ATO garnishees outlive s569

One day Liquidators will work out a solution to clawback garnishee payments made to the Australian Taxation Office pre-appointment. But s 569 is not likely one.

Garnishees have long been a thorn in our sides, as it no doubt gives the ATO an unfair advantage (when they knew or ought to have known of the Company’s insolvency) over other creditors.

It also unlikely qualifies as a voidable transaction.

569 doesn’t seem to fix this. 569 says (in summary) that any monies received by a creditor after executing orders, charges or attachments within 6 months of the debtors liquidation is (mostly) void.

This includes garnishees, because they attach.

But not, it seems, ATO ones.

Bruton Holdings Pty Limited (in liquidation) v Commissioner of Taxation [2009] HCA 32 is the leading authority on ss 500 and (via obiter) 569 of the Corps Act and s 118 of the Bankruptcy Act.

Basically, the Court said that attachment under s 500 can be any type. Meaning if the ATO issues a garnishee after the liquidators appointment, it is automatically void (including under s 468).

Attachment under ss 569 and 118 is unfortunately different. It must be ‘Curial attachment’ (Donnelly (1989) 25 FCR 432).

Curial means court/tribunal ordered.

An ATO garnishee is not Curial and therefore unlikely susceptible to s 569.

Have you got a better solution?

insolvency bankruptcy svvoidables

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