Maddison Resort Pty Ltd v Deputy Commissioner of Taxation
[2003] QSC 485
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- Unreported Judgment
- Maddison Resort Pty Ltd v Deputy Commissioner of Taxation[2003] QSC 485
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Maddison Resort Pty Ltd v Deputy Commissioner of Taxation[2003] QSC 485
Maddison Resort Pty Ltd v Deputy Commissioner of Taxation[2003] QSC 485
SUPREME COURT OF QUEENSLAND
CITATION: | Maddison Resort Pty ltd v Deputy Commissioner of Taxation [2003] QSC 485 |
PARTIES: | MADDISON RESORT PTY LTD (Applicant) v DEPUTY COMMISSIONER OF TAXATION (Respondent) |
FILE NO/S: | 628 of 2002 |
DIVISION: | Trial |
PROCEEDING: | Application to set aside statutory demand |
ORIGINATING COURT: | Supreme Court at Cairns |
DELIVERED ON: | 12 May 2003 |
DELIVERED AT: | Cairns |
HEARING DATE: | 4 March 2003 |
JUDGE: | Jones J |
ORDER: | 1. The application to set aside the statutory demand be dismissed. 2. The applicant to pay the respondent’s costs to be assessed on the standard basis. |
CATCHWORDS: | CORPORATIONS – PRACTICE AND PROCEDURE – application to set aside statutory demand – where statutory demand made for payment of Goods and Services Tax and associated General Interest Charges – whether court had jurisdiction to hear the matter – whether there was a genuine dispute between the parties as to the existence or amount of the debt – whether demand may be set aside on other grounds. Income Tax Assessment Act 1997 (Cth) ss 995-1(1) Taxation Administration Act 1953 (Cth) s AAZH Corporations Act (Cth) s 459G, s 459H, s 459J Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1995) 19 ACSR 125 considered Kanawa Nominees Pty Ltd (as Trustee for the Kanawa Family Trust v Australian Taxation Office [2001] ACT SC 114 Montere v Deputy Commissioner of Taxation [2000] 44 ATR 623 Re Morris Catering (Australia) Pty Ltd (1993) 11 ACLC 919 SC (Qld) considered |
COUNSEL: | D Morzone for the applicant |
SOLICITORS: | Miller Harris for the applicant MacDonnells for the respondent |
- This is an application pursuant to s 459G of the Corporations Act 2001 (“the Act”) to set aside a statutory demand, for payment of a debt, made of the applicant Maddison Resort Pty Ltd (“the Company”). The respondent creditor, the Deputy Commissioner of Taxation, served the company with a statutory demand for $35,278.67 on 28 November 2002. The debt was described as –
“a) Running Balance Account deficit debt as at 28 November 2002 in respect of amounts due under the BAS provisions as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (“the ITAA 1997”) [BAS provisions include, generally: the goods and services tax provisions, the PAYG withholding provisions, the PAYG instalment provisions, the fringe benefits tax instalment provisions and the deferred company instalment provisions) and the general interest charge payable under section 8AAZF of the Taxation Administration Act 1953 (“the TAA 1953”), being a debt due and payable by the company pursuant to section 8AAZH of the TAA 1953.”[1]
- The affidavit accompanying the demand referred to the amount being identified in a running balance account statement.[2] A later affidavit filed on behalf of the respondent[3] gave a more detailed history of the dealings between the parties which included the fact that, between April and July 2002, the applicant’s accounts had been audited and on 28 August 2002 notices of assessment had issued. No objection had been raised to those assessments up to the time this application was filed.
- The supporting affidavit to the application simply asserts that “the applicant disputes that is indebted to the respondent in the amount claimed in the statutory demand, or at all.”[4] The paucity of factual information in the supporting affidavit was sought to be explained by the fact that the applicant’s financial records were seized by the Federal Police acting upon a warrant “within a few days” of the service of the statutory demand. It was suggested that this seizure thereby prevented more detailed identification of the dispute. This fact loomed large when the matter first came on for hearing on 30 January 2003 and provoked the question whether s 459J could be relied upon.
- The supporting affidavit also asserts that the applicant was unable to assess how the amount of the demand was calculated because of the lack of detail in the schedule to the statutory demand. Ultimately the applicant has preferred to rely upon this aspect to argue that the demand should be set aside pursuant to s 459J of the Act.
