On Time Nurses Agency Pty Ltd v Deputy Commissioner of Taxation
[2010] VSC 573
•10 December 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
LIST E
S CI 2009 10507
| “ON TIME” NURSES AGENCY PTY LTD (ACN 084 635 790) | Plaintiff |
| v | |
| DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA | Defendant |
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JUDGE: | FERGUSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16 November 2010 | |
DATE OF JUDGMENT: | 10 December 2010 | |
CASE MAY BE CITED AS: | On Time Nurses Agency Pty Ltd v Deputy Commissioner of Taxation | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 573 | |
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CORPORATIONS – Appeal from decision of Associate Judge varying statutory demand – application to set aside demand for “some other reason” – taxation debts – whether undertaking not to issue statutory demand - whether confusion as to amount due – whether amount in demand may be varied – ss 8AAZI, 8AAZJ, 14ZZM, 14ZZR Taxation Administration Act 1953 (Cth) - ss 459J(2), 459H Corporations Act 2001.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Kohn | Rosendorff Lawyers |
| For the Defendant | Mr E Woodward | ATO Legal Practice |
TABLE OF CONTENTS
Overview of facts and decision
When will the Court set aside a statutory demand on the basis of “some other reason”?
What amount was due at the time the statutory demand was served?
Are there “other reasons” to set aside the demand?
(a) Was there an undertaking to delay service of the statutory demand?
(b)The certificate under s 8AAJZ of the Taxation Administration Act 1953 (Cth)
(d) The Deputy Commissioner is unable to state how much was owing at the date of the demand
(e) Services provided to the community and hardship
(f) On Time Nurses said to be trading profitably and taking steps to realise assets and satisfy its liabilities to the Deputy Commissioner of Taxation
(g) The amount of the statutory demand as varied by the Associate Judge differs from amounts referred to in correspondence with the Commissioner
(h) Proceedings in the Administrative Appeals Tribunal
(i) No other reason to set aside the demand
Should the Commissioner be restrained from making an application to wind up the company?
Varying the demand
HER HONOUR:
Overview of facts and decision
The plaintiff, “On Time” Nurses Agency Pty Ltd (“On Time Nurses”), operates a nursing agency providing nursing staff to regional hospitals and other health care centres. It also has a business breeding horses. Ms Susan Bourchier and Mr Donald Patrick Leahy are the directors of On Time Nurses. The Deputy Commissioner of Taxation, who is the defendant, served a statutory demand dated 12 November 2009 on On Time Nurses for $1,535,946.45 of which $1,320,520.15 is claimed as a Running Balance Account deficit debt (“RBA Debt”) and $215,426.30 for a superannuation guarantee charge (“SGC”) assessment debt. The RBA Debt is in respect of amounts for Goods and Services Tax, Pay As You Go Tax Withheld, Pay As You Go Tax Instalments, administrative penalties and general interest charges due under the Taxation Administration Act 1953 (Cth).
On Time Nurses applied to set aside the statutory demand.[1] The application was heard by an Associate Judge who dismissed the application and made orders varying the amount of the demand to $1,182,220.94. On Time Nurses appeals from those orders. The appeal is by way of rehearing.[2]
[1]The application was made under s 459G of the Corporations Act 2001 (Cth).
[2]Rule 16.5(1) Supreme Court (Corporations) Rules 2003; r 77.06(7) Supreme Court (General Civil Procedure) Rules 2005.
On Time Nurses seeks to set aside the demand on the basis of “some other reason” under s 459J of the Corporations Act 2001 (Cth). On Time Nurses says that an undertaking was given on behalf of the Deputy Commissioner that a demand would not be served for a period of 28 days. On Time Nurses also asserts that there is confusion which has been caused by the Deputy Commissioner about how much is owed. In this regard, it says that different amounts from the amount in the demand have been claimed by the Deputy Commissioner following service of the statutory demand. Alternatively, On Time Nurses seeks an injunction to restrain the Deputy Commissioner from making an application to wind up the company based on any non‑compliance with the statutory demand.
The Deputy Commissioner does not press for the SGC part of the debt and asks that the amount of the demand be varied to $1,000,585.61 (that being the amount claimed in the demand for the RBA Debt less general interest charges which were remitted by the Deputy Commissioner on 7 December 2009 after the demand was served on the basis of hardship).
