Consideration
124 A statutory demand may be set aside by reason of a conduct which is unconscionable, an abuse of process, or which gives rise to substantial injustice (see Hoare Bros Pty Ltd v Deputy Commissioner of Taxation [1996] FCA 78; (1996) 62 FCR 302 at 317-318) or for some other reason than that provided for in s 459J(1)(a) (see Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473 at [24]). It may also be accepted that a statutory demand may be set aside if it was made for a purpose other than that contemplated by the Corporations Act, such as to place commercial pressure upon the subject of the demand (see Mibor and Gribbles Pathology (Vic) Pty Ltd v Shandford Investments Pty Ltd [2004] FCA 1466; (2004) 51 ACSR 578 (Gribbles)).
125 Although there is an early authority that the use of a statutory demand to recover a debt is an improper purpose (see CVC Investments Pty Ltd v P & T Aviation Pty Ltd (1989) 18 NSWLR 295), more recent authority indicates that such a purpose need not be improper (see Khoury v Rosemist Holdings Pty Ltd [1999] FCA 458; (1999) 17 ACLC 1013 and Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (No 2) (1996) 20 ACSR 170).
126 In Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229 (Meehan), Santow JA (with whom Tobias JA and Young CJ in Eq agreed) made the following pertinent observations at [35] in relation to s 459J(1)(b):
There being no defect in the demand, reliance was placed upon whether there be "some other reason" as would satisfy s 459J(1)(b). The claimants contend that such reason cannot be based simply on some need to bring to the relationship between the parties some broad form of perceived fairness or reasonableness. Rather there must be "sound or positive ground or good reason" to set aside the statutory demand for "some other reason", which was consistent with the legislative intent of Pt 5.4 of the Act: Portrait Express (Sales) Pty Limited v Kodak (Australasia) Pty Limited [(1996) 20 ACSR 746] at 757 per Bryson J; Kezarne Pty Limited v Sydney Asbestos Removal Services Pty Limited (1998) 29 ACSR 11 at 18 per Austin J. It is the claimants' contention that the reasons given by the trial judge do not satisfy the latter requirements but are indeed based upon some broad form of perceived fairness or reasonableness.
(Emphasis added).
127 In Meehan, Young CJ in Eq added the following observations at [60]-[61] (with which I also respectfully agree):
60 It is not possible to set out fully the cases that might fall within s 459J(1)(b) nor if it were possible would it be wise to do so. The sort of case that will be covered will include gross defects in supporting affidavits and documentation and where the alleged creditor has made statements or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor's position.
61 A judge is not at liberty to set aside a demand under s 459J(1)(b) merely because he or she subjectively considers it fair to do so.
128 In CP York Holdings Pty Ltd v The Food Improvers Pty Ltd [2009] NSWSC 409, Barrett J made the following observations at [11]-[14] with regard to the relevant legislative scheme, with which I respectfully agree:
11 Part 5.4 seeks to ensure that questions about statutory demands are determined separately from a hearing of a winding up application. The objective is to ensure that the result of a creditor's attempt to obtain the benefit of a presumption of insolvency through service of a statutory demand should be known - and definitively known - before the hearing of any winding up application.
12 The statutory provisions as a whole and s 459S in particular aim to confine issues about the effectiveness of the statutory demand to s 459G proceedings heard and determined in advance of the winding up hearing so that that hearing, when and if it subsequently occurs, will proceed on the basis that there is (or, as the case may be, is not) an established but admittedly rebuttable presumption that the company concerned is insolvent.
13 The Part 5.4 regime has elements of rigidity to it. It is in some ways unforgiving. Both Gummow J in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 and Spigelman CJ in Switz Pty Limited v Glowbind Pty Ltd (2000) 48 NSWLR 661 referred to aspects of the harsh operation of the statutory provisions. As their Honours noted, these are deliberate aspects of the statutory intention and purpose.
14 It is with the purpose of Part 5.4 in mind that one approaches s 459J(1)(b). The question posed by that provision is whether there is some good reason beyond and separate from those with which s 459H and s 459J(1)(a) are concerned for setting aside a statutory demand. Section 459J(1)(b) confers a remedial jurisdiction.
