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[2010] NSWSC 1310
plaintiff. The statutory demand issued on 22 June 2010 was set aside, and the defendant was ordered to pay the costs of the proceedings.
The defendant demanded repayment of a fixed GST amount that it said it had mistakenly paid to the plaintiff after selling the plaintiff's property as mortgagee. The court accepted that a fixed mistaken payment can be a debt, and it did not set aside the demand because of the missing source-of-knowledge statement once later evidence supplied that information. But the affidavit's jurat did not show whether the deponent had sworn or affirmed it, and the court had no evidence showing whether the defendant's GST reporting period was monthly or quarterly. That meant it could not determine whether the GST was due on 22 June 2010. The court set aside the demand and ordered the defendant to pay costs.
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Spinocchia Compressor & Air Tools Sales & Service Pty Limited owned land at Taren Point that was mortgaged to Challenger Managed Investments Limited. On 2 March 2010, Challenger exercised its mortgagee power of sale and sold the land at auction for $1,175,000 exclusive of GST. The settlement funds included GST of $117,974.03 collected from the purchaser. Challenger paid the plaintiff the balance of $322,162.12 on 21 April 2010. Neither party had remitted the GST to the Australian Taxation Office. [3]–[7]
Challenger later asserted that it had mistakenly paid the plaintiff money that should instead have been paid to the ATO. It issued a statutory demand dated 22 June 2010 for $117,974.03, describing the sum as an amount paid by mistake. [1], [6] Spinocchia applied to set the demand aside. It challenged the supporting affidavit and argued that the asserted restitution claim was not a debt for statutory-demand purposes. [2]
Macready AsJ set aside the demand and ordered Challenger to pay the costs. [49] There were two independent grounds: the court was not satisfied that the supporting document was an affidavit, and the evidence did not establish whether GST was due by the date of the demand. The court also concluded that the fixed amount claimed could, in principle, be a debt. [16], [36], [47]–[49]
The first issue concerned the supporting affidavit. The opening stated that Joseph Mercieca would “say on oath”. But the jurat, which records the administration of an oath or affirmation, left both “SWORN” and “AFFIRMED” as alternatives. [10]–[11] The plaintiff argued that this made it impossible to know whether an affidavit had actually been made, as required to verify the statutory demand. [12]
The court drew on the explanation in Fastlink Calling Pty Ltd v Macquarie Telecom Pty Limited about the legal character of an affidavit and the difference between an oath and an affirmation. [13]–[15] It noted that no further evidence had been tendered to show what occurred when the document was signed. The words in the opening did not resolve the ambiguity created by the jurat. On the evidence before it, the court was not satisfied the document was an affidavit and held that this was a ground to set aside the demand. [16]
The second affidavit issue concerned the deponent's knowledge. Rule 5.2 of the Supreme Court (Corporations) Rules 1999 (NSW) required the supporting affidavit to comply with Form 7. Form 7 called for the source of the deponent's knowledge about the debt. [17]–[18] Mercieca's original affidavit described his employment and role, but did not state that source in the manner contemplated by Form 7. [19]
The court discussed why this requirement matters: the person verifying a demand should have relevant knowledge, because the affidavit's verification requirements are intended to help filter out unwarranted demands. [20], [23] Challenger later produced an affidavit stating that Mercieca had dealings with the company through the creditor's solicitors and had inspected the creditor's business records. The judge admitted that evidence provisionally and concluded that the deponent had the requisite knowledge. [21]–[25] Accordingly, the missing source statement did not provide a further basis to set the demand aside. [25]
The court then considered whether the alleged mistaken payment was a debt. It referred to the High Court decision David Securities Limited v The Commonwealth Bank of Australia for the proposition that recovery for money paid under mistake extends to mistakes of fact and law. [28] It reviewed authorities distinguishing a debt, meaning a presently payable liquidated sum, from an unliquidated claim such as damages that still requires assessment. [30]–[35]
On the facts, the demand sought a precise amount, $117,974.03. The amount did not need valuation or assessment to be quantified. The judge therefore considered it a claim for a liquidated sum and, subject to the GST timing question, a debt. [36] This was not enough to sustain the demand, because a demand also needed to be for a liability due when it was issued.
