Federal Court Says Liquidator Is Not Personally Liable

Following the Gadens E-Update last Thursday, the Federal Court has since handed down a decision in Deputy Commissioner of Taxation v PM Developments Pty Ltd (12 December 2008) concerning the following question: "Is a liquidator of a corporation personally liable for Goods and Services Tax (GST) in respect of the sale of new residential premises owned by the corporation pursuant to a contract for the sale of those premises entered into and completed after the making of the winding up order?" The court held that the liquidator was not liable for the GST payable on the sale pursuant to a contract made after the liquidator's appointment, and that the liquidator had no liability for general interest charges in relation to the incapacitated company's GST liability. The GST was held to be a post liquidation debt of the company and as such it ranks in priority to certain other unsecured debts but has no special priority as a revenue debt. Importantly, Logan J indicated that a different approach would apply to a trustee in bankruptcy, in whom the property of the bankrupt vests pursuant to section 58(1)(a) of the Bankruptcy Act 1966 (Cth). His Honour said:

"The statement in para 6.271 of the explanatory memorandum [to the GST Act] as to who carries on an enterprise after bankruptcy, receivership or liquidation is true only of bankruptcy. It is not true of corporations which are placed in liquidation. Neither is it true of a privately appointed receiver."

The Deputy Commissioner has not indicated whether an appeal will be lodged. It is also possible that the legislature may intervene to clarify the GST law.

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