Re Tomker Pty Ltd (In Liquidation) [2016] VSC 656 (2 November 2016)

1 The originating process was filed 27 June 2014. The liquidator of the second plaintiff ('Tomker') sought relief for insolvent trading pursuant to s 588M of the Corporations Act 2001 (Cth) ('Corporations Act').

2 The primary amount sought by the liquidator at that time was $99,950.80. This amount was composed entirely of a debt claimed to be proven by the Deputy Commissioner of Taxation ('Commissioner'). The Commissioner is the sole creditor. The amount now sought is $189,257.56.

3 Tomker was wound up pursuant to an earlier order of the Federal Court on 22 July 2013. The plaintiff was the Commissioner. The statutory demand which had been served prior to the application for winding up set out debts totalling $95,482.73.

4 Proofs of debt for different amounts have been lodged by the Commissioner over time, which had the effect of amending previous proofs rather than being cumulative. Those proofs of debt are as follows:

5 The amount claimed when the originating process was filed in this matter reflects the 7 October 2013 proof of debt.

6 Pursuant to orders made 15 July 2016, the plaintiffs were permitted to amend the statement of claim to increase the amount sought to $189,257.56, to reflect the 25 May 2016 proof of debt. That proof of debt set out the following:

(i) a debt of $175,764.40 by virtue of a running balance account deficit in respect of business activity statement ('BAS') amounts as at 22 July 2013, which included liability for GST, liability calculated in an audit undertaken in August 2012 and an amount incorrectly claimed by Tomker as a tax refund; and

(ii) superannuation liabilities totalling $13,373.16.

7 The defendant is the director of the second plaintiff. The defendant objected to the proof of debt dated 25 May 2016 and wished to challenge the Commissioner's assessment by lodging an objection under Part IVC of the Taxation Administration Act 1953 (Cth) ('TAA'). The reasons for this and the accounting history of the second plaintiff is set out below. For present purposes, it is sufficient to state that the liquidator did not agree to lodge the objection on behalf of the second plaintiff. The defendant therefore lodged the objection himself on 28 June 2016.

8 By the interlocutory process filed 7 July 2016, the defendant applied for the following relief:

(a) an order pursuant to s 471A(1A)(d) of the Corporations Act that the defendant's lodgement of the objection in the name of Tomker Pty Ltd (in liquidation) as trustee for the T&K Liangos Family Trust ('the objection') is approved;

(b) an order pursuant to s 1322(4) of the Corporations Act that the lodgement of the objection is not invalid by reason of having occurred prior to approval having been given by the Court.

9 This liquidation is unusual in that the only creditor is the Commissioner, and the only amount sought to be recovered in relation to insolvent trading is the amount owed to the Commissioner.

10 Notwithstanding that, the amended claim is slightly more complicated than usual in that the statement of claim outlines that Tomker was in partnership with Vege-Fresh Werribee Pty Ltd. J&T Trucks Pty Ltd was allegedly an agent for the partnership and operated a refrigerated vegetable haulage business, referred to as 'old J&T' in the amended statement of claim. Further, J&T Refrigerated Transport Pty Ltd was incorporated on 23 June 2010 and was referred to as 'new J&T' in the amended statement of claim. It is not necessary for the purposes of this interlocutory application to deal with all of the issues relating to the agent for the partnership. It is sufficient to say that from 1 July 2010 it is alleged that new J&T operated the refrigerated vegetable haulage business and acted as agent for the partnership.

11 There is a question in this matter as to whether trucks purchased by J&T were acquired by J&T as agent for and on behalf of Tomker.

12 The Report as to Affairs ('RATA') which was provided by Tomker to the liquidator is incomplete. The RATA does not set out any assets other than $12 cash at hand or refer to any creditor.

13 The partnership's running balance account ('RBA') statement, which records the partnership's liability for GST arising from BAS lodgements at 26 May 2012 was $59,630.01 inclusive of the general interest charge ('GIC').

14 On 4 June 2012, Brown Baldwin (the new accountants for the partnership) lodged revised BAS statements for each of the following quarterly periods:

15 The GST sales that were reported in the earlier lodgements were revised and reported as GST-free sales. The partnership also recorded acquisitions of:

(a) $30,000 for the July to September 2010 quarter;

(b) $255,867 for the 1 October to 31 December 2010 quarter; and

(c) $432,625 for the 1 January to 31 March 2011 quarter.