The GST issue turned on when Challenger's net amount became payable. The court considered the relevant provisions of the A New Tax System (Goods and Services Tax) Act 1999 (Cth), including the rules for taxable supplies by creditors, taxable supplies generally, and payment of net amounts. [39]–[45] The judge reasoned that if Challenger had quarterly tax periods, the GST would be payable on or before 28 July 2010. If it had monthly tax periods, it would be payable by 21 May 2010. [46]
The demand was dated 22 June 2010. That date was after the stated monthly payment date but before the quarterly payment date. The evidence did not establish which tax period applied to Challenger. The judge therefore could not determine whether a GST liability existed at the time the demand was issued. [47] The demand was set aside on that basis as well. [48]–[49]
The judgment did not announce a statutory amendment or replace an existing legal test. It applied existing requirements to the evidence before the court. In particular, it treated the requirement for an affidavit accompanying a statutory demand as substantive enough that an unresolved ambiguity about whether the deponent swore or affirmed the document could be decisive. [12]–[16]
On the knowledge issue, the court applied Rule 5.2 and Form 7's requirement to state the source of the deponent's knowledge. It also considered the purpose of that requirement: the affidavit process should involve someone sufficiently connected with the debt and any genuine dispute. The court did not treat the omission as automatically fatal in the circumstances, because later evidence established the deponent's relevant dealings and inspection of records. [17]–[25]
For the characterisation of the claim, the judgment's analysis distinguishes a fixed sum from a claim requiring assessment. A fixed amount paid under an alleged mistake may be a debt if the amount is already ascertainable and no further process is required to quantify it. [28]–[36] The court did not decide that every restitution claim supports a statutory demand. Its conclusion was expressly tied to the fixed sum claimed in this case.
On GST timing, the decision illustrates that identifying a tax liability is not necessarily enough to establish that payment was due on a particular date. The applicable tax period mattered: the monthly and quarterly dates fell on opposite sides of the demand date. Without evidence of which period applied, the court could not resolve whether the liability had accrued. [43]–[47] The judgment does not state a broader rule about all GST demands; its reasoning turns on the statutory provisions it considered and the evidentiary gap in this matter.
At paragraph 16, the judge said: “I am not satisfied on the evidence before me that the document is an affidavit”. In plain English, the court could not tell whether the witness had formally sworn or affirmed the supporting document. Because the demand required verification by affidavit, that uncertainty mattered. [12]–[16]
At paragraph 25, the court said the deponent appeared to have the “requisite knowledge” once the later affidavit was considered. Put simply, although the original document did not explain the source of Mercieca's knowledge as Form 7 contemplated, the later evidence showed that he had relevant dealings and had inspected the creditor's records. The court therefore did not set aside the demand for that defect. [21]–[25]
At paragraph 36, the judge said the claim “truly is a claim for a liquidated sum”. The amount demanded was fixed, and the court did not need to determine its value by assessment. That meant the amount could be a debt in character, subject to the separate question of whether the obligation was due when demanded. [36]
At paragraph 47, the judge said: “There is no evidence on this subject and I am therefore unable to determine whether there was a liability for GST as at the date of the demand.” In practical terms, the court lacked evidence about whether Challenger reported GST monthly or quarterly. Because those alternatives produced different due dates, it could not establish that the GST was payable by 22 June 2010. [46]–[47]
The orders at paragraph 49 were to set aside the demand dated 22 June 2010 and require Challenger to pay the costs. The judgment does not quantify those costs. [49]
The affidavit reasoning is relevant where a statutory demand depends on an accompanying affidavit and the document's opening and jurat do not make clear whether an oath or affirmation was administered. This case is particularly relevant where there is no separate evidence about what happened at the time of signing. The judgment does not hold that every imperfect jurat invalidates an affidavit; it explains that the court was not satisfied on the particular evidence before it. [10]–[16]
The source-of-knowledge discussion may be relevant where the supporting affidavit fails to state how the deponent knows the facts about the debt. Spinocchia also shows the significance of evidence that the deponent had relevant dealings and had inspected the creditor's records. The court accepted that evidence in deciding not to set aside the demand on that ground. [17]–[25]
The liquidated-sum analysis may be relevant where a creditor demands repayment of a fixed payment said to have been made under mistake. It is less directly applicable where the claimed amount still requires valuation, assessment, or another process to turn an asserted claim into a definite sum. The court contrasted fixed amounts with unliquidated claims requiring assessment. [30]–[36]
The GST analysis is relevant where a demand depends on a statutory payment being due by the demand date and the payment deadline varies according to the creditor's reporting period. In this case, the evidence had to establish whether the applicable period was monthly or quarterly because the due dates differed. [43]–[47] The judgment does not decide what the outcome would have been if evidence had established the relevant period.
