Buckland Products Pty Ltd v Deputy Commissioner of Taxation; Burwood Retail Pty Ltd v Deputy Commissioner of Taxation; Scandi

5. In the case of Buckland Products Pty Ltd, the statutory demand was served on 19 February 2001. Section 459G 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 on 9 March 2001, together with the affidavit in support, and hence within the time prescribed by the section. Section 459H then provides that, for the purposes of s.459G, the Court must be satisfied either that there is a genuine dispute or that the company has an offsetting claim before setting aside the statutory demand. The Senior Master was not so satisfied in this case of Buckland Products and therefore dismissed the application.

8. Section 459F of the Corporations Act provides for the period for compliance with the statutory demand. That section reads as follows:

"When company taken to fail to comply with statutory demand

(1) If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period. (2) The period for compliance with a statutory demand is:

(a) if the company applies in accordance with section 459G for an order setting aside the demand:

(i) if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand - the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or

(ii) otherwise - the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or

(b) otherwise - 21 days after the demand is served."

17. Thus, where a company applies to set aside a statutory demand under s.459G, the period for compliance is that fixed by order of the Court under sub-s.(2)(a)(i) or otherwise it is the period beginning on the day when the demand is served and ending 7 days "after the application under Section 459G is finally determined or otherwise disposed of". In the case of Buckland Products , there was no order made extending time under paragraph (a)(i) and so the period for compliance expired, 7 days after the date on which the s.459G application was "finally determined or otherwise disposed of". The Senior Master made his order on 21 June 2001 dismissing the application under s.459G. On the face of it, therefore, the 7 day period expired on 28 June. The company lodged notice of appeal against the orders of the Senior Master on 27 June and thus within the time allowed for such an appeal. No application was made to the Master on 21 June or thereafter for an extension of time within which to comply with the statutory demand. Such an application could have been made readily enough had there been grounds, but the company made no application. So it would seem the period for compliance ended on 28 June 2001, which was before the appeal to the judge came on for hearing.

20. The appeal from the Master was heard by Warren, J over three days in July and August 2001 and judgment was delivered on 16 August 2001. Her Honour dismissed the appeal on the ground that "the time for compliance with the subject statutory demand has run and no extension may now be granted" with the result that "the appeal is misconceived". Her Honour was unmoved by a submission on behalf of the company that the application made under s.459G could not be said to be "finally determined" within the meaning of s.459F(2)(a)(ii) until the appeal from the Master to the judge had been finally determined. I agree with Her Honour.

23. Mr Guss has now repeated to us the submission that was made below and rejected with regard to the proper construction of the phrase "finally determined". He made a valiant attempt to persuade us that the application under s.459F was not "finally determined" so long as it remained subject to appeal. In so submitting he made it clear that he was not concerned with an appeal that could be brought by extending time or granting leave; he was referring only to an appeal brought as of right and within the time laid down for appeal; and, moreover, he stressed, an appeal which, as in the case of an appeal from Master to judge, was by way of hearing de novo. However, in such a case, he argued, the determination of the Master could not be regarded as final in any relevant sense.

26. So far as this last is concerned, that the appeal was by way of hearing de novo, I do not regard it as a relevant consideration. That the appeal from the Master to the judge is to be heard de novo, albeit on the evidence before the Master unless leave is given to adduce further evidence, does not mean that the Master's order is of no consequence. Of course it may be set aside on appeal, but unless and until it is set aside it is final and conclusive, as Warren, J herself observed.

29. As to the other aspect, that the Master's order was subject to appeal, again I am not persuaded. The concept that the determination of the Master is not final so long as it remains amenable to appeal, even an appeal as of right, introduces a significant qualification on what otherwise appears to me to be a fixed and certain regime prescribed by s.459F and s.459G. (As to the latter, see especially David Grant & Co Pty Ltd (receiver appointed) v. Westpac Banking Corporation[1]. ) It would mean that a company, by exercising rights to appeal first to the judge and then from the judge to the Court of Appeal, might delay the characterisation of the Master's order as a final determination for more than a year and, at the end of the day, what then? If both appeals fail, the Master's order is then to be seen, at long last, as having been a final determination, but as at what date does that character attach? Mr Guss found it difficult to give an answer that was wholly satisfactory and that is not surprising. For the regime prescribed by s.459F is relatively simple and straightforward and it does not admit of the construction of "finally determined" that Mr Guss was urging.