129 I accept the defendant's submission that the proper test to be applied in determining an application under s 459J(1)(b) is whether his actions in issuing the statutory demands subverted the statutory scheme provided for in s 459E in Pt 5.4 of the Corporations Act such that there is a positive ground for exercising the power to set aside the statutory demands that is consistent with the purposes of that scheme.
130 For the following reasons, I do not consider that the plaintiffs have established a proper basis for setting aside the statutory demands. It is convenient to address in turn each of the three bases upon which the plaintiffs relied.
131 Were the statutory demands issued in breach of the "global deal" or binding agreements made on 10 April 2014?: The plaintiffs have not established that the parties entered into any legally binding agreement or agreements other than the Gucce Deed and the MNWA Deed (and it is common ground that neither of those Deeds reflected the broader agreement(s) which the plaintiffs claim was reached orally at the 10 April 2014 meeting). The question whether or not the agreement(s) reached at the meeting on 10 April 2014 gave rise to binding contractual relations is to be determined by ascertaining the objective intention of the parties. In applying that objective test in respect of the parties' intention, regard may be had to surrounding circumstances, such as conversations and correspondence that took place before and after that meeting (see Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332-334 per Mahoney JA and at 337-338 per McHugh JA).
132 I accept the defendant's submission that no binding oral agreement was reached at that meeting and that the relevant evidence, viewed objectively, points to the parties intending to postpone the creation of contractual relations until formal Deeds were drawn up and executed. That finding is supported by the following matters.
133 First, it is highly improbable that Mr Burns would have committed the ATO to entering into a binding legal agreement on 10 April 2014 when the ATO was not then aware of the quantum of potential additional taxation liabilities of the relevant entities which were not included in the spreadsheet used by him at that meeting but might subsequently emerge as a result of the audits which were on foot at that time. In other words, Mr Burns was simply not in a position at that time to know whether or not the security which Mr Caratti offered in respect of the known taxation liabilities would be sufficient to cover then unknown potential future liabilities.
134 As noted above, the plaintiffs submitted that it is evident from the final wording of the definitions of "Taxation Debt" in both the Deeds that the ATO was prepared to accept the possibility of some adjustment in the spreadsheet figures which might result from the Pt IVC processes. However, it is one thing to say that the ATO was prepared to accept the security arrangements notwithstanding the possibility of that type of adjustment in relation to a known taxation liability amount which had been arrived at after assessment by the ATO. It is quite another to say that a much wider inference should therefore be drawn to the effect that the ATO was willing to accept an amount of security in respect of an entirely unknown future amount or amounts which were unrelated to any known existing taxation liability. That submission cannot be accepted.
135 Secondly, I accept and prefer the evidence of Mr Burns and Mr Barton to that of Mr Caratti as to what was discussed at the 10 April 2014 meeting. In particular, I accept Mr Burns' evidence, which was corroborated by that of Mr Barton, that he told Mr Caratti that, so that there was no confusion, "there are no agreements until each respective Deed is executed". Mr Robertson QC submitted in closing address that Mr Barton was asked specifically about those words and he claimed that Mr Barton could not recollect that they were used. That is incorrect. When asked in cross-examination whether Mr Burns used those words, Mr Barton responded: "I can recall words to that effect, yes". Thus Mr Barton corroborates Mr Burns' evidence, which is contrary to Mr Caratti's.