The judgment provided here contains no discussion of later cases applying, distinguishing, or questioning Spinoccia v Challenger. It therefore does not establish how later courts have treated this decision. No later authorities or subsequent treatment can be reliably described from the text supplied.
The judgment itself refers to earlier authorities while explaining the issues before it. It explains the affidavit principles drawn from Fastlink Calling Pty Ltd v Macquarie Telecom Pty Limited; considers the purpose of the knowledge requirement by reference to B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd; distinguishes Goldspar Australia Pty Limited v KWA Design Group Pty Limited as dealing with an earlier rules provision; and discusses authorities concerning what constitutes a debt or liquidated sum. [13]–[15], [20], [24], [28]–[36] These are authorities considered by Macready AsJ, not later treatment of Spinocchia.
The judgment leaves unanswered whether the affidavit would have been accepted if evidence had established that Mercieca in fact swore or affirmed it. The court says that evidence about the circumstances of creation and signing can be received, referring to Fastlink, but no such evidence was tendered here. [15]–[16]
The decision also does not resolve what evidence, in another case, would be sufficient to establish a deponent's knowledge or whether the same later-evidence approach would apply to every Form 7 omission. Its conclusion was that the deponent's knowledge was established on the evidence in this case. [21]–[25]
On restitution, the judge accepted that the fixed amount could be a liquidated debt, but did not determine whether Challenger was ultimately entitled to recover it. The statutory demand failed on other grounds, and the discussion was expressly undertaken despite the earlier affidavit finding. [26], [36], [49]
On GST, the judgment did not establish whether Challenger had a monthly or quarterly tax period, whether a liability was in fact payable by 22 June 2010, or what the result would have been if the relevant tax period had been proved. It concluded only that the evidence did not allow the court to determine whether liability had accrued by the demand date. [46]–[48]
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CITATION : Spinoccia v Challenger [2010] NSWSC 1310 This decision has been amended. Please see the end of the judgment for a list of the amendments.
DECISION : I set aside the demand issued by the defendant dated 22 June 2010 and order the defendant to pay the costs of the proceedings
CATCHWORDS : Corporations. Application to set aside demand under s 459G of the Corporations Act. Consideration of whether a claim for money paid under a mistake of fact is a debt. Consideration of when a liability to pay GST becomes due. Demand set aside.
PARTIES : Spinocchia Compressor & Air Tools Sales and Service Pty Ltd v Challenger Managed Investments Limited
SOLICITORS : Woodward Wickes Wicken Mr D Gasic for defendant
2010/234897 SPINOCCHIA COMPRESSOR & AIR TOOLS SALES & SERVICES PTY LIMITED v CHALLENGER MANAGED INVESTMENTS LIMITED JUDGMENT 1 HIS HONOUR: This is an application under s 459 of the Corporations Act 2001 (Cth) ('the Act') to set aside a statutory demand. The demand is dated 22 June 2010 and claims the amount of $117,974.03. The description of the debt and the demand is as follows "amount paid in mistake by Perpetual Trustee Company Limited to the Company that should have been paid as GST to the ATO on the sale of the property at 2 Woodfield Boulevard Carringbah NSW 2229". 2 The plaintiff suggests that there are defects in the affidavit in support of the statutory demand that would lead to the demand being set aside and also submits that the amount sought to be recovered is not a debt but merely an unliquidated claim. Background circumstances 3 The plaintiff was the owner of land at Taren Point, NSW that was subject to a mortgage to the defendant. 4 On 2 March 2010, the defendant as mortgagee exercising its power of sale, sold the land at auction for an amount of $1,175,000 exclusive of GST. Pursuant to the contract, the deposit of $175,500 was paid to the defendant's solicitors. On settlement the defendant's solicitor received $1,180,214.34. Out of the settlement funds, the defendant received $905,674.16 in repayment of the amount due on the mortgage. In addition, the defendant's solicitors were paid $1,274.02 in payment of legal fees and $20,380.37 was drawn in payment of monies owed to a caveator. 5 On 21 April 2010, the plaintiff was paid the balance of $322,162.12. However, the amount the defendant received on settlement included an amount of GST which the defendant had collected from the purchaser of the property totalling $117,974.03. 