
60;                                        EXHIBIT 10.2
 
 

                                               
                                              
 

 

 
 
DEED OF SETTLEMENT
 
 
BETWEEN
 
 

 
 
MAGELLAN PETROLEUM AUSTRALIA LIMITED ACN 009 728 581
 
 
MAGELLAN PETROLEUM (N.T.) PTY LTD ACN 009 718 183
 
 
PAROO PETROLEUM PTY LTD ACN 010 839 488
 
 

 
 
AND
 
 
THE COMMISSIONER OF TAXATION
 
 
OF THE COMMONWEALTH OF AUSTRALIA
 
 

 
 

 
 

 
 

 
n Ernst & Young Law

Sydney Office
The Ernst & Young Building
Level 41, 680 George Street, Sydney NSW 2000  Australia
Tel  +61 2 9248 5555   Fax  +61 2 9248 5584
WWW site: http://www.ey.com.au
REF: HJA:60458530/12293168
 
An incorporated legal practice under the Legal Profession Act 2004
 
Liability Limited by a scheme approved under Professional Standards Legislation
 

                                                                                                                                      
60;                                                                   
 
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DEED OF SETTLEMENT
 
 
THIS DEED is made the 7th day of February, 2008.
 
 

 
 
BETWEEN:
 
 

 
 
MAGELLAN PETROLEUM AUSTRALIA LIMITED ACN 009 728 581
 
 
(‘the first taxpayer’)
 
 

 
 
AND
 
 

 
 
MAGELLAN PETROLEUM (N.T.) PTY LTD ACN 009 718 183
 
 
(‘the second taxpayer’)
 
 

 
 
AND
 
 

 
 
PAROO PETROLEUM PTY LTD ACN 010 839 488
 
 
(‘the third taxpayer’)
 
 
of
 
 
145 Eagle Street Brisbane QLD, 4000
 
 
(collectively known as the “Taxpayers”)
 
 

 
 
AND
 
 
THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
 
 
of
 
 
2 Constitution Ave, Canberra, ACT, 2600 (‘the Commissioner’)
 
 
 
23

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CONTENTS
 
 

 
1.     DEFINITIONS AND INTERPRETATION
4
 
2.     OBLIGATIONS OF THE COMMISSIONER
6
 
3.     OBLIGATIONS OF THE TAXPAYER
7
 
4.     TAXPAYER’S WARRANTY AND ACKNOWLEDGEMENT
7
 
5.     AUTHORITY TO SIGN
8
 
6.     GENERAL
9
 
7.     DEFAULT CLAUSE
10
 
8.     NOTICES
11

 
 
                        
                                                                                                                                      &
#160;                                                                   
 
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RECITALS
 
 
A.    
The Commissioner and the Taxpayers are in dispute as to the deductibility of the
bad debts claimed by the first and third Taxpayers in the 1997 to 2005 income
years.

 
 
B.    
In particular, the Commissioner and the Taxpayers are in dispute as to:

 
 
 
(a)
whether the amounts claimed by the first taxpayer as bad debts in the 2004 and
2005 income years are allowable under section 25-35 of the ITAA 1997;

 
 
 
(b)
whether the first taxpayer was carrying on a money lending business in those
years;

 
 
 
(c)
whether the amounts claimed by the first taxpayer are allowable under section
8-1 of the ITAA 1997 in those years;

 
 
 
(d)
whether the losses transferred to the first and / or second taxpayers from the
third taxpayer under section 80G of the ITAA 1936 and Subdivision 170-A of the
ITAA 1997 in the 2003 and earlier income years are available to the extent
claimed by the first and second taxpayers;

 
 
 
(e)
whether the amounts claimed by the third taxpayer as bad debts in the 2003 and
earlier income years are allowable under paragraph 63(1)(b) of the ITAA 1936 or
section 25-35 of the ITAA 1997;

 
 
 
(f)
whether the third taxpayer was carrying on a money lending business in those
years; and

 
 
 
(g)
whether the amounts claimed by the third taxpayer as bad debts are allowable
under subsection 51(1) of the ITAA 1936 or section 8-1 of the ITAA 1997 in those
years.

 
 
C.    
The parties remain in dispute as to the alleged taxation liability or
entitlement of the Taxpayers.

 
 
D.               The parties nonetheless wish to settle their dispute on the
following terms.
 

OPERATIVE PART
 
In consideration of the mutual promises contained in this document, the parties
to this  agree as follows:
 
 
1.     DEFINITIONS AND INTERPRETATION
 
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1.1
In this document:
‘Bank Bill Rate’ means the 90-day Bank Accepted Bill Rate.
 
‘Commissioner’ means the Commissioner of Taxation of the Commonwealth of
Australia and as required, his successors or assigns and any delegate or
authorised representative acting on his behalf.
 