For the reasons set out below, the demand should not be set aside because there is no confusion with respect to the amount that was claimed at the time the demand was made, nor was any undertaking given not to serve it. No injunction should be granted restraining the Deputy Commissioner from making application to wind up On Time Nurses. If the Deputy Commissioner makes such an application, then On Time Nurses can at that time make submissions as to why it ought not be wound up. The demand should be varied to take into account the remission in general interest charges and also to take into account that the Deputy Commissioner does not press that part of the demand based on the SGC.
When will the Court set aside a statutory demand on the basis of “some other reason”?
Section 459J(1)(a) of the Corporations Act provides that the Court may order that a statutory demand be set aside where, because of a defect in the demand, substantial injustice will be caused if the demand is not set aside. Under s 459J(1)(b), a demand may also be set aside where the Court is satisfied that there is some other reason why the demand should be set aside.
The discretion under s 459J(1)(b) is broad and the circumstances which will give rise to “some other reason” to set aside the demand have not been prescribed either by statute or the case law.[3] Nor should the Court attempt to set out all the circumstances in which a demand might be set aside for some other reason.[4] This does not mean though that the discretion is at large such that a judge may set a demand aside simply because, subjectively, that judge is of the view that it is fair to do so.[5]
[3]Hoare Bros v Deputy Commissioner of Taxation (1996) 62 FCR 302; Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTA 3.
[4]Hoare Bros v Deputy Commissioner of Taxation (1996) 62 FCR 302; Meehan v Glazier Holdings Pty Ltd (2005 53 ACSR 229 per Young CJ in Eq at p.240.
[5]Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 per Young CJ in Eq at p.240.
Some of the authorities have given examples of the types of situation where the discretion is likely to be exercised in favour of setting aside a demand for some other reason. They include situations where there are gross defects in the affidavit supporting the statutory demand; where the creditor, following service of the demand, has made representations which have induced the debtor to change its position; and where the creditor’s conduct is unconscionable, an abuse of process or gives rise to substantial injustice.[6] Where, as here, the statutory demand relates to a tax debt, one of the matters to be taken into account when exercising the discretion is the legislative policy relating to the recovery of tax debts as disclosed in the Taxation Administration Act 1953 (Cth). Under that Act, the fact that there is a review or appeal pending in relation to a taxation decision does not affect implementation of the taxation decision.[7]
[6]Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 per Young CJ in Eq at p.240; Hoare Bros v Deputy Commissioner of Taxation (1996) 62 FCR 302; Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3.
[7]Sections 14ZZM and 14ZZR Taxation Administration Act 1953 (Cth); Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473.
What amount was due at the time the statutory demand was served?
As noted above, the amount claimed in the statutory demand had two main components. The first was the RBA Debt of approximately $1.3m. The second was for the SGC debt of approximately $215,000. In respect of the SGC part of the debt, there were a number of superannuation guarantee default assessments relied on by the Deputy Commissioner. These assessments were issued pursuant to s 36 of the Superannuation Guarantee (Administration) Act 1992 (Cth). Section 75(1) of that Act provides, in part, that such assessments are conclusive evidence that the amount specified in the assessment is correct.[8] In those circumstances, that part of the statutory demand is not open to challenge on the basis of there being a genuine dispute about the existence or amount of the debt.[9] However, after the demand was served, On Time Nurses lodged an objection to the SGC assessment. The Deputy Commissioner allowed the objection in part. On Time Nurses has filed an application for review of that decision in the Administrative Appeals Tribunal. That proceeding has not been determined. As noted above, the Deputy Commissioner does not press for payment of the part of the statutory demand that relates to the SGC and which is the subject of the proceedings in the Tribunal.
[8]The assessment is not conclusive evidence in a proceeding under Part IVC of the Taxation Administration Act 1953 (Cth): s 75(1) Superannuation Guarantee (Administration) Act 1992 (Cth).
[9]Deputy Commissioner of Taxation v Broadbeach (2008) 237 CLR 473.
