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Founded in Bondi Beach in 2012, Bailey Nelson has rapidly grown into a global eyewear retailer and service provider with boutiques in Australia, London, Canada and New Zealand. The strong demand for their products and … Continued

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Maddocks appoints leading energy and resources partner November 19, 2019

Tuesday 19 November 2019 Maddocks has appointed one of Australia’s leading energy and resources lawyers. Peter Limbers will be joining Maddocks as a partner in Sydney in early 2020. Peter is widely recognised as one … Continued

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Is your franchise network now liable to pay payroll tax? December 6, 2019

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Voidable transactions – falling at the final hurdle

Liquidators will generally be pretty happy if a court finds that a transaction was both an uncommercial transaction and an unfair preference and dismisses any defence. Unfortunately for the liquidator in Re Cyberduck Software Pty Ltd (In Liq) & Anor [2018] VSC 122 you can still fail.

In Cyberduck:

  • The liquidator attacked the application of a GST refund owing to one company to reduce the tax debt of a related entity. There was no payment made by the companies in liquidation and, with the benefit of hindsight, no refund actually payable.
  • The court accepted that third party payments can be unfair preferences and that all that was necessary was that the third party was authorised by the debtor company to make the payment. That finding rejects other judgments where courts have found that the debtor company must also have some entitlement to the monies.
  • The court exercised its discretion not to make the orders sought by the liquidator, notwithstanding that the liquidator had successfully made out the claims and the defendant’s arguments failed. The court found that there was no basis to order the Commonwealth to repay a GST refund that was found post-liquidation to have never been payable.

It’s common to be asked about preference risk where a third party pays the debt. The Cyberduck decision emphasises that the risk is real. It’s also worth bearing in mind that even though the ‘transaction’ being attacked doesn’t include post-liquidation events, the court can still take those matters into account.

Liquidators will generally be pretty happy if a court finds that a transaction was both an uncommercial transaction and an unfair preference and dismisses any defence. Unfortunately for the liquidator in Re Cyberduck Software Pty Ltd (In Liq) & Anor [2018] VSC 122 you can still fail.

In Cyberduck:

  • The liquidator attacked the application of a GST refund owing to one company to reduce the tax debt of a related entity. There was no payment made by the companies in liquidation and, with the benefit of hindsight, no refund actually payable.
  • The court accepted that third party payments can be unfair preferences and that all that was necessary was that the third party was authorised by the debtor company to make the payment. That finding rejects other judgments where courts have found that the debtor company must also have some entitlement to the monies.
  • The court exercised its discretion not to make the orders sought by the liquidator, notwithstanding that the liquidator had successfully made out the claims and the defendant’s arguments failed. The court found that there was no basis to order the Commonwealth to repay a GST refund that was found post-liquidation to have never been payable.

It’s common to be asked about preference risk where a third party pays the debt. The Cyberduck decision emphasises that the risk is real. It’s also worth bearing in mind that even though the ‘transaction’ being attacked doesn’t include post-liquidation events, the court can still take those matters into account.