DFC of T v DOLLYMORE PTY LTD

Judges:
Brownie J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 13 December 1993

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Brownie J

On 22 October 1993 Mr JE Star was appointed administrator of the defendant (the company), pursuant to Section 436A of the Corporations Law. The company was then insolvent, and there was pending the present action, in which the plaintiff seeks an order that the company be wound up. The plaintiff claims to be a priority creditor, under Section 221P of the Income Tax Assessment Act 1936 (``the ITA Act''), as to $95,267.67, for unremitted tax instalments for the period 30 October 1990 to 30 October 1992; and he claims certain further sums by way of penalties, and for late payment.

On the evidence, if the company is wound up, the only creditor likely to receive any payment at all is a secured creditor. However, there has been executed a deed dated 3 December 1993 between the shareholders of the company, the administrator, and certain persons as purchasers. The general effect of the deed is that the purchasers will purchase the shares in the company; and it is proposed that, pursuant to Part 5.3A of the Corporations Law the secured creditor will be paid some money, and that after the payment of certain expenses, there will be $150,000 available to be paid to the other creditors of the company. It is proposed that $50,000 be paid to the plaintiff, as priority creditor, $50,000 to the company's employees, as preferential creditors, and that the remaining $50,000 be paid to the ordinary unsecured creditors. The proposal appears to have the support of all concerned, except the plaintiff.

By notice of motion dated 10 December 1993, the administrator sought a declaration that the deed is valid and effective to amend the order of priority which would otherwise be conferred on the plaintiff pursuant to Section 221P of the ITA Act. Unhappily, this motion was not filed until the afternoon of 10 December, whilst the deed was structured so as to require completion on that day.

On its face, and before it was amended by the Insolvency (Tax Priorities) Legislation Amendment Act 1993 (``the 1993 Act''), Section 221P made the plaintiff a priority creditor. The 1993 Act introduced into Section 221P Subsections (1A) and (1B) which provide that ``Subsection (1) does not apply'' to deductions made, in various circumstances, after various dates in 1993. In the present case, the deductions were made in or before 1992. That is, on the face of Subsections (1A) and (1B), they do not affect the priority which the Section had previously provided to the deductions now in question.

The 1993 Act introduced a new regime for the collection of unremitted tax instalment deductions. See generally Sections 222ANA to 222ARA of the ITA Act. However, the language of these new sections speaks of the future, as at the date of the commencement of the 1993 Act, and not so as to affect past events, and there is nothing in the language of the amendments to the Corporations Law, effected by the 1993 Act, or in the Second Reading Speech, or in the Report of the Australian Law Reform Commission (ALRC 45, paragraphs 733-741) which detracts from this view.

I therefore dismiss the administrator's motion, with costs. It is unnecessary to consider the plaintiff's motion, which relates to supposed procedural deficiencies concerning the deed.