358 Hampton St Pty Ltd v Deputy Commissioner of Taxation
[2013] VSC 612
•12 November 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2013 01680
| 358 HAMPTON ST PTY LTD (ACN 132 916 717) | Plaintiff |
| v | |
| DEPUTY COMMISSIONER OF TAXATION | Defendant |
---
JUDGE: | GARDINER AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 October 2013 |
DATE OF JUDGMENT: | 12 November 2013 |
CASE MAY BE CITED AS: | 358 Hampton St Pty Ltd v Deputy Commissioner of Taxation |
MEDIUM NEUTRAL CITATION: | [2013] VSC 612 |
---
CORPORATIONS — External administration — Application to set aside statutory demand for amount due under Running Balance Account under the Taxation Administration Act 1953 on the basis that the plaintiff asserted offsetting claims which would come into existence when outstanding BAS were lodged — Defendant conducts audits and raises assessments which result in assertion as to existence of off setting claim not being sustainable.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. McAloon | Madgwicks Lawyers |
| For the Defendant | Mr S. Linden | Australian Taxation Office Legal Services Branch |
HIS HONOUR:
On 18 March 2013, the plaintiff (“358 Hampton”) was served with a creditor’s statutory demand for payment of debt dated 14 March 2013 which had been issued by the defendant (“the Deputy Commissioner”) pursuant to s 459E of the Corporations Act 2001 (Cth) (“the Act”). The demand was accompanied by an affidavit of Charles Moses, affirmed on 14 March 2013, which verified the demand as required by s 459E(3).
The demand claims that the amount of $227,737.31 is owed by 358 Hampton to the Deputy Commissioner. The schedule to the demand states that the debt is owing pursuant to a ‘Running Balance Account deficit debt as at 14 March 2013 in respect of amounts due under the BAS provisions … of the Income Tax Assessment Act 1997 (“the ITAA 1997”) … administrative penalties due under Part 4-25 of Schedule 1 of the Taxation Administration Act 1953 (“the TAA 1953”) and the general interest charge payable under s 8AAZF of the Taxation Administration Act1953, being a debt due and payable by the company pursuant to section 8AAZH of the TAA 1953’.
At the same time, demands were served on companies associated with the plaintiff, 463 South Road Pty Ltd, Terreno Holdings Pty Ltd and 519 Hampton Street Pty Ltd.
On 5 April 2013, the plaintiff and these other companies made application pursuant to s 459G of the Act to set aside the demands respectively addressed to them.
On 18 June 2013, at an earlier hearing of these applications which were heard together, the applications by Terreno and 519 Hampton were dismissed and the demand issued to 463 South was varied.
358 Hampton contended that it had an offsetting claim against the debt claimed in the demand which arose by reason of an entitlement to GST credits, however the BAS that would raise such entitlements had not yet been lodged. It was asserted that when this occurred the credits arising from the lodgement of such BAS (which 358 Hampton said amounted to $306,894) would be offset against the debt claimed in the demand and extinguish it, resulting in the demand being set aside.
The hearing of the application against 358 Hampton was adjourned to 23 August 2013 to enable it to lodge such BAS. The application was further adjourned by consent on the papers to 29 October 2013.
358 Hampton’s application is supported by an affidavit of its director, Antonio Bruno, sworn 5 April 2013. In that affidavit, Mr Bruno asserts that 358 Hampton has an offsetting claim against the Commissioner’s demand. He states as follows:
6.I am informed by my accountant and believe that 358 Hampton (Trustee of the 358 Hampton Street Trust) has an offsetting claim against the Debt claimed. I am informed that 358 Hampton Street is currently entitled to GST adjustments in the amount of $306,894.00 [There is then exhibited a document prepared by the plaintiff’s accountant entitled “Summary of BAS Adjustments” prepared by 358 Hampton’s accountant”.]
