Westend Asset Pty Ltd v Deputy Commissioner of Taxation

Facts 1 The plaintiff (Westend) applies under s 459G(1) of the Corporations Act 2001 (Cth) (the Corporations Act) to set aside the statutory demand issued by the defendant (the Commissioner) on 28 March 2012 on the ground that there is a genuine dispute as to the claimed debt relating to the Running Balance Account (RBA) deficit debt of $1,133,837.87 (the tax debt), because the Commissioner is arguably barred pursuant to s 105-50(1) of Sch 1 of the Taxation Administration Act 1953 (the TAA) from recovering the amounts claimed. The tax debt is the total amount as at the date of the statutory demand of a number of assessments made by the Commissioner. It is not necessary for present purposes to detail the content of those assessments. 2 Westend had earlier, in February 2012, lodged an objection to the Commissioner's assessments. 3 Under s 459H(1)(a) and (3) of the Corporations Act, a genuine dispute about the existence or amount of the debt claimed in a statutory demand, where the substantiated amount is less than the statutory minimum, requires the Court to set aside the statutory demand. 4 The RBA Statement forming attachment "GR-6" of the affidavit of Gina Radosavljevic affirmed 31 May 2012, is prima facie evidence that the RBA was duly kept and that the amounts and particulars in the statement are correct: s 8AAZI of the TAA. 5 Westend, quite properly, accepts that the decision of the High Court in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [58] establishes that the existence and the amount of a tax debt is outside of the area for a "genuine dispute" for the purposes of s 459H(1) of the Corporations Act, but it submits that this case is distinguishable because s 105-50 of Sch 1 of the TAA was not raised or discussed in Broadbeach. This is the issue raised in the appeal. 6 Pursuant to s 105-50(1), an unpaid net amount together with any general interest charge ceases to be payable 4 years after it became payable by the taxpayer. However, the time limitation under s 105-50(1) has no application by virtue of s 105-50(3)(b), relevantly, if the Commissioner is satisfied that the payment of the amount was avoided by fraud or evaded. 7 Westend submits that the precondition to the issue of a statutory demand under s 459E(1)(a) the Corporations Act, that the debt is "due and payable", has not been met by the Commissioner. Counsel for Westend conceded that the amount in the statutory demand is "due" but she submits that it is not "payable" because recovery of the debt is time barred by reason of s 105-50(1). That time limit has passed. 8 Section 459H(1)(a) of the Corporations Act speaks of the Court being satisfied that there is a "genuine dispute" about "the existence or amount of a debt". It does not use the language found in s 459E(1)(a) of the Corporations Act which enables a person to serve on a company a demand for a debt that is "due and payable". No submission was put that "debt" in s 459H(1)(a) of the Corporations Act ought be read as a debt which is "due and payable". Nor was there a challenge to the validity of the demand itself on the ground that the debt whilst admittedly "due" was not "payable". 9 In any event, in whatever way s 105-50(1) might be relied upon by Westend, the Commissioner relies upon the fraud or evasion carve-out under s 105-50(3)(b) and seeks to enliven that statutory exception by adducing evidence that he was satisfied that payment of the net amount of GST was avoided by fraud or evaded. Westend objects to the admission of that evidence. 10 Westend submits that the Commissioner's assessments do not expressly allege fraud, and that the first time it is alleged that the Commissioner was so satisfied is in para [14] of Ms Radosavljevic's affidavit affirmed 31 May 2012. Ms Radosavljevic is an officer in the Commonwealth Public Service, employed in the Debt business line of the Australian Taxation Office at Brisbane, and she was a person duly authorised by the Commissioner to make an affidavit in opposition to this application to set aside the statutory demand. At [14] she deposed: From reviewing the Records, I am informed and verily believe that on or about 27 August 2011 the Commissioner formed an opinion that there was fraud or evasion and/or the Commissioner was satisfied that an unpaid net amount was avoided by fraud or evaded or that a payment of an excess was brought about by fraud or evasion. 