In the Matter of Australian Company Number 007 764 249 Smith, Anthony Stevens Pty Ltd v Deputy Commissioner of Taxation & Ors [1997] FCA 344

In the Matter of Australian Company Number 007 764 249 Smith, Anthony Stevens Pty Ltd v Deputy Commissioner of Taxation & Ors [1997] FCA 344

The payments of $194,000 and $41,000 by the company to the Deputy Commissioner were unfair preferences, insolvent transactions and voidable under the Corporations Law. The defence of good faith was not made out as, objectively, there were reasonable grounds for suspecting insolvency. Statutory priority under s 221P gives a right to priority but does not prevent an order for recovery. The statutory notices did not convert the transaction or make the Deputy Commissioner a secured creditor. The directors did not make out the 'all reasonable steps' defence under s 588FGB(6).

Jurisdiction
Australia
Judgment Date
09 May 1997
Procedural Posture
Corporations – Liquidator’s Application and Cross Claim / Trial Judgment
Outcome
Claim and cross-claim both succeed in part: payments set aside as voidable; indemnity order made in favour of Deputy Commissioner against directors.
Legal Topics
['voidable Transactions' 'unfair Preferences' 'statutory Priority' "directors' Indemnity" 'good Faith Defence']
['corporations Law' 'insolvency Law'] ['voidable Transactions' 'unfair Preferences' 'statutory Priority' "directors' Indemnity" 'good Faith Defence']

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Procedural Posture

Corporations – Liquidator’s Application and Cross Claim / Trial Judgment

Legal Issues

  1. 1 ['Whether payments made to the Deputy Commissioner of Taxation by the company constituted unfair preferences and insolvent transactions and are voidable under ss 588FA, 588FC, 588FE of the Corporations Law.' 'Whether statutory priority under s 221P of the Income Tax Assessment Act 1936 insulates the payment from being voidable.' 'Whether the good faith defence under s 588FG is made out and, in particular, whether the Deputy Commissioner had reasonable grounds to suspect insolvency.' 'Whether payments via solicitors and pursuant to statutory notices under s 218 of the Income Tax Assessment Act 1936 or s 74 of the Sales Tax Assessment Act 1992 alter the character of the transaction.' 'Whether directors are liable to indemnify the Deputy Commissioner under s 588FGA and can rely on the s 588FGB(6) defence.']

Ratio Decidendi

The payments of $194,000 and $41,000 by the company to the Deputy Commissioner were unfair preferences, insolvent transactions and voidable under the Corporations Law. The defence of good faith was not made out as, objectively, there were reasonable grounds for suspecting insolvency. Statutory priority under s 221P gives a right to priority but does not prevent an order for recovery. The statutory notices did not convert the transaction or make the Deputy Commissioner a secured creditor. The directors did not make out the 'all reasonable steps' defence under s 588FGB(6).

Court Disposition

Claim and cross-claim both succeed in part: payments set aside as voidable; indemnity order made in favour of Deputy Commissioner against directors.

Orders

  • ['The payment by Australian Company Number 007 764 249 Pty Ltd to the Deputy Commissioner of Taxation of $194,000 on 3 November 1994 and $41,000 on or about 6 February 1995 were each an unfair preference and insolvent transaction and a voidable transaction pursuant to ss 588FA, 588FC and 588FE of the Corporations...