ACN 104 560 821 Pty Ltd v The Commissioner of the Taxation of the Commonwealth of Australia
[2010] VSC 637
•15 December 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST E
IN THE MATTERS OF
S CI 2010 04205
| ACN 104 560 821 PTY LTD (formerly JMD Telecoms Pty Ltd) | |
| - and - | |
| S CI 2010 04208 | |
| ACN 090 423 359 PTY LTD (formerly Mercantile Pacific Pty Ltd) | |
| - and - | |
| S CI 2010 04206 | |
| ACN 082 110 441 Pty Ltd (formerly Electronic Charge Pty Ltd) | Plaintiffs |
| v | |
| THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA | Defendant |
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JUDGE: | GARDINER As J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 December 2010 | |
DATE OF JUDGMENT: | 15 December 2010 | |
CASE MAY BE CITED AS: | ACN 104 560 821 PTY LTD v The Commissioner of the Taxation of the Commonwealth of Australia | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 637 | |
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CORPORATIONS - INSOLVENCY – Applications to set aside statutory demands pursuant to s 459G of the Corporations Act2001 (Cth) – Whether there was a genuine dispute in respect of the debts the subject of the demands – Consideration of the defendants’ conduct leading up to and including the issue of the assessments the subject of the demand – Whether the demands were defective by reason of not being signed by or on behalf of the Deputy Commissioner of Taxation in accordance with s 459E(2)(f) - Applications dismissed.
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms J. Vincent (solicitor) | Mills Oakley Lawyers (who were given leave to file a notice of ceasing to act and thereupon withdrew from the hearing. |
| For the Defendant | Mr E. Wheelahan | ATO Legal Services |
HIS HONOUR:
On 3 August 2010, the plaintiff ACN 104 560 821 Pty Ltd (formerly known as JMD Telecoms Pty Ltd) (“JMD Telecoms”) and two other entities, ACN 090 423 359 Pty Ltd (formerly known as Mercantile Pacific Pty Ltd) (“Mercantile Pacific”) and ACN 082 110 441 Pty Ltd (formerly known as Electronic Charge Pty Ltd) (“Electronic Charge”) each filed an originating process seeking orders pursuant to s 459G of the Corporations Act 2001 (“the Act”) that statutory demands issued to each of them on 13 July 2010 by a Deputy Commissioner be set aside. The defendant named in each application is the Commissioner of Taxation, not the Deputy Commissioner who was the proper party but no point was taken about this by Counsel appearing for the Commissioner.
Each of the originating processes involve consideration of the same facts and issues. The reasons set out below also stand as my reasons for dismissing those two other companies’ applications to set aside the statutory demands respectively served upon them.
The demand issued to JMD Telecoms was in respect of a Running Balance Account (RBA) debt of $4,841,736.67. The statutory demand issued against Mercantile Pacific claimed the sum of $21,771,595.84 and that issued to Electronic Charge claimed $7,709,532.25.
On 13 August 2010, I made orders by consent that the proceedings be heard together and made directions for the filing of further affidavit material. The proceedings were set down for trial on 14 October 2010. Shortly before that, the trial date was vacated by consent and the matter was set down for hearing on 2 December 2010. The reason given for the adjournment was that the sole director of the plaintiffs, Kunal Narula, had suffered a heart attack had been hospitalised in Singapore.
On 1 December 2010, my associate received a facsimile from a person who identified herself as Divya Jain Narula, which stated that she was the wife of Mr Narula. In that communication, which was forwarded by my associate to the solicitor for the Commissioner, Ms Narula requested an adjournment of the plaintiffs’ applications for 45 days by reason of her husband’s condition and his inability to engage lawyers to represent the plaintiffs at the trials of these proceedings. That facsimile, which was not transformed into admissible evidence, contained what purported to be two medical reports from a cardiologist in Singapore, a Dr Baldev Singh. The first report was dated 13 October 2010 and stated that Mr Kunal had been admitted to hospital on 3 October 2010 for a week with a heart condition. It stated that Mr Kunal had been advised that he should be on “home leave and avoid stressful situations for the next three months”. In a later report of 2 November 2010, Dr Singh elaborated on the earlier report. He gave a diagnosis of inferior posterior myocardial infarction and indicated that “there had been successful reperfusion of the culprit artery following thrombolysis”. The report stated that Mr Kunal had been advised to undergo coronary stenting.
