Bayview Concepts Pty Ltd v Commissioner of State Revenue

Judgment 1The Plaintiff, Gemaveld Pty Limited ("Gemaveld") initially applied under ss 459C and 459H of the Corporations Act 2001 (Cth) to set aside, in part, a statutory demand dated 19 October 2011 ("Demand") issued by the Chief Commissioner of State Revenue ("Commissioner"). Gemaveld sought to set aside the Demand to the extent that it included an alleged debt referable to payroll tax ("Payroll Tax Debt") and an order varying the Demand to include the balance referable to land tax, which was admitted. 2Prior to the commencement of the hearing before me, the basis on which Gemaveld contended that the Payroll Tax Debt was genuinely disputed was that, at the relevant time, the beneficial interest in certain companies grouped with Gemaveld, but not Gemaveld, vested in Mr Donald Simpson and, Gemaveld contended, grouping provisions in the Payroll Tax Act 2007 (NSW) had not properly been applied in those circumstances. Gemaveld did not press that contention at the hearing before me. It was well advised in not pressing that contention, since it appears that it had not lodged an objection to the relevant notices of assessment issued by the Commissioner within 60 days of service of the assessment for the purposes of ss 86-87 of the Taxation Administration Act 1996 (NSW) nor had it sought or obtained any extension of time from the Commissioner for such an objection under s 90 of the Taxation Administration Act. 3It is also unlikely that Gemaveld could have established a genuine dispute, for the purposes of s 459H of the Corporations Act, having regard to the limits of the Court's jurisdiction under s 103A of the Taxation Administration Act and the conclusive evidence provisions in relation to a notice of assessment under s 119 of the Taxation Administration Act: Hoare Brothers Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302; 135 ALR 677; Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473 at [57], [60]; Bayview Concepts Pty Ltd v Commissioner of State Revenue (Vic) [2009] VSC 655 (Gardiner AsJ) and on appeal Bayview Concepts Pty Ltd v Commissioner of State Revenue (Vic) [2009] VSC 568. Whether the Demand should be set aside under s 459J of the Corporations Act 4Gemaveld instead contended before me that the Demand should be set aside on the basis that the affidavit of Mr Mark Dinaro dated 19 October 2011 verifying the Demand must have been sworn before the Demand. Gemaveld contended that that gave rise to some other reason why the Demand should be set aside, for the purposes of s 459J(1)(b) of the Corporations Act. 5In order to pursue this contention, it was necessary for Gemaveld to amend its Originating Process to refer to s 459J of the Corporations Act. The Commissioner did not oppose that amendment, while reserving its ability to contend that s 459J of the Corporations Act did not permit a Demand to be set aside in part. I granted leave for that amendment, in circumstances that the Demand and verifying affidavit was annexed to the initial affidavit sworn by Ms Rosa Maiolo in support of the application to set aside the Demand and that could raise, by reasonably available inference, the issue of a defect in that affidavit for the purposes of the principle in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; 21 ACSR 581 at 587; 14 ACLC 1703: see POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533; Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd [2007] NSWSC 103; (2007) 61 ACSR 321; 25 ACLC 282; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1317. 6Gemaveld's contention that the affidavit was sworn prior to the Demand was based on paragraph 2 of the Demand which stated that; "Attached is the affidavit of Mark Dinaro, Senior Operations Officer, dated 19 October 2011, verifying that the amount is due and payable by the company". The terms of that paragraph correspond to the statement specified in Form 509H, which is the prescribed form for the purposes of s 459E(2)(e) of the Corporations Act. Gemaveld's reading of that paragraph depended on the proposition that "dated 19 October 2011" indicated that the affidavit had been dated 19 October 2011 prior to the signature of the Demand and must therefore have been executed before the Demand. The same argument could, of course, be advanced in respect of any statutory demand which took the prescribed form. 7I do not read paragraph 2 of the Demand as having the meaning for which Gemaveld contends. In my view, the reference to "dated" in that paragraph, both in the Demand and in the prescribed form, does no more than indicate that the affidavit of verification bears a particular date and does not communicate anything as to whether that affidavit was sworn or affirmed before or after the Demand. The language in that paragraph would be equally apt if the Demand had been signed first, the affidavit then sworn and attached to the Demand. In either case, the affidavit verifying the Demand would be dated 19 October. 