In respect of the RBA Debt, evidence was given by Mr Peter Mackintosh, an officer in the Commonwealth Public Service, on behalf of the Deputy Commissioner that the amount of the debt at the date of the statutory demand was $1,320,520.15 (which is the amount claimed in the demand). Exhibited to one of that officer’s affidavits was a statement dated 12 November 2009 showing transactions and interest for the period 1 July 2006 to 12 November 2009. That statement shows that the amount claimed for the RBA Debt was outstanding at the date of the demand. The statement is prima facie evidence that the amount in the statement is correct.[10]
[10]Section 8AAZI Taxation Administration Act 1953 (Cth); reg 45 Taxation Administration Regulations 1976 (Cth). The Deputy Commissioner did not seek to rely on any conclusive evidence provisions in respect of any part of the RBA Debt as was done in Deputy Commissioner of Taxation v Broadbeach (2008) 237 CLR 473 and Mossimo Systems International Pty Ltd v Deputy Commissioner of Taxation [2010] NSWSC 1409.
On Time Nurses put into evidence another statement by the Deputy Commissioner dated 7 May 2010. That statement shows that the amount of $1,142,702.44 was payable if payment was made on 28 May 2010. The statement also shows the figure of $1,360,146.78 (instead of $1,320,520.15) as at the date of the demand (12 November 2009). On Time Nurses contends that these figures show that there is confusion about the amount claimed in the demand. However, both figures can be explained.
On 4 December 2009, On Time Nurses applied on the basis of hardship for remission of the administrative penalties and general interest charges which formed part of the RBA Debt. On 7 December 2009, the amount of $319,934.54 was remitted in respect of the general interest charge.
The lesser figure of $1,142,702.44 shown on the 7 May 2010 statement takes this remittance into account as well as taking into account payments that have been made and other amounts that have fallen due since the demand was served. The figure of $1,360,146.78 shown on the 7 May 2010 statement for the date of the demand (12 November 2009) included amounts of $18,382 and $20,872 processed on 5 November 2009. These amounts represented self‑assessed tax amounts for the period ended 30 September 2009. The effective date for these self assessments was 25 November 2009 (being a date after the demand). Both amounts were included on the 12 November 2009 statement and were said to be due and payable after 12 November 2009, that is, when the effective date of 25 November 2009 was reached. The 7 May 2010 statement also shows a general interest charge of $372.63 with an effective date of 12 November 2009 but a process date of 13 November 2009. When those amounts ($18,382, $20,872 and $372.63) are added together and subtracted from the figure of $1,360,146.78, the resultant amount is $1,320,520.15 (that is, the amount included in the demand).
Similar observations can be made in relation to a facsimile of 8 June 2010 from an Assistant Commissioner to On Time Nurses’ solicitors. That letter states that the RBA Debt as at 4 June 2010 was $1,157,007.52. Again, that is consistent with the deduction from the amount in the demand of the remitted general interest charge and payments made plus other amounts that fell due after the date of the demand.
There is also a certificate signed by a Deputy Commissioner of Taxation dated 11 June 2010 which provides that the RBA Debt as at that date was $1,158.069 (sic). It is clear that the full stop in that figure is a typographical error and that the amount then due was $1,158,069. Again, the fact that this figure (some seven months after the date of demand) is less than the amount demanded is explicable by taking account of the general interest charge remission and payments made and the additional tax and interest falling due after the date of the demand.
On Time Nurses also pointed to an affidavit sworn by Mr Mackintosh on 20 April 2010 in which he deposed to the Deputy Commissioner having remitted the general interest charge in the amount of $319,934.54 leaving the balance remaining in relation to the demand at $1,206,343.13. Again this does not create confusion. The figure simply takes account of events that occurred after the demand was served.
Finally, On Time Nurses submitted that the RBA Debt figure in the demand was unreliable because amounts that it said it had paid had not been taken into account by the Deputy Commissioner. It submitted that there was a genuine dispute about this. The total amount claimed to have been paid by On Time Nurses was $250,000 and the dates and amounts of each individual payment said to make up that total were set out in an attachment to a letter of 23 February 2010 from its solicitor. An Assistant Commissioner responded by letter of 26 February 2010 noting that all but two of the amounts set out in the attachment to the solicitor’s letter had been received and taken into account. The payments which were not received were for $50,000 and $20,000, both said to have been paid on 17 November 2008. The Assistant Commissioner said that there was however a payment of $10,000 which had been received but which was not included in the solicitor’s letter of 23 February 2010. Both the statement of 12 November 2009 and the statement of 7 May 2010 included all of the amounts which the Assistant Commissioner had acknowledged had been received. The statements are prima facie evidence that the amounts in them are correct. There is insufficient evidence to establish that the amounts of $50,000 and $20,000 were paid by On Time Nurses or that the statements are unreliable.