16 The revised assessments resulted in the partnership's liability for GST in each of the quarters referred to in the previous paragraph being reduced to nil. Further, the reported partnership acquisitions resulted in refunds with respect to input tax credits:

(a) EFT Refund of $45,254.07 with RBA effective date of 8 June 2012; and

(b) EFT Refund of $6,215.82 with RBA effective date of 8 June 2012.

17 The liquidator also referred to an email dated 13 July 2012 from Brown Baldwin to the partnership's office clerk. That email asked the office clerk to 'back out $300K of sales'. That was to enable the sales to be reported by Calleja Services Pty Ltd. However, that company was already in liquidation.

18 The Commissioner commenced an audit of Tomker on 6 June 2012 in relation to the revised partnership BAS for the quarter ending 31 December 2010. The Commissioner finalised the audit report in August 2012. That report concluded that the partnership was required to pay a net amount of $23,621 for the December 2010 quarter, as a result of incorrect reporting of input tax credits.

19 Tomker was wound up by order of the court on 22 July 2013 and the first proof of debt was lodged by the Commissioner on 7 October 2013. As set out above, the originating process in this matter was then filed on 27 June 2014, seeking $99,950.80.

20 The liquidator deposed that the second proof of debt was lodged on the evening of 17 December 2015, shortly before a judicial mediation was due to be held. Certain assumptions had been made. The third proof of debt was lodged on 2 February 2016 and, after reviewing the supporting documentation, the liquidator identified double accounting, which was rectified and resulted in the fourth proof of debt on 5 February 2016.

21 A further audit was conducted by the Commissioner in April 2016. The documentation requested of Brown Baldwin at that time supported the finding that the acquisition of trucks to the value of $238,096.80 was made by J & T Trucks and not the partnership. No documentation was provided to support the claim of GST-free sales.

22 The April 2016 audit set out Tomker's liability as at 22 July 2013 (the date of the winding up order). The Commissioner assessed the partnership as being liable to pay $175,764.40 at that date in respect of BAS amounts as follows:

(a) GST of $114,250 excluding GIC and penalties;

(b) GST of $49,330 representing amounts incorrectly refunded to the partnership due to the partnership's lodgement of incorrect activity statements; and

(c) GST of $23,621 for the quartered ended 31 December 2010, arising from the audit conducted in August of 2012.

That totalled $175,764.40 to which the superannuation liability of $13,373.16 was added.

23 By letter dated 27 April 2016, the Commissioner wrote to the partnership (which included Tomker) setting out 'an advice of findings of audit'.[1] That letter advised that the Commissioner would consider comments provided the same were received prior to 18 May 2016.

24 Notwithstanding the 18 May 2016 deadline, the Commissioner provided 'a completion of audit letter' to the partnership dated 29 April 2016. The completion of audit letter referred to a previous conversation with the senior auditor.

25 On 25 May 2016, the Commissioner lodged the fifth proof of debt for the amounts set out in the completion of audit letter.

26 On 24 June 2016, the defendant's solicitors provided an email to the liquidator that set out as follows:

(a) the [defendant] did not accept that the amounts assessed by the Commissioner for taxation were correct prima facie;

(b) the liquidator must take all reasonable steps to challenge the assessed liabilities, including by lodging an objection under Part IVC of the Taxation Administration Act ...; and

(c) based on the information provided to [the defendant's solicitors] on 23 June 2016, the deadline for lodging an objection appeared to be 28 June 2016.[2]

27 The liquidator denied that he was required to take reasonable steps to challenge the assessment.[3]

28 Also on 24 June 2016, the defendant's solicitors requested that the second third party and third third party lodge tax objections in their respective capacities as members of the partnership. Nothing came of that request.