136 Thirdly, as noted above, notwithstanding Mr Caratti's sincere personal belief that he had negotiated a binding agreement which was broader in terms than those in the subsequently executed Deeds, it is telling that that belief is not supported either by the terms of his letter dated 11 April 2014 (written very soon after the meeting), nor the letter which was written on behalf of Gucce on 29 April 2014 in response to the then draft Gucce Deed. In circumstances where Mr Caratti was authorised by Ms Bazzo to negotiate on behalf of Gucce, one would have expected Gucce's solicitors to have included in the letter among the numerous concerns they had with the draft Gucce Deed that it should not encroach upon the broader oral agreement which Mr Caratti claims was made at the 10 April 2014 meeting. It is significant that the solicitors' letter makes several references to that meeting yet, no comment is made on the potential effect of the entire agreement clause in cl 13.1 of the draft Deed on the alleged broader agreement. Nor was any comment made by the solicitors concerning the implications of proposed cl 5.3 and the Commissioner's power to pursue in good faith all recovery options and powers regarding Gucce's tax-related liabilities which did not fall within the definition of "Taxation Debt" in the draft Deed. That power entitled the Commissioner to pursue taxation liabilities such as those which the plaintiffs contend were protected by the broader agreement. Yet no objection was taken by Gucce's solicitors. In my view that is because, objectively assessed, there was no broader agreement.
137 None of the other correspondence relied upon by the plaintiffs which post-dates the 10 April 2014 meeting provides a sufficient evidentiary basis for concluding that a binding oral agreement was arrived at at that meeting in the broad terms now alleged by them.
138 Fourthly, it is true that there are references to an "agreement" having been reached at the 10 April 2014 meeting in various materials emanating from the ATO. For example, there is such a reference in Mr Burns' Executive Brief, which also seems to have informed Ms Harako's use of the same term in an affidavit she swore in the proceedings in the Supreme Court of Western Australia in May 2014. Ms Harako also elected to describe the agreement reached on 10 April 2014 as the "Global Settlement Agreement". I do not consider that any particular significance attaches to this terminology. It may be accepted that broad heads of agreement were reached at that meeting on particular matters, as is reflected in Mr Barton's handwritten notes and, in particular, the insertion of the word "deal" alongside various issues which were discussed. That does not conclude, however, that legally binding agreements were reached at that time. For the reasons provided above, the evidence does not support any such characterisation of the negotiations which took place on that day. The evidence strongly suggests that the parties did not intend to enter into binding contractual relationships at that time and that this would only occur following the provision of additional relevant information, further negotiations (including the drafting of the respective Deeds) and those Deeds being executed. The "agreements" or "deeds" which were negotiated at the meeting were only "in principle" and did not give rise to binding contractual relations.
139 Fifthly, the fact that Mr Burns told Mr Barton after the meeting not to pursue further recovery action while the security deeds were being sorted out does not indicate that a binding agreement was reached at that meeting to that effect. The timing of any such recovery action was at the defendant's discretion. In any event, even if it did provide some such indication, the subject matter was limited to the amounts discussed at that meeting in relation to existing taxation liabilities (as later adjusted by mutual agreement prior to the Deeds being finalised) and not any other unknown and unrelated taxation liabilities of the relevant entities.
140 Furthermore, if contrary to the above, a binding oral agreement was reached at the 10 April 2014 meeting, I consider that it was confined to the then known amounts of taxation liability by the relevant entitles as disclosed on the spreadsheet which was used by Mr Burns throughout that meeting and which provided the basis for the parties' negotiations at that time. Mr Barton's detailed notes of the meeting provide strong corroborating evidence to support the evidence of both Mr Burns and himself that the discussions at that meeting were limited to the known taxation liabilities for each relevant entity as disclosed in the spreadsheet and as explained to Mr Caratti. I accept Mr Barton's evidence that the word "global" was not used at the meeting and, perhaps even more significantly, that Mr Burns never used words such as that "the deal covered all entities" or that the arrangements which were then agreed covered all issues which were then under audit, including any future taxation liabilities which might emerge as a result of those ongoing audits. Mr Burns' evidence is to similar effect.
141 Was the issuing of the statutory demands an unconscionable departure from the terms of the global deal that no further debt recovery action would be taken against the plaintiffs?: As found above, the issuing of the statutory demands was not in breach of either of the relevant Deeds of Agreement. Both Deeds contained an identically worded cl 5.3, which was in the following terms:
Unless an Event of Default occurs, the Commissioner will not take any further action to pursue or recover any part of the Taxation Debt. For the sake of clarity, however, the Commissioner may, acting in good-faith, employ any and all recovery options and powers to pursue any tax-related liabilities of the Taxpayer which are not the subject of the Taxation Debt which is the subject of this deed.