 
‘GIC’ means the General Interest Charge calculated pursuant to Division 1 of
Part IIA of the TAA 1953.
‘ITAA 1936’ means the Income Tax Assessment Act 1936 (as amended).
‘ITAA 1997’ means the Income Tax Assessment Act 1997 (as amended).
‘party’ or ‘parties’ means the Taxpayers and/or the Commissioner.
 
‘person’ means any natural person and includes a firm, corporation, body
corporate, unincorporated association or any governmental authority.
‘relevant years’ means the financial years ended 30 June 1997 to 30 June 2005.
‘SIC’ means Shortfall Interest Charge calculated pursuant to Division 280 of
Schedule 1 of the TAA 1953.
‘TAA 1953’ means the Taxation Administration Act 1953 (as amended).
‘Taxpayers’ means Magellan Petroleum Australia Limited A.C.N. 009 728 581,
Magellan Petroleum (N.T.) Pty Ltd A.C.N. 009 718 183 and Paroo Petroleum Pty Ltd
A.C.N. 010 839 488.
‘the first taxpayer’ means Magellan Petroleum Australia Limited A.C.N. 009 728
581.
‘the second taxpayer’ means Magellan Petroleum (N.T.) Pty Ltd A.C.N. 009 718
183.
‘the third taxpayer’ means Paroo Petroleum Pty Ltd  A.C.N. 010 839 488.
‘this Deed’ means this Deed of Settlement between the Commissioner and the
Taxpayers.
 
1.2
In this document, unless the contrary intention appears:

 
 
1.2.1.
a reference to this document means this Deed, and references to clauses and
schedules are references to clauses and schedules of this Deed;

 
 
 
1.2.2.
any word, term or expression for which a particular or special meaning has been
attributed or ascribed by the Act, shall be given that particular or special
meaning in this Deed;

 
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1.2.3.
singular includes the plural and vice versa;

 
 
 
1.2.4.
a reference to any one gender includes each other gender (as the case may
require);

 
 
 
1.2.5.
a reference to a person includes a reference to that person's executors,
administrators, legal personal representatives, successors and permitted
assigns; and

 
 
 
1.2.6.
an agreement on the part of, or in favour of, two or more persons binds them or
any one of them jointly and severally;

 
   
1.2.7        time is of the essence in the performance by the parties of their
respective obligations under this Deed;

        

2.     OBLIGATIONS OF THE COMMISSIONER

2.1
The Commissioner will do the following in the order in which they appear below:

 
 
2.1.1.
issue assessments for the relevant years to each of the Taxpayers.

 
 
The adjustments to be made are as follows:
 
Taxpayer
Increase in Tax
First taxpayer:
 3,317,551
Second taxpayer:
 5,674,192
Third taxpayer:
  1,349,053
Total:
10,340,796

 
 
2.1.2.
not impose any tax shortfall penalties on any of the Taxpayers for the relevant
years of income.

 
 
 
2.1.3.
in relation to the assessments referred to in clause 2.1.1. above remit GIC and
SIC in respect of each of the Taxpayers for the relevant years so that the
interest charged is calculated at the Bank Bill Rate, from the date that the
amended tax liabilities become due and payable, to 30 April 2007. The interest
payable by the Taxpayers in respect of the assessments is as follows:

 
Taxpayer
Interest
First taxpayer:
                  656,673
Second taxpayer:
 3,054,508
Third taxpayer:
    590,017
Total:
4,301,198

 

 
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 2.2
The Commissioner has issued the assessments referred to in clause 2.1.
 

3.     OBLIGATIONS OF THE TAXPAYERS
 
The Taxpayers:-
 
 3.1
will not object to or request an amendment or review of the assessments referred
to in 2.1  above if raised on the terms set out in this Deed;
 
3.2
will not appeal against the Commissioner’s decision to any relevant objection;
 
3.3
will pay a good faith deposit of AUD $5 million to the Commissioner by 20
January 2008 such deposit monies to be applied by the Commissioner at his
discretion to the liabilities of the Taxpayers referred to in clauses 2.1.1 and
2.1.3. The Commissioner confirms that a deposit of AUD $5 million was received
by the Commissioner on 21 January 2008 in full satisfaction of this obligation.;
 
3.4
will pay to the Commissioner an amount equal to the liabilities and interest
referred to in clauses 2.1.1 and 2.1.3 , reduced by any amount paid by the
Taxpayers as a good faith deposit, by whichever is the later of 14 February 2008
or within 14 days of receiving the assessments;
 
3.5
will not seek any review of the issues agreed in this Deed, or of related
decisions, under the Administrative Decisions Judicial Review Act 1977 or
administrative law generally. This does not include review by the Ombudsman;
 
3.6
will not seek disclosure under the Freedom Of Information Act 1982 of Australian
Tax Office documents in relation to issues or decisions relevant to the
settlement recorded by this Deed; and
 
3.7
make no admissions as to liability not withstanding any provisions in this Deed.
 

