Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2001] VSC 286

5. Buckland Products Pty Ltd was formerly known as Casualife Furniture Pty Ltd, its change of name having been registered on 18 June 2001. The respondent, the Deputy Commissioner, served a statutory demand dated 14 February 2001 on the appellant whom I hereafter refer to as "the company". By originating process dated 9 March 2001, the company applied pursuant to s.459G of the Corporations Law for an order that the statutory demand be set aside. The proceeding was dismissed by the Senior Master and the appeal comes before me as a hearing de novo.

8. The statutory demand dated 14 February 2001 was served on the company on 19 February 2001. Section 459G of the Corporations Act provides that an application to set aside a statutory demand must be filed and served together with the affidavit in support within 21 days of service of the demand. The originating process was filed, as I have already observed, on 9 March 2001, hence, within the 21 day time limit prescribed by the section.

11. Section 459H of the Corporations Act provides that for the purposes of s.459G the Court must be satisfied either that there is a genuine dispute and/or that the company has an offsetting claim. Essentially, the case of the company is that it has a genuine dispute with the Deputy Commissioner as to the way in which the debt that is the subject of the statutory demand was calculated.

14. Before turning to consider the substantive issue the Deputy Commissioner raised a preliminary matter. Section 459F of the Corporations Act provides for the period for compliance with the statutory demand. Sub-section (2)(a) provides that the period for compliance where a company applies to set aside a statutory demand under s.459G is the period specified in the order of the Court or, otherwise, the period beginning on the day when the demand is served and ending seven days after the application under s.459G is finally determined or otherwise disposed of. Thus, for the purposes of s.459F of the Corporations Act the period for compliance expired seven days after the date the application before the Senior Master under s.459G was finally determined. The Senior Master made the relevant orders on 21 June 2001. Hence, the seven day period expired on 28 June 2001. The appellant lodged a notice of appeal against the orders of the Senior Master on 27 June 2001. No application has been made since the orders of the Master on 21 June 2001 for an extension of time of the period for compliance with the statutory demand. Such an application could have been made very easily but for reasons that remain unexplained the company did not avail itself of that opportunity.

17. There is a line of authority that stands for the principle that the commencement of an appeal against the dismissal of an application under s.459G does not operate as a stay or entitle a company to an extension of time for compliance with the statutory demand. On the contrary, where a company wishes to appeal against the dismissal of an application under s.459G it must apply and, indeed, continue to apply if necessary for an extension of time within the last extension period until the last appeal is determined.

20. In David Grant and Co Pty Ltd v Westpac Banking Corporation (1995) 60 ALJR 778, the High Court considered s.459G and 459F of the then Corporations Law and, in particular, the period for compliance with a statutory demand. The High Court was concerned with three appeals where statutory demands had been served on companies and applications were filed under s.459G to set aside those demands. Filing and service of the application to set aside occurred after the expiration of the 21 day period referred to in s.459G. The particular issue before the High Court in the David Grant case was whether the time for compliance with a statutory demand under s.459F could be extended by a court exercising its powers under s.1322. Gummow J (with whom Brennan CJ and Dawson, Gaudron and McHugh JJ agreed) held (at 785) that the requirement in s.459G that the application to the Court for which it provides be made only within 21 days after service of the demand should not be treated as supplemented or qualified by the operation of s.1322(4). As a result, the appeals by the subject company were dismissed.

23. In Livestock Traders International Pty Ltd v BUI and Anor (1996) 22 ACSR 51, Jenkinson J of the Federal Court considered a review of an order by a Deputy Registrar dismissing an application to set aside a statutory demand. At first instance, the Deputy Registrar made orders including an order extending the period for compliance with the demand for a period of 14 days from the date of decision. Within 21 days after the decision of the Deputy Registrar an application for review was filed. Additional orders were sought for an extension of time for compliance with the statutory demand until the hearing and determination of the review. Jenkinson J expressed the view (at 53) that an application is finally determined for the purposes of s.459F of the then Corporations Law when an order determining the application is made notwithstanding that the determination may be reviewable and subject to appeal. Citing the principles stated by the High Court in the David Grant case, Jenkinson J (at 54) concluded that s.459F and s.459C(2)(a) of the Law " ... premise unalterability of the time at which a company is to be taken to have failed to comply with a statutory demand once the period for compliance has ended at a time when the demand is still in effect". Jenkinson J concluded that once an exercise of the power to extend time for compliance has occurred and no further extension has been granted s.459F of the Corporations Law (now the Corporations Act) is exhausted. His Honour further concluded that as no further order extending time was made during the currency of the initial order extending time the statutory demand was in effect at the end of the period for compliance and that the applicant company must be taken to have failed to comply with the statutory demand.[1]

26. In Equuscorp Pty Ltd v Perpetual Trustees WA Limited (1997-98) 25 ACSR 675 the Full Court of the Federal Court held that provided an application for an extension is brought before the expiration of the period fixed for compliance that period can be further extended even in circumstances where an application under s.459G has been determined. The Court held (at 70) that the power to extend time is necessary and contemplated with respect to circumstances where a statutory demand is varied and further time is needed by a company to comply with that demand or in circumstances, as the present, where there is an appeal against the dismissal of the application under s.459G at first instance. Here the difficulty lies in the fact that no extension has been sought and the time for compliance has run.