6 The defendant's claim arises because it says that at the time it had paid the $322,162.12 to the plaintiff there was outstanding GST in relation to the sale that had not been remitted to the ATO. It is submitted that in making the payment to the plaintiff, the defendant made a mistake of fact in not appreciating that it had an obligation to pay to the ATO the GST of $117,974.03. There is no doubt that the plaintiff is properly entitled to the balance of the payment to it. 7 It is clear that neither party has paid the amount of the GST to the Australian Taxation Office. Defects in the affidavit 8 After debate and submissions the basis upon which the plaintiff said the affidavit was deficient boiled down to two points. Firstly, a matter connected to the jurat in the affidavit and secondly, the defendant did not state the source of his knowledge. 9 I will deal with the first matter. 10 The commencing part of the affidavit was as follows: "I, Joseph George Mercieca, of Level 33, 101 Collins Street, Melbourne VIC 3000, Collections Manager-Commercial Lending, say on oath: … ". 11 The jurat which followed the 12 paragraphs of the affidavit was in the following form: SWORN/AFFIRMED by the deponent at ) Melbourne ) In New South Wales ) On 21 June 2010. ) a signature . Signature of Deponent
a signature . A Justice of the Peace / A Solicitor of the Supreme Court holding a current Practising certificate in New South Wales
ADAM FARREL KAWALSKY RACV Tower, 485 Bourke Street Melbourne Victoria 3000 An Australian Legal Practioner Within the meaning of the Legal Profession Act 2004.
12 The plaintiff submitted that because one cannot tell whether the affidavit was either affirmed or sworn, the plaintiff cannot be satisfied that it is in truth an affidavit. If it were not an affidavit then the demand would be deficient because there was no affidavit verifying the demand as required by s 459G(3)(a). 13 In Fastlink Calling Pty Ltd v Macquarie Telecom Pty Limited [2008] NSWSC 299, Barrett J had to deal with a similar situation and carefully set out the legal basis that applies to the swearing of affidavits. He said the following:
"14 It follows that the question whether the undated document signed by Ms Jebril is, for the purposes of s 459G of the Corporations Act , an "affidavit" is a question to be determined according to the law of New South Wales.
15 No statute of New South Wales deals comprehensively or exhaustively with the procedures involved in the creation of affidavits. The Oaths Act 1900, to which reference will be made presently, presupposes certain principles of the unwritten law and builds upon them. It is to those principles that I now turn.
16 Bacon's Abridgement (Matthew Bacon, "A New Abridgement of the Law", London 1832), at page 124, defines or describes an affidavit as follows:
"An affidavit is an oath in writing, signed by the party deposing, sworn before, and attested by him who hath authority to administer the same."
17 An oath was central to an affidavit. An affidavit usually began:
"I [name] of [address], [occupation], being duly sworn make oath and say as follows:"
"Sworn at [place] this [day] of [month] in the year [year], Before me. [Signature and designation of person administering oath]"
19 The deponent's oath, essential to the character of a written statement as an affidavit, was administered by the administering official's instructing the deponent to take the Bible in his or her hand and to say the words:
"I swear by Almighty God that this is my name and handwriting and that the contents of this my affidavit are true."
20 In the United Kingdom, provision was made by the Oaths Act 1888 for a person without religious belief (or with a religious belief precluding the swearing of an oath) to make, instead of an oath, a "solemn affirmation" causing an affidavit to take the following form:
"I, [name] of [address], [occupation], do solemnly and sincerely affirm as follows."
21 For the jurat, the usual form for an affidavit made by affirmation was:
"Affirmed at [place] this [day] of [month] in the year [year], Before me [Signature and designation of official before whom affirmation made]"
22 The words to be spoken upon making an affidavit by affirmation were to this effect:
"I solemnly, sincerely and truly declare and affirm that this is my name and handwriting and that the contents of this my affidavit are true."
23 In New South Wales, s 12 of the Oaths Act 1900 provides that, when an oath is required to be taken by a person "who objects to take an oath", the person may instead make a "solemn affirmation in the form of such oath", but with the words "solemnly, sincerely and truly declare and affirm" substituted for "swear" and with the words "so help me God" or other like words omitted. Positive objection to the taking of an oath is a pre-condition to the making of an affirmation.
24 By s 11A of the Oaths Act , the manner of taking an oath, for the purposes of an affidavit, is consistent with that described at paragraph [19] above. While the form of oath most often administered is one applicable to persons having a religious belief in the Bible (or the Old Testament alone), a person who has some different form of religious belief and does not object to taking an oath will be sworn in some manner binding on his or her conscience. An adherent of the Muslim religion may thus be sworn on the Koran; and in R v Moore (1892) 40 WR 304, a native of India who said he had a religion, believed in the existence of a God and respected "all religious things" was sworn on the Bible.