29 By email transmission of 27 June 2016, the defendant's solicitors provided to the liquidator a draft objection form and draft notice of objection, and:

(a) Implore(d) the liquidator to either:

(i) lodge the objection form and notice of objection; or

(ii) consent to the [defendant] lodging the objection form and notice of objection;

(iii) ...[4]

30 On 28 June 2016, the liquidator 'strongly objected' to that course.

31 By facsimile transmission dated 28 June 2006, the defendant lodged the tax objection form and notice of objection.

32 By letter dated 22 August 2016, the Commissioner confirmed that the objection would not be considered as the defendant did not have standing to lodge that objection while Tomker was in the hands of a liquidator. The objection was therefore invalid. The letter stated that the Commissioner could only proceed with an objection request if it were valid.[5] The letter then explained that upon the appointment of the liquidator, an objection would be valid only if it were lodged with the permission of the liquidator or approval of the Court. As the objection was not valid, the matter was treated as finalised.

33 By email dated 1 September 2016, the defendant's solicitors advised the Commissioner that this application had been made pursuant to s 471A(1A) of the Corporations Act.

34 The objection principally relies upon two grounds, dealt with in the following order below. First, that s 105-50 of Schedule 1 to the TAA provides a four-year time limit on the recovery of tax amounts, which expired prior to the final notice of assessment. These amounts are therefore no longer recoverable. Second, that the taxpayer was entitled to claim input tax credits in relation to the purchase of trucks which were then leased to J&T Transport.

35 Section 105-50 of Schedule 1 of the TAA provides for a four year time limit for the Commissioner to pursue the recovery of a net amount.

105-50 Time Limit on Recovery by the Commissioner

(1) Any unpaid net amount ... of indirect tax (together with any relevant general interest charged under this Act) ceases to be payable 4 years after it became payable by you.

(2) If:

(a) an amount was paid to you, or applied under Division 3 of Part IIB of this Act, as:

(i) a refund in relation to a net amount ... of indirect tax; or

(ii) an amount of indirect tax that was overpaid or wrongly paid; and

(b) that amount exceeded the amount (if any) that you are entitled to be paid, or to have applied under Division 3 of Part IIB of this Act;

the amount of the excess (together with any relevant general interest charged under this Act) ceases to be payable 4 years after it became payable by you.

(3) However, subsection (1) does not apply to an amount, and subsection (2) does not apply to an amount of an excess, if:

(a) within those 4 years the Commissioner has required payment of the amount or the amount of excess by giving notice to you; or

(b) the Commissioner is satisfied that:

(i) the payment of the amount was avoided by fraud or evaded; or

(ii) the payment of the amount of excess, or its application under Division 3 of Part IIB of this Act, was brought about by fraud or evasion.

...

36 The defendant submits that the assessments issued on 29 April 2016 were with respect to tax periods ended 30 September 2010, 31 December 2010, 31 March 2011, 30 June 2011, 30 September 2011, 31 December 2011, 31 March 2012 and 30 June 2012. That led to the date the net amount was payable with respect to each tax period as follows: 28 October 2010, 28 February 2011, 28 April 2011, 28 July 2011, 28 October 2011, 28 February 2012, 28 April 2012 and 28 July 2012. On that basis, the defendant submits that all of the assessments were barred by operation of s 105-50, except for that for the period ended 30 June 2012.

37 The four year period established by s 105-50 of the TAA is in contrast to the six year limitations period established by the liquidation and insolvent trading regimes in the Corporations Act.

38 Section 553(1) of the Corporations Act provides that the following debts are admissible to proof against the company in liquidation:

(1) ... all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date...

39 The 'relevant date' is defined in s 9 to be 'the day on which the winding up is taken because of Division 1A of Part 5.6 to have begun'.

40 Section 588M(2) of the Corporations Act allows the liquidator to recover, 'as a debt due to the company', an amount equal to the loss or damage sustained by a person as defined in s 588M(1). Section 588M(1), in turn, applies where:

(a) a person (in this section called the director) has contravened subsection 588G(2) or (3) in relation to the incurring of a debt by a company; and

(b) the person (in this section called the creditor) to whom the debt is owed has suffered loss or damage in relation to the debt because of the company's insolvency; and

(c) the debt was wholly or partly unsecured when the loss or damage was suffered; and

(d) the company is being wound up;

whether or not:

(e) the director has been convicted of an offence in relation to the contravention; or

(f) a civil penalty order has been made against the director in relation to the contravention.

41 Sections 588G(2) and (3) prohibit what is ordinarily referred to as 'insolvent trading'.

42 The recovery of loss and damage, as a debt due to the company, under s 588M(2) must be commenced within six years of the beginning of the winding up: s 588(4) Corporations Act. This provision is in contrast to the four years provided by s 105-50 of the TAA, after which an amount of taxation is no longer payable.