 
 
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4.     TAXPAYERS’ WARRANTY AND ACKNOWLEDGEMENT
 
4.1
The Taxpayers warrant that to the best of their knowledge and belief they have
made a full and true disclosure of all relevant facts to the Commissioner prior
to entering into this Deed and they will promptly disclose to the Commissioner
any material facts which come to their knowledge after the execution of this
Deed.
 
4.2
The Taxpayers acknowledge that, if there has not been a full and true disclosure
of all relevant facts to the Commissioner as required by clause 4.1, the
Commissioner may in his absolute discretion take whatever further action he
considers appropriate, including, without limitation:

 
 
4.2.1.
electing that this Deed be terminated;

 
 
 
4.2.2.
electing that this Deed is void (as if it had never been executed) as against
all parties to this Deed (except insofar as the warranties or indemnities
referred to in this Deed are concerned); or

 
 
 
4.2.3.
rescinding, reversing or amending any of the things referred to in clause 2.

 
4.3
    The Taxpayers acknowledge that, if they default in performing their
obligations under clauses 3.4 the taxpayer will not contest any recovery steps
taken by the Commissioner.  The Commissioner may:

 
 
4.3.1.
obtain judgment against the Taxpayers; and

 
 
 
4.3.2.
cause the Taxpayers to be wound-up.

 
 
 4.4
        The Taxpayers acknowledge that if they default in performing their
obligations under clause 3.4:

 
4.4.1.              
the Commissioner will be entitled to take whatever action he considers is
necessary to recover the full amount outstanding by the Taxpayers in relation to
the relevant years including the commencement or recommencement of audits and
assessments in relation to the Taxpayers, and in relation to any other
associated persons or entities or;

 
4.4.2              
           
    in particular, and without limiting the foregoing, the Commissioner may, at
the Commissioner’s complete and unfettered discretion, and without further
reference to the Taxpayers, elect either to sue the Taxpayers jointly or
severally for the balance of the debts which are the subject of this Deed, on
the basis of, and in the same manner as if this Deed had not been entered into,
or elect to sue the Taxpayers for breach of the Taxpayers’ obligations pursuant
to this Deed.

 

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5.     AUTHORITY TO SIGN

5.1
Tax Office Authority
 
This Deed is to be signed by either a delegate or authorised officer of the Tax
Office, as follows:

 
 
5.1.1.
The person signing this Deed is Tom Rengers, Assistant Commissioner Small and
Medium Enterprises and a delegate of the Commissioner, who has the power to
make, enter into and execute this Deed on the Commissioner's behalf.

 
 
 
5.1.2.
It is acknowledged by the parties to this Deed that Tom Rengers shall have no
personal liability as a result of being the authorised signatory of the
Commissioner to sign this Deed and it is further acknowledged that he is the
agent of the Commissioner acting within the scope of his authority.

 
 
6.     GENERAL
 
6.1
This Deed shall operate in respect to the matters herein and does not release
the Taxpayers from their future taxation obligations.

 

 
6.2
No modification, variation or amendment of this Deed shall be of any force
unless such modification, variation or amendment is in writing, expressed to be
a variation of this Deed and signed by the parties.

 

 
6.3
The warranties referred to in this Deed shall survive the expiration or
termination of this Deed.

 

 
6.4
Any provision of this Deed which is unenforceable or partly unenforceable is,
where possible, to be severed to the extent necessary to make this Deed
enforceable, unless this would materially change the intended effect of this
Deed.

 

 
6.5
The parties mutually covenant and agree that they will each do all the acts and
things and execute all the Deeds and documents as shall, from time to time, be
reasonably required for the purpose of, and to give effect to, this Deed.
 
6.6
This Deed is confidential to the parties and shall not be disclosed by any of
the parties, except:

 
 
6.6.1.
as is required or permitted by any law, including Australian and US federal
securities and stock exchange rules and regulations;

 
 
 
6.6.2.
by the Taxpayers to their auditors, bankers, tax advisers or legal advisers; and

 
 
 
6.6.3.
by the Commissioner to his legal advisers.

 
 
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6.7
This Deed constitutes the entire agreement and undertaking between the parties
in relation to the subject matter, and supersedes any previous Deeds,
agreements, arrangements, and undertakings between them.
 
6.8
Provided that the amended tax liabilities as set out in 2.1 above are paid by
the dates specified in accordance with clause 3.4 above, the parties agree that
this Deed constitutes a complete release and extinguishment of the Taxpayers’
liability with regard to the assessments, and related matters.
 
