By Originating Process filed nearly a year ago, on 20 March 2018, the Plaintiff, The Oak Hotel Cessnock Pty Limited ("TOHC") applied under s 459G of the Corporations Act 2001 (Cth) to set aside a creditor's statutory demand dated 22 February 2018 ("Demand") issued by the Deputy Commissioner of Taxation. It ought to be of some regret that these proceedings were to reach a hearing today, nearly a year after they were commenced, in the context of an application to set aside a creditor's statutory demand that should ordinarily be determined promptly. The reason that has come about emerges from the history of directions made by the Court, over an extended period.
The application to set aside the Demand was supported by an affidavit of Mr John Harvey dated 20 March 2018, filed at the time the application was brought, who is the general manager of TOHC. The Deputy Commissioner of Taxation in turn filed evidence in support, being an affidavit of Ms Machielsen dated 10 May 2018. From that point onwards, the Court made several orders for the filing of reply evidence by TOHC, and also, on several occasions, adjourned the proceedings at the parties' request. The Court, for example, adjourned the proceedings on the parties' request on 25 June 2018, 16 July 2018, 13 August 2018 and again on 10 September 2018.
On 13 August 2018, the Court directed the solicitor for the Defendant to notify the Plaintiff that, by reason of the protracted adjournments, any further adjournment would have to be supported by evidence.
On 24 September 2018, the Court directed that TOHC file and serve its evidence in reply by 8 October 2018. It did not do so and, on 15 October 2018, the Court noted that the parties were engaged in without prejudice discussions, and again adjourned the proceedings to 26 November 2018. On 26 November 2018, the Court once again extended the time for TOHC to serve its evidence in reply to 10 December 2018, with no evidence in reply to be relied upon if it was filed after that date, without leave. No such evidence was filed.
The matter was, on 26 November 2018, listed for hearing today. Mr Raffell of Counsel, who appears for TOHC, has frankly conceded that, on his assessment of the evidence as it stands, TOHC cannot succeed in setting aside the Demand, because the grouping provisions on which it seeks to rely would not answer the amounts claimed by the Deputy Commissioner of Taxation in respect of taxation liabilities other than income tax.
[3]
TOHC's wish to identify additional grounds to set aside the Demand
Mr Raffell had also frankly indicated that an adjournment of the proceedings is sought in the hope that further grounds may be identified and further evidence may be led which would support a successful application to set aside the Demand.
There are two immediate difficulties with that proposition, to which Mr Metlej who appears for the Deputy Commissioner of Taxation has pointed. The first is that, on the position as it stands, TOHC cannot file further evidence, either in chief or in reply, because the existing orders prevent the filing of such evidence without leave. The prospects of obtaining such leave are limited, given the history set out above. Second, and possibly more fundamentally, the effect of s 459G of the Corporations Act is that a party is restricted to relying, in an application to set aside a creditor's statutory demand, on the grounds raised within the 21 day period in which the application to set aside the demand was brought. TOHC relied, in that period, on Mr Harvey's affidavit dated 20 March 2018, which raised only the issue of a suggested consolidation of Hunter Valley Dental Surgery Pty Limited and TOHC, and identified the grounds for setting aside the Demand as follows:
"Based on the advice I have received, it is my understanding that if the consolidation application has been accepted by the ATO, the liability of TOHC to the ATO as set out in the Statutory Demand will be either off-set or otherwise extinguished."
That, of course, is the proposition Mr Raffell now recognises cannot succeed, so far as it treats an application for consolidation as raising a dispute as to claims for taxation other than income tax.
As Mr Metlej points out, the additional grounds to set aside the Demand on which the Plaintiff now hopes to identify, and has not yet identified, would be outside those raised in its application to set aside the Demand within the 21 day period, and are not grounds on which it can rely under the applicable statutory regime.
[4]
Mr Harvey's and Ms Morphett's health issues
A second basis for the adjournment related to the health position of Mr Harvey, who as I have noted is the general manager of TOHC, and Ms Morphett, who is the director of TOHC. I will refer below to the evidence in respect of the health difficulties of Mr Harvey and Ms Morphett, which I accept are real. Before doing so, it should be noted that, where Mr Raffell has conceded the case as presently formulated by TOHC will fail, and if there is no basis for reformulating it as some different case by reason of s 459G of the Corporations Act, then whether Mr Harvey or Ms Morphett are able to be present today is not the point. Their presence or absence will have no impact, where Mr Raffell concedes that TOHC's case as formulated will fail.
In support of an adjournment, TOHC relies on the affidavit of its solicitor, Mr Webb, dated 12 March 2019, which refers to instructions by Ms Morphett and Mr Harvey that they are not presently medically fit to assist the Court in conducting the proceedings. He refers, first, to Ms Morphett's medical condition, and to the fact that she is expected to have surgery in a little more than a week's time, and will require four to six weeks to recover from that surgery. I accept that Ms Morphett's health difficulties are real. I note, however, that they have existed for a considerable time, and there was reference to them in paragraph 20 of Mr Harvey's affidavit dated 20 March 2018, in support of the original application to set aside the Demand, which noted that Ms Morphett had then been taken to hospital for treatment of the condition which she continues to suffer.