- On 28 February 2003 shortly before the Court was to hear this application the applicant lodged objection to the notice of assessment.[5] This document does not give any factual basis for the objection but simply asserts an entitlement to claim tax credits pursuant to certain stated sections of the Goods and Services Tax Act 1999. There is no statement of the amount of the entitlement nor the circumstances in which the entitlement is claimed.
The issues
- The respondent argues two grounds for the dismissal of the application. They are:-
- The Court has no jurisdiction because the applicant has not complied with s 459G(3); alternatively
- The applicant has not established the existence of a genuine dispute.
Jurisdiction
- It is accepted that the application filed on 18 December 2002 was filed within the time limit provided by s 459G and that a copy of the application and supporting affidavit was served on the respondent within that time. However counsel for the respondent submits that the supporting affidavit does not disclose the material facts upon which the applicant relies to establish the existence of a genuine dispute and that without such disclosure the Court has no jurisdiction to hear the application. He relies particularly on the High Court decision David Grant & Co Pty Ltd v Westpac Banking Corporation[6] where Gummow J (with whom all other members of the Court agreed) said (at p 276-7):-
“In providing that an application to the court for an order setting aside a statutory demand “may only” be made within the twenty-one day period there specified and that an application is made in accordance with s 459G only if, within those twenty-one days, a supporting affidavit is filed and a copy thereof and of the applications are served, sub-ss (2) and (3) of s 459G attach a limitation or condition upon the authority of the court to set aside the demand. In this setting, the use in s 459G(2) of the term “may” does not give rise to the considerations which apply where legislation confers upon a decision-maker an authority of a discretionary kind and the issue is whether “may” is used in a facultative and permissive sense or an imperative sense (25). Here, the phrase “[a]n application may only be made within 21 days” should be read as a whole. The force of the term “may only” is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G. An integer or element of the right created by s 459G is its exercise by application made within the time specified. To adapt what was said by Isaacs J in The Crown v McNeil (26), it is a condition of the gift in sub-s (1) of s 459G that sub-s (2) be observed and, unless this is so, the gift can never take effect. The same is true of sub-s (3).”
- This passage was applied by Sundberg J in Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund[7] when he considered the minimum requirements for a “supporting affidavit” to comply with the requirements of the subsection. His Honour said (at 459):-
“In order to be a “supporting affidavit”, an affidavit must say something that promotes the company’s case. An affidavit which merely says, “I am a director of the company but am too busy at present to make a full affidavit, and I will do so later” would not support the application. It would in no way advance, further or assist the company’s cause, which is to have the notice set aside. At the other extreme, the affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute: John Holland. That evidence must be available at the hearing of the application to set aside, because that application is for final and not interlocutory relief: 71 Paisley Street.
In a s 459H(1)(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading.
An affidavit which exhibits an exchange of correspondence between the parties or between their solicitors from which it appears that a claim is made and rejected for reasons given can qualify as a supporting affidavit. And an affidavit verifying the pleadings in an action may qualify.”
- The affidavit relied upon as supporting the application has only two relevant paragraphs on this point namely:-
“(3) The applicant disputes that it is indebted to the respondent to the amount claimed in the statutory demand, or at all.”
…
(5) From the information contained in the creditors’ statutory demand, and supporting (accompanying) affidavit of Lisa Ann Everingham I am unable to assess how it is that the said sum claimed by the respondent is calculated, or is said to be payable by the company.”
- It is clear from the remarks of Sundberg J that the terms of para 3 above would not be sufficient to raise an issue identifying a genuine dispute or the presence of an offsetting claim for the purpose of s 459H and I so find.
- The next question is whether the terms of para (5) quoted above ARE sufficient to raise an issue that there is some other basis why the demand should be set aside for the purpose of s 459J. In this connection the description of the debt in the statutory demand is clear, viz. a random balance account deficit in respect of amounts due under various provisions of the Income Tax Assessment Act 1997 (“ITAA”) or the Tax Administration Act 1953 (“TAA”).
