The Bell Group Ltd (in Liq) & Anor v Deputy Commissioner of Taxation & Anor
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 1030 of 2015)
Judgment date: 29 September 2015
Date published: 12 November 2015

Summary of decision:

Overview of facts:
1. The Bell Group Ltd (TBGL) went into liquidation on 24 July 1991. | 2. In 2000 TBGL and its related entities commenced proceedings in the Supreme court of Western Australia against a number of Australian and overseas banks. These proceedings were eventually settled and the Deed of Settlement provided, amongst other things, for the banks to pay a settlement sum to the Liquidator of TBGL, Mr Woodings to be held for the benefit of TBGL and its related entities (settlement sum). | 3. The settlement sum is still held by Mr Woodings and he has deposited $300,000,000 of it into a National Australia Bank (NAB) term deposit which was due to expire on 2 October 2015. | 4. On 10 August 2015, the Commissioner issued a notice of assessment to TBGL for the year ended 30 June 2014 pursuant to section 167 of the Income Tax Assessment Act 1936 for tax payable of $308,724,204.90. The assessment relates to the settlement sum. | 5. On 18 August 2015, the Commissioner issued an amended notice of assessment to TBGL for the year ended 30 June 2014 with a reduced tax payable amount of $298,190,348.70. | 6. On 14 August 2015, a Deputy Commissioner of Taxation, as delegate of the Commissioner, issued a notice pursuant to section 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA) to NAB requiring payment to the value of $298,190,348.70 (garnishee notice). | 7. TBGL and Mr Woodings sought declarations that the garnishee notice was void and of no effect. They also sought orders quashing the garnishee notice. | Issues decided by the court | 8. The Court, relying on Bruton Holdings Pty Ltd (in liq) v CoT (2009) 239 CLR 346 (Bruton Holdings), held the garnishee notice was void and of no effect for two related reasons: a. The notices are an attachment against property of TBGL and therefore void by operation of subsection 468(4) of the Corporations Act; b. The power conferred on the Commissioner under section 260-5 of Schedule 1 to the TAA is not available where the relevant 'debtor' for the purposes of that section is a company which is being wound up, or its liquidator. That is so even where the relevant debt is for tax payable on income derived after the commencement of the winding up. | a. The notices are an attachment against property of TBGL and therefore void by operation of subsection 468(4) of the Corporations Act; b. The power conferred on the Commissioner under section 260-5 of Schedule 1 to the TAA is not available where the relevant 'debtor' for the purposes of that section is a company which is being wound up, or its liquidator. That is so even where the relevant debt is for tax payable on income derived after the commencement of the winding up.

Issues decided:
8. The Court, relying on Bruton Holdings Pty Ltd (in liq) v CoT (2009) 239 CLR 346 (Bruton Holdings), held the garnishee notice was void and of no effect for two related reasons: a. The notices are an attachment against property of TBGL and therefore void by operation of subsection 468(4) of the Corporations Act; b. The power conferred on the Commissioner under section 260-5 of Schedule 1 to the TAA is not available where the relevant 'debtor' for the purposes of that section is a company which is being wound up, or its liquidator. That is so even where the relevant debt is for tax payable on income derived after the commencement of the winding up. a. The notices are an attachment against property of TBGL and therefore void by operation of subsection 468(4) of the Corporations Act; b. The power conferred on the Commissioner under section 260-5 of Schedule 1 to the TAA is not available where the relevant 'debtor' for the purposes of that section is a company which is being wound up, or its liquidator. That is so even where the relevant debt is for tax payable on income derived after the commencement of the winding up.

ATO view of decision:
9. Following the decision in Bruton Holdings the Commissioner ceased to issue notices under section 260-5 of Schedule 1 to the TAA in respect of pre-liquidation tax liabilities of companies in liquidation. | 10. The Commissioner was of the view that garnishee notices could be issued with respect to tax liabilities that relate to income derived by a company in liquidation post-liquidation. The Commissioner continues to be of the view that notices under section 260-5 can be validly issued in a limited range of circumstance involving post liquidation tax liabilities. The High Court's decision in Bruton Holdings is not considered determinative in the context of post liquidation liabilities. That situation was not before the High Court. That Court expressly stated that '... the remedy available to the Commissioner on the facts of this case was that under the regime for liquidations (s260-45), not the garnishee regime provided by s260-5' (CLR [51], emphasis added). Section 260-45 is not enlivened in the circumstance of a post liquidation tax liability. Additionally, the High Court did not rule as to the wider question of the interaction of the taxation law and the Corporations law. | 11. The present case was considered to be an inappropriate vehicle to test these issues before an appeal Court. The very short period of time between the handing down of the decision and the maturity of the term deposited, and the possibility that actions by the liquidator after the deposit matures could materially affect both the factual and legal positions, meant that an appeal could be rendered futile. | 12. The Commissioner will continue to review his position with a view to finding an appropriate method of testing the relevant legal issues.

Administrative treatment:
Implications for impacted ATO precedential documents (Public Rulings, Determinations, ATO IDs) | Not applicable | Implications for impacted Law Administration Practice Statements | Not applicable

Legislative references: Corporations Act 2001 (Cth) 468(4) 500(1) 555 556 Companies Act 1899 (NSW) 95 Income Tax Assessment Act 1936 (Cth) 6 167 215 221 254 Income Tax Assessment Act 1997 (Cth) 960-100 995-1 Taxation Debts (Abolition of Crown Priority) Act 1980 (Cth) The Act Taxation Administration Act 1953 (Cth) 3AA(2) 255-1 260-5 260-45
Case references: Bank of New South Wales v The Commissioner of Taxation of the Commonwealth of Australia (1979) 145 CLR 438 (1979) 10 ATR 482 79 ATC 4687 Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation [2007] FCA 1643 (2007) 67 ATR 618 2007 ATC 5151 (2007) 244 ALR 177 Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation (2009) 239 CLR 346 (2009) 72 ATR 856 2009 ATC 20-125 Federal Commissioner of Taxation v Bruton Holdings Pty Ltd (in liq) (2008) 173 FCR 472 (2008) 70 ATR 903 2008 ATC 20-073