Deputy Commissioner of Taxation v VA Corporation of Aust. Pty Ltd

Federal Court of Australia|2013-11-22|Before: Davies J

introduction 1 On 9 October 2013, a Registrar of the Court made an order winding up VA Corporation of Aust. Pty Ltd ("VA Corporation") in insolvency on the application of the Deputy Commissioner of Taxation ("the DCT"). The DCT relied on the failure of VA Corporation to comply with a statutory demand for payment of tax debts and the statutory presumption of insolvency under s 459C of the Corporations Act 2001 (Cth) ("the Act"). Mr Vasiliou, who was the sole director of VA Corporation at the time it was ordered to be wound up, has brought an application in the name of VA Corporation for review of the Registrar's order.

grounds FOR REVIEW 2 Before the Court are three affidavits of Mr Vasiliou. In his first affidavit, which was also before the Registrar when he made the winding up order, Mr Vasiliou deposed that there was no legal basis for the tax debt, the subject of the statutory demand, which he asserted was "illegitimate and fake". He provided no facts or details to support the claim that the tax liability was wrongly imposed. 3 In his second affidavit, which he filed in support of this application for review, Mr Vasiliou made a number of allegations of "false representations" purported to have been made to the Registrar in the wind up proceeding by the solicitors for the DCT and he deposed to having corresponded with the DCT's solicitors and the Court about those "false representations". 4 A third affidavit sworn by Mr Vasiliou on 21 November 2013 was directed at the solvency of VA Corporation.

Section 459S OF THE ACT 5 As the application to wind up the company in insolvency was based on a failure by the company to comply with a statutory demand, it was not open to Mr Vasiliou to put forward as a ground of opposition to the winding up of VA Corporation that there is a genuine dispute about the existence and amounts of the tax debts unless he has the leave of the Court to raise that ground. The leave of the Court is required by s 459S(1) of the Act, which provides that where an application to wind up a company in insolvency is based on a failure by the company to comply with a statutory demand, as it was here, the company may not without the leave of the Court rely on any ground in opposition to the application that the company could have relied on in an application to set aside the demand. The Court must not grant that leave unless it is satisfied that the ground is material to proving that the company is solvent: s 459S(2) of the Act.

Section 471A(1)(A) OF THE ACT 6 Mr Vasiliou faces another hurdle. It was also not open to Mr Vasiliou to bring this application on behalf of VA Corporation without either the consent of the liquidator, which has not been provided, or the approval of the Court: s 471A(1)(A) of the Act; HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd [2002] FCA 1638; Rodgers v CJS Panels Pty Ltd [2001] VSC 470; Binetter v Commissioner of Taxation (2011) 198 FCR 49. Factors relevant to whether approval should be given include whether the application would have some utility: in short, whether there is an arguable case that the winding up order should not have been made: Deputy Commissioner of Taxation v Soiland Pty Ltd (in liq) [2010] FCA 168. In order for Mr Vasiliou to satisfy the Court there is an arguable case that the winding up order should not have been made, he needed to show an arguable case that VA Corporation is solvent.

Evidence of solvency 7 Either way, in the review of the Registrar's winding up order, it is solvency, not the statutory demand, that is the core issue. In the present case the Court must presume that VA Corporation is insolvent because the application to wind up VA Corporation in insolvency was based on a failure by the company to comply with a statutory demand: s 459C of the Act. That statutory presumption is rebuttable but there must be some cogent evidence before the Court of solvency in order to rebut that presumption. 8 Mr Vasiliou did not put any financial material before the Registrar in opposition to the wind up application, although he was ordered to do so before the wind up application was heard, nor did he put any financial material in the affidavit that he filed in support of this application. When the present application initially came on for hearing, Mr Vasiliou, who is self-represented, advised the Court that he was unaware that he needed to put evidence of solvency before the Court. He informed the Court that he knew that the company is solvent but Mr Vasiliou was told that the mere assertion of solvency was not acceptable and he needed to put on evidence to substantiate that claim. Mr Vasiliou requested an adjournment to enable that to occur, which he was granted. Mr Vasiliou then filed an affidavit on 21 November 2013 in which he referred to his previous affidavits and asserted without any supporting material that the company has no unpaid debts and a surplus of 99 cents. He again asserted that the tax debt is not "real". He also relied on recent correspondence from the Australian Taxation Office ("ATO") that the "matter" was being reviewed by the Dispute Resolution area of the ATO. Mr Vasiliou took that to mean that the ATO was reviewing the correctness of his liability to the tax as assessed. However, that recent correspondence was shown in fact to have been made in response to an email from Mr Vasiliou in which he raised complaints about the conduct of the solicitors who had acted for the DCT in the winding up application before the Registrar.

CONCLUSION 9 There is no cogent evidence of solvency of the company before the Court. All that is before the Court is Mr Vasiliou's assertion that the company has no unpaid debts and a surplus of 99 cents and that assertion does not take into account the tax debts that Mr Vasiliou asserted are not owed by the company. 10 In evidence are the notices of assessment on which the DCT based his statutory demand, and the production by the DCT of the notices of assessment conclusively demonstrated that the amounts and particulars in the assessments are correct: s 177(1) of the Income Tax Assessment Act 1936 (Cth) and s 298-30(3) of Schedule 1 to the Taxation Administration Act 1953 (Cth). In consequence, the existence and amounts of the tax debts on which the statutory demand was based "are outside the area for a 'genuine dispute'" for the purposes of s 459H(1) of the Act: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473. Mr Vasiliou, in any event, did not put any financial material before the Court which would indicate the solvency of the company but for the tax debts, nor in respect of the tax debts did he put any material before the Court which would indicate that the company may have a reasonably arguable case for contesting the assessments: Re MIG Property Services Pty Ltd [2012] VSC 12; Adamopoulos v Olympic Airways SA (1990) 95 ALR 525; Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137. Absent such material, the claim of solvency was based purely on unsubstantiated assertion. 11 In the circumstances, I am not satisfied that the application for review would have any merit and approval is not granted under s 471A(1)(A). The application for review is therefore dismissed.

Orders 12 The formal orders of the court will be: 1. The interlocutory application filed by Mr Vasiliou in the name of VA Corporation of Aust. Pty Ltd on 23 October 2013 is dismissed. 2. Mr Vasiliou is to pay the costs of the respondent including reserved costs, such costs to be taxed in default of agreement. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies J.

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