Office of State Revenue error forced Cussen to court

There’s nothing like a howler in official government documentation – in this instance from the NSW Office of State Revenue – to disrupt the straightforward process of asset disposal, as Deloitte’s Neil Cussen learned in the curious case of Zerren Pty Ltd.

Cussen was appointed liquidator of Zerren in June 2014 following an application by the Chief Commissioner of State Revenue to wind up the company.

Zerren had two significant assets – a property at Willoughby and another at Wollstonecraft.

In October 2014, the Australian Taxation Office (ATO) lodged a proof of debt in the liquidation which showed two accounts: one for Zerren and one referring to Zerren as trustee for the Merrick Family Trust.

According to Federal Court justice Jacqueline Gleeson in Cussen (Liq), in the matter of Zerren Pty Ltd (in liq) [2017] FCA 981, “this was the first occasion on which it was suggested to the liquidator that Zerren may have operated as trustee for that trust”.

Cussen continued on his merry way, selling the Willoughby property over the course of 2014/2015.

In February 2017 he was on the verge of causing Zerren to sell the Wollstonecraft property, with contracts exchanged between Zerren and the prospective purchasers. He then sought a land tax assessment notice for Zerren.

“On about 8 March 2017, the liquidator received a letter from the NSW Office of State Revenue (“OSR”) which stated that land tax was payable for the 2017 tax year on the Wollstonecraft property owned by “ZERREN PTY LTD ATF MERRICK FAMILY TRUST,” Justice Gleeson said.

“This letter was the first indication the liquidator received that the Wollstonecraft property may be held on trust by Zerren.” Really? What about the ATO’s proof of debt back in October 2014?

Talk about motivated vendor. Cussen immediately made enquiries to determine if the Wollstonecraft property – a nice three bedroom apartment – was held on trust.

Nothing from Zerren’s bank, the NAB, indicated Zerren acted as a trustee for the Merrick Family Trust. Nor was there any reference to Zerren trading as a trustee for any trust in correspondence Cussens’s enquiries elicited from the solicitors who acted for Zerren when it purchased the Wollstonecraft property in 2007 for $910,000.

Zerren’s accountants from that period also had nothing in the way of evidence of any trustee status to provide. Zerren’s directors were positive Zerren owned the properties.

“Ms Merrick and Mr Merrick have each made statutory declarations which state that, to their knowledge, Zerren holds the Wollstonecraft property in its own right and not as the trustee for any trust,” Justice Gleeson said.

“Further, they each believe that the OSR was in error in showing that Zerren’s ownership of the property was as trustee for the Merrick Family Trust.

“In error”? How does such an error come to be inserted into the record by an employee or employees of the OSR unknown?

Justice Gleeson said: “The OSR has confirmed that it does not have any records to indicate the basis upon which it recorded that Zerren purchased or holds the Wollstonecraft property on trust.”

Armed with overwhelming evidence of an OSR error Cussen applied to the Federal Court for an order that he could cause Zerren to sell the Wollstonecraft property in its own right.

The sale of the Wollstonecraft property – for $1.9 million – appears to have been concluded recently and the judge ordered that Cussen’s costs of the application be met out of the liquidation. The question of how the false information came to be entered by the OSR is yet to be answered.