On 15 November 2010, the plaintiff’s solicitors, Mills Oakley Lawyers, filed a notice of solicitor ceasing to act in each of the proceedings. They did not seek the required leave under r 20.03(3)(b) before doing so and a representative of that firm, Ms Vincent, attended at Court on the hearing of the applications to formally seek such leave. Those applications relied on an affidavit of a partner of Mills Oakley Lawyers, Stewart Andrew Lewin, sworn 1 December 2010, who stated that a dispute had arisen between Mills Oakley Lawyers and the plaintiff in each application in relation to Mills Oakley Lawyers’ legal fees. That dispute was not able to be resolved, resulting in Mills Oakley Lawyers’ desire to cease to act for the plaintiffs. Such dispute had apparently been on foot since mid‑September 2010. Mr Lewin deposes that on 15 November 2010, he wrote by email to Mr Kunal, his brother and his father, advising them as there had been no satisfactory resolution of the dispute regarding Mills Oakley Lawyers’ fees, they would be filing and serving a notice of solicitor ceasing to act.
At the hearing of this matter on 2 December, I gave Mills Oakley Lawyers leave to file and serve a notice that it has ceased to act as the solicitor for the plaintiffs in each proceeding. Ms Vincent then withdrew from the hearing.
I am satisfied that the plaintiffs have had adequate notice to engage new legal representation. The dispute has been ongoing for some two and a half months and the plaintiffs’ representatives were advised by email some two weeks ago that Mills Oakley would be ceasing to act as the plaintiffs’ solicitors.
The plaintiffs were not otherwise represented at the hearing on 2 December 2010. Mr Eugene Wheelahan of Counsel appeared on behalf of the Commissioner in each application and sought to proceed. Mr Wheelahan indicated that the proceedings had previously been adjourned on 7 October 2010, as a result of the situation regarding the plaintiffs’ sole director. Mr Wheelahan stated that although he had no reason to suppose that the medical certificates were not genuine, they were not in admissible form. He also submitted that the plaintiffs had had more than adequate time to engage new legal representation. I determined to proceed with the applications despite the absence of the plaintiffs.
As I have said, each of the applications relied on the same grounds to set aside the demands. Those grounds were as follows:
(a)There was a genuine dispute in respect of the debt the subject of the demand.
(b)The Deputy Commissioner’s conduct leading up to and including the issue of the assessment contained jurisdictional error and/or the exercise of bad faith which invalidated the assessments.
(c)The statutory demands were defective in that they were not signed by, or on behalf of, the Deputy Commissioner of Taxation in accordance with s 459E(2)(f).
In each case, the plaintiffs relied on the affidavit of Jack Stuk sworn 3 August 2010. Mr Stuk is the solicitor for the plaintiffs and save as to differences in the quantum of the debt claimed, deposed to the same matters in each affidavit.
Similarly, the Commissioner relied on affidavits of David Ian Johnston sworn 15 July 2010 and 15 September 2010 in each proceeding. The first affidavit proved service of the statutory demands on each of the plaintiffs and the second deposed to substantive matters in opposition to the plaintiffs’ application.
Each of the statutory demands claim a debt which arises from a Running Balance Account debt as at 13 July 2010 in respect of amounts due under the Business Activity Statement Provisions as defined in sub‑s (995)-1(1) of the Income Tax Assessment Act 1997, together with administrative penalties due under Part IV-25 of Schedule 1 of the Tax Administration Act 1953 (TAA (1953)) and the general interest charge payable under s 8AAZF of the Tax Administration Act 1953 as a debt payable by the plaintiff pursuant to s 8AAZH of the Tax Administration Act 1953.
Legislative scheme
The Commissioner relies on the provisions set out below as the basis of his submission that the plaintiffs cannot contend that there is a genuine dispute in respect of the debts the subject of the demands.