25 The Supreme Court (Corporations) Rules 1999 apply to these proceedings. Those rules require an originating process or interlocutory process to be "supported by an affidavit stating the facts in support of the process": rule 2.4(1). There is also a provision dealing specifically with proceedings by way of application under s 459G concerning annexing of a search to "the affidavit in support of the originating process". The Supreme Court (Corporations) Rules do not make provision with respect to the form and taking of such an affidavit. Rule 1.3(2) therefore causes the "other rules of the Court" concerning such matters to apply. The Uniform Civil Procedure Rules 2005 contain numerous references to "affidavits" and to their being "sworn". They say nothing, however, about the form of affidavits and the way in which they are to be made.
26 One of the forms for documents to be used in connection with civil proceedings prescribed pursuant to s 17(1) of the Civil Procedure Act 2005 is Form 40, "Affidavit". That form envisages that the operative part of an affidavit will begin with a statement of the name of the deponent, his or her address and occupation and the date, followed by:
"#SWORN #AFFIRMED at Signature of deponent Signature of witness Name of witness Address of witness Capacity of witness [#Justice of the peace #Solicitor #Barrister #Commissioner for affidavits #Notary public]"
28 Strict adherence to the prescribed form is not essential: Interpretation Act 1987, s 80.
29 The parts of Form 40 just quoted may be accepted as modern or "plain language" equivalents of the older forms of words I have mentioned at paragraphs [17] and [18] above." 14 As is apparent from what his Honour said, one either takes an oath, or if there is an objection to the taking of an oath, one can make an affirmation. 15 His Honour also considered a series of cases dealing with the question of whether the Court can consider the events surrounding the signing of the document that might be produced separately and concluded at [38] that it was appropriate to receive evidence of the circumstances surrounding the creation and the signing of the document said to be an affidavit. However, in this case there has been no further evidence tendered to say whether in fact the witness had affirmed, that is, made an affirmation, or sworn his oath to the truth of the contents of the affidavit. 16 Although in the commencing words of the affidavit the witness uses the words "say on oath", the form of the jurat makes the matter quite ambiguous. In the circumstances, I am not satisfied on the evidence before me that the document is an affidavit and on this ground the demand should be set aside. 17 I turn to the other defect in the affidavit. Rule 5.2 of the Supreme Court (Corporations) Rules 1999 (NSW) is as follows:
"For the purposes of subsection 459E (3) of the Corporations Act , the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must: (a) be in accordance with Form 7 and state the matters mentioned in that Form, and (b) be made by the creditor or by a person with the authority of the creditor or creditors, and (c) not state a proceeding number, or refer to a Court proceeding, in any heading or title to the affidavit." 18 Form 7 which is referred to in the Rules, provides that the affidavit accompanying a statutory demand will include, as set out in paragraph 3 of that Form, the following:
"3 [State the source of the deponent's knowledge of the matters stated in the affidavit in relation to the debt or each of the debts, eg 'I am the person who, on behalf of the creditor(s), had the dealings with the debtor company that gave rise to the debt', 'I have inspected the business records of the creditor in relation to the debtor company's account with the creditor']." 19 The affidavit does not comply with this direction in the prescribed Form. The affidavit is made by Mr Mercieca who describes his role in relation to the matter in paragraph 1 in these terms:
"1. I am employed as the Collections Manager in Commercial Lending at Challenger Managed Investments Limited ACN 002 835 592 in its capacity as trustee of the Challenger Mortgage Fund (formerly the Howard Mortgage Trust) ( Creditor ) named in the statutory demand, which this affidavit accompanies, relating to the debt owed by Spinocchia Compressor & Air Tools Sales & Service Pty Ltd ACN 001 023 052 ( Company )." 20 In Finlay v Taylor Finlay v Taylor [2010] NSWSC 193, I said:
"9 The importance of the knowledge of the person who has to swear the affidavit was set out as long ago as 1994 by McClelland CJ in Eq in B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433 at 435 where he said the following:
"The requirement of that rule, as to the identity of the person making the affidavit accompanying the statutory declaration, is designed to serve the public interest as well as to protect the company against unwarranted demands, by endeavouring to ensure, within practical limits, that the person who must put his or her oath or solemn affirmation to the relevant matters (and thereby risk a conviction for perjury if a knowingly false statement is made) is the person associated with the creditor who is most likely to have direct knowledge of those matters. It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out to cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute if there is one makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability."