The evidence establishes that the amount due and payable at the date of the demand was the amount claimed in it.
Are there “other reasons” to set aside the demand?
On Time Nurses contends that the Deputy Commissioner’s conduct has been unconscionable, is an abuse of process and gives rise to substantial injustice such that the demand should be set aside under s 459J(1)(b) of the Corporations Act for some other reason. On Time Nurses claims that:
(a)the Deputy Commissioner breached an undertaking to delay service of a statutory demand;
(b)the certificate of 11 June 2010 as to the amount of the RBA Debt cannot be relied upon;
(c)there is confusion regarding the amount of tax owed;
(d)the Deputy Commissioner is unable to state how much was owing as at the date of the statutory demand;
(e)On Time Nurses provides critical care services to the community and if the Deputy Commissioner proceeds with the application to wind up the company, considerable hardship will be suffered by hospitals, patients and employees in regional and northern Victoria;
(f)On Time Nurses is trading profitably and is able to pay its debts within a short time;
(g)On Time Nurses is taking steps to realise assets and satisfy its liabilities to the Deputy Commissioner;
(h)the statutory demand amount as varied by the orders of the Associate Judge is inconsistent with the amount referred to in correspondence from the Deputy Commissioner;
(i)proceedings in the Administrative Appeals Tribunal relating to part of the debt are still on foot; and
(j)to apply to wind up a company for non‑compliance with a statutory demand where the debt is the subject of reasonably arguable Administrative Appeal Tribunal proceedings is an abuse of process of the Court.
In light of these matters, On Time Nurses submitted that the justice of the case demanded that the statutory demand should be set aside pursuant to s 459J of the Corporations Act or an injunction ought be granted to restrain the Deputy Commissioner from making an application to wind up On Time Nurses in reliance on any non‑compliance with the statutory demand.
I will deal with each of (a) to (j) in turn other than the issue in paragraph (c) which I have already dealt with above.
(a) Was there an undertaking to delay service of the statutory demand?
Ms Bourchier deposed that on 11 November 2009 her solicitor, Mr Rosendorff, asked the Australian Taxation Office for three weeks’ grace on behalf of On Time Nurses to negotiate a settlement of the tax debts. Ms Bourchier says that Mr Rosendorff obtained an undertaking from Ms Karen White, representing the ATO, that On Time Nurses would be given a period of 28 days for this purpose. Ms Bourchier asserted that the statutory demand was served in breach of that undertaking. There was no evidence given by Mr Rosendorff.
Ms White has sworn an affidavit in which she deposes that what she told Mr Rosendorff when she spoke to him on 11 November 2009 was that he would need to demonstrate that he was authorised to speak on behalf of On Time Nurses either by completing a “Notification of Appointment of a Legal Practitioner” form or by Ms Bourchier verbally confirming that he was authorised by the company. According to Ms White, she told Mr Rosendorff that any verbal authorisation would last for 28 days. Ms White also deposed that she told Mr Rosendorff that the next step in the ATO’s collection process would be to issue a statutory demand, that this would require the matter to be escalated to a senior officer for approval and that a decision was pending in this regard. Her evidence is that at no time did she state that the ATO would withhold recovery action for 28 days. Ms White’s version of the discussion on 11 November 2009 is supported by her contemporaneous file note and also by an email that she sent to Mr Rosendorff on 11 November 2009. In that email she made no mention of any agreement to defer action in respect of On Time Nurses but rather attached a link to the ATO website for the notification of appointment form. She also mentioned the 28 day period for the verbal authorisation in her email. As counsel for the Deputy Commissioner submitted, it is implausible that someone in the position of Ms White, having received a request for three weeks’ grace on further action would unilaterally agree to four weeks and then send the email that she did later that day making no mention of any agreement and, indeed, confirming that the notification of appointment of legal practitioner was required before the ATO could have any detailed discussions with Mr Rosendorff.