Section 8AAZH(1) of the Tax Administration Act 1953 (“TAA 1953”) provides:
If there is a Deficit Debt on an RBA at the end of the 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.
Section 255-5 of Schedule 1 to the TAA 1953 provides:
An amount of a tax related liability that is due and payable:
(a)is a debt due to the Commonwealth; and
(b)is payable to the Commissioner.
Section 255-1 of Schedule 1 to the TAA 1953 provides:
A tax related liability is a pecuniary liability to the Commonwealth arising directly under a taxation law (including a liability the amount of which is not yet due and payable).
Section 8AAAZF of the TAA 1953 provides:
(1)If there is an RBA Deficit Debt at a day, then general interest charges payable by the tax debtor on that RBA Deficit for that day.
(2)The balance of the RBA is altered in the Commissioner’s favour by the amount of the general interest charge payable.
Section 8AAZI of TAA 1953 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 the statement are correct.
Section 14ZZM of the TAA 1953 provides:
The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.
Similarly, s 14ZZR in the context of appeals affecting taxation decisions provides:
The fact that an appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no appeal were pending.
Section 105-100 of Schedule 1 to the TAA 1953 provides:
The production of:
(a)a Notice of Assessment under this Part
…
is conclusive evidence:
(c) that the assessment or declaration was probably made; and
(b) except in proceedings under Part IVC of this Act on a review or appeal relating to the assessment or declaration – that the amounts and particulars in the assessment or declaration are correct.
Section 298-30(3) of Schedule 1 to the TAA 1953 provides in respect of assessments for administrative penalties:
The production of a notice of such an assessment, or a copy of it certified by or on behalf of the Commissioner, is conclusive evidence for making the assessment and of the particulars in it.
The evidence
In the plaintiffs’ affidavits in support of these applications, Mr Stuk deposes that objections were lodged in respect of the assessments giving rise to the debts pursuant to Part IVC of the TAA 1953 on 31 May 2010. Further, it is said that the assessments are invalid by reason of the Commissioner’s conduct leading up to and including the issue of the assessment period.
The Commissioner contends in each case that each of the debts the subject of the demands is an RBA Deficit Debt under s 8AAZH of the TAA (1953). As such, they are debts due to the Commonwealth and payable to the Commissioner under s 255-5(1) of Schedule 1 to the TAA (1953). The affidavit of Mr Johnston of 15 September 2010 exhibits the Notices of Assessment giving rise to the debts the subject of the statutory demand. The Commissioner says that by reason of s 105-100 and 298-30(c) of Schedule 1 of the TAA (1953), the assessments are conclusive evidence of the debts. It is submitted that these provisions are indistinguishable from s 177(1) of the Income Tax Assessment Act 1936 and in support of that proposition, reference was made to the decision of the High Court of Australia in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd.[1]
[1](2008) 237 CLR 473 at [33] and [40] in that regard.
The Commissioner contends that the effect of these provisions is that it is not open to the plaintiffs to challenge the assessments on any ground in any proceedings other than proceedings under Part IVC of the Tax TAA (1953) or an application for judicial review under s 39B of the Judiciary Act 1903 or s 75 of the Constitution of the Commonwealth of Australia.
In paragraph 8 of Mr Stuk’s affidavit, it is stated that the plaintiff is considering its position in each case in relation to commencing proceedings pursuant to s 39B of the Judiciary Act 1903 in respect of the validity of the assessments and the Commissioner’s alleged conduct, which is described in detail in Mr Stuk’s affidavit. There is no evidence that such proceedings have been commenced. Mr Stuk deposes that the assessments are presently the subject of objections lodged by the plaintiffs with the Deputy Commissioner on or about 31 May 2010 pursuant to Part IVC of the TAA 1953. The Deputy Commissioner says however that having regard to the provision of ss 14ZZM and 14ZZR, any debt to the Commissioner may be recovered despite the fact that a review or appeal under Part IVC is pending.