32. Application under s.459G to set aside the statutory demand was "finally determined" within the meaning of 459F(2)(a)(ii) when the Master's order was made on 21 June 2001 and the fact that that order was liable to appeal was nothing to the point. If the company was wishing to appeal it could do so, but unless the appeal was heard and determined before the expiry of the period for compliance otherwise fixed, an extension of the time for compliance had to be obtained. Without it, there could be no point in the continued prosecution of the appeal, for, the period of compliance having ended before the appeal was heard and determined, the consequence prescribed by s.459F(1) attached, with all that followed under the statute. There can be no occasion, in my opinion, for adopting a construction of s.459F(2)(a)(ii) that would require that the consequence prescribed by sub-s.(1), having once attached, should then be undone because of the exercise of some right of appeal. Once that consequence attached, it remained attached (as indeed Gummow, J was disposed to suggest in David Grant, albeit in a slightly different context).

35. As for the other two appeals, there is no need, I think, to canvass in detail the circumstances. These were the appeals brought by Burwood Retail Pty Ltd and Scandi (Qld) Pty Ltd. The position in each is like that in the first appeal, save for one thing. The statutory demands were in each case served early in December 2001 and on 24 December 2001 application was made to set aside the statutory demand. Each application was within the time specified by s.459G. The applications, after adjournments, were finally heard and determined on 13 June 2002 by the Senior Master. Each was dismissed with costs, although in the case of Scandi, the statutory demand was ordered to be varied. On 19 June, and thus again within the time allowed for appeal, each company filed notice of appeal to a judge. What is different is that on 19 June each company also filed an application for an order under s.459F(2)(a)(i) to extend the time for compliance with the statutory demand. An extension was sought until 7 days after the hearing and determination of the appeal from the orders made by the Senior Master. The applications for extension of time were heard by Byrne, J on 20 June 2002 and dismissed. There was therefore no extension of time, being the period for compliance laid down by s.459F(2), and so in these two cases, like the first, that period ended "7 days after the application under s.459G was finally determined or otherwise disposed of". That is, in these cases, 7 days after 13 June or, in other words, on 20 June 2002.

38. In these two cases the appeals which had been instituted against the orders made by the Master on 13 June were heard by Hansen, J. in the Trial Division on 2 August 2002. The appeals were dismissed on 23 August on much the same basis as the first was dismissed by Warren, J. Again it was held that, notwithstanding the institution of an appeal to the judge, the applications under s.459G to have the statutory demands set aside were "finally determined" within the meaning of s.459F by the orders made by the Senior Master. The argument that the Master's decision ceased to be of relevance once notice of appeal was given was rejected.

41. It is altogether unnecessary to go any further into the arguments advanced by the appellants on these three appeals or to canvass the cases cited by Mr. Guss. All were dealt with below and, with respect, I agree with the very careful and comprehensive reasons given by both Warren, J. and Hansen, J. There is simply nothing in these appeals.[2] The only qualification I add is this: after disposing of the argument raised over of s.459F(2)(a)(ii) and in case she was wrong on the question of construction, Warren J. went on to deal with the merits of an argument that there were defects in the statutory demand and that there was a genuine dispute as to the debt relied upon. I say nothing about that further argument. It is unnecessary to consider the submission that the appeal to the judge should have been allowed on the ground just mentioned because, for the reasons already given, there is no point in considering the appeal.

44. There is, however, one further thing yet to be considered, that being the objection taken in limine to the continued prosecutions of these appeals. In her helpful outline of submissions, counsel for the respondent, the Deputy Commissioner of Taxation, took objection that, because all three appellants were being wound up in insolvency or by the court, s.471A of the Corporations Act precluded the appellants now from prosecuting these appeals in the absence, as was the fact, of the written approval of the liquidator or the approval of the Court.

