Eaton v Deputy Commissioner of Taxation

The appeal concerned the liability of three directors of a company, Mr. Eaton and two others, for the company's tax debts. The Deputy Commissioner of Taxation had entered judgment against the directors personally. The company's tax liability had subsequently been entirely cancelled due to a Deed of Company Arrangement. The directors sought to resist the enforcement of the judgments against them on the grounds of unfairness. The matter was heard in the Court of Appeal of New South Wales.

The central legal issue before the Court of Appeal was whether the directors could resist the enforcement of the judgments entered against them personally, given that the company's underlying tax liability had been extinguished by a Deed of Company Arrangement. This raised questions about the nature of the directors' liability and whether the cancellation of the company's debt retrospectively impacted the validity or enforceability of the judgments against them.

The Court of Appeal dismissed the directors' appeals. The Court reasoned that the directors' liability was a separate and independent obligation from the company's primary tax liability. The entry of judgment against the directors created a distinct legal debt owed by them to the Commissioner. The subsequent cancellation of the company's tax liability under the Deed of Company Arrangement did not, in the Court's view, operate to discharge or invalidate the judgments already entered against the directors. The Court applied principles of statutory interpretation and the nature of judgment debts, concluding that the directors' liability was not contingent on the continued existence of the company's primary tax obligation in a way that would permit them to resist enforcement after judgment. The appeals were dismissed with costs.