7.I am also informed by my accountant and believe that the GST adjustments referred to above relate only to 358 Hampton Street’s account records being up to date as at June 2011. I have instructed my accountant to update 358 Hampton Street’s account record for 2012. I am informed this will take approximately 4 – 6 weeks to complete. I am further informed by my accountant and believe that 358 Hampton Street may be entitled to further GST credits once the records have been updated, which will further offset the amount of the Debt. [There is then exhibited a letter from the accountant to 358 Hampton’s solicitors dated 5 April 2013.]
The document headed “Summary of BAS adjustments” exhibited by Mr Bruno asserts various matters as to the BAS position of 358 Hampton. In the letter dated 5 April 2013 from 358 Hampton’s accountant, Boss Private Clients to its solicitors, Madgwicks, the accountants state:
We wish to advise, we are currently in the process of preparing the 2012 Financial Statements and Tax Returns for the above named entities. We anticipate completing the Financials (sic) Statements and Tax Returns in approximately four – five weeks.
We suspect there may be additional GST credits to be claimed for the 2012 year. If there are additional GST credits to claim, we will amend the necessary Business Activity Statements (BAS).
If you have any further queries, please do not hesitate to contact our office.
In opposition to the application, the Deputy Commissioner relies on two affidavits of Lynette Pascoe, sworn 7 June 2013 and 12 June 2013. At the hearing of this matter the Deputy Commissioner sought to and was allowed to rely on an affidavit of Daniel Pownell, sworn 28 October 2013.
Ms Pascoe is an officer in the Australian Public Service, employed in the Strategic Recovery-Debt Section of the Australian Taxation Office at Brisbane. She has access to the records of the Deputy Commissioner in relation to 358 Hampton. In both her affidavits, she states that she is familiar with the Deputy Commissioner’s record system maintained by the ATO which includes the records relating to the liabilities of tax payers and any payments or credits made or applied in reduction or discharge of those liabilities, the receivables management system (RMS), which electronically records contemporaneous file notes prepared by ATO officers and the Siebel Client Relationship Manager System, which stores correspondence and records interaction with tax payers.
In her affidavit of 7 June 2013, Ms Pascoe deposes that at the date of the statutory demand, the ATO records show that 358 Hampton owed an amount of $227,737.31 pursuant to a Running Balance Account deficit debt and exhibits a copy of a Running Balance Account statement reflecting this.
In her affidavit of 12 June 2013, Ms Pascoe deposes that as at 12 June 2013 the amount claimed against 358 Hampton under the Running Balance Account had increased to $450,290.25. The increase is represented by ATO determinations for GST and for penalties exacted for understatement of GST liability. A Running Balance Account Statement is exhibited which reflects this.
In his affidavit, Mr Pownell deposes that he is an officer of the Commonwealth Public service and is employed in the Strategic Recovery section of the Australian Taxation Office. He states that he has had access to the Deputy Commissioner’s computer records and has perused the records in respect of 358 Hampton. He states that subsequent to the issue of the statutory demand in this case, in May 2013, an audit was conducted of 358 Hampton’s liabilities under the BAS provisions of the ITAA 1997. As a result of that audit, on 13 May 2013 the Commissioner issued a Notice of Amended Assessment of GST net amounts to 358 Hampton for the period 1 January 2012 to 31 March 2012 pursuant to Schedule 1 of the TAA 1953. On 14 May 2013, a Notice of Assessment and Liability to Pay penalty was issued to 358 Hampton for the period 1 January 2012 to 31 January 2012 pursuant to Schedule 1 of the TAA 1953. That document noted a liability of $109,227.50 to the Deputy Commissioner which was due to be paid on 12 June 2013.
Mr Pownell also deposes that the Commissioner concluded an audit of 358 Hampton in respect of its liabilities under the BAS provisions of the ITAA 1997 for the quarters ending June 2009, September 2009, December 2009, June 2010, June 2011 and June 2012 in September 2013. On 18 September 2013, as a result of that audit, notices of assessments with net amounts due under the BAS provisions were issued to 358 Hampton which noted a liability for $672,595.00. On 24 September 2013, the Commissioner issued notices of assessments of shortfall penalty to 358 Hampton for those periods pursuant to Schedule 1 of the TAA 1953 in the total sum of $336,297.50. Each of the assessments is conclusive evidence of 358 Hampton’s liability for the amounts mentioned. [1]
[1]See s 298-30 of Sch 1 of the TAA 1953 with respect to administrative penalties, including shortfall penalties, and s 350-10 of Sch 1 of the TAA 1953 with respect to GST declarations.