8A second difficulty with Gemaveld's contention is that, after Gemaveld identified the new basis on which it attached the Demand, Mr Dinaro gave evidence of his practice in respect of signing statutory demands and swearing affidavits under s 459E of the Corporations Act. Mr Dinaro's evidence was that he signed many demands and swore many verifying affidavits in his role as Senior Operations Officer with the Commissioner and, not surprisingly, had no specific memory of the order in which he signed the Demand and swore the verifying affidavit in issue in these proceedings. However, it was his usual practice to open a Word document containing a pro-forma electronic version of the statutory demand and affidavit, type in the relevant details in the electronic document, print the document, sign the creditors statutory demand for payment of the debt and then swear the affidavit before an available Justice of the Peace. As Mr Dinaro noted in cross-examination, that practice was consistent with simply following the order of the statutory demand and verifying affidavit in the pro-forma document. 9Nothing in Mr Dinaro's cross-examination raised any doubt as to the evidence as to his usual practice. Although Mr Dinaro properly conceded that he could not say that he had not departed from his usual practice on the particular occasion, no reason was shown why he would have done so and I am comfortably satisfied that he in fact acted in accordance with his usual practice in this case. 10In these circumstances, Gemaveld has not established the factual basis of its attack on the Demand, that the verifying affidavit was sworn prior to the signature of the Demand. This finding is sufficient to require that the application to set aside the Demand should be dismissed. Legal issues raised by Gemaveld's submission 11I should say something further as to the legal issues raised by Gemaveld's submission, which would be capable of having a wide impact upon practice in relation to the signature of statutory demands and the swearing of affidavits in support of those statutory demands. 12Section 459E(3) of the Corporations Act requires that, unless the relevant debt is a judgment debt, a statutory demand must be accompanied by an affidavit that "verifies that the debt, or the total of the amounts of the debts, is due and payable by the company". The ultimate question for a Court is not, in my view, the precise timing of signature of the statutory demand and swearing of the verifying affidavit, but whether the affidavit in fact verifies that the debt is due and payable by the company. The requirement in s 459E(3) reflects the legislative intention that a company receive in the accompanying affidavit a clear and unmistakeable assertion that there is a "present and unconditional" obligation to pay the debt demanded: Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd [2002] NSWSC 219; (2002) 20 ACLC 726. That intent is satisfied so long as the statutory demand and affidavit are signed and sworn or affirmed contemporaneously. 13Professional commentary in respect of the section has previously offered the practical suggestion that a statutory demand and verifying affidavit should be finalised "contemporaneously": see, for example, F. Assaf, Statutory Demands: Law and Practice at [3.28]. Mr Assaf also suggests that "[t]he better view is that, on balance, an accompanying affidavit should be sworn on the same day as the statutory demand" (at [7.54]). In my view, the case law is not inconsistent with that approach. In Dolvelle Pty Ltd v Australian Macfarms Pty Ltd (1998) 43 NSWLR 717 at 727; 145 FLR 129, Santow J referred to the importance of the requirement of "exact coincidence of date for verification of the statutory demand", plainly focussing on whether the demand and verifying affidavit were sworn on the same day rather than on which was sworn first. In Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39; 5, Higgins CJ noted that "[t]he essential requirement is that the affidavit must purport to verify the debt particularised in the demand with which it is delivered" (at [41]) and expressly noted that a demand which existed but had not yet been executed could be verified by such an affidavit (at [55]). 14There are, of course, a number of cases where affidavits sworn prior to a statutory demand have been held not to verify that statutory demand, and that has been held to give rise to a defect for the purposes of s 459J of the Corporations Act. However, those cases variously related to affidavits sworn between a day and several days prior to the date of the statutory demand: Wildtown Holdings Pty Ltd v Rural Traders Pty Ltd [2002] WASCA 196; Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39; Ri-Co Holdings (Aust) Pty Ltd v Allied Sandblaster Pty Ltd [2009] QSC 122 [2010] 1 Qd R 293; R2M Pty Ltd v Gourlay [2011] FCA 168. It is obvious enough that an affidavit sworn on, say, 14 or 18 October could not, in fact, verify a debt claimed to exist on 19 October, because that debt might well have been repaid in the intervening day or days. 15By contrast, I would not accept that, as a matter of fact, an affidavit sworn at 11.55am or 11.59am on 19 October could not verify a debt asserted to be due and payable in a statutory demand signed at noon on that day. I do not consider that that such a construction of the section is required by the terms of s 459E(3) of the Corporations Act or by any of the authorities dealing with affidavits sworn prior to the day on which the statutory demand is signed. I can see no reason why the Court should adopt an approach which, first, will encourage arid inquiries as to which of the signature of a statutory demand and the swearing or affirmation of the verifying affidavit occurred first within a short time frame on the same day and, second, is likely to have the consequence that statutory demands will fail for technical reasons. 