matters necessary to establish a voidable transaction under s 588FE so as to allow the Court to be satisfied that the transaction is voidable because of s 588FE and that an order should be made under s 588FF.

Whilst a court might act upon the admission of a defendant and so be satisfied of the matters contained in s 588FF, it is not obliged to do so. Because of the effect of s 588FGA, it would be relevant, if it were the Commissioner who was offering the concession or admission, to have regard to the interests of the persons who might be affected by that concession or admission. Ordinarily, they would be the persons who would be affected by the statutory indemnity which would be created by the orders made under s 588FF.

Also, the court would have regard to the provisions of s 588E(8) of the Act which raises a statutory presumption in relation to subsequent proceedings. The court might insist that the liquidator give notice to persons who might be affected under s 588FGA, s 588FGB or s 588E, before the court was so prepared to act.

The court would also have regard to the information which had been considered by the party offering the concession or admission and the extent of that party's inquiries to satisfy itself that the concession or admission should be made and acted upon by the court." 9 With the case law in this state, it is clear, in my view, that I should take the course that commended itself to Lander J. That is, in any event and for the reasons given by both Lander J and Austin J, the approach to the question that I consider to be correct. 10 A significant factor in the present case is that the controversy is and will remain confined to the immediate parties now before me, being the liquidators and the Commissioner. The relevant payment related to tax liabilities that are not within the any of the categories mentioned in s.588FGA(1). As a result, there is no possibility that the making of the order now sought will occasion prejudice to persons upon whom derivative liability might be visited by means of an order for indemnity under s.588FGA. Nor is there any suggestion that any other person will be adversely affected, whether through s.588E(8) or otherwise, by a finding of insolvency on the particular date here in question if the court proceeds on the basis of the Commissioner's admission and without any inquiry into its cogency. There is no reason to think that the admission has been made otherwise than in an appropriately considered way. 11 The result will therefore be that, based on the claims in paragraphs 14 to 19 of the statement of claim and the admissions in relation thereto in the defence, the court will, in response to the application of the liquidators of Reynolds Vineyards Pty Ltd, make an order under s.588FF requiring the Commissioner of Taxation to pay the claimed sum of $77,750 to that company. 12 I now make orders in accordance with the short minutes which I initial and date.

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