10 The appropriateness of this has also been dealt with in Saferack Pty Ltd v Marketing Heads Australia Pty Limited [2007] NSWSC 1143, a decision of Barrett J in which his Honour reinforces the critical part that the requirements for affidavits play in the whole process of the service of statutory demands. If one has people who, in fact, do not have any knowledge of the matter, that process can be completely subverted." 21 The defendant sought to lead evidence to correct this problem by an affidavit that became available after the start of the hearing before me. Mr Mercieca swore in paragraph 3 of his affidavit of October 2010:
"I am the person who, on behalf of the Creditor, had the dealings with the Company through my solicitors that gave rise to the debt. I have inspected the business records of the Creditor in relation to the Company's account with the Creditor." 22 I admitted that matter provisionally. 23 It would be seen from the Chief Judge's comments in B & M Quality Constructions that there is a need for a filtering mechanism to prevent the harassment of companies from what on their face may appear to be an unwarranted demand. 24 The defendants referred to a decision of Austin J in Goldspar Australia Pty Limited v KWA Design Group Pty Limited (New South Wales Supreme Court, 29 October 1998, unreported). That however, is a different case that dealt with an earlier provision of rules, which no longer applies and required a statement that the matters set out in the affidavit were true. 25 I do note that in the B & M Quality Constructions case, not only was the source not stated, but also the affidavit failed to state that the deponent believed that there was no genuine dispute about the debt. However, his Honour's comment upon the usefulness of the statement that there is no genuine dispute when it is based upon hearsay is important. It now appears that the person who did swear the affidavit had the requisite knowledge so the evils referred to are not present in this case. I would not strike out the demand for this reason. Whether the amount claimed in the demand is a debt 26 Although this issue does not apply, given my earlier findings, it is probably useful to address this matter. 27 The defendant suggests that it paid an amount for GST to the plaintiff by mistake, instead of paying it in accordance with its statutory obligation to the Taxation Office pursuant to GST legislation. 28 Since David Securities Limited v The Commonwealth Bank of Australia (1992) 175 CLR 353 recovery for monies paid under a mistake extends both to mistake of law and mistake of fact.
29 At common law the only action in which mistake could be set up as a ground for relief was in circumstances where no express contractual basis to a claim existed and "money had and received" by the defendant, was in justice, recoverable by the plaintiff. Such a claim is one of the normal indebitatus assumpsit claims (see New South Wales Law Reform Commission, "Community Law Reform Program: Eleventh Report - Restitution Of Benefits Conferred Under Mistake Of Law" Report 53 (1987), Chapter 2 and Bullen & Leake's Precedents of Pleadings 3rd ed (1868) on page 50). 30 There have been a number of cases that deal with the word debt in the context of demands under the Corporations Law (Cth) and its predecessors. As I said in Reinsurance Australia Corporation v Odyssey [2000] NSWSC 1118, the first of these is Rothwells Ltd v Nommack (No 100) Pty Ltd [1990] 2 Qd R 85; (1988) 6 ACLC 1199. That was a decision of McPherson J of the Supreme Court of Queensland who was considering a notice under s 364 of the Companies (Queensland) Code. That provision required that there must be a "creditor to whom the company is indebted in a sum exceeding $1,000 then due…" His Honour took the word "indebted" to mean a liquidated sum in money presently due owing and payable by one person called the debtor to another person called the creditor. After dealing with some of the facts, his Honour went on deal with what was a debt at common law, which would support an action in debt or indebitatis assumpsit. He indicated that there were three ways in which a debt could arise. They were: 1. By judgment; 2. By deed under seal; and 3. As quid pro quo for a consideration that was executed. 31 The factual circumstances related to a promise to pay a sum to a third party. His Honour found that the arrangements did not give rise to a debt, which he saw as importantly different from a claim for breach of contract. 