43 The parties provided submissions on the effect of these provisions. The arguments of the parties present two related issues. First, whether the proper time limit for recovering the tax amount is four years (s 105-50 of the TAA) or six years (s 588M of the Corporations Act). Second, whether there is an amount owing if the shorter (four year) period applies, and whether this period is affected by the liquidation of the second plaintiff.

44 In relation to the first issue, the liquidator says that it is possible that a tax amount may be recovered in the winding up under s 588M even if it is no longer payable under s 105-50. This is because s 588M(1)(b) speaks of a person who 'has suffered' loss and damage, in the past tense. The liquidator contends that:

A creditor will have suffered loss and damage in relation to a debt at the moment that debt is incurred because of the company's insolvency.

The loss and damage does not cease to have been suffered because of the operation of s 105-50 of the TAA. Similarly, the loss and damage does not cease to have been suffered because of the winding up of the company.

45 That is, loss and damage occurred at the time of incurring the tax liability. That loss and damage is not affected by the expiration of the time period in s 105-50 of the TAA. Rather, it can be recovered at any time within the six years set by s 588M(4).

46 Against this construction, s 588M(1)(b) also speaks of a person 'to whom the debt is owed' (emphasis added). This suggests that if the tax amount is no longer payable by virtue of s 105-50 of the TAA, recovery in the liquidation is not possible: there 'is' no longer any debt which is owing to the Commissioner. If this construction is accepted, the four year time limit is determinative.

47 The liquidator contends that a construction of the words '[i]s owed' in s 588M(1)(b):

is not used in a temporal sense, but to identify the person referred to in the section as "creditor". This is supported by the use of the past tense: 'has suffered loss and damage'.

If the liquidator's interpretation is accepted, it does not matter whether the debt 'is' owing. Rather, the fact that loss and damage was suffered within the last six years allows the debt to be recovered, notwithstanding that tax amount is no longer payable under s 105-50. The six year limitation under s 588M(2) prevails over the four year limitation period in s 105-50 of the TAA.

48 I reject that submission. The four year period will either apply or not apply. If the amount is no longer payable by virtue of s 105-50 of the TAA, it cannot be recovered by the Commissioner. To allow the Commissioner to recover that sum by way of s 588M would allow the Commissioner to gain a greater revenue from taxpayers in liquidation than from taxpayers trading in the ordinary course of business. There is no apparent reason why that should be the case. Such a conclusion would be contrary to the clear intention of s 105-50. If there is no tax amount which is payable, there can be no debt in respect of that amount.

49 The conclusion that the four year period of s 105-50 is determinative leads to the second issue: whether there is, in fact, an amount payable under that provision and whether the four year period is affected by the liquidation of the second plaintiff.

50 The defendant contends that the assessment of 29 April 2016 was issued more than four years after the tax amounts were payable, with the exception of tax incurred during the period ending 30 June 2012.

51 The liquidator contends that the debt was one which was owing as at the relevant date and is therefore provable in the liquidation. On this analysis, the fact that the four year period set by s 105-50 has expired has no impact. The liquidation effectively stops time if the amount was payable at the relevant date, it is provable in the liquidation.

52 The case referred to by the liquidator as being analogous is Motor Terms Co. Pty Ltd v Liberty Insurance Ltd ('Motor Terms').[6] The proposition which can be distilled from Motor Terms and the cases referred to therein is that a debt which is statute barred prior to the commencement of the winding up is not provable in the liquidation. A debt which was not barred at the commencement of the winding up may still be proved in the liquidation, even if it is proved after the debt would ordinarily be statute barred (that is, irrecoverable by action).

53 These propositions do not assist the liquidator. Section 105-50 is not the same as an ordinary limitation of actions provision. Whether or not tax is payable under the statutory scheme is not the same question as whether a debt remains recoverable by action. In the case of a debt which becomes statute barred after the commencement of the liquidation but before being proved in the liquidation, there is still a debt which is owing. The limitation only prevents it being recovered by ordinary action; it still exists, however, and can be recovered in the liquidation. If s 105-50 operates in relation to a tax amount, however, there is no debt. No amount is payable to the Commissioner after four years, whether inside the liquidation or outside it.

