Re Greenhill, R. Ex parte Deputy Commissioner of Taxation

[1989] FCA 496

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION )

BANKRUPTCY DISTRICT OF THE STATE	) NO. P754 OF 1989
OF NEW SOUTH WALES AND THE	1
AUSTRALIAN CAPITAL TERRITORY	1

RE:

RONALD GREENBILL

Debtor

EX PARTE:

DEPUTY COlllIISSIONER OF TAXATION

Creditor

CORAM: H. L. FOSTER J.

DATE: 25TH JULY, 1989

PLACE: SYDNEY

TEE COURT ORDERS TEAT:

1)      The sequestration order be made in accordance with the

petition.

2)    The petitioning creditor's costs with any reserved costs be taxed and paid out of the estate

8 , l

FEZZI:~!. COURT OF

AUSTRALIA ,. I

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE STATE	) NO. P754 OF 1989
OF NEW SOUTH WALES AND THE	)
AUSTRALIAN CAPITAL TERRITORY	)

RE:

RONALD GREENBILL

Debtor

EX PARTE:

DEPUTY COMMISSIONER OF TAXATION

Creditor

CORAII: M. L. FOSTER J. DATE: 25TH JULY, 1989 PLACE: SYDNEY

REASONS FOR JUDGMENT

( EXTEMPORE )

HI S HONOUR: In these proceedings the petitioner, the Deputy Commissioner of Taxation petitions the court for the making of a sequestration order against Ronald Greenhill ( ~ n the petition

referred to as the debtor). The petltion is founded upon an act of bankruptcy being a failure on the part of the debtor on or before 9 December 1988 to comply with requirements of a Bankruptcy Notice served on him on the 25th day of November, 1988. That notice related to his failure to pay a judgment entered against him in the District Court for an amount of $20,211.67 with interest. That ludgment was in respect of an amount of group tax allegedly payable by him to the Deputy Commissioner of Taxation in respect of salaries and wages paid to the staff of the wollongong Hotel, Crown Street, wollongong.

The debtor opposes the making of the sequestration order under s 52(2) of the Bankruptcy Act. It is submitted on his behalf that the court should find sufficient cause to refuse the making of the order. The sufficient cause referred to can be stated compendiously as belng the existence of a proper defence to the proceedings brought in the District Court.

It is clear that judgment was signed in those proceedings by default. The judgment was obtained on 17 December 1985. The application to set the judgment aside in the District Court was not made for a considerable period of time thereafter.

to set aside the judgment brought by the debtor was refused in	It appears from the material put before me that the application
limine on the basis that the delay in bringing the application had not been sufficiently explained.
The debtor in opposing the making of a sequestration order asks that the court take Into account the defence that he would have sought to raise on the merits had he been allowed to do so in the District Court and find, in effect, that that defence is made out before this court on the evidence placed before it. That being so, it is further submitted that sufficient cause has been shown to prevent the making of a sequestration order with the consequence that the petitioning creditor would be remitted to his rights under the judgment in the District Court.
A number of matters have been put in argument before me. It is convenient in the first place to consider the provisions of the Income Tax Assessment Act under which the judgment was obtained. I have already indicated that the amount of the judgment relates to an amount of group tax said to be unpaid by the debtor to the Deputy Commissioner of Taxation. The collection of this tax is provided for by Part 6, Division 2, of the Income Tax Assessment Act ("the Act").
The substantial factual issue that has been raised on the part of the debtor is whether or not he was relevantly the employer of the various employees of the Wollongong Hotel with the consequent obligation on his part as an employer to make the
deductions of group tax in respect of those employees and forward the amounts of the deductions to the Deputy Commissioner of
Taxation. His submission on the facts put before me was that he was not the employer at any relevant time of these employees but that they were employed by the owner of the hotel, Tooth and Co. Pty. Ltd.
There is a threshold question which arises as a matter of construction of the relevant sections of the Act as to whether this factual issue properly arises at all. There is no contest in the case that the debtor was relevantly registered as the group employer of these employees. Both "employer" and group employer are defined in S 221(a) of the Act. "Employer" is defined as a person who pays or is liable to pay any salary or wages. It is the debtor's contention that he does not fall within this definition as he was not relevantly the person liable to pay the salary and wages of the employees in question.

However, "group employer" is deflned as meaning:

"A person who is registered as a group employer
under S 221F."

It is to be observed that thls definition does not employ, as a constituent part of it, the term "employer". Consequently, in my view, one does not need to look to the definition of "employer" in order to ascertain the meaning of "group employern in the Act. On the basis that the debtor was, as is not contested, the group employer registered under the section one can turn to , to see what obligations were imposed

upon him as a result of the fact. S 221F(5)(a) provides that:

"A group employer shall (a) not later than the seventh day of the month next succeeding a month in which he has made deductions, pay to the Commissioner the amount of the deductions so made. "

The court has before it in this case group relevant certificates indicating that deductions were made. Accordingly, in my view, there is demonstrated on the part of the debtor, as group employer, a clear obligation to pay the amount of the deductions to the Deputy Commissioner of Taxation.

The next section which must be considered in the chain of relevant sections is s 221R(l). That section provides that:

"An amount payable to the Commissioner under the provisions of this Division shall be a debt due to the Commonwealth and payable to the Commissioner, and may be sued for and recovered in any court on competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name.