32 The next case is First Line Distribution Pty Ltd v Paul Whiley & Ors (1995) 13 ACLC 1216. This was a decision of Cohen J of the Supreme Court of New South Wales and was concerned with a contract that gave a right to distribute and sell the plaintiff company's products. The company was paid money by the defendants for the distribution rights and under the contracts the defendants delivered the company's goods. For a while the defendants bought stock from the company but the company became unable to continue to supply the goods. The statutory demand, under the Corporations Law, claimed that the monies that had been paid for the right to distribute the company's products were now debts owing to the defendants. His Honour referred to the fact that contingent or respective liabilities may not be the subject of a statutory demand. He pointed out that the defendant would be entitled to claim damages for breach of the agreement. His Honour went on to say: "However, as none of the defendants have brought an action for damages there is no judgment debt against the company, the company's claim is, and was at the time the demand was served, merely one for unliquidated damages. The amount of damages has not been ascertained and the company does not owe a debt to any of the defendants until then." 33 Plainly, claims for damages for breach of contract for unliquidated claims are not susceptible to creating a debt for the purposes of a statutory demand. The claim to be advanced in the present case in respect of the money received by the defendant for the use of the plaintiff was, as I have said, one of a common indebitatus assumpsit count. 34 In Hansmar Investments v Perpetual Trustee [2007] NSWSC 103; (2007) 25 ACLC 282 at 291, White J considered the promise under contract to pay a specific or readily calculable sum was properly characterised as giving rise to a debt in that sum. 35 A case which is useful for its explanation of what is a debt for the purpose of the present provision is Vimblue Pty Ltd v Toweel t/as Carpenters Core Building [2009] NSWSC 494. After referring to the words of McPherson, in Rothwells which I quoted above, Barrett J said: " [14] It may be noted that McPherson J referred to a "liquidated sum", not a "liquidated demand". The nature of a "liquidated sum" was explained by Knox CJ and Starke J in Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21 ; (1923) 32 CLR 138 at 142 by quoting from the then current edition of Odgers on Pleading:
Whenever the amount to which the plaintiff is entitled … can be ascertained by calculation or fixed by any scale of charges or positive data it is … liquidated.
[15] There was reference in Spain's case to Stephenson v Weir (1879) 4 LR Ir 369. It was held in that case that a common count claim for work done was a "liquidated demand". Palles CB said at 372: [D]emands for work and labour on a quantum meruit, or for goods sold, although the price was not fixed by contract, are clearly "liquidated demands"; … when the value of the work or the goods as the case may be, is ascertained, that value determines and therefore liquidates the claim.
[16] This statement identifies the distinction between "liquidated claim" or "liquidated demand" and "liquidated sum". A process of valuation or assessment or the application of some standard of measurement is necessary to cause the latter to emerge from or be distilled from the former.
[17] The process by which a claim is translated into a right to a liquidated sum was described by Cohen J in Re Ahearn; Ex parte Palmer (1906) 6 SR (NSW) 576, a case concerning an unliquidated claim. His Honour said at 577: For failure to meet his contracts he was liable in damages, and, so long as it rested in damages, the liability was not a liquidated sum; before it could become so, it would have to be assessed either under the Stock Exchange rules, or by the ordinary tribunals, or by agreement between the parties, for the parties may meet and agree upon an amount which one shall be deemed to owe the other. There is no special virtue in having the amount assessed by a Court or a domestic tribunal, for an assessment between the parties is equally efficacious for the purpose of constituting the amount a liquidated sum.
[18] The same reasoning applies to a liquidated claim upon a quantum meruit for work done. In the Irish case to which I have referred, Palles CB held that an action for debt is maintainable upon such a claim, adding at 373: When it was said that an action of debt would lie only for a sum certain, it was sufficient that the sum should be capable of being ascertained by a jury by positive data, and not merely measured by opinion or conjecture. In the present case, for instance, when the value of the work was ascertained, the sum to be recovered became definite, and the case would not be like one of assault in which there were not any certain data to fix the amount of damages.
