Kinglangley Pty Ltd v Deputy Commissioner of Taxation [1998] FCA 966

FEDERAL COURT OF AUSTRALIA

CORPORATIONS - COMPANIES - WINDING UP - STATUTORY DEMAND - Statutory Demand based on a number of debts, including penalty for unremitted group tax - whether demand defective for failure to specify precise details of how components of each of the debts were arrived at - absence of evidence that applicant was unable to determine whether it was liable for the amounts claim.

Corporations Law ss 459G, 459H, 459J Income Tax Assessment Act 1936 (Cth) Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 13 ACLC 229 followed; Topfelt Pty Ltd v State Bank of New South Wales Ltd (1994) 12 ACLC 15 referred to; Chains & Power (Aust) Pty Ltd v Commonwealth Bank of Australia (1995) 13 ACLC 73 referred to; Re Aroora Pty Ltd (1993) 27 ATR 473 referred to.

KINGLANGLEY PTY LTD (ACN 063 861 905) -v- DEPUTY COMMISSIONER OF TAXATION VG 3205 of 1998 BEFORE: MURPHY JR PLACE: MELBOURNE DATE: 11TH AUGUST 1998

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 3205 of 1998

BETWEEN: KINGLANGLEY PTY LTD (ACN 063 861 905)

Applicant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

before: judicial registrar MURPHY

DATE OF ORDER: 11/08/98

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The application is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 3205 of 1998

BETWEEN: KINGLANGLEY PTY LTD (ACN 063 861 905)

