Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation

The Court of Appeal of the Australian Capital Territory heard an appeal from a judgment of the Master of the Supreme Court of the Australian Capital Territory. The appeal concerned an application by Arcade Badge Embroidery Co Pty Ltd (the appellant) to set aside a statutory demand served by the Deputy Commissioner of Taxation (the respondent) under section 459E of the Corporations Act 2001 (Cth). The Master had refused to set aside the statutory demand, finding that the supporting affidavit filed by the appellant was inadequate.

The primary legal issues before the Court of Appeal were whether the affidavit filed in support of the application to set aside the statutory demand met the minimum requirements of section 459G(3) of the Corporations Act 2001 (Cth), and if not, whether there were other grounds under section 459J(1)(b) upon which the statutory demand should be set aside. Specifically, the Court had to determine if the affidavit, which asserted a genuine dispute about the debt and referred to a "government review," sufficiently supported the application, and if the respondent's conduct in agreeing to withdraw the demand and then reneging on that agreement constituted an "other reason" for setting aside the demand.

The Court of Appeal reasoned that the affidavit, by mentioning the "government review," went beyond a mere assertion of a dispute and promoted the appellant's case by indicating that the debt's validity was subject to a waiver process. This, the Court held, satisfied the minimum requirements of section 459G(3), granting the Court jurisdiction to consider setting aside the demand. Furthermore, the Court found that the respondent's agreement to withdraw the statutory demand and subsequent failure to do so, particularly when the appellant was invited to provide further information for the waiver request, constituted an "other reason" under section 459J(1)(b) to set aside the demand. The Court considered this conduct to be unconscionable and productive of substantial injustice, especially given the respondent's obligations to act fairly and reasonably.

Consequently, the Court of Appeal allowed the appeal, set aside the Master's order, and ordered that the statutory demand be set aside pursuant to section 459J(1)(b) of the Corporations Act 2001 (Cth). The respondent was also ordered to pay the appellant's costs of the appeal and the costs incurred before the Master.