Heritage Projects Pty Ltd v Deputy Commissioner of Taxation No. Scciv-03-200, Scciv-00-810

HERITAGE PROJECTS PTY LTD V DEPUTY COMMISSIONER OF TAXATION
[2003] SASC 135

JUDGE BURLEY. In this action the plaintiff has applied for an order setting aside a statutory demand served on the plaintiff by the defendant. The defendant served the demand on the plaintiff pursuant to the provisions of Division 2 of Part 5.4 of the Corporations Act. The application to set aside the demand has been made by the plaintiff pursuant to the provisions of Division 3 of Part 5.4.
The statutory demand is dated 3 February 2003 and the description of the debt in the schedule to the statutory demand is as follows:
“Running Balance Account deficit debt as at 1 February 2003 in respect of primary tax debts due under Divisions 1AAA and 3A of Part VI of the Income Tax Assessment Act 1936 (‘the ITAA 1936’) [Prescribed Payments System deductions] 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.”
The affidavit of Marlan Jurisevic, an officer employed by the defendant, accompanied the statutory demand. In the affidavit Mr Jurisevic deposed to the outstanding balance in similar terms to the description of the debt in the schedule to the demand. He said that he was authorised by the defendant to make the affidavit and he then said:
“3I have access to, and am familiar with, the records of the creditor in respect of the debtor company, including the creditor’s computer system which records information relating to the debt owing to the creditor by the debtor company. I have inspected the said records of the creditor in relation to the company’s account.
4The debt mentioned in paragraph 1 of this affidavit is due and payable by the debtor company.
5I believe that there is no genuine dispute about the existence or amount of the debt.”
The plaintiff, the alleged debtor, has advanced two reasons why the statutory demand should be set aside: first, it is contended that the debt referred to in the statutory demand was the subject of an earlier statutory demand dated 4 August 2000 which has been set aside; and, second, in any event, the debt is genuinely disputed by the plaintiff.
The plaintiff has also contended that the nature of the debt referred to in the schedule and verified by affidavit, has been wrongly characterised because, it was contended, the reality of the debt is founded in a written settlement agreement reached between the parties in 1998, a copy of which has been admitted into evidence. I have come to the view that there is no substance to this aspect of the plaintiff’s case because, in my view, the debt itself has arisen as a result of the statutory provisions referred to in the description of the debt. The settlement agreement has merely quantified what is owing pursuant to those provisions. Consequently, the lack of reference to the settlement agreement in the description of the debt or the affidavit supporting the statutory demand does not constitute a defect which either by itself or in conjunction with the other matters relied upon by the plaintiff, would lead to the setting aside of the statutory demand. There is no doubt in my mind that because of what occurred between the parties in respect of the earlier notice of demand dated 4 August 2000, the plaintiff was well aware of the nature and extent of the debt referred to in the statutory demand dated 3 February 2003.
The first ground relied upon by the plaintiff for the setting aside of the statutory demand is based on the fact that the earlier statutory demand and the later statutory demand each referred to the same debt except for amounts of interest and penalties. It is common ground that each of the two statutory demands refer to the same core debt, being that reached by reference to the settlement agreement entered into in 1998, deducting one payment which has been made by the plaintiff in respect of the settlement agreement and adding amounts for interest and penalties pursuant to the relevant provisions of the revenue legislation. The plaintiff contends that the second statutory demand constitutes an abuse of the Court’s process and that the defendant was estopped from issuing a second statutory demand in light of proceedings taken, and the result thereof, in respect of the earlier statutory demand.
In response to these contentions the defendant, in Action No 810 of 2000 in this Court, applied to set aside the statutory demand contending that there had been no proper service of the proceedings and that no notification of the hearing time had been given.
The originating process and the duplicate sealed copy thereof each bore the endorsement that the application to set aside the statutory demand was returnable before Judge Kelly on 13 September 2000 at 10.10 am. It is not disputed that a copy of the originating process and the affidavits in support thereof were served upon the defendant by the delivery of a copy of those documents by a person employed by the plaintiff’s solicitors to an officer employed by the defendant. On the basis of the affidavit material before me, I find that when those copy documents were delivered to the officer employed by the defendant, the duplicate copy of the summons was not shown to that officer and, in addition, the copy of the originating process supplied to the defendant’s officer did not have endorsed on it the date and time of the first return of the application to set aside the statutory demand. I find, further, that no one within the defendant’s office made any enquiries, either of the Court Registry or of the plaintiff’s solicitors, as to when the originating process was due for hearing, notwithstanding that the copy of the originating process provided to the defendant’s officer contained a paragraph (which had not been completed) providing for the return date of the application. I find on the affidavit material before me that the plaintiff’s solicitors did not otherwise advise the defendant of the hearing time of the first return of the application.
