FEDERAL COURT OF AUSTRALIA

Nicols, in the matter of Anatax Pty Ltd (in liquidation) [2019] FCA 1528

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the entry by the plaintiffs into the Deed of Assignment dated 18 April 2019 and the Deed of Amendment signed 31 July 2019 is approved.

2.    The costs of this proceeding be costs in the liquidation of the Company.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

1    The First Plaintiff (‘Mr Nicols’) is the liquidator of the Second Plaintiff (‘Anatax’) having been so appointed when Anatax was wound up in insolvency on 27 May 2015. There is only one creditor, the Commissioner of Taxation (‘the Commissioner’), who has submitted a proof of debt in the amount of $5,416,194.34. The only asset Anatax presently appears to have is a bank account with a balance of $333.08. The sole director of the company is Ms Sourlas. She has not been co-operative and Mr Nicols has yet to obtain access to any of Anatax’s books and records.

2    Anatax was incorporated on 31 October 1995. It appears that from around 16 May 1996 Anatax was registered as a tax agent. From 30 June 1997 Anatax employed Mr Ornelas who was at that time Ms Sourlas’ de facto partner. Mr Ornelas has previously been convicted of falsifying tax returns and obtaining $170,000 in tax refunds. He was sentenced to one year’s imprisonment by Judge Gallen of the District Court on 27 October 1994.

3    On 21 August 2014, the Tax Practitioners Board terminated the registration of Anatax and Ms Sourlas on the basis that Ms Sourlas was no longer a fit and proper person. Meanwhile, the Australian Taxation Office (‘ATO’) had begun a review of their tax affairs. On 5 June 2015 the Insititute of Public Accountants terminated Ms Sourlas’ membership.

4    Until that termination, the business of Anatax had been conducted from premises at 14 King St, Warrawong (‘the King Street premises’). These premises were owned by Anatax. These premises were transferred to Flower and Cactus Pty Limited (‘Flower and Cactus’) on 18 May 2015. Flower and Cactus is an entity owned and controlled by Ms Danielle Ornelas who is Mr Ornelas’ daughter. This transfer was done in return for consideration of $300,000. About this transaction little more is presently known.

5    A tax agents business is still being conducted from the King Street Premises by a Ms Alarcon through another entity, Taxation Masters Pty Ltd. It is not clear whether Ms Alarcon is paying rent to Flower and Cactus or whether she purchased the business from Anatax.

6    Also on 18 May 2015, Anatax transferred premises owned by it at Bent St in Warrawong (‘the Bent Street Premises’) to Jebiga Pty Ltd, an entity controlled by Mr Ornelas. The transfer was expressed to be for consideration of $300,000. The bank settlement sheet suggests that most of the proceeds were then used to reduce a home loan although what the home loan was is unknown since Ms Sourlas has not co-operated.

7    Mr Nicols, unsurprisingly it may be thought, believes there may be a number of causes of action available to Anatax (and also himself as liquidator) arising out of the ATO’s audit relating to the sale of the King Street and Bent Street premises. He has in mind actions against Ms Sourlas for contraventions of ss 181 and 182 of the Corporations Act 2001 (Cth) (‘the Act’). He also thinks that there may be actions against the entities which are currently holding those properties.

8    Because Anatax has no money, Mr Nicols has not been able to conduct any proper inquiries into these transactions. He thinks it would be useful to conduct examinations under ss 596A and 596B of the Act and also to issue notices to produce in order to obtain relevant books and records. However, he does not have the funding to do this.

9    The Commissioner suggested to Mr Nicols that it might be useful for Anatax to assign all of its causes of action to the Commonwealth and for the Commissioner to take over Mr Nicols’ role in conducting the relevant inquiries. Mr Nicols agreed that this would be a good idea and appropriate since the only creditor of Anatax is the Commissioner. A deed was therefore executed on 18 April 2019 to give effect to this transaction. The deed was further amended on 31 July 2019.

10    Because the deed creates obligations on Anatax which extend beyond three months after its date, the Court’s approval is necessary for the deed to take effect. In fact, the deed is expressed to be conditional on Court approval being obtained pursuant to s 477(2B) of the Act.

11    Section 477(2B) provides:

477 Powers of liquidator

…

(2B)    Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company's behalf (for example, but without limitation, a lease or an agreement under which a security interest arises or is created) if:

   (a)    without limiting paragraph (b), the term of the agreement may end; or

(b)    obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;

more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months.

12    The principles governing the grant of approval are not in doubt. As Giles J observed in Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85:

… the court is necessarily confined in attempting to second guess the liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error of law or principle, or real or substantial grounds for doubting the prudence of the liquidator’s conduct.

13    It is clear that what Mr Nicols proposes in this case is proper and appropriate. I do not doubt its prudence, it is plainly being done in good faith and I perceive no error of law or principle. Accordingly, I will grant approval in the form set out in prayers 1 and 2 of the originating application.

Associate:

Dated:    16 September 2019