54 This is what is meant by the fact that the assessment goes to the substance of whether a tax amount is payable, and not merely its recovery. That is, the question is not one of recovery of a debt, but whether there is a debt at all. If the time period set by s 105-50 has expired, the tax amount is not 'payable' and there is no debt.

55 So much is evident from s 7-15 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) ('GST Act'), which provides that the net amount for a taxpayer is the 'the amount that the entity must pay to the Commonwealth ... in respect of the period'. If no amount is payable by virtue of s 105-50 TAA, the net amount under s 7-15 of the GST Act is clearly affected.

56 In support of the proposition that s 105-50 goes to the substance of tax liability rather its recoverability, the defendant points to the decisions of the Administrative Appeals Tribunal ('AAT') in Re Cyonara Snowfox Pty Ltd and Commissioner of Taxation ('Cyonara Snowfox')[7] and Re The Hotel Apartment Purchaser v Commissioner of Taxation ('Hotel Apartment').[8] These decisions both considered whether a tax amount was payable in light of the operation of s 105-50. It is said by the defendant that the Tribunal is limited to considering the substantive correctness of the tax amount. The fact that the Tribunal considered the s 105-50 question therefore indicates that s 105-50 must go to the question of substance. If the matter was not one of substance, the Tribunal would have fallen into jurisdictional error, yet the Full Federal Court found no error in the Tribunal's decision.[9]

57 In support of the proposition that the Tribunal is limited to questions of the 'substantive correctness of the amount', the defendant cites s 105-40 of the TAA. That provision provides as follows:

(1) You may object, in the manner set out in Part IVC, against a decision you are dissatisfied with that is a reviewable indirect tax decision relating to you.

(2) A decision under section 105-5 or 105-25 involving an assessment of a net amount, a net fuel amount or an amount of indirect tax is a reviewable indirect tax decision.

58 Section 105-5 allows the Commissioner to make an assessment of a taxpayer's net amount. Section 105-25 allows that assessment to be amended. Regarding whether or not this provision strictly limits the Tribunal to questions of substance, again, the conclusion is that s 105-50 goes to the substance of the tax liability, rather than its recovery.

59 Neither the Cyonara Snowfox or Hotel Apartment decisions involves a company in liquidation. This fact, however, does not alter the conclusion reached earlier. In this respect, I accept the following submission made by the defendant:

Nothing in the words of the relevant provisions indicates an intention that the time limit for the Commissioner to act would be extended by an entity being wound up...

60 Any assessment made by the Commissioner therefore had to be made within the four year period set by s 105-50. It is only an amount which is the subject of a notice of assessment made within the four year period which is payable after the expiration of the four year period (in the absence of allegations of fraud or evasion): s 105-50(3)(a) TAA.

61 The liquidator seeks to lessen the importance of the date of the assessment. The liquidator asserts that the question of whether an amount is payable is not determined by the making of an assessment. The liquidator relies on upon the statement by Logan J in Deputy Commissioner of Taxation v PM Developments Pty Ltd ('PM Developments'):[10]

Unlike income tax, where liability to pay the tax is not complete until the making of an assessment, liability to pay GST is not dependent on the making of an assessment by the Commissioner.

Even so, by s 105-10 in Sch 1, the Taxation Administration Act anticipates that a person whom the Commissioner asserts to be the subject to a liability to GST may require the Commissioner to make an assessment, thereby initiating the process that may lead to external merits review by the AAT or the exercise of original jurisdiction by this Court in a taxation appeal.[11]

63 The liquidator's submission in this respect is that if the debt is incurred by reason of the transaction - rather than the Commissioner's assessment - the debt is one 'the circumstances giving rise to which occurred before the relevant date' and is therefore provable in the liquidation as per s 588M(1) Corporations Act.

64 Although the liability to pay GST is not dependent upon the assessment having been made, it is certainly the mechanism whereby a merit assessment may ensue. In the absence of that review, the assessment will stand. Moreover, this does not overcome the conclusions reached above in relation to whether or not the tax remains payable.

65 The defendant therefore has reasonable prospects of success if permitted to object to the assessment. To the extent that an assessment requires payments of amounts, which had not been claimed within the four year period, those requirements may be plausibly disputed.