- Having been involved in the tax audit process lasting several months, the applicant was no doubt well aware of a Running Balance Account. This audit established that the applicant company had over-claimed Goods and Services Tax credits for the period 1 July 2000 to 30 April 2002. As a result the applicant company had become liable to pay Goods and Services Tax, penalties and a general interest charge. On 22 August 2002 the applicant was advised by letter that the revised GST amount payable was $38,392 plus any general interest payable. In this letter the Taxation Officer also provided a summary statement of the revisions it had made to the company’s Business Activity Statements and cogent reasons for making these revisions.[8] On 28 August 2002 successive notices of assessment were issued totalling this amount.[9] Then, on 28 November 2002, the applicant company was served with a statutory demand in the sum of $35,278.67, not for $38,392 as originally advised. It is unclear to me how this lesser sum became the subject of the statutory demand, particularly as the Taxation Office has deposed to this sum having included a General Interest calculated up to 27 November 2002. In the Wilson Affidavit, sworn 22 January 2003, para 7 the sum of $35,278.67 was described as the Running Balance Account deficit debt as at 28 November 2002. That deficit has now risen to the sum of $35,859.43 due to the further accrual of general interest charge[10] The applicant lodged an objection against the assessment underlying the respondent’s statutory demand on 28 February 2003.
- Throughout the audit process the applicant had the benefit of professional advice from and representation by his accountant. The balance was arrived at after a detailed process described in para [3] of the Everingham affidavit sworn 14 February 2003. That process included two formal interviews, several conversations and an exchange of correspondence. The issue of notices of assessment on 28 August 2002 demonstrated what was the respondent’s position was in relation to the Running Balance Account.
- For the applicant to assert that he was “unable to assess how the sum is calculated,” without his identifying the cause of that inability does not, in my view, satisfy the requirements of s 459G. Initially, it was suggested that this inability was due to records having been seized by Federal Police. The lack of access to these records would not have prevented the applicant from claiming (as he did subsequently in a notice of objection) the source of the legal error into which he contends the respondent had fallen, nor would it have prevented the applicant from identifying at least some facts material to the circumstances in which the respondent failed to apply the law correctly. If the applicant had a genuine dispute with the respondent about the quantum of the notices of assessment one would have expected at least some estimate by him of the extent to which the contested assessment ought be varied. In the final analysis none of these matters has been raised in the accompanying affidavit and I find that it was insufficient for the purpose of constituting a “supporting affidavit” within the meaning of s 459G(3).
- Consequently the court has no jurisdiction to set aside the statutory demand.
Genuineness of claim
- In case I am found to be in error on the jurisdictional question I should deal with the argument that the applicant has not, in any event, established a genuine dispute between it and the respondent.
- The respondent, in argument, referred in more detail to the lack of particulars upon which the genuineness of the dispute could be assessed but the respondent relies particularly upon the provisions of the tax legislation which determine that the defendant’s claim is a statutory debt.
- The Taxation Administration Act 1953 (“the TAAA”) s AAZH provides that “if there is an RBA deficit debt on an RBA at the end of a day, the tax debtor is liable to pay to the Commonwealth the amount of the debt. The amount is due and payable at the end of that day.” Further, even though the substantive liability for this company’s RBA deficit debt has been challenged, counsel for the applicant has conceded that the mere fact that the company had objected to the assessments did not establish that there was a genuine dispute as to the existence or amount of the relevant debt. One might assume there to be a genuine dispute as to the subject matter of the objection, namely, whether some or all of the GST input credits should have been allowed, but that does not mean there was a genuine dispute as to the existence or amount of the relevant debt. (Hoare Bros Pty Ltd v DCT (1995) 19 ACSR 125 per Black CJ, Eynfeld and Sackville JJ at 135, 136).
- This notwithstanding, counsel for the applicant has asked me to consider the lodgement of an objection as “analogous to an appeal from a judgment debt”.[11] It is the case that in Woodhead Firth Lee Pty Ltd v Archer Pty Ltd [12] the defendant was granted an adjournment of its winding up summons to await the determination of the appellate Court. The debt in that matter was a debt established by judgment of a court. The debt in this matter is a debt imposed by statute and the application here is not for a winding up of the defendant, but to set aside a statutory demand.