I accept Ms White’s evidence that there was no undertaking given by the ATO to delay service of the demand.
(b) The certificate under s 8AAJZ of the Taxation Administration Act 1953 (Cth)
The certificate dated 11 June 2010, which I have referred to above, was relied on by the Deputy Commissioner before the Associate Judge. The certificate stated that it was given under s 8AAZJ of the Taxation Administration Act 1953. That section provides that in proceedings for recovery of an RBA Debt, a Deputy Commissioner of Taxation’s certificate is prima facie evidence that the amount specified in the certificate was the RBA Debt on the date of the certificate. As noted above, the 11 June 2010 certificate stated the amount owing at that date was $1,158.069 (sic). The Deputy Commissioner put little (if any) reliance on the certificate in submissions to me. However, it was put on behalf of On Time Nurses that I should take this certificate into account when considering whether there is some other reason to set aside the demand. The certificate is in the following form:
CERTIFICATE UNDER SECTION 8AAZJ OF THE TAXATION ADMINISTRATION ACT 1953
Pursuant to section 8AAZJ of the Taxation Administration Act 1953, I hereby certify the following matters in respect of the RBA established for “On Time” Nurses Agency Pty Ltd:
1.No tax debts (other than general interest charge on the RBA deficit debt) were allocated to the RBA after 13 November 2009;
2.The amount of the RBA deficit debt as at today’s date is $1,158.069 and is due and payable by the Defendant to the Commonwealth of Australia.
DATED: 11 June 2010
PAUL DUFFUS
DEPUTY COMMISSIONER OF TAXATIONOF THE COMMONWEALTH OF AUSTRALIA
It was submitted that the certificate does not take into account amounts upon which no superannuation guarantee charge should have been made because the amounts in question were paid to the employees by way of reimbursement for fuel costs. The reason the certificate does not take this into account is because the certificate relates to the RBA Debt. That is, it does not relate to that part of the demand relating to the superannuation guarantee charge.
Secondly, it was submitted that paragraph 1 of the certificate could not be issued because of s 8AAZJ of the Taxation Administration Act. This submission was not developed before me. In any event, I have not relied on the certificate in determining the amount due on the date of the statutory demand and, in those circumstances, the mere existence of the certificate cannot give rise to a reason for setting the demand aside.
Thirdly, it was submitted that because the certificate stated that the amount of the debt was $1,158.069 (sic), this resulted in the amount of indebtedness being $1,158 which was less than the statutory minimum for the service of a statutory demand. Again, in circumstances where no reliance has been placed by me on the certificate and where it is clear that the figure is a typographical error, this does not give rise to a reason to set the demand aside.
Fourthly, it was put that the certificate is only prima facie evidence and does not prevent the demand being set aside for some other reason. That may be true if I had relied upon the certificate and if there had been some other reason for setting the demand aside. However, that is not the case.
Finally, it was put that the certificate was inconsistent and confusing when read together with other correspondence sent by the Deputy Commissioner. For the reasons given above, I do not accept that there was any confusion as to the amount included in the statutory demand at the time that it was made.
(d)The Deputy Commissioner is unable to state how much was owing at the date of the demand
The evidence is that when On Time Nurses asked for the amount owing, the ATO responded with the amount due at the time of the response. The evidence in respect of the amount due at the date of the demand is consistent with the amount claimed in it (as to which see paragraphs [9] – [18] above).
(e) Services provided to the community and hardship
The evidence discloses that On Time Nurses provides critical care services to the community. It was submitted that if an application to wind up the company is made, considerable hardship will be suffered by hospitals, patients and employees in regional and northern Victoria. Whilst this is something which might be taken into account on a winding‑up application (and I express no view as to whether it should be taken into account) it is not relevant in determining whether the statutory demand should be set aside. If the demand is not set aside, the only effect will be that On Time Nurses will have to pay the amount demanded and, if it does not, it will be deemed to be insolvent.[11]
(f)On Time Nurses said to be trading profitably and taking steps to realise assets and satisfy its liabilities to the Deputy Commissioner of Taxation
[11]Section 459C(2) Corporations Act 2001 (Cth).