11 This paragraph, Westend submits, is inadmissible by reason of s 76(1) of the Evidence Act 1995 (Cth). I disagree. Section 76(1) renders inadmissible, subject to s 76(2), which has no application here, evidence of an opinion to prove the existence of a fact about the existence of which the opinion was expressed. Paragraph [14] does not contain an opinion of the deponent as to a fact. Rather, it deposes to the fact, relevantly, that she has, on grounds stated, a belief that the Commissioner was satisfied that the unpaid net amount of tax in this case was avoided by fraud or evaded. Her evidence of the fact that the Commissioner was relevantly satisfied is admissible. That the paragraph also directs itself to an opinion formed by the Commissioner and referred to payment of an excess, whilst on its face is irrelevant, does not detract from the relevant fact to which she deposed. She was not required to attend for cross-examination. I accept her statement as evidence of the relevant state of satisfaction reached by the Commissioner. 12 Additionally, Westend submits that no evidence has been tendered in support of the basis upon which the Commissioner's opinion was formed and that absent such evidence, the evidence of the Commissioner's opinion carries little weight. It also submits that a very significant unfairness arises by the Commissioner's failure to tender evidence of the basis for his opinion because the plaintiff cannot answer the allegation without knowledge of its basis. It points to the Commissioner's status as a model litigant in this respect. 13 Westend then contends that the Commissioner's opinion is inconsistent with his reasons set out in his interim audit report dated 11 November 2011, or the final audit report dated 22 December 2011, because no allegation of fraud or evasion was raised in either of those reports. 14 I do not accept these submissions. They both misstate and overstate what is required by way of evidence in order to make good the fraud or evasion exception. Section 105-50(3)(b) is relevantly concerned with the fact that the Commissioner is "satisfied" and not about his "opinion". It is unnecessary to analyse the content of the audit reports, although it is clear enough that the force of their content, relevantly, was that fraud or evasion was involved even if not expressed in those ways in terms. 15 Westend submits that the Court must be satisfied that there is no genuine dispute as to whether or not the Commissioner was satisfied at the time of issuing the notice of assessment that the payment was avoided due to fraud or evasion. This inquiry, according to the plaintiff, invokes the Briginshaw standard of proof: Briginshaw v Briginshaw (1938) 60 CLR 336. 16 Westend contends that the Commissioner cannot discharge his burden of proof in circumstances where he has failed to tender business records setting out the basis of his opinion. I take this submission to also be made as to the basis of the Commissioner being "satisfied" for the purposes of s 105-50(3)(b). 17 It follows, Westend contends, that it "has a reasonably arguable position with respect to the operation of s 105-50 of Schedule 1". Westend contends that there is, therefore, a genuine dispute as to whether the tax debt is payable and, therefore, whether the Commissioner can recover this debt. 18 Westend's submissions proceed from a false premise, namely, its contention that the Commissioner's assertion that the tax debt is due and payable rests on proof that there has been fraud or evasion for the purposes of s 105-50(3)(b), and that unless there was fraud or evasion, the Commissioner cannot rely on this exception to overcome the time bar to recover the tax debt. This overstates what is required under that provision. Relevantly, for the purposes of s 105-50(3)(b), the Commissioner need only be "satisfied" that the payment of the amount was avoided by fraud or evasion. That state of being satisfied has been established by the evidence of the Commissioner adduced through Ms Radosavljevic. No more is required. Curial standards of proof in adversarial proceedings do not apply. The tax debt is admittedly due. It was also, and remains, I find, payable. 19 Accordingly, Westend has failed to establish that there is any genuine dispute for the purposes of s 459H(1)(a) of the Corporations Act as to the existence or amount of the tax debt even if "debt" in that sub-section when read together with s 459E(1)(a) of the Corporations Act means a debt which is "due and payable". 20 The application will, for these reasons, be dismissed with costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.