NSW Court suspends ATO garnishee-style notice in Hudson administration

The NSW Supreme Court has granted section 447A relief in Hudson Global Resources’ voluntary administration, permitting Part 5.3A to operate so that ScotPac, Hudson’s invoice financier, would not have to comply with an ATO garnishee-style notice that required 20% of Hudson’s drawdowns to be remitted to the Commissioner, after finding that the notice threatened to drain funding needed to keep the labour hire business trading.

The decision arose from urgent proceedings brought by Hudson’s administrators, Glenn Livingstone, Nick Charlwood and Benjamin Ho of WLP, against the Deputy Commissioner of Taxation and Scottish Pacific Business Finance. The dispute centred on a 30 March 2026 notice issued to ScotPac under section 260-5 of Schedule 1 to the Taxation Administration Act, which required ScotPac to remit 20% of all Hudson drawdowns to the Commissioner, up to $19.6 million.

Hudson is a national recruitment agency and labour hire company with approximately 350 public and private sector customers, 1,209 employees and 353 contractors across Australia. In 2021, it entered into an invoice financing facility with ScotPac, under which ScotPac advanced up to 85% of eligible invoices shortly after issue, in return for fees and an assignment of rights and title to Hudson’s receivables.

The administrators were appointed on 22 April 2026 under section 436A of the Corporations Act. Hudson had only $948,877 in cash and urgently needed funding to continue trading, including weekly payments of approximately $3.2 million in net wages, $900,000 in PAYG instalments, $1.8 million per month in GST and superannuation accruing at approximately $300,000 per week. ScotPac was not prepared to allow further drawdowns under the existing facility while Hudson was in administration.

The administrators asked the Commissioner to withdraw the ATO notice on 23 April 2026, but the notice was not withdrawn. In the absence of alternative funding, the administrators entered into a new funding agreement with ScotPac on 29 April 2026, structured as an amendment to the existing facility. The amended terms included a reduced facility limit, a $500,000 arrangement fee plus GST, an increase in management fees from $15,000 to $20,000, and an increased margin from 0.90% to 1.50%.

ScotPac remitted $636,068.92 and $168,133 to the Commissioner under the ATO notice after the administrators drew down on the facility on 29 and 30 April 2026. The administrators understood that approximately $4 million had already been remitted to the Commissioner before the administration began. They sought, in substance, to suspend the notice so ScotPac would not have to continue diverting 20% of drawdowns to the ATO.

The administrators first relied on section 440B, which restricts enforcement of security interests during voluntary administration. Justice Brereton accepted that the ATO notice created a statutory charge in favour of the Commissioner over amounts owing by ScotPac to Hudson, and that the Commissioner was therefore a secured party in relation to Hudson’s property for the purposes of section 440B.

That conclusion turned on the statutory character of section 260-5 notices. Justice Brereton held that, once ScotPac became liable to pay amounts to Hudson under the funding agreement, the ATO notice charged the contractual obligation to pay Hudson and required ScotPac to pay 20% to the Commissioner instead. The fact that the Commissioner’s charge did not necessarily confer a proprietary interest in the debt did not prevent it from being a “charge” and therefore a security interest under the Corporations Act.

However, the Court refused the administrators’ section 440B relief because the Commissioner was not enforcing the charge. Justice Brereton distinguished between creation of the statutory charge and enforcement of it. Passive receipt of funds from ScotPac, and letters refusing to withdraw the notice, were not steps to enforce the charge. Enforcement would require a step to compel ScotPac to pay, such as legal proceedings if ScotPac failed to comply.

The Court accepted that ScotPac was practically compelled to comply because non-compliance with a section 260-5 notice is an offence. But that did not mean the Commissioner had enforced the charge. The criminal consequences made it unlikely the Commissioner would need to enforce the charge, but they did not transform the notice’s ongoing operation into enforcement by the Commissioner.

The administrators succeeded on their alternative claim under section 447A. Justice Brereton held that the Court had power to modify how Part 5.3A operated in relation to Hudson, because suspending the practical effect of the ATO notice would advance the statutory purpose of voluntary administration: maximising the chances of the company or its business continuing, or producing a better return than immediate winding up.

The evidence showed that the ATO notice was likely to consume cash needed to preserve the business. Livingstone gave evidence that, without relief, the administrators expected to run out of immediately available cash to trade the business or continue staffing levels, leaving them with little alternative but to wind down operations or terminate employees and PAYG contractors. That would destroy value and crystallise estimated employee entitlements of up to $11.3 million.

The Commissioner argued that section 447A could not be used to alter the operation of a Commonwealth taxation collection power. Justice Brereton rejected that submission, distinguishing cases where section 447A had been used for purposes outside Part 5.3A. The relief was not sought for the foreign purpose of rewriting tax law; it was directed to the administration of Hudson and to ensuring Part 5.3A could operate consistently with its statutory purpose. Any effect on the Commissioner’s tax collection rights was incidental.

The Court also relied on the policy of the voluntary administration moratorium. Although section 440B was not directly engaged because there was no enforcement step, the ATO notice had the practical effect of siphoning property to the Commissioner that would otherwise be available to the administrators. Justice Brereton said that outcome offended the policy of section 440B and Part 5.3A more generally, and compared the notice to a statutory garnishee. If the Commissioner had obtained a court garnishee order, section 440F would have suspended enforcement during the administration.

The Court did not order repayment of amounts ScotPac had already remitted to the Commissioner during the administration. That restitutionary relief depended on success under section 440B, which failed. The section 447A relief was forward-looking, and the parties were directed to propose orders giving effect to the reasons. Justice Brereton suggested that one possible route would be to make section 440F operate as though it also referred to a notice issued under section 260-5 of Schedule 1 to the Taxation Administration Act.

At the urgent hearing on 13 May 2026, the Court separately made orders under section 90-15 confirming that the administrators were justified in entering into and using the ScotPac funding agreement. The Court also modified Part 5.3A so that, if the administrators’ statutory indemnity under section 443D was insufficient to meet liabilities under the funding agreement, they would not be personally liable to the extent of the insufficiency.

Read the decision here.

Professionals involved:

• David Sulan SC and Brandon Smith of Banco Chambers, counsel, and Mallesons, solicitors, for Glenn Livingstone, Nick Charlwood and Benjamin Ho of WLP as administrators of Hudson Global Resources

• Steven Golledge SC of 3 St James Hall Chambers and S Scott, counsel, and Craddock Murray Neumann, solicitors, for the Deputy Commissioner of Taxation

• Cayli Bloch of Clayton Utz for Scotpac