It was submitted that On Time Nurses is trading profitably and is able to pay its debts within a short time frame. The company’s audited accounts for the financial year ending 30 June 2009 show a loss of $26,646. Ms Bourchier explains that this result was because there were a number of abnormal items which were included in the accounts for that financial year which she did not expect to be included in future accounts. The audited accounts show a liability to the ATO for the RBA Debt of $1,195,047. That amount has not been paid. There is no evidence which updates the 30 June 2009 financial year information and no cash flow forecasts have been provided (although it is said that On Time Nurses is taking steps to realise its assets). The evidence does not establish that On Time Nurses is solvent. Even if it did, depending upon the other circumstances of the case, that may well not be enough to give rise to a reason to set the demand aside.[12] Further, if On Time Nurses is solvent, then it will be able to pay the tax amounts owed.
(g)The amount of the statutory demand as varied by the Associate Judge differs from amounts referred to in correspondence with the Commissioner
[12]See Paperlinx Limited v Skidmore (2004) 51 ACSR 614 and the cases cited in that decision.
The amount of the demand (as varied by the Associate Judge) is different from amounts included in correspondence emanating from the Deputy Commissioner. However, that is of no consequence on this appeal. As noted above, the appeal is by way of rehearing. The decision of the Associate Judge to vary the amount of the demand cannot give rise to a reason to set it aside.
(h) Proceedings in the Administrative Appeals Tribunal
The proceedings in the Administrative Appeals Tribunal relate to the SGC component of the statutory demand. It represents less than 15% of the amount included in the demand. At the time the demand was served, no objection had been lodged by On Time Nurses in respect of the assessments for the SGC. However, an objection was subsequently lodged in December 2009 and was allowed in part by the Commissioner on 16 July 2010. The application for review of the Commissioner’s decision was lodged with the Administrative Appeals Tribunal on 3 September 2010. Taking into account the legislative policy for the recovery of taxation debts (as disclosed in the Taxation Administration Act),[13] there is nothing inappropriate, let alone an abuse of process, in the Deputy Commissioner relying on the statutory demand in circumstances where there was no objection to the assessment when the demand was served; she does not press for that part of it which relates to the SGC and where the balance of the amount demanded is a not insignificant sum. The facts are distinguishable from those in Softex Industries Pty Ltd v Commissioner of Taxation.[14] In that case, the Commissioner had included in a statutory demand the amount of a tax liability which was at the time of service of the demand the subject of a proceeding in the Administrative Appeals Tribunal. Mullens J held that it was oppressive for the Commissioner to serve a statutory demand incorporating the disputed sum and ordered that the demand be set aside. That is not the situation here. The facts are also distinguishable from those in Willemse Family Company Pty Ltd v Deputy Commissioner of Taxation[15] where an appeal was on foot in respect of the bulk of the amount claimed in the statutory demand. Holmes J held that there would be some injustice in permitting the statutory demand to stand in those circumstances and set it aside on the basis of some other reason. Mullens J in Softex Industries[16] and Holmes J in Willemse Family Company[17] both held that the demand in question could not be varied under s 459J of the Corporations Act so that payment would be required of that part of the debt claimed by the Commissioner which was not in dispute and which was not the subject of other proceedings.
(i) No other reason to set aside the demand
[13]See s 14ZZM and s 4ZZR and paragraph [8] above.
[14](2001) 187 ALR 448.
[15](2003) 2 Qd R 334.
[16](2001) 187 ALR 448.
[17](2003) 2 Qd R 334.
It follows from what I have said above that there is no other reason to set the statutory demand aside under s 459J of the Corporations Act.
Should the Commissioner be restrained from making an application to wind up the company?