Applicant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

before: judicial registrar MURPHY

DATE: 11/08/98

PLACE: MELBOURNE

REASONS FOR JUDGMENT Pursuant to s 459G of the Corporations Law Kinglangley Pty Ltd applies to set aside a statutory demand served on it by the Deputy Commissioner of Taxation. The statutory demand is dated 26 May 1998. It is verified by an affidavit of Adriana Mayer-Albahari, an officer of the respondent, sworn the same date. In the proceeding the applicant, represented by Mr Cook of counsel, relies on affidavits Andriana Agrotis sworn on 7 July 1998 and Michael Polyvios Michael sworn 17 June 1998. The respondent relied on an affidavit of another of its officers, David Ian Johnston, sworn 16 July 1998. There was no cross-examination of any of the deponents. In its affidavit material the applicant sought to raise facts which suggested that there was a genuine dispute between the parties as to the existence or the amount of the debt: s 459H(1)(a) of the Corporations Law. As an alternative or additional ground, the affidavits suggested that there was an agreement between the parties that the respondent was not entitled to serve or proceed with any statutory demand under the Corporations Law. In his oral submissions counsel for the applicant did not press these two grounds. On the material before me there was no genuine dispute as to the existence or the amount of the debt. Further, there was no agreement between the parties that would preclude the respondent from proceeding with a statutory demand. As to the first, the affidavit of Mr Johnston addresses the matters raised by Ms Agrotis in her affidavit in relation to the allocation of two payments made by the applicant. Second, the various annexures do not support the assertion of any agreement between the parties for a series of payments to be made in satisfaction of the outstanding group taxation liabilities and penalties thereon. The applicant has not satisfied me that there is any basis for the Court to set aside the demand under section 459H(1)(a) of the Corporations Law. A defect in the statutory demand? The alternative and main argument of counsel for the applicant was that the statutory demand was defective and that it should be set aside under s 459J(1)(a) of the Corporations Law. Counsel took the Court to the demand, which was exhibit "MPM1" to Mr Michael's affidavit. The statutory demand is for a number of debts that arise under various group taxation provisions of the Income Tax Assessment Act 1936 (Cth). In particular, in paragraphs (c) and (d) the demand is for relevant penalty amounts and additional relevant penalty amounts payable as a result of a failure to remit the appropriate group tax payments. In paragraph (h) it is a claim for additional amounts due for late payments of group tax deductions as set out in paragraph (g) of the demand. In paragraph (i) is an additional penalty at the rate of four per cent due in respect of amounts in paragraph (g). A similar claim is made in paragraph (j) of the demand. I should note that the demand at various places provides for a credit, against the amounts due, of amounts paid by the applicant. The applicant's submission was that the demand was defective in that it failed to specify the relevant basis for the amount of the calculations such that the applicant was not in a position, using its own resources and business records, to calculate the amount that might be due or to verify the amounts claimed. The particular paragraphs to which this submission was directed were paragraphs (c), (d), (h), (i) and (j). It was submitted that the amounts here could not be verified. When these amounts were compared to the total amount of the demand, $47,151.50, this created a substantial injustice. The Court's calculation of the relevant amount is $15,378.45. Counsel for the applicant submitted that the applicant could not verify this because of insufficient detail in the demand. The particular defect alleged in the demand is that the amounts claimed do not refer to the starting date for the particular amounts, the date of each amount on which the relevant penalty is levied, the date when each amount on which the relevant penalty was levied was due, the actual amount of the penalty and the relevant interest rate and whether it was simple or compound. For example, in paragraph (c) a penalty amount is claimed which is stated to be "computed from the date when the amount of the deductions should have been remitted." The actual demand refers to wide periods where deductions should have been made, such as in sub-paragraph (g)(i), "the period from 1 January 1996 to 30 June 1997 inclusive." Counsel submitted that more particulars should have been supplied so that the applicant could have, without recourse to its accountants or other advisers, easily ascertained whether it in fact was liable for the various penalty and additional penalty amounts in the demand. The solicitor for the respondent argued that the applicant had been provided with sufficient information to calculate, from its own records, its liability under the Income Tax Assessment Act and under the demand. Counsel for the applicant relied on Topfelt Pty Ltd v State Bank of New South Wales Ltd (1994) 12 ACLC 15. That case was concerned with a demand for a substantial amount and interest. The demand failed to specify the rate of interest, the amount claimed, and the source of the entitlement to interest. The demand was held to be defective. Both parties also relied on Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 13 ACLC 229, where Lindgren J was asked to consider an argument that there was a defect in a statutory demand that referred to more than one debt. He annexed the actual demand to his reasons. It is in similar form to that in this case and in particular it makes claims for taxation debts and penalties claimed to be due over periods. The demand was upheld. At 243, when considering the argument of a defect in the demand, Lindgren J said: "This ground and the next are related. Chippendale claims to be in a situation which must not be uncommon. A company may not be able to satisfy itself that it is indebted for the full amount claimed. It may seek and obtain further particulars but remain uncertain of its position when the period of the notice expires. Perhaps it would be prudent and make for good administration for a creditor, at least in the case of statutory debts as in this case, to refer in a statutory demand to all the legally essential elements of liability for the amounts claimed. In the present case this would have involved, in the case of each of the three Acts, reference to the relevant legislative provision, each amount in respect of which default was made, the date of the default, the percentage rate applied and the commencement and end dates of the period for which the calculation of additional tax and penalty was made. After all, if the respective legislative provisions were correctly applied, such calculations must have been carried out by the Commissioner. But does this Law require this? He went on to consider two competing constructions of ss 459E(2)(a) and (b) and at 244 said: "For two reasons I do not find it necessary to choose between the two constructions contended for, or to decide whether appropriate identification of the debts to which a demand relates must always necessitate that the demand "specify" the individual debts. Firstly, the statutory demand in this case did specify the individual debts and the amounts of them (see Annexure A to these Reasons). The word "specify" does not, in my view, require that a demand make explicit the way in which the amount of a debt was arrived at. ......... I am not persuaded that Chippendale was caused substantial injustice by the supposed defect. The demand makes clear the amount claimed in respect of each individual debt, the date to which the additional tax and penalties have been calculated, and facts from which the correct commencement date under the legislation can be ascertained (contrast Topfelt Pty Ltd v State Bank of New South Wales Ltd). This enables Chippendale, if its own record-keeping has been adequate, to determine whether it is liable for the amounts claimed. That is the present situation here. The demand can only be read if the various provisions of the Income Tax Assessment Act are incorporated into the various debts claimed that constitute the demand. These provisions set out in great detail when the amounts are due to be remitted to the respondent. They also set out the penalties that are to apply when they are not. By reference to its own business records as to its status with the respondent, the dates on which it was liable to, and did in fact remit the various payments, the applicant was in a position to "determine whether it was liable for the amounts claimed" in the demand. The solicitor for the respondent also relied on Chains & Power (Aust) Pty Ltd v Commonwealth Bank of Australia (1995) 13 ACLC 73. That case concerned a demand that included two separate debts and failed to separate out principal and interest. At 81 Sackville J adopted an observation from Topfelt when he said that he "would not regard the omission of [details of interest, fees and charges] as so fundamental that the demand would be incapable of amounting to a statutory demand under the Corporations Law". He went on: "I have previously referred to the fact that no evidence was adduced by the company to suggest that it had suffered prejudice or injustice by the absence of a breakdown of the amount claimed in the demand. As I have noted, there was no evidence that the amount claimed was not due or that the company had been unable to calculate the sums due to the Bank." Here the applicant must show that there is a defect in the demand and that substantial injustice will be caused unless it is set aside. Here, applying the comments in Chippendale, I am unable to accept that the form of the demand constitutes a defect as that term is defined in the Corporations Law. The form of the demand brings in the statutory basis of the amounts claimed and is similar to that considered in Chippendale. I note also the absence of any evidence in the applicant's affidavits that the form of the demand is such that it has been unable to calculate the amounts due. This was referred to by Sackville J in Chains & Power and by Hayne J in Re Aroora Pty Ltd (1993) 27 ATR 473. I further note the comments of Sackville J in Chains & Power at 79 that technicalities are to be avoided in the approach to the legislation. For these reasons I propose to dismiss the application.