Insolvency Service is desperately hanging on to nearly two million dollars held in the name of unpaid Capital + Merchant investors as it tries to resolve with Inland Revenue an alleged GST stuff up. If found to have got its GST calculations wrong, Insolvency Service wants to use investors’ money rather than its own money to clear up the mess.
Insolvency specialists Korda Mentha are acting on behalf of some 7500 retail investors in Capital + Merchant left unpaid after the finance company went belly-up in 2007. Insolvency Service is liquidator of Capital + Merchant. It negotiated an $18.5 million out of court settlement with auditors BDO Spicers. Much of this money went to secured creditors: Perpetual Trust Ltd and Fortress Credit Corporation (Australia) II Pty Ltd. Insolvency Service booked $2.34 million for its liquidation fees and costs. By agreement, a balance of $1.75 million was to go to Korda Mentha as receiver acting on behalf of unpaid investors. This agreement was filed in court, gaining the status of a court order.
After the court filing, Insolvency Service woke up to the fact GST might be payable on some or all of the $18.5 million settlement with the auditors. This issue is not yet resolved. When Korda Mentha demanded the agreed $1.75 million be handed over for payment to investors, Insolvency Service asked the High Court to refuse enforcement. Justice Courtney ordered a stay of enforcement. Investors will not be seriously disadvantaged by any delay, she said. The funds are being held by Insolvency Service on term deposit earning tax-free interest.
In a separate legal action, Korda Mentha is suing Insolvency Service alleging negligence, claiming it should bear the cost of any GST mistake, not investors.
Gibson v. Official Assignee – High Court (16.08.18)
18.166