66 Finally, it should be noted that the Commissioner did require payment of certain amounts within the four year period. The Commissioner is entitled to amend the assessments made within that four year period: s 105-25 TAA. To the extent that those amended payment requirements were made within the four year period (and were not otherwise excessive) they are prima facie payable by the taxpayer. The fact that the Commissioner could not require payments by amendments made on 29 April 2016 does not prevent the Commissioner relying on the previous assessments that were made within the four year period.

67 The second limb to the objection claims that the defendant was entitled to certain input tax credits in relation to the purchase of trucks by J&T Transport.

68 Input tax credits are available under s 11.20 of the GST Act for 'creditable acquisitions'. Section 11.5 defines a creditable acquisition as being made when:

(a) you acquire anything solely or partly for a creditable purpose; and

(b) the supply of the thing to you is a taxable supply; and

(c) you provide, or are liable to provide, consideration for the supply; and

(d) you are registered, or required to be registered [for GST purposes].

69 The 'creditable purpose' referred to in paragraph (a) of that definition is defined in s 11.15 as follows (so far as is relevant):

(1) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

(2) However, you do not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be input taxed; or

(b) the acquisition is of a private or domestic nature.

70 The defendant claims that from 1 July 2010, the taxpayer leased trucks to J&T Transport for a quarterly fee of $89,270.00. The primary position is that Tomker (as part of the taxpayer) made the acquisition of the trucks and was entitled to claim input tax credits in relation to such acquisitions. That understanding was based upon:

(a) The assertion made by the liquidator and his proposed amended statement of claim that J&T Transport acted as agent for the partnership;

(b) The financial statements for taxpayer and J&T Transport, which refer to J&T Transport acting as the partnership manager of the taxpayer; and

(c) The understanding of the accountant responsible dealing with the Commissioner in relation to the 2012 audit (whose position appears to have been misinterpreted).

Should the taxpayer be found to not have made the acquisitions of the relevant trucks, the Commissioner should reconsider whether amounts received by the taxpayer were consideration for a taxable supply in relation to the leasing of those trucks to another party. Accordingly, if the Commissioner does not allow the objection on the basis that the grounds above, he should allow the objection on the basis that the taxpayer did not make the alleged taxable supply.

72 It is possible that the purchase of the trucks was a 'creditable acquisition' on behalf of the taxpayer which entitles it to input tax credits. However, it is not possible for me to form a view on this question without evidence as to the circumstances of the purchase of the trucks.

73 The defendant has chosen not to swear an affidavit in support of the interlocutory application. Not only does he not verify any of the matters relied upon in the objection but, more importantly, he also does not explain what has happened to the trucks which he contends were 'creditable acquisitions'. The RATA is not explained. The relationship between the taxpayer and the agent is not clarified. I did not receive into evidence any material which might have set out the ambit of the agency between the taxpayer and the agent. Source documents with respect to the purchase of trucks were not provided. The absence of such material results in me not being able to make any assessment of the merits of the second ground for objection.

74 The approval of the Court is sought by the defendant under s 471A(1A)(d) of the Corporations Act to allow the objection to be validly lodged by the defendant. In Binetter v Commissioner of Taxation ('Binetter'),[12] the director had sought approval to bring proceedings in the name of the company. Stone J held that:[13]

The matters relevant to the exercise of the Court's discretion will depend on the nature of the action that an applicant for approval wishes to pursue. "It would be a mistake to encrust the court's discretion with one-size-fits-all rules for the conditions that must attach to any approval given by the court": HVAC Constructions (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd [2002] FCA 1638; (2002) 44 ACSR 169 at [43].

75 Her Honour then considered whether granting leave would result in prejudice to creditors and the likelihood of success of the director's proposed action.

