Michael Hodge KC (leading Mr S Trewavas) represented the plaintiffs, instructed by Enyo Lawyers.
The defendant (Commissioner of State Revenue) was represented by Sean Russell, instructed by Crown Law.
The liquidator of two related labour hire companies (Workforce and Payroll), sought orders under s 588FF(1)(a) of the Corporations Act 2001 (Cth) to recover payments made to the Queensland Revenue Office (QRO) in respect of payroll tax liabilities during the six months prior to liquidation. It was common ground that the payments were voidable unfair preferences. The sole contested issue was whether the Commissioner could rely on the good faith defence in s 588FG(2).
The Court held that the Commissioner failed to establish the s 588FG(2)(a) good faith criterion. The Commissioner’s witnesses each deposed that they had no independent recollection of their dealings with the companies, and their evidence did not address their state of mind as to the solvency of Workforce or Payroll at the time of the transactions. A key officer who had been significantly involved in the QRO’s files was not called to give evidence. The Court found that it was not possible to conclude that the witnesses called were the only persons within the QRO whose state of mind was relevant.
Several circumstances known to the QRO told against the defence, including the QRO’s awareness (through the inter-governmental Phoenix Taskforce) of the group’s history of phoenixing, internal references to “risk to revenue” and garnishment from an early stage, the very large overdue liabilities that had accumulated, and the ongoing pattern of overdue returns and unpaid liabilities even during the payment plan period. The Court held that the matters relied upon by the Commissioner – including substantial funds in Workforce’s bank account and an attestation by a director that the companies were solvent – were insufficient to discharge the onus.
The Court also found that the Commissioner had failed to prove that the QRO had no reasonable grounds for suspecting insolvency to satisfy s 588FG(2)(b).
The Court declared that each of the impugned payments was a voidable transaction, ordered the Commissioner to pay $2,474,375.01 to Workforce and $345,791.57 to Payroll, together with interest under s 51A of the Federal Court of Australia Act 1976 (Cth), and ordered costs in favour of the plaintiffs.
The judgment can be read by clicking here