(Emphasis added)
142 As noted at [98] above, in the case of MNWA, "Taxation Debt" was defined in cl 1.1 to mean:
the tax-related liabilities arising from the income tax assessment for the 2010, 2011, 2012, 2013 income tax years and applicable GIC due and payable by the taxpayer as at 16 June 2014, being the amount of $30,736,752.69… .
143 As noted at [97] above, in the case of Gucce, "Taxation Debt" was defined in cl 1.1 to mean:
the tax-related liabilities and applicable GIC due and payable by the taxpayer as at 6 May 2014, being the amount of $10,795,673.13…
144 Accordingly, in the case of MNWA, the GST liabilities the subject of the relevant statutory demands do not fall within the definition of "Taxation Debt" in the MNWA Deed. And in the case of Gucce, the 2012 Income Tax liabilities and associated penalties which were due on 31 July 2014 which are the subject of the relevant statutory demand do not fall within the definition of "Taxation Debt" in the Gucce Deed.
145 Under the respective Deeds, the Commissioner's obligation not to take any further action to pursue or recover any part of the Taxation Debt is limited to the defined "Taxation Debt".
146 The statutory demand issued on 4 September 2014 to MNWA is limited to the GST Liabilities and subsequent GIC. Those matters fall outside the definition of "Taxation Debt". In the case of Gucce, the statutory demand issued on 4 September 2014 is limited to the 2012 Income Tax liabilities and associated penalties only which, again, fall outside the definition of "Taxation Debt" in the Gucce Deed.
147 Accordingly, the issuance of the statutory demands was not in breach of either Deed. Nor was there any "global deal" of the sort contended for by the plaintiffs, for reasons given above. In these circumstances, no unconscionable conduct has been established to warrant setting aside the statutory demands.
148 Was the issuing of the statutory demands an abuse of process because there was an improper purpose of coercing security to be pledged on behalf of other entities with disputed liabilities?: The relevant issue is whether the Commissioner's actions in issuing the statutory demands was consistent with the legislative intent underlying Pt 5.4 of the Corporations Act, and not for some ulterior purpose (see Gribbles at [20] and Meehan at [47]).
149 In Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602 (Createc), Martin CJ, presiding in the Court of Appeal of Western Australia, said at [2]:
The issue of the statutory demand, and the appeal from the decision of the master setting it aside, reflect a fundamental misconception as to the purpose of the statutory demand process created by Pt 5.4 of the Corporations Act. That purpose is to provide a means whereby the insolvency of a company may be established for the purposes of an application to wind up that company. Its purpose is not to provide a means whereby those claiming a genuinely disputed debt can avoid the obligation of establishing their entitlement to that debt in a court of appropriate jurisdiction by placing commercial pressure on the party resisting payment. There is a clear inference from the evidence that Createc's purpose in issuing the statutory demand was the improper purpose of using the statutory demand process to enforce payment of a debt which it knew to be genuinely disputed. That is an abuse of process.
150 Later at [48]-[50], his Honour said:
48 Following the introduction of Pt 5.4, doubts were expressed as to whether the statutory procedures provided an exclusive code for the resolution of proceedings brought as a result of the issue of a statutory demand. However, in David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; 131 ALR 353; 18 ACSR 225; [1995] HCA 43 (David Grant), Gummow J, with whom the other members of the High Court agreed, expressed the following view (at CLR 279; ALR 362; ACSR 234):
It also may transpire that a winding-up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz . However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction. [Footnotes omitted.]
