Graywinter Management Pty Ltd v Deputy Commissioner of Taxation

CATCHWORDS

JUDGMENT 14u. ...

I I

..8J.J -U

CORPORATIONS - Statutory Demands - s459G application for

extension of time to comply with demand - extension granted at time of final determination of the s459G application - request for further extension of time - no further s459G application

made - whether s459F(2) contemplates a further extension of

time in such circumstances.

Corporations Law, ss459G, 459F

David Grant and CO Pty Ltd v Westpac Banking Corporation

. .

(1995)

184 CLR 265

Livestock Traders International Pty Ltd v Thi Lam Bui,

(unreported, FCA, 7 October 1996, Jenkinson J)

Graywinter Properties Pty Ltd v Dyer, (unreported, FCA, 19

November 1996 Ryan J)

GRAYWIW~ER

MANAGEMENT PTY LTD (Applicant) v DEPUTY COMMISSIONER

OF TAXATION (Respondent)

No VG3031 of 1996

GRAYWINTER PROPERTIES PTY LTD (Applicant) v DEPUTY COMMISSIONER

OF TAXATION (Respondent)

No VG3032 of 1996

FINN J

MELBOURNE

9 DECEMBER 1996

FEDERAL COURT OF AUSTRALIA

)

VICTORIAN REGISTRY

1	No VG3031 of 1996

GENERAL DIVISION

)

BETWEEN: GRAYWINTER MANAGEMENT PTY LTD

(ACN 057 918 340)

(Applicant)

AND:	DEPUTY COMMISSIONER OF TAXATION (Respondent)

COURT

FZNN J

PLACE

: MELBOURNE

DATE

9 DECEMBER 1996

MINUTES OF ORDERS

THE COURT ORDERS THAT:

the period for compliance with the statutory demands, the subject of the orders of Jenkinson J on 22 November 1996, be extended until 21 days after the hearing and determination of the appeal in VG546 of 1996, or until further order.

FEDERAL COURT OF AUSTRALIA

)

VICTORIAN REGISTRY

)	No VG3032 of 1996

GENERAL DIVISION

BETWEEN: GRAYWINTER PROPERTIES PTY LTD

(ACN 051 373 570)

Applicant

AND:	DEPUTY COMMISSIONER OF TAXATION (Respondent)

COURT

FINN J

PLACE :	MELBOURNE
DATE:	9 DECEMBER 1996

MINUTES OF ORDERS

THE COURT ORDERS THAT:

Note

Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

FEDERAL COURT OF AUSTRALIA

VICTORIAN REGISTRY

No VG3031 of 1996

GENERAL DIVISION

)

BETWEEN: GRAYWINTER MANAGEMENT PTY LTD

(ACN 057 918 340)

(Applicant)

AND :

DEPUTY COMMISSIONER OF TAXATION

(Respondent

)

FEDERAL'COURT OF AUSTRALIA

)

VICTORIAN REGISTRY	No VG3032 of 1996
GENERAL DIVISION

BETWEEN: GRAYWINTER PROPERTIES PTY LTD

(ACN 051 373 570)

Applicant

AND :	DEPUTY COMMISSIONER OF TAXATION
(Respondent)

COURT :	FINN J
PLACE :	MELBOURNE
DATE :	9 DECEMBER 1996

EX TEMPORE REASONS FOR JODGMEN'T

These two proceedings were instituted under s459G of the Corporations Law. Their objects were to have set aside, or alternatively to have determined the substantiated amount payable under, two statutory demands served by the Deputy

Commissioner of Taxation on Graywinter Properties Pty Limited

("Properties") and Graywinter Management Pty Limited

("Management") respectively.

On 22 November 1996, Jenkinson J made orders in each

proceeding (inter alia)

: (i) determining the substantiated

amount of each demand; (ii) extending the . .period for compliance with the demands until 13 December 1996; and (iii) for costs.

The application before me is for a further extension of

the time for compliance. While I entertain some doubt as to

whether I have jurisdiction to grant such an extension, I am prepared in light of present authority (as I will indicate) to proceed on the assumption that I have power so to do.

The particular debts founding the two demands were for unpaid group tax - in the case of Properties, going back to 1991. As is apparent from my reasons for judgment in the related matter of The Solicitors' Liability Committee ("the

SLCo) , v Garrick Lewis Gray and Michael Frederick Winter

(trading as Gray & Winter) (9 December 1996, unreported), Mr

Gray, the present director and principal shareholder of the

companies has executed two irrevocable authorities directing the SLC to pay to the Deputy Commissioner of Taxation the

amounts due under the demands, out of a judgment of over $1.3 million that Gray & Winter were awarded against the SLC by Olney J on 9 August 1996. What prevents that payment being

made is an order of Jenkinson J of 21 October staying execution of the judgment pending the hearing and determination of the SLC'S appeal against it. I have today in those proceedings

refused to vary the stay order to allow the payment to be made. The date on which the appeal from Olney J's judgment is to be heard is l1 March 1997.

The present application is to have the time'for compliance

with the two demands extended until the hearing and

determination of the appeal.

The Jurisdictional Question

Under s459G of the Corporations Law, a company can apply

to the Court for an order setting aside a statutory demand

served on it. In the present proceedings both Properties and

Management took this step.

Of present relevance is s459F(1), it provides that:

'If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period."

That failure provides a basis for applying to wind up the

company on the ground of insolvency: see sections 4594 and 4595 of the Corporations Law. As I have noted the compliance

date in these proceedings is 13 December 1996.

such power as the Court has to extend the time for

compliance is contained in s459F(2). It provides relevantly,

that

"The period for compliance with a statutory demand is:

, .

