Deputy Commissioner of Taxation v Priestdale Property Holdings Pty Ltd (No 2)
[2012] FCA 1515
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Priestdale Property Holdings Pty Ltd (No 2) [2012] FCA 1515
Citation: Deputy Commissioner of Taxation v Priestdale Property Holdings Pty Ltd (No 2) [2012] FCA 1515 Parties: DEPUTY COMMISSIONER OF TAXATION v PRIESTDALE PROPERTY HOLDINGS PTY LTD ACN 150 966 377 File number: QUD 263 of 2012 Judge: DOWSETT J Date of judgment: 23 November 2012 Cases cited: Deputy Commissioner of Taxation v Broadbeach Properties (2008) 237 CLR 473 cited Date of hearing: 23 November 2012 Place: Brisbane Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 8 Counsel for the Plaintiff: Ms M Brennan Solicitor for the Plaintiff: ATO Legal Services Branch Counsel for the Defendant: Mr D Marks Solicitor for the Defendant: Conomos Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 263 of 2012
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: PRIESTDALE PROPERTY HOLDINGS PTY LTD ACN 150 966 377
Defendant
JUDGE:
DOWSETT J
DATE OF ORDER:
23 NOVEMBER 2012
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.Priestdale Property Holdings Pty Ltd ACN 150 966 377 (Provisional Liquidator Appointed) be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth);
2.Michael Richard Peldan, an official liquidator, be appointed liquidator of the company; and
3.the plaintiff’s costs be fixed in the sum of $30,463.04 and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth).
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 263 of 2012
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: PRIESTDALE PROPERTY HOLDINGS PTY LTD ACN 150 966 377
Defendant
JUDGE:
DOWSETT J
DATE:
23 NOVEMBER 2012
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This is an adjourned application for the winding up of the company Priestdale Property Holdings Proprietary Limited. The matter came before me on 8 November 2012, at which time the company, appearing by counsel, and sought an adjournment of the hearing of the petition. The application was prompted by observation made by the High Court in its decision in the Deputy Commissioner of Taxation v Broadbeach Properties (2008) 237 CLR 473 at [13] that:
Notwithstanding the presumption of insolvency that would apply under section 459C(2)(a) [of the Corporations Act], in written and oral submissions to this Court, the Commissioner made an important concession. This was that upon the hearing of such winding up applications the court might properly have regard to whether the taxpayer had a “reasonably arguable” case in proceedings under Pt IVC of the Administration Act, if those proceedings then still be on foot; questions of the kind canvassed in General Steel Industries Inc v Commissioner for Railways (NSW) might arise.
This statement concerning the Commissioner’s position has been taken to indicate that notwithstanding the fact that a debt becomes payable upon issue of an assessment to taxation, where the debt is challenged, there may be circumstances in which winding-up proceedings based upon it should be deferred pending determination of any appeal against the assessment. It seems to me, however, that such an adjournment should only be granted if there is at least some arguable basis for asserting that absent the Commissioner’s claimed debt, the company may be solvent.
In the present case, there is only a very unpromising basis offered for asserting solvency. The company is owed a very substantial amount by its director, Mr Kavvadas. There is no reason to believe that he is capable of paying the debt, at least on the evidence before me. The company is also being sued for an amount in excess of $7.9 million by the St George Bank. In reasons delivered on 8 November I have set out the circumstances surrounding both that claim and the basis of the Commissioner’s assessment.
It is for the company to demonstrate to me that there are circumstances which should lead me to grant an adjournment of the hearing of the petition, particularly as any adjournment at this stage will probably mean that no determination will be made prior to the petition lapsing. The company has failed to do so. The circumstances as pleaded by St George create a very strong perception that a large amount has been obtained as a result of Mr Kavvadas convincing an officer of St George Bank to permit substantial funds to be drawn against cheques which were not honoured. The honesty or otherwise of such conduct must be considered, but the circumstances as pleaded and substantially admitted by the company lead me to doubt very much that the company will be successful. The provisional liquidator, whom I appointed on 8 November, also doubts that there will be success in those proceedings. The circumstances surrounding the Commissioner’s assessment also cause grave concern.
There is a very real possibility that the Commissioner will successfully assert that the claims to input tax credits have been confected for the purpose of extracting money from him without any real intention to proceed with the transaction in connection with which they were derived. Again, the question of dishonesty or otherwise in connection with those matters remains to be determined, but the facts as they have been disclosed to me, and which appear to be substantially unchallenged, lead to very grave doubts about the probity of the transaction and, therefore, offer me no real basis for inferring that the company may be solvent, or that the Commissioner’s assessment is likely to be overturned.
I have previously indicated that I accept in a technical sense, that there are disputes requiring resolution. Nonetheless, in connection with the possible adjournment of the hearing of the petition, I see no basis for inferring solvency. In resisting the matter today, counsel for Mr Kavvadas, as a director appearing to oppose the application, has offered to assist the provisional liquidator in funding the proceedings of the suit against St George. However, he cannot do so until 7 December. It seems to me that Mr Kavvadas has, for some time, been aware of the difficulties which the company faces in funding the litigation. If he had any real inclination to assist, he would have done so before now. It is also pointed out that in the event that the company is successful in the tax appeal, an amount of $300,000 will be returned by way of interest, in addition to the other amounts. However it seems to me that the provisional liquidator, in assessing the prospects of success in the St George proceedings, has made it clear that even in the event that the Commissioner is wholly unsuccessful, the company will still be insolvent. The additional amount will make no difference. It is also said that the provisional liquidator has not had regard to the possibility that other entities associated with the company may be able to assist it. The other entities are Mr Kavvadas and a company called VK Property Holdings Proprietary Limited. As I understand it that company was involved in the presentation of cheques which were not honoured. There seems little reason to hope for much assistance from that quarter. As to Mr Kavvadas, his real relationship to the company is as a substantial debtor. There is little reason to believe that the debt will be paid.
In the circumstances, I accept the intimation made by the provisional liquidator that the company is, regardless of the proceedings involving the Commissioner, insolvent. As I have already observed in the course of argument, my own view, based on what I heard on the previous occasion, coincides substantially with the conclusions reached by the provisional liquidator. I am not satisfied that it would be in the interests of justice that the hearing of the petition be adjourned.
There will be an order in terms of the draft.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate:
Dated: 21 March 2014
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