The High Court has dismissed a liquidator’s application to reverse a £55.9 million payment to a Cyprus company, ruling that the claim would indirectly enforce an Australian tax debt and was barred by the foreign revenue rule.
Mr Justice Rory Mulcahy gave the ruling on 27 May 2024 in proceedings brought by Martin Ferris, liquidator of Redefine Australian Investments Limited. The company paid £55,916,731 to its sole shareholder, Redefine Cyprus Limited, on 18 September 2015 under a loan agreement. Ferris sought orders under sections 608 and 604 of the Companies Act 2014 to recover the payment, alleging it defrauded creditors or gave a connected creditor an unfair preference.
The company had invested in Australian property securities. The Australian Tax Office (ATO) later assessed it for more than A$29 million in capital gains tax and penalties. The company had disputed the tax assessment, but the liquidator admitted the ATO claim as a debt in the liquidation. The judge said the ATO was by far the company’s largest creditor and that, without that claim, there was no basis for the liquidator’s application.
The respondents, Brightbay Real Estate Partners Limited and Redefine Cyprus, asked the court to strike out the application. They argued that it was an attempt to collect foreign tax through Irish proceedings. The judge held that the claim’s purpose was to recover money to pay the ATO and that the revenue rule barred such indirect enforcement. He found no applicable agreement displacing that rule: Ireland’s reservations to the 2011 Convention on Mutual Administrative Assistance in Tax Matters excluded assistance in recovering tax claims.
The court also dismissed the section 604 claim because the payment was made more than two years before the company entered liquidation on 24 January 2018, outside the maximum period for a payment to a connected person. The section 608 claim was dismissed as statute-barred: the six-year period ran from the 2015 payment, not the liquidator’s appointment.
The judge rejected two other grounds advanced by the respondents. He said it could not be ruled out at this stage that section 608 might cover the alleged improper payment of a contractual liability, or that an order could be made against Brightbay even though it was not party to the transaction. Those points did not alter the dismissal on the other grounds. The court listed the matter for 6 June 2024 to make final orders.