Commissioner of State Revenue v Energy Labour Hire Pty Ltd (Formerly Carbontrack Services Pty Ltd) (Costs)

[2018] VSC 825

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S CI 2017 01939

COMMISSIONER OF STATE REVENUE	Plaintiff
v
ENERGY LABOUR HIRE PTY LTD (FORMERLY CARBONTRACK SERVICES PTY LTD (ACN 162 225 407))	Defendant
DEPUTY COMMISSIONER OF TAXATION	Applicant for substitution as plaintiff

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JUDGE:	GARDINER AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	On 21 February 2018 the parties were directed to file written submissions at the conclusion of the proceeding on the question of costs
DATE OF RULING:	28 March 2018
CASE MAY BE CITED AS:	Commissioner of State Revenue v Energy Labour Hire Pty Ltd (Formerly Carbontrack Services Pty Ltd) & Anor (Costs)
MEDIUM NEUTRAL CITATION:	[2018] VSC 825

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APPEARANCES:	Counsel	Solicitors
The plaintiff was excused from further attendance in the proceeding on 26 July 2018
For the Defendant	Mr M P Pirrie	Frenkel Partners
For the Deputy Commissioner of Taxation	Mr C Micallef	Australian Taxation Office

HIS HONOUR:

1. On 23 May 2017 the Commissioner of State Revenue for the State of Victoria (‘the Commissioner of State Revenue’) commenced a winding up application against the defendant Energy Labour Hire Pty Ltd (‘Energy Labour Hire’). The application relied on Energy Labour Hire’s non-compliance with a statutory demand dated 2 February 2017 and served on it by the Commissioner of State Revenue.

1. On 26 July 2017, Judicial Registrar Hetyey excused the Commissioner of State Revenue from further attendance in the proceeding following the resolution of the dispute as between the Commissioner and the defendant.

1. On 31 July 2017, the Deputy Commissioner of Taxation (‘Deputy Commissioner’) filed an interlocutory process seeking to be substituted as plaintiff in the application pursuant to section 465B of the Corporations Act 2001 (Cth) (‘the Act’). The Deputy Commissioner contended it was a creditor with respect to two debts. The first alleged debt was a Running Balance Account (‘RBA’) Deficit Debt for $624,957.89 (‘the RBA Deficit Debt’). The second debt, identified in an amended Superannuation Guarantee Charge assessment dated 14 October 2016, was for $45,477.63 (‘the SGC Liability‘). The RBA Deficit Debt was prima facie evidence of the defendant’s liability for the amount mentioned whereas the SGC Liability was the subject of a conclusive assessment.

1. After the Commissioner of State Revenue was excused from attendance in the proceeding there were four adjournments of the application. An extension of the period during which the application must be determined was made under section 459R of the Act on 11 October 2017.

1. On 21 February 2018 orders were made dismissing the proceeding and the interlocutory application.  I made a further order that the costs of the application be reserved and directed the parties to file written submissions as to what orders should be made as to costs. The parties filed submissions in accordance with my direction. The Deputy Commissioner submits that the defendant should pay his costs and that they should be fixed. The defendant submits that the Deputy Commissioner should pay the defendant’s costs.

1. The dismissal of the proceeding and the interlocutory process was by consent and arose by reason of a Research and Development Grant credit for 2017 being applied against the RBA Deficit Debt. This resulted in the defendant paying the balance of the RBA Deficit Debt and the original SGC Liability on 14 February 2018. The defendant also paid an additional Superannuation Guarantee Charge Debt of $198,382.27 which arose by reason of a default assessment issued on 18 January 2018. 

1. At the time of its application for substitution, the defendant was presumed to be insolvent by reason of its non-compliance with the statutory demand served by the Commissioner of State Revenue.  The evidence is clear that at the date of the filing of the interlocutory application, the Deputy Commissioner was a creditor of the defendant and remained so until the Research and Development Grant credit was applied and the payments described in paragraph 6 were made. 

1. The matter was adjourned from time to time because of outstanding issues involving the defendant’s entitlement to the Research and Development Grant credit, which it contended should be offset against its liability to the Deputy Commissioner, and which it ultimately was.  The purpose of each adjournment was to enable the result of any application of the Research and Development Grant credit to be ascertained and the net indebtedness to the Commissioner determined. This was a protracted process.

1. The defendant was in a sense granted an indulgence by the various adjournments to enable it to obtain the benefit of the Research and Development Grant credit. The only reason the proceeding was ultimately dismissed was because the defendant capitulated to the Deputy Commissioner’s demands for payment of the amounts it was indebted for. 

1. The Research and Development Grant credit arising from the 2017 financial year was not available to be applied against the defendant’s indebtedness to the Deputy Commissioner until the defendant filed its 2017 tax return.  Moreover, when that credit was applied, it only reduced and did not extinguish the RBA Deficit Debt and could not affect the conclusiveness of the SGC Liability.

1. Until payment of the balance owing to the Deputy Commissioner after application of the 2017 Research and Development credit, the Deputy Commissioner was a creditor and thus entitled to be substituted as applicant in the winding up proceeding.  In my view, the Deputy Commissioner at all stages acted reasonably in commencing and maintaining the application for substitution. I consider that the defendant should pay his costs of the proceeding including reserved costs.

1. In his written submission Mr Micallef submits that if the Court does exercise its discretion in favour of his client, that the Deputy Commissioner’s costs should be fixed in the amount described in the schedule which is attached to his submission.  Whilst I am usually reluctant to fix the costs in these types of matters, I have reviewed the statement of disbursements incurred and the invoices of Mr Micallef’s clerk which are attached to Mr Micallef’s submissions. I note that no professional costs are claimed in relation to the Deputy Commissioner’s internal legal section.

1. I consider that the amounts sought are more than fair and reasonable in the circumstances and in accordance with my obligations under the Civil Procedure Act 2010 (Vic) to deal with the question as economically as possible, I consider I should fix the costs in the amount sought rather than order that they be fixed in the Costs Court. I assume the differences in the amounts claimed (noting the invoices are for a greater sum than the amount claimed) arise by reason of the Deputy Commissioner not being liable for GST. The fee for filing of the interlocutory application and transcript fees are also fair and reasonable.

1. In the circumstances I will order that the defendant pay the Deputy Commissioner of Taxation’s costs of the proceeding including the costs reserved by Judicial Registrar Hetyey on 28 June 2017 and 26 July 2017, and by myself on 23 August 2017, 11 October 2017, 13 December 2017, 15 February 2018, and 21 February 2018 fixed in the sum of $5,721.18.

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