- The latter was also the subject of the application in Wilden Pty Ltd v Greenco Pty Ltd[13] to which counsel for the applicant has also referred me. However that case also concerned a judgment debt, not a debt imposed by way of statute. Master Adams recognised that, had there been a winding-up application made and the matter had gone to a hearing, then the fact that the matter was under appeal might well have been an issue. But, as the application was to set aside a statutory demand, it did not matter that the matter was under appeal.[14]
- I do not accept the applicant’s argument that an objection might be regarded as analogous to an appeal from a judgment debt. I do not consider it appropriate to adjourn the proceedings until the objection has been heard. More particularly, the plaintiff’s application under s 459H must fail, as counsel for the respondent has pointed out, because the applicant has simply asserted the existence of a dispute and presented nothing more.
Substantial injustice or other reason
- Under s 459G the Court may set aside a statutory demand “if it is satisfied that:
- because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
- there is some other reason why the demand should be set aside.”
- Counsel for the applicant has conceded that s 8AAZH(1) of the Tax Administration Act creates a statutory debt due and payable. However, he invites me to consider the s 459J2(b) ground, namely, that there is “some other reason why the demand should be set aside”. The basis for such consideration is that the respondent might be regarded as taking advantage of statutory provisions the purpose of which is to establish conclusive indebtedness so as to prevent the applicant from challenging its taxation liability through appropriate appeal channels. In his submission he has cited Montere v Deputy Commissioner of Taxation[15] at some length to this same effect.
- In that case no notice of objection was lodged against the Commissioner’s decision on the remission of penalties for the applicant’s failing to send certain prescribed payments to the commissioner. In this matter an objection has been lodged, albeit somewhat tardily.
- However Montere makes clear that the touchstone of the discretion I must exercise with respect to s 459J(1)(b) is whether, in issuing a statutory demand, the commissioner has acted “oppressively or unfairly” (per Austin J para 55, 543). Montere recognises that “if the commissioner decides not to await the outcome of the objection, the proper course will often be for him to take proceedings for recovery of the debt rather than to summon up the spectre of liquidation by issuing a statutory demand”.
- But I am not satisfied that the Australian Taxation Office has acted “oppressively or unfairly” at any stage in this matter. Immediately following its audit, the Taxation Office conducted an interview with the sole director of the plaintiff and his accountant to discuss the company’s liability to pay Goods and Services Tax, penalties and a general interest charge. Discussions continued between the Office and the company’s accountant until the end of July 2002, including a further interview with the company’s director and the accountant regarding his having over-claimed Goods and Services Tax credits. It has been deposed that the company’s director was made fully aware of all the proposed adjustments and that the company’s director made no objection to such proposed adjustments.[16]
- It is true that numerous documents relating to the applicant company were seized in December 2002 by the Australian Federal Police, but I do not accept, given the Everingham Affidavit sworn 14 February 2003, that the Director of the plaintiff company had not had, as of 30 January, 2003, “an opportunity to review records relating to…the debts alleged by the Australian Taxation Office”. (see Thomas Affidavit, para 3). He had already been given ample opportunity to do this before those documents were seized.
- Thus, it is not open to me to find any other reason why the demand should be set aside under s 459J(1)(b).
Orders
- My orders are as follows:-
- The application to set aside the statutory demand be dismissed.
- The applicant to pay the respondent’s costs to be assessed on the standard basis.
Footnotes
[1] Ex “SJT1” to affidavit of Stephen Thomas sworn 17 December 2002
[2] Ex “A” to affidavit of Yvonne Wilson sworn 22 January 2003
[3] Affidavit of Lisa Everingham sworn 14 February 2003
[4] Para [3] of affidavit of Stephen Thomas sworn 17 December 2002
[5] Ex “SJT1 “to the affidavit of Stephen Thomas filed 4 March 2002
[6] (1995) 184 CLR 265
[7] (1996) 70 FCR 452
[8] See Ex “LAE 1” to Everingham affidavit sworn 14 February 2003
[9] See Ex “LAE 2” to the Everingham Affidavit sworn 14 February 2003
[10] See Wilson affidavit filed 22 January 2003
[11] See counsel’s submission, para 12
[12] (1995) Supreme Court of SA BC 9502306
[13] (1995) Supreme Court of WA BC 9503697
[14] See Wilden Pty ltd BC 9503697 at 4, p 2
[15] [2000] 44 ATR 623
[16] See the Everingham Affidavit, sworn 14 February 2003