3Bears Childcare Centre Pty Ltd v Deputy Commissioner of Taxation, in the matter of 3Bears Childcare Centre Pty Ltd

Background facts 4 The statutory demand sought payment of $538,684.73 in respect of running balance account deficit debts and unpaid superannuation guarantee charges. 5 The company's director, Mr Trang, has provided evidence that the amount claimed in the statutory demand was substantially overstated and that 3Bears has paid the balance owing under the statutory demand in full. 6 However, before I can consider the merits of 3Bears' application for review, I must first determine whether I have jurisdiction to hear it and, secondly, whether there is any utility in the application. 7 When the Registrar dismissed 3Bears' application, he extended the time for compliance with the statutory demand to 8 August 2018. 8 On 1 August 2018, 3Bears filed the interlocutory process and an affidavit in support of its application. In the interlocutory process, there was no application to extend the time for compliance with the statutory demand after 8 August 2018. 9 The DCT's submissions noted that Mr Trang's affidavit filed on 18 October 2018 does not assert that, and there is no evidence in support of the fact that, 3Bears made an application to the Court to extend time for compliance with the statutory demand. The DCT's submissions observe that Mr Trang says no more than that an oral request for more time to comply was made to an unknown representative of the Australian Taxation Office ("ATO"). 10 3Bears did not make payment or otherwise satisfy the statutory demand within the time set for compliance, which has now expired. 11 As the time for compliance has expired, there is now no power in this Court under s 459F(2)(a)(i) of the Corporations Act 2001 (Cth) ("Act") or otherwise to permit the making of an order to extend the time for compliance: Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314 ("Vic Plant Hire") at [3] and [27]; applied in Westend Asset Pty Ltd v Deputy Commissioner of Taxation [2013] FCA 538 at [30] to [33]. Questions of significant prejudice if 3 Bears is wound up, raised by Mr Trang, are not relevant because the Court has no discretion to extend the time for compliance with the statutory demand.

jurisdiction to review Registrar's decision 12 Section 35A of the Federal Court of Australia Act 1976 (Cth) provides relevantly: (5) A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power. (6) The Court may, on application under subsection (5) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised. 13 The Court's power under s 35A(5) extends to reviewing both questions of fact and law and is in the nature of a rehearing de novo: Guildford International Group Pty Ltd, in the matter of Aviation 3030 Pty Ltd v Aviation 3030 Pty Ltd [2018] FCA 600 at [1]. 14 By r 16.1(3) of the Federal Court (Corporations) Rules 2000, an application for the review of a decision of a registrar made under those Rules must be made within 21 days after the decision complained of, or any further time allowed by the Court. 15 The DCT says that the Interlocutory Process was filed 22 days after the Registrar's decision and so requires leave to proceed under r 16.1(3). I am satisfied that the application was made on 1 August 2018, contrary to the submission of the Deputy Commissioner that it was made on 2 August 2018 and accordingly, the application was made in time. 16 I am not satisfied that the Court has no jurisdiction to review the Registrar's decision, although the time for compliance with the statutory demand has expired. 17 However, because the time for compliance has now expired, any setting aside of the Registrar's order would be futile: Marthas T Market Pty Ltd v Reliance Financial Services Pty Ltd [2002] NSWSC 931 at [11]. As the High Court noted in Vic Plant Hire, at [19] to [22], the Act attaches a consequence to a failure to comply with a statutory demand within the time for compliance, namely, that (by s 459C) the Court must presume that the company is insolvent for the purposes of an application to wind up a company in insolvency. 18 In this case, there has been such a failure and even if 3Bears were to succeed on its interlocutory process, the fact of that failure would remain. 19 In Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 84, Latham CJ stated: [I]f a court is of opinion that the plaintiff cannot succeed there is every reason for protecting a defendant from vexation by the continuance of proceedings which must be useless and futile. 20 Mr Trang submitted that the 3Bears company is solvent and that it has made arrangements to pay another amount outstanding to the DCT. He submitted that he is seeking to protect all of the people who would be affected if the company was wound up, that if he has made a "small mistake" that should not result in the company being wound up and that it is not acceptable to wind up a company which seeks to comply with its legal obligations. Mr Trang also complained that the District Registrar heard his application without the full picture of the company's financial position which was evolving as the ATO considered the facts. 21 Unfortunately, for the reasons I have given, none of these matters affects the issue that I am required to decide. Accordingly, in the circumstances, the appropriate order is to dismiss the Interlocutory Process.

Other Matters 22 I was informed that the ATO has not yet filed an application to wind up 3Bears and that it has agreed not to seek a winding up order before 19 November 2018. It seems fairly unlikely to me that the ATO will have an opportunity to seek a winding up order before 19 November 2018 in any event because that is only three weeks away. If the debt owed by 3Bears cannot be paid under an agreement with the ATO, the company will have an opportunity to prove that it is solvent, as Mr Trang says that it is, and to raise other discretionary reasons why a winding up order should not be made. 23 I am recording these matters to emphasise to Mr Trang, who is self-represented, does not speak English as a first language, and is understandably upset by the prospect of 3Bears' winding up, that today's decision will not inevitably lead to the winding up of the company. 24 In relation to costs, I had asked the DCT to prepare written submissions to give Mr Trang, as a litigant in person, an opportunity to understand clearly the case that he was required to address. Unfortunately, those submissions were confusing, in that they identified the principal issue as a jurisdictional one in relation to the relief sought in the Interlocutory Process, rather than a question of futility. In those circumstances, although the DCT was successful, its success was primarily based on an issue not raised in its written submissions. Accordingly, it seems to me that each party should bear their own costs. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.