Liquidators and ATO at odds over relation back date

Two Queensland liquidators are licking their wounds after betting that the Commissioner of Taxation (CoT) was wrong on the question of the relation back date for 52 The Esplanade Pty Ltd, a Surfers Paradise cafe operator.

The question came before Queensland Supreme Court judge Declan Kelly for determination on March 15 and judgment in Re 52 The Esplanade Pty Ltd (in liquidation) [2023] QSC 57 was delivered the following week. Costs is a question yet to be resolved.

“The construction suggested by the liquidators is uncommercial as it would suggest that there could be more than one relation-back day for a winding up.” Judge Declan Kelly.

In his judgment the judge noted: “The relation-back day is an important date for the administration of a winding up and needs to be able to be ascertained with certainty.”

It’s also a date that can make or break claims for preferences or insolvent trading.

The dispute followed the appointment by court order on June 28, 2022 of Rodgers Reidy directors David Hambleton and Kaily Chau as liquidators, replacing SV Partners’ Terry Rose, who’d been installed as provisional liquidator in late 2021.

iNO’s mail is that one of the shareholders was miffed at the sale price Rose achieved for the business – a sale secured after the landlord issued a Notice of Breach of Lease which subsequently saw a much lower sale price secured but rental arrears and a portion of Rose’s remuernation paid.

The shareholder’s dissatisfaction was purportedly the justification for the application to appoint replacement liquidators but iNO understands the complainant shareholder is also connected with the director whom Hambleton and Chau are investigating in respect of possible insolvent trading claims so the focus on Rose might have been a smokescreen.

Once appointed the Rogers Reidy pair also discovered preferences to the ATO that were potentially recoverable, which might go some way to explaining why they and the CoT were on different pages about the relation back date when they came before Judge Kelly.

In summarising the differences Judge Kelly said: “The liquidators contend that the relation-back day is 17 September 2021, being the date that the originating application was filed. The ATO contends that the relation- back day is 3 June 2022, being the date that the provisional liquidator’s application was filed.”

Having a court-mandated relation back date in 2021 would obviously present more potential recovery options than a date only weeks before the liquidators’ appointment so it’s easy to see why Hambleton and Chau had a crack by trying to argue that the first winding up application filed in 2021 by a contributory should be used to determine the relation back date. But it wasn’t to be.

“The liquidators’ submission to the effect that the expression “the day on which the application was filed” should be construed as contemplating more than one application must be rejected,” the judge said.

“If more than one application were in contemplation, more than one filing date would be in contemplation.

“The relation-back day is an important date for the administration of a winding up and needs to be able to be ascertained with certainty.

“The construction suggested by the liquidators is uncommercial as it would suggest that there could be more than one relation-back day for a winding up.”

In summing up he ruled that Rose’s application for winding up orders – made 28 June 2022 in his capacity as provisional liquidator of 52 The Esplanade – represented the only winding up application for the purposes of deterring the relation back date.