76 In relation to prejudice to creditors, I adopt the observations made by Perram J in HFGC Nominees (No 2) Pty Ltd v Hancock as liquidator of 246 Arabella Investments Pty Ltd) (In Liq) ('HFGC Nominees').[14] In that case, a shareholder of the taxpayer sought leave nunc pro tunc to object to the Commissioner's assessment of the taxpayer's liability during winding-up. As in this case, the Commissioner was the only creditor.[15] Perram J held that:[16]

The Commissioner did not oppose the granting to Mr Higgins [the shareholder] of leave but did draw my attention to the fact that proceedings in the Tribunal would be likely to delay the ordinary course of the winding-up. No doubt that is true but in circumstances where the Commissioner is the only creditor I do not regard that as a sufficient reason to deny Mr Higgins his chance to undermine the Commissioner's status as a creditor. The prejudice in terms of delay is much less than the prejudice to Mr Higgins if the tax assessments are truly liable to be set aside but go unchallenged.

Mr Higgins accepted that if leave were granted orders should be made which rendered the liquidator harmless; that is, that the full cost of pursuing the Tribunal appeal should be borne by Mr Higgins and should not impact upon the taxpayer or the liquidator in any way. This is so and such orders should be made. Mr Higgins is entitled to an order granting him leave to pursue the Tribunal proceedings in the name of taxpayer and that order should be made nunc pro tunc.

77 This is not a matter where a collective group of creditors might or might not be prejudiced. I accept that if the objections are treated adversely to the taxpayer then it may be open to review such a decision. It is axiomatic that any review will further delay the winding up. However, that is a matter for consideration if the issue arises. The potential prejudice to the taxpayer in refusing leave in this case is greater than the potential prejudice to the liquidator (and thus the Commissioner) in granting that leave. There are no other creditors who may suffer prejudice here.

78 The second matter considered by Stone J in Binetter was the likelihood of success of the director's proposed action. Her Honour said:

The second matter to be considered, as in any case where leave is required to commence proceedings, is the utility of such an order, in other words the likelihood of any such proceeding meeting with success. [17]

79 In that case, Stone J was required to consider whether leave ought to be granted to commence proceedings to bring an appeal from orders made by Jagot J. The orders provided for the winding up of the company and its re-registration for that purpose, it having been previously deregistered. Stone J considered that the decision of Jagot J was not attended with sufficient doubt to warrant it being reconsidered and dismissed the director's application.[18]

80 In HFGC Nominees, Perram J considered that although the shareholder was required to adduce evidence to the Commissioner in order to substantiate his objection, his Honour was 'willing to accept that [the shareholder's] contention is sufficiently arguable to be allowed to proceed in the Tribunal'.[19]

81 HFGC Nominees was considered in Re ACN 092138442 Pty Ltd (In Liq) v Commissioner of Taxation ('ACN 092138442 Pty Ltd').[20]

82 In ACN 092138442 Pty Ltd an objection had been made in the name of the taxpayer without the permission of the liquidator. Gzell J in the Supreme Court of NSW granted leave to the director to lodge an objection to the Commissioner's assessment 'pursuant to Pt IVC' of the TAA.[21] Following determination of the objection, the director appealed to the AAT. There was a question as to whether the scope of leave granted included appeals to the Tribunal. The Senior Member noted that the order of Gzell J:

permitted [the director] to lodge an objection pursuant to Part IVC in the name of ACN 092 138 442 and nothing more. The order could easily have been framed to include a review by the Tribunal or an appeal to the Federal Court. It did not do so. I do not accept the submission that an order permitting a person to lodge an objection in the name of a company in liquidation also permits, by inference, all of the potential processes set out in Part IVC that may follow.[22]

83 The Commissioner had urged the Senior Member to dismiss the review proceedings before the Tribunal as a result of this lack of standing.[23] The Tribunal Member declined to dismiss the review. In doing so, he noted the possibility of leave being subsequently granted by a court nunc pro tunc in line with the decision of Perram J in HFGC Nominees.[24] The Senior Member made no order, which had the effect of allowing the director time to apply for an order similar to that made by Perram J in HFGC Nominees if he so chose.

84 In relation to these issues, the primary position of the liquidator is that permitting the objection to proceed serves no utility. The liquidator contends that the objection is solely directed towards reducing the amount of compensation payable in this proceeding. That is a question that will be determined in the proceeding.

85 However, in the absence of a concession on the part of the liquidator, I conclude that the liquidator will rely upon the latest assessment as evidence of the amount due. That will not permit any extensive argument as to the propriety of the assessment, and therefore, there is little prospect of the quantum of liability being reduced in any way.