Where Ms Morphett's condition has existed for over a year, it seems to me that the Court can have little confidence that a further adjournment of the proceedings would avoid her continuing health difficulties. I also note that, in any event, Ms Morphett has not sought to give evidence in the proceedings in the last year; there is no suggestion that she would now give evidence in the proceedings; and any evidence that she could give would presumably be directed to the new issues that have yet to be identified, which have the difficulties that I have noted above so far as they were not raised in the original application to set aside the Demand.
Mr Webb also refers to evidence that Mr Harvey is suffering psychological distress, which I also accept is real, as a result of what he perceives as ongoing difficulties with the Deputy Commissioner of Taxation, being those matters which the Deputy Commissioner of Taxation may perceive as its attempts to recover taxation debts owed to it. I do not doubt that Mr Harvey is in fact suffering distress as a result of those matters, as many litigants would in similar circumstances. I also recognise that there is evidence of a consultant psychiatrist as to the extent of Mr Harvey's distress as to these matters, albeit that the weight to be given to that evidence is somewhat qualified by the fact that he was first instructed that Mr Harvey was not fit to attend the hearing; give evidence; be cross-examined; provide instructions to lawyers; and that an application would be made to have the hearing adjourned for four to six weeks. His report supports that outcome and, in doing so, he also appears to have misunderstood the nature of the application, on the basis of an instruction that Mr Harvey was facing liquidation of TOHC today. That is not the case, where these proceedings involve an application to set aside the Demand, and the effect of leaving the Demand on foot will be, if and only if it is not satisfied within the prescribed period, that a presumption of insolvency will arise which would support a future winding up application.
[5]
Other correspondence
Mr Webb's affidavit also annexes a letter from a senator who expresses concerns as to the Deputy Commissioner of Taxation's dealings with Mr Harvey and Ms Morphett, and, fairly, also annexes the Deputy Commissioner of Taxation's comprehensive response to that letter. It does not seem to me that that correspondence should be given significant weight in the application for an adjournment. The hearing today would determine the merit of the application to set aside the Demand, and that is a matter which the Court would determine for itself, unassisted by the views expressed in that correspondence.
[6]
Determination
I bear in mind, in dealing with the application for an adjournment, several matters. The first is that, as I have noted, the adjournment is partly sought in order to seek to identify other grounds to set aside the Demand, which it appears would not be available given the statutory regime. Second, so far as illness on the part of Mr Harvey is identified, involving his anxiety as to the nature of the proceedings, there is at least a risk that the adjournment of the proceedings will continue the circumstances of that anxiety, rather than abate it. I also recognise that there is no suggestion that Mr Harvey is required for cross-examination, or that his presence today would assist in the resolution of the matters, particularly where Mr Raffell had already conceded that TOHC's present case cannot succeed. So far as Ms Morphett is concerned, she has not led evidence in the proceedings to date, and her presence today also could not assist in the resolution of the matter, given the difficulties with TOHC's case which Mr Raffell has conceded.
I must also be conscious of several issues to which I have drawn attention in my judgment in Re Elsmore Resources Ltd [2016] NSWSC 884. In dealing with an adjournment application, the Court may have regard to the matters identified in ss 56-58 of the Civil Procedure Act 2005 (NSW), the effect of which I summarised in Re Elsmore Resources above at [11]-[13], and particularly the need to promote the just, quick and cheap resolution of the real issues in dispute in the proceedings. I must also bear in mind the matters to which Allsop ACJ referred in Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230, namely that the effect of case management may, on occasion, be the cause of disadvantage to individual parties, in order to promote the community's interest in the delivery of justice. Here, a day has been set aside for this hearing, which has been allocated for nearly three months, after the proceedings had been on foot for nearly a year. If the hearing is adjourned, other parties who could have had their proceedings heard today will not have the opportunity to do so, and another day will need to be set aside at some future date, to deal with any matters that are then sought to be raised, notwithstanding the statutory limitations in s 459G of the Act, as a basis to set aside the Demand. It does not seem to me that that course would promote the interests of other litigants who have been shut out of a hearing today, or of the community which ultimately funds the justice system.
In these circumstances, it does not seem to me that there would be any utility in an adjournment of the hearing date. In particular, there is no utility in such an adjournment, in order to allow TOHC to seek to identify other grounds to set aside the Demand, where the only basis on which it could seek to set aside the Demand is that it originally raised, namely the question of consolidation, which it now accepts cannot succeed. There is no utility in an adjournment to allow Mr Harvey to be present, where he is not required for cross-examination and his presence today could not affect the fate of the proceedings, as presently framed by TOHC, which Mr Raffell accepts will fail. There is no benefit in an adjournment to allow Ms Morphett to be present, where she has not led evidence in the proceedings, and there is no basis to assume that her health condition will improve in the meantime, or that her presence would increase the Plaintiff's prospects of success, given the matters to which Mr Raffell has referred.
For these reasons, the adjournment application is dismissed.
[7]
Further orders
After I indicated that result, Mr Raffell again frankly conceded that, on the evidence as it stands, that there are no arguments that he can properly put which would support an application to set aside the Demand. I make the following orders:
Proceedings be dismissed.
The Plaintiff pay the Defendant's costs of the proceedings, as agreed or as assessed.
[8]
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Decision last updated: 03 April 2019