David Iannuzzi.
Evading an order for indemnity costs aside, iNO can’t help wondering if the Commissioner of Taxation (CoT) regrets entering into consent orders with struck off liquidator David Iannuzzi way back in 2019.
Sure the CoT avoided the need to go through with the court-ordered inquiry it initially sought into Iannuzzi’s conduct as a registered liquidator, but given what’s transpired since maybe the inquiry would’ve been preferable.
“As the Commissioner submits this occurred in circumstances where the Applicants were relying on the passage of time as a source of alleged prejudice to them in their defence of the Supreme Court Proceedings and thus any delay operated to their forensic advantage.” Justice Brigitte Markovic.
Certainly in respect of the orders handed down yesterday by Federal Court judge Brigitte Markovic, it’s a case of consent in haste, defend indemnity costs applications at leisure.
In Commissioner of Taxation v Iannuzzi (No 4) [2024] FCA 1094 her honour refused an application for indemnity costs brought by multiple applicants who are defendants in voidable transaction proceedings commenced by Gayle Dickerson and Stephen Vaughan.
The KPMG duo were appointed liquidators to various wound up entities whose registrations were reinstated in 2019 in the same proceedings which saw Iannuzzi propose consent orders which included him agreeing to being struck from the roll of registered liquidators and banned from reapplying for registration for a period of 10 years.
The consent orders also included an order pursuant to s 601AH(3)(d) of the Corporations Act allowing that, when calculating the period ending three years after the relation-back day for any of the reinstated Companies, the period between the date of the deregistration of the relevant company and the date of the Reinstatement Orders was to be disregarded.
This has become known as Order 3 and it created a headache for the CoT and for Dickerson and Vaughan, who, upon being appointed to the reinstated companies, had commenced the voidables proceedings in the NSW Supreme Court.
In February this year, various defendants in those proceedings succeeded in having Order 3 discharged.
They then applied for their costs to be paid by the CoT and the liquidators on an indemnity basis.
According to one of the applicants neither the CoT or Iannuzzi has ever explained “why Order 3 was put before the Court on a non-urgent basis at the last minute without notice,” Justice Markovic said.
“While the Commissioner only received the draft Reinstatement Orders containing Order 3 for the first time at 1.22 pm on the day those Orders were made and, accepting that it is conceivable that the Commissioner did not turn his mind to the question of whether potential defendants should be given notice, those circumstances do not ameliorate the unreasonableness of his consenting to Order 3.
“The Commissioner knew or should have known that consent was given on uncertain legal footing where known, or readily knowable, third parties’ economic interests were directly and predictably affected.”
But Justice Markovic refused to make orders for indemnity costs, pointing out that at the time the CoT entered into the consent orders he could not have known which third parties would come to be affected by Order 3.
Further, the indemnity costs applicants had delayed bringing proceedings to discharge Order 3, with the earliest application being brought some 11 months after the Dickerson and Vaughan gave notice that they had been appointed to the reinstated entities.
“The Applicants’ delay caused prejudice to the Commissioner and more so to the Liquidators (as explained below) in terms of time and increased cost,” the judge said.
“Had the applications been brought earlier some of those costs (which were incurred in the Supreme Court Proceedings brought by the Liquidators) would have been avoided as those proceedings would have been adjourned at an earlier time pending the outcome of the applications for discharge of Order 3.
“The Applicants have provided only limited explanation for the delay and, in particular, why the applications could not have been brought at the same time they filed their defences in the Supreme Court Proceedings in which they raised the issue of whether the proceeding had been brought within time for the purposes of s 588FF(3) of the Corporations Act.
“As the Commissioner submits this occurred in circumstances where the Applicants were relying on the passage of time as a source of alleged prejudice to them in their defence of the Supreme Court Proceedings and thus any delay operated to their forensic advantage.”
Further reading:
Tax boss and banned RL on same side in costs dispute
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