16That approach would, in my view, be inconsistent with Parliament's intent when introducing Pt 5.4 of the Corporations Act, namely to ensure that disputes in respect of statutory demands would be resolved on the basis of the "commercial justice" of the matter rather than on the basis of "technical deficiencies": Explanatory Memorandum to the Corporate Law Reform Bill 1992 (Cth) para 688; F. Assaf, Statutory Demands: Law and Practice at [7.1]. That approach would also, in my view, be inconsistent with the general approach that the law does not take account of fractions of a day: Lester v Garland (1808) 15 Ves 248; 33 ER 748; Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd above at [55]. 17Whether there is "some other reason" to set aside a statutory demand for the purposes of s 459J(1)(b) is to be determined by reference to the legislative intent of Pt 5.4: Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229 at 235. Given the findings which I have set out above, I do not consider that Gemaveld has established that there is some other reason why the Demand should be set aside for the purposes of s 459J of the Corporations Act. Whether a Demand can be set aside in part under s 459J of the Corporations Act 18Had Gemaveld otherwise been successful, a question would have arisen whether it would have been open to the Court to set aside the Demand in part under s 459J of the Corporations Act. This question would have arisen because Gemaveld has at all times acknowledged that the Commissioner's claim for land tax is validly based and, in its initial application to set aside the Demand, did not seek to set aside the Demand in respect of the amount of land tax and has properly recognised that it is unable now to depart from that position. Section 459H of the Corporations Act, on which Gemaveld originally relied, plainly allows the Court to vary a demand to exclude part of the debt to which the statutory demand relates. On the other hand, it seems to me that s 459J of the Corporations Act does not contemplate that a statutory demand can be set aside in part, as distinct from set aside as a whole where, relevantly, a reason is established to set it aside. I also do not think that it would be open to me to construe the Demand, as Gemaveld contends, as separate statutory demands so as to set aside one but not the other where the Demand is, on its face, a single demand for several debts arising in respect of payroll tax and land tax. It is not necessary for me to reach a final view as to this question given the other findings which I have reached above. Extension of time under s 459F of the Corporations Act 19In its Originating Process, Gemaveld also sought an order that the time for compliance with the Demand, upon the entry or substitution by the Court of the admitted amount, be the period 21 days from the date of the final order. No "admitted amount" now arises for the purposes of s 459H of the Corporations Act, because Gemaveld has not pursued its application under s 459H of the Corporations Act. I have also held that that Gemaveld's application under s 459J of the Corporations Act to set aside the Demand is not established. 20The Court has power to make an order extending the time for compliance with a statutory demand under s 459F of the Corporations Act although an application to set aside the Demand has failed: Vista Commercial Construction Pty Ltd v Deputy Commissioner of Taxation [1997] FCA 1169. However, I do not consider that Gemaveld has established any basis to extend the date for compliance with the Demand when it has not, for example, led evidence that it would have complied with the Demand within 21 days had it not brought these proceedings, or that such an extension would facilitate its raising funds to satisfy the Demand, or indeed that it has any capacity to satisfy the Demand or any intention of doing so. 21Accordingly, I will not extend the period for compliance under s 459F(2) of the Corporations Act which will, in the absence of any order extending it, be the period ending 7 days after today, when Gemaveld's application under s 459G of the Corporations Act is finally determined. Orders and costs 22I therefore order that the Originating Process dated 14 November 2011 be dismissed. In the ordinary course, costs will follow the event. However, I will hear the parties as to costs.