[19] The words of particular importance in this passage are, "when the value of the work was ascertained, the sum to be recovered became definite". "Definite", in the context, is synonymous with "liquidated"
[20] If a mechanic spends half an hour repairing my car and there is no agreement between us as to the amount he will charge and I will pay, his subsequent claim for $1 million may be regarded as a liquidated claim. But no liquidated sum is thereby owing, due and payable by me to him. His entitlement is to be paid a reasonable sum upon a quantum meruit. Until the value of the work is ascertained and in the absence of some process that fixes what is reasonable according to what Palles CB called "positive data", as distinct from "opinion or conjecture", the liquidated claim does not mature into an entitlement to a liquidated sum." 36 Here in the present case the claim is for a fixed amount that has been paid because of an alleged mistake. There is nothing that needs to be determined or ascertained to fix the amount of the claim. It truly is a claim for a liquidated sum. In these circumstances, subject to the next matter that I will address, there is a debt that is the subject of the demand. 37 There is no doubt in this case that the purchasers paid the GST in addition to the contract price. The front page of the Contract for the Sale of Land - 2005 Edition, executed on 2 March 2010, provided the sale of the property was a taxable supply on a GST exclusive basis. 38 Clause 31.3 of the special conditions of the contract provided as follows: "31.1 The consideration expressed to be payable under any other clauses of this Agreement for any supply made under or in connection with this Agreement does not include GST." 39 The defendant's liability to pay GST under A New Tax System (Goods and Services Tax) Act 1999 (Cth) is said to arise under section 105-5 of that Act: "105-5 Supplies by creditors in satisfaction of debts may be taxable supplies (1) You make a taxable supply if: (a) you supply the property of another entity (the debtor ) to a third entity in or towards the satisfaction of a debt that the debtor owes to you; and (b) had the debtor made the supply, the supply would have been a taxable supply. (2) It does not matter whether: (a) you made the supply in the course or furtherance of an enterprise that you carry on; or (b) you are registered, or required to be registered. (3) However, the supply is not a taxable supply if: (a) the debtor has given you a written notice stating that the supply would not be a taxable supply if the debtor were to make it, and stating fully the reasons why the supply would not be a taxable supply; or (b) if you cannot obtain such a notice - you believe on the basis of reasonable information that the supply would not be a taxable supply if the debtor were to make it. (4) This section has effect despite section 9-5 (which is about what is a taxable supply)." 40 The requirement in 105-5(1)(a) is satisfied in this case. The definition of taxable supply is set out in s 9-5 of the Act as follows:
"9-5 Taxable supplies You make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with Australia; and (d) you are registered, or required to be registered. However, the supply is not a * taxable supply to the extent that it is GST-free or input taxed." 41 So far as the additional requirement of s 105-5(1) (b) is concerned the evidence discloses:
(a) the property was sold under the contract for consideration; (b) The property was a commercial property and the plaintiff was a company. The online Australian Business Register as at 8 October 2010 showed that the plaintiff was registered for GST purposes. I would thus infer that the sale would have been in furtherance of its enterprise; (c) the property was situated in Australia. 42 I do note that there is no evidence that a notice under s 105-5(3)(a) has been served nor is there evidence of a belief held under 105-5(3) of the Act. Thus liability is not impeded. 43 The payment liability is found in s 9-40 of the Act. The relevant period for attributing the GST on taxable supplies is dealt with in s 29-5(1). The period is the one that covers the settlement date of 15 April 2010. The amount payable under s 17-5 is the net amount after deducting from all liabilities for GST in the period relevant input tax credits. 44 In relation to payment of net amounts, section 33-3 of the Act provides: 33-3 When payments of net amounts must be made - quarterly tax periods If: (a) the net amount for a tax period applying to you is greater than zero; and (b) the tax period is a quarterly tax period; you must pay the net amount to the Commissioner as follows: When quarterly GST payments must be made Item If this day falls within the quarterly tax period … Pay the net amount to the Commissioner on or before this day: … 4 1 June the following 28 July
45 Section 33-5 of the Act provides: "33-5 When payments of net amounts must be made - other tax periods (1) If the * net amount for a tax period (other than a * quarterly tax period) applying to you is greater than zero, you must pay the net amount to the Commissioner on or before the 21st day of the month following the end of that tax period. (2) However, if the tax period ends during the first 7 days of a month, you must pay the * net amount to the Commissioner on or before the 21st day of that month." 46 If the defendant had a quarterly tax period, the GST was due and payable to the ATO on 28 July 2010. If the defendant had a monthly tax period, the GST was due and payable to the ATO on 21 May 2010. 47 The statutory demand was dated 22 June 2010 so the defendant would only accrue a liability if it had a monthly tax period. There is no evidence on this subject and I am therefore unable to determine whether there was a liability for GST as at the date of the demand. 48 This is another reason for setting aside the demand. 49 I set aside the demand issued by the defendant dated 22 June 2010 and order the defendant to pay the costs of the proceedings.
15/11/2010 - Date of judgment corrected - Paragraph(s) Date - no paragraph number
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Spinoccia
Challenger
(1992) 175 CLR 353
(1923) 32 CLR 138
The statutory demand issued on 22 June 2010 was set aside, and the defendant was ordered to pay the costs of the proceedings.