The Commissioner submits that the current applications are not proceedings under Part IVC of the TAA 1953, nor are they applications for judicial review under s 39B of the Judiciary Act 1903 or s 75 of the Constitution of the Commonwealthof Australia and, therefore, the matters raised by the plaintiffs in each application at paragraphs 6, 7(a) and (b), 9 to 52 and 52 to 97 of the affidavits of Mr Stuk cannot be sustained. In the words of McDonald J in Deputy Commissioner of Taxation v Collie[2], such matters were “inadmissible”.
[2][1998] 2 VR 106.
In Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd[3], the High Court held that the phrase “may be recovered” where it appears in sections 14ZZM and 14 ZZR applies to the statutory demand procedure under the Corporations Act[4]. The Commissioner says that the present applications are on all fours with the circumstances under consideration in the Broadbeach case where the High Court held that provisions such as s 105-100 and s 298-30(c) of Schedule 1 to the TAA 1953 oblige the Court to treat the relevant tax debt as undisputed for the purposes of Part 5.4 of the Corporations Act2001, that is, the provisions of the Act which deal with winding up in insolvency including the statutory demand provisions.
[3](2008) 237 CLR 473.
[4]Ibid at [58].
I accept the submissions of the Commissioner that grounds (a) and (b) of the respective originating processes cannot form the basis of a genuine dispute under s 459H(1)(a) of the Corporations Act.
The final ground on which the plaintiffs rely is that the statutory demands are defective as they have not been signed by or on behalf of the Commissioner as required by s 459E(2)(f). This is contended in paragraph 7 of Mr Stuk’s affidavits.
It is the subject of a response by Mr Johnston in paragraphs 19 to 24 of his affidavit of 15 September 2010. Mr Johnston deposes that he is an officer in the Commonwealth Public service employed in the Debt Section of the Australian Taxation Office at Acting Australian Public Service (APS) Level 6. He states that he affixed the signature of Paul Michael Duffus, a Deputy Commissioner of Taxation, to each of the statutory demands. Mr Johnston knows Mr Duffus to be the Deputy Commissioner of Taxation, Debt and at the time of affixing the signature to the statutory demands, Mr Johnston was doing so as an employee of the Australian Taxation Office at APS6 level.
Exhibit DIJ‑4 to Mr Johnston’s affidavit is a copy of a General Delegation signed by the Commissioner of Taxation of the Commonwealth of Australia, Michael D’Ascenzo on 2 August 2007. By that document, Mr D’Ascenzo delegates to the persons from time to time holding or occupying the positions or assigned the duties of, among others, “Deputy Commissioner of Taxation, Debt”, the powers described in that delegation.
Exhibit DIJ‑5 to Mr Johnston’s affidavit is a copy of an Instrument of Authorisation dated 12 July 2010 signed by Mr Duffus, in his capacity as the Deputy Commissioner of Taxation, Debt. That document authorises the delegation of the powers given to Executive Level 2 officers of the Australian Taxation Office (ATO) powers under the Act, which would include the affixing of signatures to statutory demands. It does not exclude or limit Executive Level 1 officers or APS6 officers of the ATO from that authorisation. Schedule 4 of the authorisation deals with authorisations for APS6 level officers and provides that “Officers holding or occupying the position, or assigned to the duties of APS level 6 are authorised to exercise in the course of their duties in the name and on behalf of the person from time to time holding or occupying the position, or assigned to the duties of the Deputy Commissioner of Taxation all the powers and functions which Executive Level 1 officers are authorised to carry out under “Schedule 3” (other than the matters referred to in the schedule which have no application in these circumstances)”.
The Commissioner, relying on the decision of Dooney v Henry[5], submits that the administration of the Commissioner’s powers in relation to the Corporations Act2001 and the TAA 1953 may be carried out by officers of the Australian Taxation Office when the necessary delegations have been executed.
[5](2000) 174 ALR 41 at [10]-[17].
I am satisfied that each of the statutory demands has been executed in compliance with the required delegations.
For the foregoing reasons, I order in each of the proceedings referred to in paragraph 1 of these reasons that:
1.The proceeding be dismissed.
2.The plaintiff is to pay the costs of the Deputy Commissioner including reserved costs, if any.
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