In light of the increased prevalence of companies experiencing issues with the recovery of tax debts, the recent decision of Commissioner of Taxation v Bayconnection Property Developments Pty Limited  FCA 363 is a unique case. This is a rare example of the circumstances in which the Court will allow an adjournment of winding up proceedings following an application to wind up by the Deputy Commissioner of Taxation.
The Deputy Commissioner of Taxation (Deputy Commissioner) filed an application to wind up Bayconnection Property Developments Pty Limited (Bayconnection) on the basis that they were insolvent under section 459P of the Corporations Act 2001 (Cth) (the Act). Whilst Bayconnection accepted they were insolvent they sought an adjournment pending the outcome of its appeal of the tax debt in the Administrative Appeals Tribunal (the Tribunal). This tax debt was the subject of the winding up proceedings.
Bayconnection submitted it was insolvent only as a result of the tax debt and called for the Court to exercise its discretion to adjourn the winding up proceedings pursuant to section 459A of the Act based upon the company’s special circumstances.
The Court considered whether Bayconnection had a "reasonably arguable" case in the Tribunal proceedings under Pt IVC of the Taxation Administration Act 1953 (Cth) (the Administration Act).
The Court also considered the timeframes associated with the pending proceedings and whether the matter could be resolved timely. Finally the Court noted that there was great importance placed on the collection of revenue and that this process should not be unnecessarily interfered with.
The Court gave substantial consideration to section 14ZZM of the Administration Act providing that a tax debt remains payable regardless of any pending appeal or review.
The factual circumstances that the Court considered included that Bayconnection:
- Had not been trading for six years;
- Had no assets; and
- Had no third party creditors apart from the Deputy Commissioner.
Taking into account these considerations and factual circumstances Justice Robertson granted the adjournment. He held that Bayconnection had a reasonably arguable case in relation to the tax debt and that there would be no prejudice to recovery of the tax debt. Further, the Court imposed the condition that Bayconnection would take all reasonable steps to have the Tribunal decision heard as soon as possible.
This case highlights the difficulty and rare circumstances in which an adjournment during the winding up proceedings will be granted. This case also highlights some factual circumstances in which a company may seek an adjournment.