49 Since that decision, it has generally been accepted that the court retains a residual jurisdiction to restrain reliance on the statutory demand procedure on the ground of an abuse of process: see House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 21 ACSR 527 at 528; SMEC at [35]; Roberts at [54]-[58]; and State Bank of New South Wales v Tela Pty Ltd (No 2) (2002) 188 ALR 702; [2002] NSWSC 20 at [5]. In Roberts, the jurisdiction was exercised on the grounds of impropriety of purpose, and a winding-up application was dismissed with costs. Similarly, in Old Kiama Wharf Co Pty Ltd v DCT (2005) 55 ACSR 223; [2005] NSWSC 929, an application to set aside a statutory demand was upheld because the court concluded that the process was being used to 'attempt to apply pressure to a taxpayer to force payment of a debt': at [42].
50 Adopting the criterion from Williams v Spautz (1992) 174 CLR 509; 107 ALR 635; [1992] HCA 34 (Williams), suggested by Gummow J in David Grant , there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers - such as the application of pressure to compel payment of the disputed debt.
151 These passages were approved and applied by Edmonds J in Lifese. His Honour found that there was a genuine dispute as to the debt. This finding then partly informed his Honour's conclusion that the statutory demand there was also an abuse of process. His Honour stated at [17]:
On the hearing of the Company's application to set aside the statutory demand, there was no evidence before the Court that the Company was insolvent. Moreover, Lee Crane Hire put nothing in the way of submission before the Court, either orally or in writing, to the effect that the Company was insolvent. In those circumstances, the only inference open is that the issue of the statutory demand was for a collateral purpose, namely, to put pressure on the Company to pay the debt the subject of the statutory demand. Counsel for Lee Crane Hire steadfastly refrained from addressing that proposition, even though I expressly put it to him.
152 It may be accepted that, in an appropriate case, the issuance of a statutory demand for the purpose of compelling a solvent company to pay a disputed debt could amount to an improper purpose. Lifese is a recent example of such a case. Significantly, however, there was also a finding in that case that there was a genuine dispute concerning the underlying debt. Neither plaintiff contended here that there was a genuine dispute regarding the underlying taxation debts. Accordingly, it is not necessary to consider and determine whether either plaintiff is solvent or insolvent or, indeed, which party would carry the onus in respect of that question. In any event, it is relevant to recall Lindgren J's decision in Chippendale Printing Co Pty Limited v Commissioner of Taxation [1995] FCA 20; (1995) 55 FCR 562 at 575-578, which is to the effect that solvency, without more, does not constitute an "other reason" within s 459J(1)(b) for the setting aside of a statutory demand. I respectfully agree with that view.
153 It is important not to lose sight of the fact that, in the case of Gucce, the statutory demand is in respect of debts totalling $3,796,160.01 which reflects the company's income tax liability and GIC for the taxation year ended 30 June 2012 as asserted in the notice of assessment issued on 7 July 2014, which became due for payment on 31 July 2014. Gucce did not adduce any evidence that it had lodged an objection to this assessment. Moreover, in his affidavit accompanying the statutory demand, Mr Barton explicitly deposed that he believed that there was no genuine dispute about the existence or amount of any of these debts. This aspect of his evidence was not challenged by the plaintiffs.
154 Similar comments apply to MNWA. The statutory demand issued to that company on 4 September 2014 is in respect of taxation debts totalling $5,462,889, which relate to GST liabilities for the tax periods from 1 October 2009 to 31 December 2010 as per the taxation assessment issued on 30 May 2014. MNWA did not adduce any evidence to indicate that it had lodged an objection to that taxation assessment. Furthermore, Mr Barton swore an affidavit in support of the statutory demand and deposed that he believed that there was no genuine dispute about the existence or amount of any of these debts. He was not cross-examined on that evidence.
155 I accept the Deputy Commissioner's submission that no probative evidence has been adduced to sustain an allegation that either statutory demand was issued for any purpose other than to set in train winding-up processes in respect of both plaintiff companies on the basis of their individual unpaid taxation debts for the relevant periods. Nor is there probative evidence to support the plaintiffs' contention that the statutory demands were issued with the improper purpose of coercing other entities to pledge security in respect of their disputed liabilities.