The assessments overwhelm the contention by 358 Hampton that it has offsetting claims against the Deputy Commissioner that reduce or extinguish the Deputy Commissioner’s claims.
Mr Pownell’s affidavit concludes by exhibiting a Running Balance Account statement which is prima facie evidence of the indebtedness of 358 Hampton under s 8AAZI of the TAA 1953. That document reveals that as of 14 March 2013 the company was indebted to the Deputy Commissioner for $227,737.31, the amount claimed on the demand. The RBA statement then notes the various debits and credits on the running balance account which arise by lodgement of BAS, the audit
and the assessments referred to concluding with a balance on 28 October 2013 of $695,735.84.
Section 8AAZH of the TAA 1953 provides:
If there is an RBA deficit debt on an RBA at the end of a day, the tax debtor is liable to pay the Commonwealth the amount of the debt. The amount is due and payable at the end of that day.
Section 8AAZI provides:
(1) The production of an RBA statement:
(a)is prima facie evidence that the RBA was duly kept; and
(b)is prima facie evidence that the amounts and particulars in this statement are correct.
(2)In this section: RBA statement includes a document that purports to be a copy of an RBA statement and is signed by the Commissioner or a delegate of the Commissioner or by a second Commissioner or Deputy Commissioner.
Thus, until displaced, the Running Balance Account statements are prima facie evidence of the amounts demanded.
At the hearing of this matter on 29 October 2013, 358 Hampton sought to and was allowed to rely on an affidavit of Sam Cimino, sworn 28 October 2013. Mr Cimino is 358 Hampton’s accountant. He states that on 21 August 2013 he received a letter from the ATO which contained interim findings of the audit carried out on 358 Hampton. He states that he took issue with various contentions in the interim findings letter and detailed them to the officer at the ATO having responsibility for the matter, Ms Gunn. On 18 September, he states that he received a notice from the ATO advising that the audit was now complete. A new case officer had taken over the file and Mr Cimino observed to him that his clients had been denied input tax credits that he asserted they were entitled to. On 28 October 2013, Mr Cimino received an amended completion of audit notice. I do not consider that Mr Cimino’s affidavit takes the matter any further.
It was indicated by Mr McAloon, counsel for 358 Hampton, that objections to the assessments under Part IVC of the TAA 1953 had been filed in relation to the assessments which had been recently generated but this does not advance its position in the present application. [2]
[2]See Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473.
The principles to be applied in applications of this type require the plaintiff to establish the existence of a genuine dispute or offsetting claim. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [3] the Court of Appeal in this state considered that the test to be applied was as follows:
[3](2008) 66 ACSR 67.
[56]The court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim.
[57]No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the “ultimate question” of the existence of the debt should not be compromised.
…
[71]As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something “between mere assertion and the proof that would be necessary in a court of law” may suffice.
In my view, this is a clear cut case. The application was adjourned in June for the purpose of 358 Hampton lodging BAS statements which it contended would result in the balance of the account between it and the Deputy Commissioner being reduced or even extinguished. Since then, the Deputy Commissioner has carried out an audit of 358 Hampton’s taxation affairs, the result of which has been the generation of several assessments. Those assessments state that 358 Hampton’s liability has significantly increased to the point where it is now indebted for $695,735.84. In my view, those assessments overwhelm any contention by 358 Hampton as to the existence of offsetting claims. In my view there has been no displacement of the prima facie evidence as to 358 Hampton’s liability which arises from the Running Balance Account as at the date of the demand or for that matter the assessments mentioned for which the Deputy Commissioner has adduced conclusive evidence.
In my view, the application should be dismissed with costs, including any reserved costs.
0
3
0