It is apparent from the Court file that the originating process was called on before Judge Kelly on 13 September 2000. On that occasion Mr Strawbridge appeared for the plaintiff and there was no appearance for the defendant. There is no affidavit material before me as to what was said to the Master on that occasion but it is clear from the Court file that the matter was adjourned to 4 October 2000 at 10.40 am.
I find on the affidavit material before me that no notice of that further hearing was given by the plaintiff’s solicitors to the defendant.
The originating process was called on again before Judge Kelly on 4 October 2000. On that occasion Mr Strawbridge appeared for the plaintiff and there was no appearance for the defendant. The orders made by Judge Kelly on that occasion were as follows:
“1Statutory demand set aside.
2Costs to plaintiff.”
There is no affidavit evidence before me as to what was said to the Master on that occasion, nor is there any note of what occurred on the Court file other than the orders that I have just referred to.
I turn, first, to the plaintiff’s contention that the statutory demand the subject of the proceedings in Action No 200 of 2003 (which I shall refer to as “the second statutory demand”) should be set aside because the previous statutory demand the subject of the proceedings in Action No 810 of 2000 (which I shall refer to as “the first statutory demand”) was essentially a demand in respect of the same debt and had been set aside by order of the Court made on 4 October 2000. The defendant’s response to this contention was that the order in respect of the first statutory demand was obtained irregularly because proper notice of the relevant hearings had not been given by the plaintiff to the defendant so that when the matter was called on in Action No 810 of 2000 on 4 October 2000, the order setting aside the statutory demand and the order for costs in favour of the plaintiff was obtained in default of attendance by the defendant. It was argued by the defendant that if the judgment was irregularly obtained, it should be set aside, and if so, there was nothing to prevent the defendant from subsequently serving another statutory demand on the plaintiff based on the same debt. In particular, it was argued that it was not an abuse of the Court’s processes to issue the second statutory demand.
There is a further matter which needs to be considered and that relates to the question of the costs order made on 4 October 2000. If that costs order, like the order setting aside the first statutory demand, was obtained irregularly, it is liable to be set aside because it would be unfair to impose a liability for costs on the creditor/defendant in circumstances where that party has had no opportunity to put their case in opposition to the Court.
In the circumstances outlined above, I consider that there are two bases for revisiting the order that was made on 4 October 2000 in Action No 810 of 2000. The first is that reliance is now placed on that order to support a submission that a second statutory demand based on the same debt should be set aside. In addition, there remains the question of the effect of the costs order made on 4 October 2000. Those matters, in my view, justify the defendant’s application in the earlier action seeking an order setting aside the orders made on 4 October 2000.
Given the findings of fact I have made in relation to service of the proceedings in Action No 810 of 2000 on the defendant and the lack of notice both as to the original and subsequent hearings of the originating process, there is no doubt in my mind that when the plaintiff in the earlier action sought judgment in the form of an order setting aside the statutory demand and an order for costs, the application so made was wrong because service of the proceedings had been defective to the extent that notice of the original hearing was not given and this defect was compounded when, after the first hearing, the plaintiff failed to notify the defendant of the subsequent hearing on 4 October 2000. Consequently, the orders obtained setting aside the first statutory demand and ordering costs against the defendant were irregularly obtained and should be set aside: see Civil Procedure, para 23.04.10 and the cases referred to therein. It is therefore unnecessary to determine whether the order of 4 October 2000 estops the defendant from issuing a second statutory demand.
I accept that once the order of 4 October 2000 is set aside, there will be in existence two statutory demands relating to the same debt. Technically, that demand may be acted upon if the earlier action is dismissed because the time for compliance with the demand does not expire for a period of 7 days after the application to set aside the first statutory demand is “finally determined”: s459F(2)(a)(ii) of the Act. It seems to me that this difficulty, which, if left unresolved would be embarrassing to the plaintiff, may be resolved by the giving of an undertaking by the defendant not to act upon the earlier statutory demand. I am prepared to set aside the orders of 4 October 2000 and to dismiss the earlier action if such an undertaking is given by the defendant.