156 I do not accept the plaintiffs' submission that Mr Burns made an admission that he threatened to issue statutory demands to the plaintiffs if security was not provided in respect of Mr Caratti's daughters' tax liability as beneficiaries of the Whitby Trust. The relevant parts of the transcript are as follows:
MR ROBERTSON: The issue in relation to the daughters of Mr Caratti, you sought security for their debts, didn't you?---Yes. I - I - I guess you could actually say I offered ..... security arrangement with it, yes.
And that offer was for $8 million security?---That was actually in respect of Whitby. We're talking in terms of Whitby itself, with the implication being that if we could secure the Whitby debt - this is the stuff that arose after we had the security for the GST, so the income tax liability as it came on. I had said to him, "If we can secure the Whitby debt, if you give me enough collateral for that, then I would not be seeking to get additional collateral to secure the daughters' debts", because, as I said to him, I thought that would be unfair.
And you didn't - he didn't accept your offer of $8 million of security for the daughters, and so you took the Supreme Court summary judgment application against the daughters?---Well, once again, it wasn't $8 million of security for the daughters; it was actually for those combined assessments. But yes, he in fact offered an unacceptable counter-proposal, which was that he provide security. In fact, what he was after was at various times 3 or 5 million dollars for this $23 million, which was too little, in my opinion. He also said that the collateral could only be used to satisfy the daughters' assessments if they were the ones that stood - that ultimately were the last assessments standing out of this contest in alternative assessments. But in the event that Whitby's assessment were the one that was found to be correct, I wouldn't be able to use that security, and I found that completely unacceptable, because he also insisted that we would be having to give up our recovery rights in respect of any of those debts to enter into that arrangement.
And so when you threatened to exercise your recovery powers to issue a statutory demand, you say that was only against Whitby and not against Gucce and Mammoth?---No, I don't say that, because I did say that, if he stopped dealing with us, if he decided he's not providing any more security, and - we went from having a fairly cordial - I mean, we're still friendly towards each other, but things went - you know, reached - we were at loggerheads at that point, and I had said to him "If you're not going to be entering into the security arrangements any more, satisfactory security arrangements, then I'm left with debts that I have to collect, and inevitably, if you've got companies that have got debts that they don't have the wherewithal to pay, then I will be issuing statutory demands", and I am sure I mentioned more than just Whitby in that, and I'm sure the unsecured portion of the debts for Gucce and Mammoth would have been - were part of that.
So in your dispute with him about Whitby trust and the beneficiaries of the Whitby trust, the daughters, you made a general statement that if any of his companies didn't comply with their security demands, they would get statutory demands?---No.
Security arrangements they would get statutory demands?---No, no, no. It wasn't about whether they complied with their security arrangements. At that point they all were complying with their security arrangements. It was with respect to any portion of the debts - the liabilities that had been raised against them that were not the subject of a security arrangement, then I would be - and it was "Regrettably this is what I'm going to have to do". And I gave him quite a bit of warning about that, that this - you know, "Unless you're going to actually continue to co-operate, as we have done before, then that's, you know, what we're faced with, and that's what's going to happen again".
Yes. So in relation to this dispute over the Whitby trust and the kids, you said that you might have to issue statutory demands to Gucce and Mammoth in respect of that portion of their debts that were not covered by their security deeds?---Eventually I said that. I said I was going to issue statutory demands, and he responded - I don't know whether this is where you're going, but he responded and said "Well, you can't, because they're subject to a security deed". And I said "Well, the security deed only covers the tax liabilities that are specified in the security deed", and it's, you know, clause 5.3, I think, said we're quite entitled - just - I think it even says "for the sake of clarity Commissioner is entitled to recover against any other liabilities that arose". I put that to him. I was still urging him to continue to co-operate with me.
So that observation about your construction of the security deeds for Gucce and for Mammoth was made in the context of your dispute with the Whitby - in relation to the Whitby trust and the children, the daughters as the beneficiary trust?---No. I think it was broader than that. It was that he had actually just stopped co-operating, stopped dealing with us. There was a period there he wasn't returning - unusually he wasn't returning my telephone calls any more. And he had not done anything that was progress, constituted progress towards resolving these things in a fashion that would negate the need for the recovery action.
