Improper purpose argument fails to derail examinations

A liquidator being funded by the Commissioner of Taxation (CoT) has defeated an attempt to derail public examinations by respondents who argued that the liquidator’s true purpose was to investigate their tax affairs as opposed to the relevant companies’ examinable affairs.

“I do not accept that there was an arguable case as to an improper purpose based on the various inferences that the applicants invited me to draw. These inference were said to arise from the combined effect of: (a) the breadth and extent of the orders for production; (b) the fact that the Commissioner of Taxation was funding the Liquidator; (c) the fact that the Commissioner was separately investigating Mr Cassaniti and other of the applicants in respect of their tax affairs; and (d) the absence of any plausible or other cogent evidence as to the prospect of genuine recovery.” Justice Yaseen Shariff.

Examinations of multiple persons linked to Sydney Exotic Aquariums Casula Pty Ltd, Richmond Lifts Pty Ltd and United Lifts Technologies Pty Ltd (The Companies) were set to commence on December 5 when the examinees made an urgent application to Justice Yaseen Shariff in the Federal Court on December 4.

The applicants sought to have the scheduled examinations adjourned so as to give them time to make an application for an extension of time in which to apply to have the examination summonses discharged.

BRI Ferrier NSW partner Peter Krejci, who replaced O’Brien Palmer’s Daniel Frisken as liquidator of the Companies in March this year, opposed the application.

For the applicants to succeed – and they had Farid Assaf SC and University Chambers’ Jacob Rodgers in their corner – they needed to persuade the judge to make a series of inferences about Krejci’s intentions.

As can be seen from his honour’s decision in Krejci, in the matter of Sydney Exotic Aquariums Casula Pty Ltd (in liq) [2024] FCA 1409, despite Rodgers and Assaf’s exertion, his honour was left unconvinced.

“The applicants’ submitted that, notwithstanding that the orders for production were not being pressed, their wide-ranging categories were consistent with the fact that the Liquidator was pursuing an improper purpose for and on behalf of the Commissioner of Taxation in connection with its separate statutory investigations into the tax affairs of various individuals and entities,” the judge said.

“In my view, despite the breadth and extent of the orders for production, a close examination of all the matters that I have set out above establishes that the purpose of the orders for production was in connection with the examinable affairs of the Companies.

“As noted above, Mr Cassaniti was considered to be a link between the various companies, and, additionally, there was evidence of a series of transactions, including as to security being provided, as between related entities and individuals.

“In view of Mr Cassaniti and the current and former directors providing little, if any, assistance to the Liquidator I am not prepared to infer that there was an improper purpose, or even that there was an arguable case that there was such a purpose.”

Krejci’s investigations and the separate investigation being run by the CoT are not exactly unfamiliar territory for Accolade Advisory’s Sam Cassaniti, who was gaoled in 2004 for a minimum two years and nine months on 22 counts of tax fraud.

Krejci told iNO that further examinations were scheduled for the new year.