29. The issue turns upon the proper construction of s.459F of the Act. Sub-section (2)(a) concerned as it is with an application under s.459G specifically provides that the period for compliance is when the Court makes an order that extends the period for compliance with the demand, being the period specified in the order, or in the last such order, as the period for such compliance. Clearly the section contemplates that a court may extend the period for compliance to a specified period and the words "or in the last such order" contemplate that the period for compliance may be further extended.

32. In the present matter the company made no application to the Senior Master after the determination of the application under s.459G for an extension of the period for compliance. Hence, sub-s.(2)(a)(ii) of s.459F of the Corporations Act came into play whereby the period for compliance with the statutory demand ended "seven days after the application under s.459G" was finally determined. It was suggested on behalf of the company before me that the words "finally determined" contemplate an appeal and the fact that the company filed a notice of appeal pursuant to Order 77.05 of Chapter 1 of the Supreme Court Rules meant that the application under s.459G was not "finally determined" for the purposes of s.459F(2)(a)(ii). I do not accept such submission. The application under s.459G remains finally determined unless and until the appeal is allowed. Furthermore, in my view, sub-s.(2) of s.459F contemplates that extensions of time may be applied for by virtue of the words "or in the last such order". The company never availed itself of that opportunity.

35. Accordingly, the time for compliance with the subject statutory demand has run and no extension may now be granted. On this basis, therefore, I consider that the appeal is misconceived and should be dismissed. However, in the event that it was necessary to do so, I turn to consider the merits of the appeal.

38. The statutory demand related to a debt stipulated as being the amount of $148,659.00 and described as being the total of the amounts of the debts described in the schedule to the statutory demand. The schedule specified two amounts. First, an item described as:

"(a) Running Balance Account deficit debt as at 13 February 2001 in respect of primary tax debts due under Divisions 1AAA and 2 of Part IV of the Income Tax Assessment Act 1936 (as amended) ('the ITAA36') [PAYE deductions] and the general interest charge payable under s.8AAZF of the Taxation Administration Act 1953 as amended ('the TAA53'), being a debt due and payable by the company pursuant to s.8AAZH of the TAA53."

42. The running balance account was claimed in the sum of $137,236.69.

"(b) Running Balance Account deficit debt as at 13 February 2001 in respect of primary tax debts due under the Sales Tax Assessment Act 1992 (as amended) ('the STAA92') [Sales Tax] and the general interest charge payable under s.8AAZF of the TAA53, being a debt due and payable by the company pursuant to s.8AAZH of the TAA53."

49. The amount claimed in the second category was the sum of $11,422.31.

52. The total amounts of the claims in the schedule was the sum of $148,659.00 being the amount specified in the statutory demand.

55. The affidavit accompanying the statutory demand was sworn by one Leanne Patrice de Niese of the Receivables Management section of the Australian Taxation Office. She deposed that she had access to and was familiar with the records of the creditor being the Australian Taxation Office in respect of the company including the creditor's computer system which records information relating to the amounts owing to the creditor by the debtor company. Ms de Niese deposed that she had inspected the records of the creditor in relation to the debtor company's account and that the total amount of the debts being $148,659.00 is due and payable by the debtor company. She also deposed as to her belief that there is no genuine dispute about the existence or amount of any of the debts.

58. The company adopted the position of relying upon s.459E(3) of the Corporations Act which requires that the statutory demand be accompanied by an affidavit that verifies that the debt or the total amounts of the debts is due and payable by the company and complies with the rules. The principle ground on which the company relied was that the demand was defective and should, therefore, be set aside to avoid a substantial injustice as contemplated by s.459J of the Act. The basis for the defect as alleged by the company was that the amount claimed in the demand related to a number of debts or potential debts and there was no description of the individual debts comprising the amount stated in the schedule to the demands. With respect to the second component of the amount it was submitted that it was the subject of the statutory demand contained in paragraph (b) to the schedule concerning sales tax. The company alleged that there was a defect in the notice in that it was apparent that there were a number of debts or potential debts claimed but that there was no description of the individual debts that may compromise the amount stated in the schedule.