6.9
This Deed shall be construed and governed in accordance with the laws in force
in Queensland and shall take effect between the parties from the date this Deed
is signed or executed.
 
6.10
All parties acknowledge that this Deed is not to be considered a general
precedent but applies only to the parties mentioned, and only on the merits of
the case and for the years covered by the settlement.

 
7.     DEFAULT CLAUSE
 
7.1
Any party to this Deed who becomes aware of a breach of any of the terms of the
settlement contained herein (other than a breach of clause 3.4 ), may serve a
written notice on the defaulting party specifying the breach and requiring that
it be rectified.
 
7.2
Any defaulting party to this Deed who has received written notification under
clause 7.1 above, has fourteen (14) days to rectify the breach.
 
7.3
If the defaulting party fails to rectify the breach within the time required by
clause 7.2, the non-defaulting party may, without further notice to the
defaulting party, take whatever action is necessary (including injunctive or
other relief) to require the defaulting party to rectify the breach.
 
7.4
 For the purposes of this Deed, an event of default occurs if:
7.4.1  payment is not made to the Commissioner by the time stipulated in clause
3.4 hereof unless the Commissioner grants an extension of time; or
7.4.2  the Taxpayers stop or threaten to stop payment to the Commissioner; or
7.4.3 this Deed is or becomes wholly or partly void, voidable or unenforceable
or is claimed to be so by either party or anyone on their behalf; or
7.4.4  the Taxpayers do not observe any obligation under this Deed.
 
7.5
If the Taxpayers default in payment, pursuant to clause 3.4, then the balance of
the amount owing in respect of the tax related liabilities for the relevant
years shall become immediately due and payable and the Commissioner will be
entitled to sue for the balance of the tax related liabilities which are the
subject of this Deed on the basis and in the same manner as if this agreement
had not been entered into.

 
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8.     NOTICES
 
8.1
Any notice, request or other communication to be given or served pursuant to
this Deed shall be in writing and dealt with as follows:

 
8.1.1.
if given by the Taxpayers (or any of them) to the Commissioner – addressed and
forwarded to the Commissioner for the attention of:

 
Geoff Williams

28 Macgregor Street
Upper Mount Gravatt
QLD 4122

at the address set out above or as otherwise notified by the Commissioner.
 
 
8.1.2.
if given by the Commissioner to the Taxpayers (or any of them) – signed by the
Commissioner and forwarded to the Taxpayers (or any of them) at the address
indicated at the commencement of this Deed.

 
8.2
Any such notice, request or other communication shall be delivered by hand or
sent by pre-paid security post, facsimile or e-mail, to the address of the party
to which it is sent.
 
8.3
Any notice, request or other communication will be deemed to be received:

 
 
8.3.1.
if delivered personally, on the date of delivery;

 
 
 
8.3.2.
if sent by prepaid security post, upon the expiration of 2 business days after
the date on which it was sent; and

 
 
 
8.3.3.
if transmitted electronically, upon receipt by the sender of an acknowledgment
that the communication has been properly transmitted to the recipient.

 
 

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EXECUTED BY THE PARTIES AS A DEED
 
Signed, sealed and delivered by
)
 
Magellan Petroleum Australia Limited
)
 
ACN 009 728 581
)
       
As permitted under the Corporations Act (CA) 2001
)
   
)
   
)
 
/s/ Bruce McInnes
Secretary/Director
 
/s/ Robert J. Mollah
Director
Bruce McInnes
Print name
 
Robert J. Mollah
Print name
           
Signed, sealed and delivered by
   
Magellan Petroleum (N.T.) Pty Ltd
)
 
ACN 009 718 183
)
       
As permitted under the Corporations Act (CA) 2001
)
   
)
 
/s/ Bruce McInnes
Secretary/Director
 
/s/ Thomas Gwynn Davies
Director
           
Bruce McInnes
Print name
 
Thomas Gwynn Davies
Print name

33

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Signed, sealed and delivered by
)
     
Paroo Petroleum Pty Ltd
)
     
ACN 010 839 488
)
               
As permitted under the Corporations Act (CA) 2001
)
       
)
     
/s/ Bruce McInnes
Secretary/Director
 
/s/ Thomas Gwynn Davies
Director
             
Bruce McInnes
Print name
 
Thomas Gwynn Davies
Print name
 
 
 
SIGNED for and on behalf of the Commissioner of Taxation by Tom Rengers,
Assistant Commissioner Small and Medium Enterprises in the presence of
 
 
 
/s/ Robert Zuanetti
Signature of witness
 
 
/s/ Thomas Rengers
Signature of authorised officer
Robert Zuanetti
Name of witness
 
Thomas Rengers
Name of authorised officer

 

 

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60;                                                                   
 
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