The action brought in the District Court purported to be brought pursuant to s 221R(1).

In my view, one need not really look further than s 221F(v)(a) although reference could perhaps also be made to s 221(b). The first section quite clearly provides an obligation to make payment to the Commissioner of the amount of the deductions. that amount becomes an amount payable to the

Commissioner as a debt with the terms of s 221R.

In my view, consequently once it is established that the person proceeded against by the Commissioner in relation to the claim for group tax is relevantly a group employer within the meaning of the Act, questions as to whether that person also falls within the description of "employer" become irrelevant. The result is that, in my view, the question whether the debtor, Mr Greenhill, was the employer, within the meaning of the Act, of the employees, as opposed to Tooth and Co. Pty. Ltd. being the employer does not arise and the debtor consequently has failed to make out any defence which could have been available to him in the District Court proceedings.

However, against the possibility that this construction of the Act be incorrect, I propose briefly to consider the matter on the basis raised by Hr Greenhill, namely that he was not in fact the employer and that consequently, had he been entitled to raise the defence sought to be raised in the District Court then that defence would have succeeded with a resulting immunity on his part from the claim brought by the Deputy Commissioner of Taxation. That defence is set out in an annexure to his affidavit of 23 November 1987 filed in the District Court and

which has been put in evidence before me. It reads as follows:

"The defendant is not liable to pay the tax referred to in the Statement of Liquidated Claim as alleged or at all. The tax is payable by the employer of employees at the Wollongong Hotel, Crown Street, Wollongong. At no stage did the defendant employ any persons at the Wollongong Hotel, Crown Street, Wollongong, the defendant himself being an employee."

The debtor has given evidence orally and by affidavit to the effect that at all relevant times during which the group tax became payable he was present merely as manager of the Wollongong Hotel on behalf of the owner Tooth and CO Pty. Ltd. He says that he was not the licensee of the Hotel. He says that the company

was the employer and as such liable for the payment of the tax. He further says that he was managing a Hotel pursuant to a rather special arrangement whereby the profits of the Hotel were all payable to Tooth and Co. Pty. Ltd. to be used by that company to defray debts owing by the debtor to the company in respect of his previous management on their behalf of certain liquor stores.

He says that all moneys in effect obtained from the operation of the Wollongong Hotel passed to Tooth and Co. Pty.

Ltd. subject to his receiving living expenses of the amount of

$200 or $300 per week. I put to one side the question of whether

it has been established in these proceedings that the court

should go behind the judgment properly obtained in the District

Court, which judgment has already been the subject in that Court

of an unsuccessful Application to set it aside. I approach the

matter on the basis of whether it has been demonstrated on the

evidence placed before me that the debtor was, in fact, merely an	I
employee of Tooth and Co. Pty Ltd and not the employer of the
relevant wage earners.	i
On that evidence, the debtor appears in the relevant group certificates as employer, he has signed the group certificates as employer. The application for registration as a
group employer, a necessary Application to be made under the Act,	I
shows him as being the employer of labour at the Wollongong Hotel. It also indicates that the business was purchased as a concern from the owner Tooth and Co. Pty. Ltd. The Application is signed by the debtor.
i
There is also in evidence a written agreement for a weekly tenancy of the premises for the relevant period, the parties being Tooth and Co. Pty. Ltd. as landlord and the debtor, Ronald David Greenhill as tenant. Additionally there is a document relating to an account with the State Bank in Wollongong. It is entitled the "Wollongong Hotel working account". The signature in relation to the account, is that of the debtor. In the application he is described as hotel licensee and it is further indicated that he is self-employed in that capacity.
The debtor in his evidence has said, in relatlon to this document, that it never came into operation. He has said in respect of the other documents, as I apprehend his evidence, either that they were entered into carelessly or that it was a known thing in the hotel trade that persons acting as manager, as he was, could regularly enter into such documents which were not intended to operate according to thelr tenor. I am not satisfled by this evidence that I should fail to glve effect to the clear inferences that are open on the face of these documents, namely that the debtor was acting as employer of the labour at the hotel and was therefore, if it be necessary that he be categorized as
employer under the provisions of the Act, was relevantly "the
employer".
Accordingly, in my vlew, the defence that the debtor wished to raise before the District Court but was not able to do because of the failure of his application to be let in to defend, a defence which could not have succeeded so far as appears from

,

9

the evidence placed before me. In these circumstances the debtor has failed to show sufficient cause under s 52(2) of the Bankruptcy Act agalnst the making of the sequestration order

sought in the petition. I accordlngly propose to make it.

I am satisfied as to the matters required to be proved pursuant to s 52 of the Act. I note the act of bankruptcy set forth on the Petition. I make the sequestration order in accordance with the Petition. I order that the petitioning creditor's costs with any reserved costs be taxed and paid out of the estate.

pages are a true copy of the reasons for	1 certify that this and the preced~ng 8
judgment herein of His Honour, Mr Justlce M. L. Foster.
Associate: Dated: 29 August 1989

A P P E A R E N C E S

DEBTOR: Mr Davidson (solicitor)

PETITIONING CREDITOR:  Mr Aldridge

HEARING DATE:	25 JULY, 1989
JUDGMENT DATE:	25 JULY, 1989