47. In the case of the appeal by Buckland Products, Mr Guss pointed to the fact that the application to wind up had been made only after Warren, J. had given her decision and the company's appeal from that decision had been instituted. The judge gave her decision on 16 August 2001, the appeal was instituted on 30 August 2001, the application for winding up was filed on 6 September 2001, and the winding up order was made on 25 October 2001. In the circumstances he sought to distinguish those cases concerning s.471A, which dealt, for example, with a notice of appeal which, after winding up had been ordered, had been signed by a director purporting to act on behalf of the company. But in my opinion the distinction is without significance. Section 471A is clear in the conduct it proscribes. It says in sub-s.(1):

"While a company is being wound up in insolvency or by the Court, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company."

The continued prosecution of an appeal brought by the company is plainly within these words.

52. Mr Guss sought to rely upon the so-called residual powers of directors which were identified in Re Diamond Fuel Company[3] and recognised by Heerey, J in Object Design Inc v. Object Design Australia Pty Ltd[4]. That was a decision delivered on 25 August 1997. But in Rock Bottom Fashion Market Pty Ltd v. H R and C E Griffiths Pty Ltd[5], an appeal which was argued on 14 July 1997 and in which judgment was delivered by the Court of Appeal in Queensland on 4 November 1997, the Court was of a view contrary to that adopted by Heerey, J, holding that s.471A made the recognition of residual powers unnecessary. As their Honours saw it, s.471A made the relevant provision nowadays, with the result that, if a director was to exercise any power or function of a director when the company was being wound up in insolvency or by the Court, he needed the approval of the liquidator or of the Court as required by s.471A(2).

55. With respect, I agree with what their Honours said in Rockbottom. In Walker v. Midlink Nominees Pty Ltd[6], Owen, J had occasion to consider the decisions in both Object Design and in Rockbottom and felt himself compelled to reject the view of Heerey, J and to prefer the views expressed by the Queensland Court of Appeal. In my opinion, we too should follow that course, applying the reasoning of the Court of Appeal. In so doing, I simply note that we would be acting in line with the injunction of the High Court in Australian Securities Commission v. Marlborough Gold Mines Ltd[7].

58. In dealing with s.471A I have mentioned in particular the position of Buckland Products as Mr Guss took us to the relevant dates in that instance, but the position is not materially different in the case of the other two appellants. In those cases, the decision of Hansen, J was given on 23 August 2002 and the appeals were instituted on 5 September. Although applications for winding up had by then been

filed, they had not been determined and orders for winding up were only made afterwards, on 13 September 2002. The submission of Mr Guss was the same, that the appeals before us were made before it could be said that the appellants "are being wound up" within s.471(A)(1) and so the section did not apply. For the reasons already given, I reject that submission.

62. It follows that, by reason of s.471A, the appellants would need the "approval" of this Court, (as the statute puts it,) before the appeals can be prosecuted. Mr Guss therefore applied ore tenus for such leave in case such leave was needed, but I would refuse it. That is because, for the reasons already given, I think the appeals have no merit and would have to be dismissed in any event.

65. Accordingly, in my opinion the appeals should be dismissed as incompetent.

The order of the Court is therefore as follows. In each of the three appeals the same order is made: the appeal is dismissed.

We will adjourn the question of costs. We recall our orders and will defer making any orders until tomorrow when we will dismiss these appeals for the reasons given. In the meantime we will adjourn the three appeals so that the question of costs can then be argued. Mr Guss is now on notice that the Court is considering ordering costs against the solicitor personally and considering also an order for costs against the directors of the companies, being those who were giving him instructions to prosecute these appeals.

[1] [1995] HCA 43; (1995) 184 C.L.R. 265.

[2] Indeed that was the opinion expressed on 30 September 2002 by Ormiston and Batt, JJ.A. when rejecting the application by the appellants for a stay of the winding up orders pending the hearing and determination of these appeals.

[3] (1879) 13 Ch D 400.

[4] (1997) 78 F.C.R. 60.

[5] [2000] 1 Qd.R. 573.

[6] [2000] WASC 112; (2001) 22 W.A.R. 318.

[7] [1993] HCA 15; (1993) 177 C.L.R. 485 at 492.