61. It was also the position of the company that where the schedule to the demand referred to a "Running Balance Account deficit debit" the affidavit accompanying the statutory demand was deficient because it did not verify the debt as a Running Balance Deficit debt. Further, there was complaint by the company that the demand did not elucidate or clarify whether the Deputy Commissioner had established a Running Balance Account or whether the deponent of the relevant affidavit was referring to such an account or to other computer records of the Australian Taxation Office.

64. Considerable time was taken by Mr Guss who appeared as solicitor on behalf of the company in examining the requirements of the relevant legislation governing taxation and sales tax and also the relevant authorities.

67. The company further criticised the statutory demand on two other grounds. First, that the Deputy Commission did not adduce a certificate under s.8AAZJ of the Income Tax Assessment Act to prove the relevant debt. Secondly, that there were no particulars of the calculation of the interest included in the schedule to the statutory demand. The company relied upon the views expressed by Lockhart J in Topfelt Pty Ltd v The State Bank of New South Wales Limited (1994) 12 ACLR 15.

70. A number of observations can be made. At the outset, the debt is not disputed by the company bearing in mind that the debt is based upon a self-assessing liability for group tax and sales tax.

73. Turning to the demand and the affidavit in support, I observe that further affidavits were filed in the course of multiple hearings before the Senior Master below. It is unclear as to why the affidavits were filed and served on behalf of the Deputy Commissioner. In any event, I observe that the affidavits did not constitute in any way nor were they purported to be relied upon as the affidavit accompanying the statutory demand. In my view it is the affidavit of Ms de Niese that is the relevant and critical affidavit arising from the statutory regime itself.

76. In Chippendale Printing Co v Deputy Commissioner of Taxation (1995) 13 ACLC 229 Lindgren J held (at 244) that a statutory demand relating to two or more debts must give a description of the individual debts specifying their amounts and also state the total of those amounts. With respect I agree. In the present case I am satisfied that the Deputy Commission has met those requirements. Further, in the Chippendale case, Lindgren J (at 244) went on to observe that even if the statutory demand did not satisfy the requirements of the legislation the learned Judge considered he had power under s.459J to set aside the demand only if substantial injustice would be caused by doing otherwise. His Honour went on to express the view that he was not persuaded in the Chippendale case that substantial injustice would be caused to the company in any event by the supposed defect. His Honour observed that the demand clearly stated the amount claimed in respect of each individual debt and other related matters. In my view the same circumstances apply in the present matter. Even if it was the case that the statutory demand and/or the affidavit in support were defective I could not be satisfied that there was substantial injustice caused to the company in the circumstances of the matter. It is again relevant to observe at this point that there is no denial by the company that the debt is owed.

79. It is relevant, also, given that the company relied upon the circumstances in Topfelt to note that in the Chippendale case (at 244 also) Lindgren J drew a distinction between the circumstances in the two cases. Indeed, as has been observed on other occasions the circumstances in the Topfelt case were very different in that there the demand itself did not specify the amount of the debt due by the respondent to the applicant. Hence, as the demand in the Topfelt case did not specify the rate of interest and claimed interest on a "continuing" basis the debtor was found to face unacceptable difficulties. In essence, as Lockhart J found in the Topfelt case, the demand could not be complied with on its face as it was "uncertain" and "unspecified": see also Chains & Power (Aust) Pty Ltd v Commonwealth Bank of Australia (1995) 13 ACLC 73, 78; also Spencer Constructions Pty Ltd v G&M Aldridge Pty Ltd (1997) 15 ACLC 1,001, 1,007. In the present matter no uncertainty prevails as occurred in the Topfelt case.

82. In this matter I adopt, also, the approach of Hayne J in Re Aroora Pty Ltd (1993-94) 27 ATR 473, 477. In that case a tax payer launched a series of challenges to a statutory demand including its status under the relevant legislation and thereby asserting that the statutory demand was defective. Hayne J observed (at 477):

"It is, in my view, necessary to bear steadily in mind that the company does not seek to dispute its liability to pay the group tax instalments claimed; nor, for that matter, does it dispute its liability to pay penalties on those sums. In those circumstances, even if the penalties may not properly be the subject of demand - and in my view they can - I do not consider that the demand should be set aside."

86. With respect I would apply the same view in the present matter.

89. It follows from these reasons that the appellant has failed, in any event, to make out a basis for the setting aside of the statutory demand. If called upon to determine the substantive application I would dismiss it accordingly.

[1] See, also, Graywinter Properties Pty Ltd v Dyer (1997) 15 ACLC 302.