FEDERAL COURT OF AUSTRALIA Bruton Holdings Pty Limited (In Liquidation) v Commissioner of Taxation [2007] FCA 852 BRUTON HOLDINGS PTY LIMITED (IN LIQUIDATION) v COMMISSIONER OF TAXATION AND PERSONS NAMED IN SCHEDULE 'A' TRADING AS PIPER ALDERMAN NSD966 OF 2007 EMMETT J 30 MAY 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD966 OF 2007 IN THE MATTER OF BRUNTON HOLDINGS PTY LIMITED (IN LIQUIDATION) ACN 078 683 182 BETWEEN: BRUTON HOLDINGS PTY LIMITED (IN LIQUIDATION) Plaintiff AND: COMMISSIONER OF TAXATION First Defendant PERSONS NAMED IN SCHEDULE 'A' TRADING AS PIPER ALDERMAN Second Defendant JUDGE: EMMETT J DATE OF ORDER: 30 MAY 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave be granted for the originating process in the form initialled by Emmett J to be filed forthwith. 2. The Originating Process be set down for first return before Justice Emmett on 1 June 2007 for directions. 3. The time for service of the Originating Process and supporting affidavit of Richard Albarran sworn 30 May 2007 be abridged to 5:00 pm on Wednesday, 30 May 2007 4. The Second Defendant be restrained up to and including 1 June 2007, from dealing in any way with sums of money, held in the following trust accounts: 4.1 $447, 402.20 held in Piper Alderman General Trust Funds Trust Account for Bruton Holdings Pty Limited (Administrators Appointed) on account of costs and disbursements; and 4.2 $20,467.34 held in Piper Alderman – Bruton Holdings Pty Ltd Trust Account for Bruton Holdings Pty Limited (Administrators Appointed) on account of costs and disbursements. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD966 OF 2007 IN THE MATTER OF BRUNTON HOLDINGS PTY LIMITED (IN LIQUIDATION) ACN 078 683 182 BETWEEN: BRUTON HOLDINGS PTY LIMITED (IN LIQUIDATION) Plaintiff AND: COMMISSIONER OF TAXATION First Defendant PERSONS NAMED IN SCHEDULE 'A' TRADING AS PIPER ALDERMAN Second Defendant JUDGE: EMMETT J DATE: 30 MAY 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 28 February 2007 Richard Albarran and Geoffrey McDonald were appointed administrators of Bruton Holdings Pty Limited (the Company). On 30 April 2007 the creditors of the Company resolved that the administration of the Company should end and that the Company be wound up. Accordingly, the Company was subject to a creditor's voluntary liquidation from that time. 2 However, in the meantime, the Commissioner of Taxation issued a notice of assessment under the Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth). The notice of assessment was addressed to the trustee for Bruton Educational Trust. The amount of the assessment referred to in the notice was $7,715,873.73 which was due for payment on 30 April 2007. 3 Until the appointment of the administrators, the Company was the trustee of the Bruton Educational Trust (the Trust) under a trust deed dated 8 July 1997 (the Trust Deed). The Trust was established for the purpose of enabling and facilitating the promotion, advancement and encouragement of purposes which are charitable. However, by clause 10.2 of the Trust Deed, the office of the Company as trustee was to be terminated and vacated immediately if it entered into administration or liquidation. 4 The notice of assessment relates to receipts by the Company in its capacity as trustee of the Trust for the year ended 30 June 2004. The Company disputes that the receipts were assessable income. It had previously applied for endorsement as a tax exempt entity from 1 July 2000. The Commissioner declined to give such an endorsement and the Company objected to that decision. The Commissioner disallowed the objection and the Company then appealed to the Court against that objection decision. That appeal was by way of application filed on 23 June 2006. That matter is next listed for directions before Allsop J on 7 June 2007. 5 In connection with that proceeding, the Company's solicitors, Piper Alderman, have in their trust account a sum in excess of $400,000 held by them on account of the costs of the proceeding. By notices dated 8 May 2007, variously addressed to Bruton Holdings Pty Limited (in liquidation) as trustee for Bruton Educational Trust, the trustee for Bruton Educational Trust and Bruton Holdings Pty Limited in liquidation, the Commissioner, in the exercise of the powers conferred under s 260-5 of the Taxation Administration Act 1953 (Cth) required Piper Alderman to pay to the Commissioner the sum of $447,420.20. The notices pursuant to s 260 require immediate payment. Under s 260-20 a third party on whom a notice under s 260-5 is served must not fail to comply with the notice. 6 The administrators, who are now the liquidators, are concerned that if those moneys are paid to the Commissioner they will not be able to prosecute the appeal presently before the Court because they have no funds available to them other than the money held by Piper Alderman. 7 It appears that there has been some communication between Piper Alderman and the Commissioner concerning compliance with the notices. A letter of 29 May 2007 from Piper Alderman to the Commissioner's solicitor indicates that it had been conveyed to Piper Alderman on behalf of the Commissioner that they should immediately file an application or pay the money or they will be prosecuted. In their letter Piper Alderman say that, in the absence of the filing of an application by the liquidators by the close of business on 1 June 2007, they propose to pay the money in accordance with the notices, notwithstanding that they may be void. 8 The liquidators say that the notices are void. Section 500(1) of the Corporations Act 2001 (Cth) provides that any attachment, sequestration, distress or execution put in force against the property of a company after the passing of a resolution for voluntary winding up is void. The liquidators say that the notices constitute attachments within the meaning of s 500 and that they are against property of the Company, being the money held in trust by Piper Alderman. The liquidators wish to establish by due process that the notices are void by reason of the operation of s 500. 9 On the other hand Piper Alderman, understandably, do not wish to be in a position where they might be seen to have committed an offence under s 260-20 of the Taxation Administration Act. It is clearly desirable that the matter be brought before the Court as soon as is practicable. In the circumstances I propose to make an order restraining Piper Alderman from dealing with the money held in trust in any way up to and including 1 June 2007. I will abridge the time for service of initiating process. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 1 June 2007 Counsel for the Plaintiff: DR Stack Solicitor for the Plaintiff: Nash O'Neill Tomko Lawyers Date of Hearing: 30 May 2007 Date of Judgment: 30 May 2007 SCHEDULE A