Commissioner fiddled as claims deadline burned

The Commissioner of Taxation’s (CoT) ears would’ve been aflame last week as Steven Golledge SC excoriated the highest tax officer in the land for repeatedly failing to preserve claims to millions lost to illegal phoenixing.

As iNO reported in Banq Jurisdiction Case Could Limit Late Start Litigation, ex-clients of the controversial Banq Accountants & Advisers are seeking to overturn the basis on which liquidators funded by the CoT are pursuing them for recoveries in the NSW Supreme Court.

The Commissioner of Taxation is “a poor candidate for any benevolent exercise of discretion.” Steven Golledge SC.

Some of those ex-clients have the 3 St James Hall insolvency guru in their corner, and last Thursday Golledge meticulously articulated what he insisted was evidence of the Commissioner’s egregious failure, identified as commencing after former liquidators David Iannuzzi and Murray Godfrey were appointed to RC Group (Aust) Pty Ltd (RC Group) and related entities in 2014.

Phrases like “breach of procedural fairness” and “lack of due diligence” peppered the narrative as Golledge told Federal Court judge Brigitte Markovic how the Commissioner sat back, barely bothering to poke the coals when put on notice by Iannuzzi that he had concluded his investigations and was preparing to deregister the companies.

This was despite the ATO being the only creditor of significance in not only RC Group but a veritable bin fire of creditors voluntary liquidations (CVLs) referred to Godfrey and Iannuzzi by Banq’s principals.

And it was also despite concerns within the ATO about how Godfrey and Iannuzzi were conducting themselves, concerns which manifested in ATO officers visiting the premises of the liquidators’ firm Veritas Advisory and correspondence directed to Iannuzzi in which the Commissioner threatened to seek the appointment of a replacement liquidator or special purpose liquidator (SPL). Iannuzzi responded a week later with a request for funding.

Golledge’s purpose in laying before her honour this litany of the Commissioner’s apathy was to support his clients’ challenge to orders made by Federal Court judge Angus Stewart in September 2019 in the matter of Commissioner of Taxation v David Nicholas Iannuzzi..

Those orders included orders reinstating a host of deregistered companies linked to Banq and Veritas and appointing KPMG partners Gayle Dickerson and Stephen Vaughan as liquidators.

Justice Stewart also decreed that for the purposes of calculating the relation back day, the period of time that had elapsed between deregistration and the date of his orders could be disregarded.

Consequent of those orders being made Dickerson and Vaughan commenced a raft of recovery proceedings in the NSW Supreme Court against Golledge’s clients and others. But Justice Stewart also rightly made provision for any party affected by his orders to apply to have them varied or overturned.

When Dickerson and Vaughan were put on notice by one of the defendants in the recovery proceedings that Justice Stewart’s orders would be challenged the liquidators realised that there were questions that needed answers before they could continue.

That led to the parties’ respective legal advisors agreeing to ask the Federal Court court to rule on two questions.

Whether Justice Stewart had the power to make the orders he did in respect of the reinstatement and relation back day and whether, assuming he had the power, he should have exercised his discretion to do so.

The orders were made on September 2, 2019 by his honour in chambers and by consent between the Commissioner and Iannuzzi just days before Iannuzzi was to be subjected to three days of public examination as part of a judicial inquiry into his conduct.

On Thursday, Golledge told her honour that even if Justice Stewart had the power the Commissioner was “a poor candidate for any benevolent exercise of discretion in respect of a grant of any extension.”

He said the Commissioner, by focussing on efforts to rid the profession of Iannuzzi, had failed to act with “appropriate diligence”, and tossed in incendiary submissions about how the Commissioner had abandoned a bid to seek compensation from Iannuzzi for the losses incurred when the businesses were phoenixed.

The appeal hearing concluded on Thursday afternoon and Justice Markovic has reserved her judgment.

The recovery proceedings meanwhile are stayed and will remain so until her honour produces a decision that is itself likely to be challenged by one side or the other given the prodigious legal resources marshalled by both sides last week.

Further reading:

Banq Jurisdiction Case Could Limit Late Start Litigation