The next matter to be determined, in respect of the second action (No 200 of 2003), is whether or not the plaintiff in that action has established that the debt the subject of the statutory demand is genuinely disputed. It is apparent from the undisputed evidence that the debt exists by virtue of the statutory provisions referred to in the description of the debt in the notice of demand. The quantum of the debt has been calculated by reference to a settlement agreement reached between the parties in 1998, a copy of which has been tendered.
Given the existence of the settlement agreement, it could be argued that the plaintiff, having acknowledged the quantum of the debt in the settlement agreement, it was not thereafter open to the plaintiff to challenge the amount of the debt and, in particular, it was not open to the plaintiff to say that the debt, arising as it does by virtue of the relevant statutory provisions and the settlement agreement, that such a debt is genuinely disputed. However, the defendant chose not to pursue opposition to the plaintiff’s application to set aside the statutory demand on such a basis.
The application to set aside the statutory demand was supported by the affidavit of James Michalakas sworn on 20 February 2003. That affidavit refers to the first statutory demand and the fact that it had been set aside. As I understand it, the affidavit sets out the factual basis upon which it has been contended by the plaintiff that it would be an abuse of process to allow the defendant to proceed pursuant to a second statutory demand based on the same debt. I have already ruled against that contention because the order setting aside the first statutory demand was irregularly obtained.
The plaintiff relied, in addition, upon his affidavit sworn in the earlier action on 29 August 2000. That affidavit has exhibited to it a copy of a letter dated 25 August 2000 (that is after the settlement agreement was reached between the parties in 1998) whereby the plaintiff, through Mr Michalakas, asserted that the amount referred to in the first statutory demand said to be owing was not in fact owing as was evident, according to Mr Michalakas, from a substantial quantity of additional documents which had been found by him and upon which he now relied.
It is common ground that those documents have not been supplied to the defendant nor has there been any correspondence either from the plaintiff direct or by its solicitors, setting out the factual basis upon which the plaintiff has contended, since August 2000, that the amount arrived at by way of the settlement agreement in 1998 is not actually owing. It is apparent from the letter of 25 August 2000, and from correspondence forwarded later by the plaintiff’s solicitors, that the debt is based upon the requirement under the relevant revenue legislation which was then in existence that a contractor deduct from payments due under a contract amounts on account of taxation that would be levied on the contract price in the hands of the subcontractor. It has been referred to in the correspondence as the “PPS levy”. It was contended by the plaintiff that the calculations of the amounts required to be deducted and forwarded to the defendant were wrongly calculated because most of the contractors or subcontractors involved were either exempt from the requirements to deduct amounts on account of taxation or in respect of whom, lesser percentages than the maximum percentage were required to be deducted.
It was the defendant’s case that the mere assertion by the plaintiff that the calculations of the defendant were incorrect was not a sufficient basis to support a case that there was a genuine dispute in respect of the second statutory demand. I think this submission has substance. The plaintiff’s contention that the amount due has been incorrectly calculated is no more than an unsubstantiated assertion given that there has been no attempt to put before the defendant, or the Court, an analysis of the documentation relied upon leading to the conclusion that the calculations by the defendant of indebtedness are incorrect and that thereby the debt was genuinely disputed. It is clear from the many cases on the question of whether or not a debt is genuinely disputed, that a mere assertion that the debt is disputed is insufficient: see, for example, John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 where Young J said that there must be something “between mere assertion and the proof that would be necessary in a court of law”. Reliance was also placed by the defendant on the decision of Young J in Dromore Fresh Produce Pty Ltd v W Paton (Fertilizers) Pty Ltd (1997) 23 ACSR 230.
In my view the provision of sample copies of documents by the plaintiff to the defendant with a letter of 25 August 2000 does not go beyond mere assertion. I accept that the Court, on an application such as this, is not required to, nor should it, require proof of a genuine dispute sufficient to make out the actual defence. However, the factual basis upon which the debtor/plaintiff asserts that the debt is genuinely disputed must be disclosed with reasonable particularity. The plaintiff has failed to do so on this occasion.
For the above reasons and provided the appropriate undertaking is given by the defendant, I intend to make an order setting aside the orders made on 4 October 2000 in Action No 810 of 2000, an order dismissing that action and a further order in Action No 200 of 2003 dismissing the plaintiff’s application to set aside the second statutory demand.
I will hear the parties as to the costs of action in respect of Action No 810 of 2000, the costs of the application to set aside orders in that action and the costs of the application in Action No 200 of 2003 for an order setting aside the statutory demand.

[2003] SASC 135

14 May 2003