"After the closing, the Company sought, without significant success, to receive certifications from the members of the LLCs and LLPs as to their residency status. Towards the end of the 18-month period, the Company made a voluntary disclosure to the ATO. The ATO determined that, since there was inadequate evidence of the residency status of the beneficial recipients of the deemed dividend, withholding tax at the 30% rate was payable, which was then paid.\n\nHmelnitsky J found that, as submitted by Arrap, the correct withholding tax rate instead was 15% given that the Australian tax regulation requiring permitted the withholding rate to be determined on the basis of the address of the recipient, and that there was no requirement to ascertain whether a recipient with a US address was entitled to benefits under the Treaty. However, he found that Nuvei had not breached its implied obligation to cooperate with the sellers (Arrap), so that the Company was entitled to receive the escrowed funds in order to reimburse itself for the payment made to the ATO. He stated:\n\nThe plaintiff’s [Nuvei’s] conduct in seeking to resolve the withholding tax issue must be judged in the context of the advice it actually received. That advice was given by eminent and highly experienced practitioners who advised, wrongly in my respectful view, that the amount of withholding should have been 30% unless the Company was able to substantiate the investors’ entitlement to treaty benefits.\n\nFurthermore, Nuvei had not breached any implied duty by failing to present the correct interpretation of the withholding tax regulation to the ATO, as no one had suggested this interpretation until after the completion of the 18-month escrow period, and that it was not relevant that Nuvei had not provided Arrap an opportunity to comment on the specific wording of the voluntary disclosure, as there was no denial of an opportunity to Arrap to point out the correct construction of the withholding tax regulation."