(Emphasis added).
157 Mr Robertson QC placed particular emphasis on the passage in which Mr Burns said: "Eventually I said that….". However, that statement cannot be read in isolation. When viewed in the context of all the evidence set out above I do not accept that Mr Burns threatened to issue statutory demands to the plaintiffs unless adequate security was provided in respect of Mr Caratti's daughters' interest in the Whitby Trust. Mr Burns' statement, which is relied upon by Mr Robertson QC, was primarily directed to the topic of the possible use of statutory demands against the plaintiffs in respect of taxation debts that were not covered by the Deeds. Mr Burns made clear that his discussions with Mr Caratti on this topic were broader than the Whitby Trust, and related to the period when he was concerned that the plaintiffs had ceased to cooperate with the ATO in finalising suitable arrangements. This evidence does not indicate any propensity on the part of Mr Burns to use the statutory demand powers for an unauthorised purpose. Nor does the email exchange dated 8 August 2014, upon which the plaintiffs also relied in making this serious allegation.
158 Finally, it is appropriate to say something further about the plaintiffs' submission that the onus is the same for a plaintiff who seeks to set aside a statutory demand under s 459H(1)(a), i.e. genuine dispute about the existence of a debt, as applies if a plaintiff relies on "other reason" under s 459J(1)(b). It is not strictly necessary to determine this matter because, for the reasons given above, I am not satisfied that the plaintiffs have even established a plausible basis for s 459J(1)(b) to apply. In any event, however, I would reject the submission. NT Resorts dealt with an application to set aside a statutory demand where the plaintiff alleged that the debt was not presently due and payable. Justice Finkelstein considered and rejected that this amounted to a "defect" as defined in s 9 of the Corporations Law. His Honour found that such an application could, however, fall within either s 459H(1)(a) or s 459J(1)(b). At 366-367, Finkelstein J made the following obiter observations:
On what ground then should the applicant base its application? There are only two possibilities. The first is s 459H(1)(a) that permits an application to be made when there "is a genuine dispute ... about the existence ... of a debt to which the demand relates". Here there is no dispute about the existence of the debts due to the Crown. What is said is that those debts were not due and payable. Does such an allegation fit within the language of the ground? It would if the "debt" that is referred to in s 459H(1)(a) is only a debt of the class that can be included in a statutory demand; that is a debt that is due and payable. In that event the application could be made under s 459H(1)(a). But it is by no means clear that this construction is available. The second possibility is that the application should be based on s 459J(1)(b). There is no doubt that this ground is available if s 459H(1)(a) is not.
In reality it is not necessary to reach a concluded view on the matter (although I should say that I incline in favour of the view that s 459J(1)(b)) is the only available ground) for the reason that the standard of proof would in either case be the same. That is to say if the application must be made under s 459J(1)(b) the court would not exercise its discretion to set aside the demand unless it was satisfied that there was a genuine dispute about whether the debt to which the demand relates was due and payable.
159 It is important to understand that those obiter observations (which were approved by Sulan J in Total Beverage at [30]), were directed to a situation where a claim that a debt was not due and payable arose for consideration under s 459J(1)(b). As his Honour effectively observed, it makes good sense that the same onus should apply in that circumstance as would be the case if the issue arose in the context of whether there was "a genuine dispute" in relation to the debt.
160 I do not consider that these obiter observations as to onus apply where the claim of "other reason" concerns not whether a debt is due and payable, but rather whether the power to issue a statutory demand has been abused or used for some collateral purpose. In my opinion, in such a case the onus is higher than merely establishing an arguable case. Indeed, the onus in such a case is to establish on the balance of probabilities the alleged abuse or collateral purpose and is akin to the onus which arises under s 459J(1)(a) where it is alleged that there is a defect in the statutory demand. As Finkelstein J held in NT Resorts at 364, it is necessary in such a case to establish the existence of the defect before the demand will be set aside and an arguable defect will not suffice.