86 Logan J recognised that if an assessment had been tendered in PM Developments it 'would have been conclusive evidence of that liability',[25] citing s 105-100 TAA and Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd.[26] His Honour stated that:[27]

Part of the comprehensive scheme for the resolution of Commonwealth revenue law controversies is the conclusive effect given to the correctness of an assessment upon its tender in proceedings other than appeal or review under Part IVC of the Taxation Administration Act.

87 The liquidator contends that Commonwealth tax legislation establishes a 'pay now, dispute later' regime. If the director wishes to dispute the underlying tax debt, the liquidator contends that he should put the company in a position to pay it prior to the dispute. It is said that that is in accordance with the principles set out in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd ('Broadbeach').[28]

88 Broadbeach concerned the effect of statutory provisions which allow recovery of tax debts which are disputed.[29] The decision does not require payment before a dispute can be lodged. There is nothing in the statutory provision which prevents leave being granted nunc pro tunc in these circumstances in order to lodge or validate an objection.

89 As I have already set out, I am not impressed by the lack of evidence on behalf of the applicant to explain the acquisition of the trucks and what has become of them. The material before me does not permit sufficient consideration to consider whether that ground has any prospect of success on objection.

90 The time bar objection is sufficiently arguable and falls into a different category, for the reasons given in paragraphs [35] to [66] above.

91 I determine that the prejudice likely to be suffered by the defendant if the objection remains unheard would be greater than that suffered by the Commissioner or liquidator if there is a delay in the winding up.

1. An order pursuant to s 471A(1A)(d) of the Corporations Act 2001 (Cth) permitting lodgement of the objection (nunc pro tunc) lodged by the Defendant/Applicant on 28 June 2016 in the name of Tomker Pty Ltd (in liquidation) as trustee for the T&K Liangos Family Trust.

2. An order pursuant to s 1322(4) of the Corporations Act 2001 (Cth) that the lodgement of the objection is not invalid by reason of having occurred prior to approval having been given by the Court.

93 I will reserve the question of costs to after the result of the objection is known.

94 I will vacate the trial date and require the parties to submit suitable consequential orders.

[1] Affidavit in Support of Interlocutory Process dated 7 July 2016, Exhibit ALLM-1.

[2] Affidavit in Support of Interlocutory Process dated 7 July 2016, Exhibit ALLM-3.

[5] Affidavit of Vince Murano dated 2 September 2016, Exhibit VM-1.

[6] [1967] HCA 9; (1967) 116 CLR 177.

[7] [2010] AATA 137.

[8] [2013] AATA 567.

[9] Cyonara Snowfox Pty Ltd v Federal Commissioner of Taxation [2012] FCAFC 177; (2012) 208 FCR 471.

[10] (2008) 173 FCR 247, 252 at [21].

[11] Deputy Commissioner of Taxation v PM Developments Pty Ltd (2008) 173 FCR 247, 252 at [21].

[12] [2011] FCA 1195.

[14] [2010] FCA 1005.

[15] HFGC Nominees [2010] FCA 1005; (2010) 80 ATR 442, 448 at [22].

[17] Binetter [2011] FCA 1195; (2011) 198 FCR 49, 59 at [31].

[18] Binetter v Commissioner of Taxation [2011] FCA 1195 at [37], [39].

[19] HFGC Nominees (No 2) Pty Ltd v Hancock as liquidator of 246 Arabella Investments Pty Ltd) (In Liq) [2010] FCA 1005 at [20].

[20] [2013] AATA 690.

[21] ACN 092138442 Pty Ltd v Commissioner of Taxation [2013] AATA 690 at [9].

[22] ACN 092138442 Pty Ltd (2013) 95 ATR 976, 980−1 at [20].

[23] ACN 092138442 Pty Ltd (2013) 95 ATR 976, 982 at [27].

[24] ACN 092138442 Pty Ltd (2013) 95 ATR 976, 982 at [28]-[30].

[25] PM Developments (2008) 173 FCR 247, 251-2 at [18].

[26] [2008] HCA 41; (2008) 237 CLR 473, 489 at [33]; [2008] HCA 41; (2008) 237 CLR 473, 491-2 at [40]-[45].

[27] PM Developments (2008) 173 FCR 247, 252 at [22].

[28] [2008] HCA 41.

[29] See Taxation Administration Act 1953 (Cth) s 14ZZM.