The recent case of Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Limited  FCA 363 is a rare example of the Court allowing an adjournment of a winding up application in connection with a tax debt pending an appeal.
The plaintiff, the Deputy Commissioner of Taxation (Deputy Commissioner), filed an application to wind up the defendant Bayconnection Property Developments Pty Limited (Bayconnection) on the ground of insolvency under s.459P of the Corporations Act 2001 (Cth) based on the failure of Bayconnection to comply with a statutory demand.
Bayconnection sought an adjournment on the basis that the tax debt, the subject of the winding up proceedings, was also the subject of pending appeal proceedings under Part IVC of the Taxation Administration Act 1953 (Cth) (TA Act) in the Administrative Appeals Tribunal (AAT).
Decision of the Federal Court
In determining whether the Court should exercise the discretion conferred on it by s 459A of the Corporations Act to adjourn winding up proceedings, Robertson J confirmed that substantial weight must be given to s 14ZZM of the TA Act which provides that a tax debt remains payable irrespective of any pending appeal or review.
His Honour went on to note the limited circumstances where the Court should exercise its discretion to adjourn winding up proceedings where a tax debt is the subject of pending appeal proceedings, namely, where:
- there exists no prejudice to recovery of the tax debt in respect of the timing of recovery or otherwise;
- there is a reasonably arguable case in the pending appeal proceedings; and
- the pending appeal proceedings are soon to be heard.
In this case, Robertson J was satisfied that there would be no prejudice to recovering the tax debt as Bayconnection had no assets, had not been trading for six years and had no other creditors. Robertson J was also satisfied that Bayconnection had a reasonably arguable case in the pending appeal proceedings.
Accordingly, Robertson J adjourned the winding up application on the condition that Bayconnection take all steps available to it to have its appeal heard as soon as possible.
Given the current climate surrounding recovery of tax debts, this case serves as a timely reminder that the Courts are extremely reluctant to grant an adjournment to winding up proceedings - even where a tax debt is in dispute and pending appeal.
This case is the first of its kind in which the Federal Court has adjourned winding up proceedings pending appeal proceedings in respect of a tax debt. The fact that such an appeal is on foot is not generally a relevant consideration under s 459A of the Corporations Act. Consideration was only given to the pending appeal by reason of the unusual circumstances before the court, namely, that Bayconnection had no assets, had ceased trading some six years earlier and had no other creditors.