Case: Superior Press Pty Ltd v Deputy Commissioner of Taxation (2004) 55 ATR 541
Outcome: cited
I have already indicated that I do not accept the evidence given by Scott and Fairbank concerning the asserted payment arrangements with creditors such as the SRO, Swinburne, and MBA. Scott's unsubstantiated assertions about these payment arrangements are not capable of discharging the onus that falls on the directors to establish the defence set out in s 588FGB(3): see Superior Press Pty Ltd v Deputy Commissioner of Taxation (2004) 55 ATR 541 (' Superior Press ')at 546-547. 118 I am also satisfied that the financial support that was provided by Swift Malaysia did not provide Scott and Fairbank with reasonable grounds to expect that TSI and TSIA were solvent during the six months ending 15 May 2003, and that they would remain solvent even if they made the payments to the Commissioner with the support of Swift Malaysia. I refer to my earlier findings: the July agreement does not contain any obligation or undertaking by Swift Malaysia to provide funds to TSI and TSIA on a continuing basis to enable those companies to discharge their liabilities as and when they arose; and the funds actually advanced by Swift Malaysia and/or Swift Australia to TSI and TSIA were ad hoc loans and were not sufficient to enable either company to pay its debts as and when they fell due. 119 I also consider that there was no evidence establishing that Scott and Fairbank could reasonably rely upon Swift Malaysia to provide all of the funds necessary to enable TSI and TSIA to pay their debts, on a continuing basis, as and when they fell due. 123 The first part of the submission was that any order against the Commissioner requiring it to repay amounts that were paid to the Commissioner in respect of ITW liabilities would simply involve unwinding preferential payments that the Commissioner had no entitlement to receive. On this basis, it was submitted that the Commissioner would not suffer any loss or damage. I disagree. By the order I propose to make in favour of the liquidator, the Commissioner will be required to repay amounts it received in payment of debts that were outstanding to the Commissioner. To the extent that those debts relate to ITW liabilities, an order requiring that the amounts in question be paid to the liquidator will cause loss or damage within the meaning of s 588FGA(2). Instead of retaining payments amounting to $29,260.82 in the case of TSI's ITW liabilities, and $107,329.99 in respect of ITW liabilities owed by TSIA, the Commissioner will have to prove in the winding up of TSI and TSIA respectively. As the liquidator said in evidence, unsecured creditors will not receive any distribution in the winding up of those companies. Consequently, the orders sought against the Commissioner will result in loss or damage: see Superior Press , per Byrne J at 548 [35]-[37]. 124 In the first proceeding, the Commissioner has agreed to submit to an order that he will pay the liquidator the sum of $16,865.33 in respect of interest and costs. The corresponding order in the second proceeding does not make any provision for interest or costs. Scott and Fairbank argue that interest and costs paid by the Commissioner to the liquidator forms no part of the loss or damage resulting from the s 588FF order. 125 In Superior Press , Byrne J accepted that interest that the Commissioner is ordered to pay to the liquidator pursuant to s 588FF will constitute loss and damage suffered by the Commissioner within the meaning of s 588FGA(2), or at least it will do so when payment is made: at 549 [38]. However, Byrne J took into account the fact that the interest ordered under s 588FF related to all of the impugned payments, whereas the indemnity under s 588FGA only relates to those payments which were made in respect of ITW liabilities. Accordingly, Byrne J adjusted the amount of interest to reflect the ratio of total tax payments recovered by the liquidator to the ITW tax payments that attracted indemnity. I propose to adopt a similar course. In TSI's case, the ITW liabilities of $29,260.82 represented 76.36 per cent of the payments totalling $38,319.55 which will be the subject of the order under s 588FF; and in TSIA's case, the ITW liabilities of $107,329.99 represented 67.15 per cent of the payments totalling $159,815.12 which are to be the subject of orders under s 588FF. 126 Scott and Fairbank also submitted that any costs that the Commissioner might be required to pay to the liquidator of TSI pursuant to s 588FF should not attract indemnity under s 588FGA(2). In Superior Press , Byrne J accepted that if the Commissioner is ordered to pay costs to the liquidator in an appropriate amount, that will form part of the Commissioner's recoverable loss and damage under s 588FGA(2): at 549 [39]-[40]. I agree. 127 For these reasons, I reject the argument that the Commissioner has not suffered any recoverable loss or damage resulting from the order I propose to make in each proceeding under s 588FF. To the extent that the Commissioner is ordered to pay an amount to the liquidator in each case, representing the amount of payments it received in respect of ITW liabilities, and amounts in respect of interest and costs, those amounts can properly be the subject of an indemnification order. I am satisfied that the figure agreed for interest and costs in the first proceeding of $16,865.33 is an appropriate sum, and less than the figure that might have been awarded in the absence of agreement. I will, however, adjust this figure so as to take account of the ratio of ITW payments to total payments. 128 At the commencement of these reasons for judgment, I set out the orders which the liquidator seeks in each proceeding as against the Commissioner. I propose to make orders in each proceeding in the form sought by the liquidator.