(a)

if the company applies in accordance with section 459G for an order setting aside the demand:

(i)

if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand - the period specified in the order, or in the last such order, as the case requires, as the period for such compliance;

The present applicants submit that, because this subsection clearly envisages (as it does) that a special application for an extension may be made under it, and equally clearly envisages (as it does) that extension orders may be made from time to time, it is open to them to apply for the additional extension sought in these proceedings.

Were this matter free from authority, I would have to say

that I would find it difficult to bring the circumstances

. .

the present application within the terms of the subsection.

As I have already indicated, Jenkinson J, on 22 November, made orders which, in my view, had the effect of finally and fully disposing of the s459G application. While not at all

doubting that the power conferred by the subsection would allow

special 'application, and application from time to time, for an extension while the s459G application remained on foot, I find some difficulty in the view that that power subsists after the making of the orders determining the s459G application and fixing the period for compliance. The language of the opening

words of paragraph (a) of the subsection seem to imply that there be a 'live" s459G application at the time' the extension

order is sought.

Be this as it may, on two occasions it has been held in

this court in reliance upon the decision of the High Court in

David Grant and CO Pty Ltd v Westpac Banking Corporation (1995)

184 CLR 265 that, provided the application for an extension is

brought before the effluxion of the period fixed for

compliance, that period can be further extended notwithstanding that the s459G application itself had been determined: see

Livestock Traders International Pty Ltd v Thi Lam B u i ,

. .

(unreported, FCA, 7 October 1996, Jenkinson J)

: Graywinter

Properties Pty Ltd v Dyer, unreported, FCA, (19 November 1996

Ryan J)

In the David Grant case Gummow J (with whom all members of the High Court agreed), in referring to the power to extend time granted by s459F, observed that an extension given under

paragraph (a) of subsection ( 2 ) may itself be extended on further application. This unqualified, but general, statement

has been treated in the two decisions to which I have referred

as allowing extension applications for so long as the period

for compliance has not expired.

Notwithstanding my own misgivings, I am prepared for now accepted reasons to follow the course previously endorsed in the above decisions. In so doing I necessarily am

accepting,that the power to extend time can be exercised for reasons unrelated to settling the validity of the demand or of the amount payable under it, and for settling the time

appropriate for payment of that demand in consequence. In the present matter, the application for an extension of time having

been made within the time for compliance, it needs to be

considered on the merits.

The present application

The circumstances must be fairly exceptional before a

. .

court would grant an extension of time in which to comply with the period set when the court makes orders both settling the

substantiated amount and the date from which the demand was to have effect: cf s459H. In such a case the company's

indebtedness is no longer the subject of contention.

Having said this, I am prepared albeit with some

hesitation, to conclude that the present is such a case.

The essence of the application is that full provision has now been made (via Mr Gray's Irrevocable Authorities) for the payment of the two demands and that payment is to be made out

of a valid and subsisting judgment. All that precludes immediate payment is the stay of execution of the judgment pending the appeal that has been set down for hearing in just over three month's time.

As I understand it, the Deputy Commissioner of Taxation's opposition to the application is that, in the absence of acceptable evidence as to the financial circumstances of the companies, they should not be relieved of the obligation of

complying with the notices. One or both of them, it is said, may well be insolvent - the evidence in relation to Properties (though contested) suggests as much - and the appropriate place

in which to have this issue ventilated is in proceedings under

part 5 - 4 of the Corporations Law. Further, in such a state of

evidence, to require the Deputy Commissioner at best, to accept payment from the SLC in the future may well merely condemn the

Deputy Commissioner to the receipt of a preference that will be

recoverable in a subsequent liquidation.

It .is the case that I have no satisfactory evidence before me which would allow me to arrive at a provisional view as to the present financial position of either of the companies.

While I contemplated granting an adjournment to allow such evidence to be procured, it seemed to me in the end undesirable in the context of Part 5.4 proceedings to have in effect a

preliminary hearing on the matter of solvency - the very matter

towards which the Part 5.4 procedures are directed. For this

reason I have excluded from consideration the present need for

such evidence.

In these circumstances I have concluded that no injustice will be done in granting the extension sought. First, I have no reason for believing that, in the period from now until when the appeal in the SLC proceedings is determined, there is

likely to be any significant change in the circumstances of the

two companies. Secondly, if the appeal is unsuccessful, the

debt to the Deputy Commissioner will be paid by the SLC. If

the appeal is successful the Deputy Commissioner will be in the

same position as it is now. Thirdly, while it has been argued that even if paid the Deputy Commissioner might well find

itself in the position of a preferred creditor in the

subsequent liquidation of the companies (so that an extension could in any event be without actual beneficial effect), such a contingency is not a matter on which I consider it necessary to speculate in these proceedings.

In my view, because the arrangements now in place to secure payment of the tax debt are such, and because the period of its deferment is likely to be relatively short, the granting of an extension of time will not unduly impede the Deputy Commissioner in the prosecution of the rights given it by Part

5.4 and will, subject to the fate of the appeal, allow for the payment of the debt, which, but for the order of this Court,

could be presently paid. I note, additionally, that some part of the indebtedness sought to be recovered dates back to 1991. There seems no compelling reason for urgency now.

In both applications then, I will order that the period

for compliance with the statutory demands, the subject of the orders of Jenkinson J on 22 November 1996, be extended until 21 days after the hearing and determination of the appeal in VG546

of 1996, or until further order.

I certify that this and the preceding 9 pages

are a true copy of the Reasons for Judgment

herein of the Honourable Justice Finn.

Dated: 28 January 1997

counsel for the applicant	P Searle
Solicitors for the applicant :	Gray & Winter
Counsel for the respondent	J Davies
Solicitors for the respondent :	Australian Government Solicitor
Date of hearing	9 December 1996
Date of judgment	9 December 1996

[1996] FCA 1183

9 Dec 1996