On Time Nurses submitted that an injunction should be granted restraining the Deputy Commissioner from making an application to wind up On Time Nurses in reliance on any non‑compliance with the statutory demand. The submission was made on the same basis as the submissions for setting aside the statutory demand for some other reason. Counsel relied on General Welding and Construction Co (Qld) Pty v International Rigging (Aust) Pty Ltd.[18] That case was decided before the introduction into the Corporations Law (now Act) of the provisions dealing with the setting aside of statutory demands. Following the issue of an application by a creditor to wind up the company, an injunction was sought to restrain prosecution of the winding up petition. The creditor had sued the company for recovery of a debt and had served a statutory demand for the same amount as that claimed in the debt proceedings. The statutory demand was not met and the creditor sought to wind up the company. McPherson J held that the basis of the jurisdiction to restrain a winding up petition founded on a disputed debt is the injury which may be done to a solvent company. His Honour held that there was sufficient evidence that the debt was disputed and that, together with evidence that the company appeared to be able to pay its debts as they fell due and was trading profitably, was sufficient to find that the non‑compliance with the demand ought not to be regarded as evidence of insolvency. In those circumstances, his Honour granted an injunction to restrain the advertisement of the petition and to stay the proceedings for winding up until determination of the debt proceeding. The facts in that case are far removed from this case where the undisputed part of the debt is in excess of $1 million and the evidence does not establish that the company is able to pay that amount and its other debts as they fall due. Further, as I have already said, the case was decided before the introduction of the provisions relating to the setting aside of a statutory demand. Under the current statutory framework if, as I have decided here, there is no basis to set aside the demand, then there is also no basis upon which to grant an injunction at this stage.
[18][1983] 2 Qd R 568.
Varying the demand
The demand was for the total amount of $1,535,946.45. The SGC component (which the Deputy Commissioner does not press for) is $215,426.30. The amount of the general interest charge that the Commissioner has determined to remit on hardship grounds is $319,934.54. The issue is whether the demand may be varied by deducting both the SGC component and the remitted general interest charge amount.
Section 459H(1)(a) of the Corporations Act provides that s 459H applies where there is a genuine dispute between the company and the creditor about the existence or amount of the debt claimed in the statutory demand. Under s 459H(2), the Court is required to calculate the substantiated amount of the demand by subtracting the amount of any offsetting claim from the amount of the admitted debt. In this case there is no offsetting claim. Where the Court is satisfied that there is a genuine dispute about part of the debt, then the admitted amount is so much of the amount as the Court is satisfied is not the subject of such a dispute.[19] Provided that the substantiated amount is at least as much as the statutory minimum, the Court may make an order varying the demand as specified in the order.[20]
[19]Section 459H(5)(b) Corporations Act 2001 (Cth).
[20]Section 459H(4) Corporations Act 2001 (Cth).
As noted above at paragraph [9], the effect of s 75(1) of the Superannuation Guarantee (Administration) Act is that the assessment of the SGC is conclusive evidence of the amount specified in the assessment such that there is no genuine dispute about that part of the debt. As a consequence, there is a question as to whether there is any means by which the demand may be varied to take account of the fact that the Deputy Commissioner does not press for payment of the amount of the SGC.
Counsel for the Deputy Commissioner submitted that to enliven the Court’s power to vary the demand, all that was required was that there was a genuine dispute as to part of the debt and that the undisputed part of the debt was above the statutory minimum. He submitted that the demand could then be varied to an amount less than the substantiated amount. In this regard counsel submitted that the remitted general interest charge represented the amount over which there was a genuine dispute which had been conceded by the Deputy Commissioner. He submitted that the power to vary the demand was therefore enlivened. He then submitted that I could vary the demand by not only that amount but also by deducting the amount of the SGC which is not pressed by the Deputy Commissioner.
Counsel for On Time Nurses submitted that if I was satisfied that there was a genuine dispute at all, then the whole of the demand must be set aside. However, that cannot be so if only part of the debt is disputed. Here, On Time Nurses does not dispute that it owes a debt to the Commissioner. Indeed, as I have said, a liability in excess of $1million for the RBA Debt was included in On Time Nurses’ audited accounts for the year ending 30 June 2009. The position taken by On Time Nurses is that it says that it does not know the exact amount of the debt to be paid.
The circumstances of this case are unusual. It is now over 12 months since the statutory demand was served. Throughout that period the Deputy Commissioner has acted fairly and has continued to deal with the many enquiries, the hardship application in respect of the general interest charge and the objection in respect of the SGC. The Deputy Commissioner does not press for the amount of the general interest charge or the SGC. I accept the submissions made by counsel for the Deputy Commissioner. In the unusual circumstances of this case, I will vary the demand by deducting both the amount remitted in respect of the general interest charge and the SGC.
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