FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v Australian Investment & Property Corporation Pty Ltd [2014] FCA 666 Citation: Deputy Commissioner of Taxation v Australian Investment & Property Corporation Pty Ltd [2014] FCA 666 Parties: DEPUTY COMMISSIONER OF TAXATION v AUSTRALIAN INVESTMENT & PROPERTY CORPORATION PTY LTD (ACN 098 891 840) File number: VID 1159 of 2013 Judge: GORDON J Date of judgment: 23 June 2014 Date of hearing: 23 June 2014 Date of last submissions: 23 June 2014 Place: Melbourne Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 17 Solicitor for the Plaintiff: Mr J Angenent of Gadens Lawyers Counsel for the Defendant: The Defendant did not appear IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1159 of 2013 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: AUSTRALIAN INVESTMENT & PROPERTY CORPORATION PTY LTD (ACN 098 891 840) Defendant JUDGE: GORDON J DATE OF ORDER: 23 JUNE 2014 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The interlocutory application filed on 10 June 2014 is dismissed. 2. The Defendant pay the Plaintiff's costs of and incidental to the application, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth). IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1159 of 2013 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: AUSTRALIAN INVESTMENT & PROPERTY CORPORATION PTY LTD (ACN 098 891 840) Defendant JUDGE: GORDON J DATE: 23 JUNE 2014 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The Deputy Commissioner of Taxation (the Commissioner) sought an order that Australian Investment & Property Corporation Pty Ltd (ACN 098 891 840) (the Company) be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth) (the Act). On 2 May 2014, the Company was wound up in insolvency under the Act and Mr Brent Leigh Morgan was appointed liquidator of the Company. 2 The order for the winding up of the Company was made on the application of the Commissioner following the Company's failure to comply with a creditor's statutory demand in respect of debts of $59,157.04. That amount represented a running balance account deficit debt as at 24 July 2013 in respect of amounts due under the BAS provisions (as defined in the Income Tax Assessment Act 1997 (Cth)), administrative penalties and interest charge under the Taxation Administration Act 1953 (Cth) and superannuation guarantee charges (as defined in the Superannuation Guarantee (Administration) Act 1992 (Cth)). 3 On 2 May 2014, the Registrar dispensed with r 4.01(2) of the Federal Court Rules 2011 (Cth) (FCR) which enabled the Company to be represented by Mr William Meehan, a director of the Company. 4 By an interlocutory process filed on 10 June 2014, the Company stated that: 1. Certain vital information referred to by the Registrar in his summary, and therefore a contributory basis for deciding the case (during our hearing of 2 May 2014), was fundamentally and materially incorrect. The [Company] had included in its evidence an official [Australian Taxation Office (ATO)] document which showed that the ATO owed [the Company] $6.45; rather than [the Company] owing [the] ATO anything at all. This did not receive any recognition by the court. 2. We believe from the content of the Registrar's summation, that he was of the understanding that [the Company] owed the ATO at least $15,000; which he thought was agreed to by the [Company's] Accountant. Whereas, the $15,000 approx referred to by the Accountant, was a different matter. It referred to the total amount that [the Company's] employees had accrued in Super and which had been paid over their years of employment. This was set out in our affidavit which explained that the ATO was claiming that the total amount accumulated by our employees was around $19,000. However, evidence was provided by the [Company] to show that [the ATO] had included an additional 3 quarters of calculations; in error, which was computed after the employees had left, and after the [C]ompany had ceased to operate. This matter can be very easily verified to [the] ATO who first need to be prepared to allocate the time to fairly examine our case from the documentation compiled. 3. Our evidence, presented primarily in the form of tables representing payments to either [the] ATO or to Super Companies, was described as "all over the place" by the court, and we feel it was thereafter discounted by both the court and the representative for the [Commissioner]. The representative for the [Commissioner] summarily dismissed our material when addressed by the Registrar without, we believe, having had it properly reviewed (The [Commissioner] only received a copy of our affidavit the day before the hearing and it is highly unlikely that a competent ATO officer could have verified what had taken us 3 months to collect and compile in one night). An affidavit from the ATO examining officer would be helpful, and the opportunity to cross examine this officer would be a worthwhile pursuit. While the Court asked a number of important questions about our material, we feel we did not have leave to present the case we had prepared which would have clarified what had been superficially seen as being "all over the place". 4. We, the [Company], had, during the period of the hearing and several adjournments, been in productive discussion with an ATO officer, … who, on the eve before the Hearing on 2 May 2014, was getting a good grasp of our case with [the] ATO, and we (Frank Benjamin and William Meehan) were of the understanding that he would be briefing [the solicitor for the Commissioner], to arrange for [the Company] to be given further leave to obtain additional evidential information from the Super companies that represented our former employees, and to work with him to reach a suitable result outside of the court. Additional time was crucial, as even on the morning of the Hearing, a letter from North Super Fund was received by the [Company] which provided clear evidence that (another one) of the five [Company] employees super contributions had been paid up completely. We offered this new evidence to the court but there seemed to be little interest in it so late in the case. 5 No orders were sought. I have treated that application as an application for a review of the Registrar's exercise of power pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth) (the FCA). 6 The Commissioner opposes the application on three grounds: 1. The application is defective because it fails to articulate any orders sought by the Company; 2. The application for review of the Registrar's exercise of power pursuant to s 35A(5) of the FCA was out of time and there is no basis for extending the time in which to file that application; 3. Even if the Company was granted an extension of time to file the application for review, the application would fail. 7 Rule 3.11 of the FCR requires a party to make an application for review of a Registrar's decision within 21 days after the day on which the power was exercised. The winding up order was made on 2 May 2014. The Application was filed on 10 June 2014. There was no evidence to support any contention that any application was filed earlier. Rule 1.34 of the FCR allows a party seeking a review to apply to the Court to dispense with any requirement of the FCR. The Company did not seek dispensation in the Interlocutory Application and I have therefore treated this application as containing such an application for dispensation. For the reasons that follow, that application is refused. 8 The matters the Court may take into account when determining and considering an application to grant an extension of time to file an application pursuant to s 35A(5) of the FCA include any explanation for the delay, whether there is an arguable case that the winding up order should not have been made and the prejudice to other parties: see Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-9 and Lemmen v Porcu [2013] FCA 1056. DELAY 9 The Commissioner accepts that because the applicant is in effect a litigant in person and thus without the benefit of a legal representative that may be sufficient to explain the relatively short delay in issuing the application. I agree. However, that of itself is not sufficient. It is to the other matters that I now turn. First, there was no appearance by the Company on the hearing of the application. ARGUABLE CASE? 10 Second, the Company's complaints set out in the Interlocutory Application: see [4] above. The Company faces insurmountable hurdles. 11 A core issue is that of the solvency of the Company. The Application does not assert that the Company is solvent and no evidence was filed as to the Company's solvency. The Company has failed to present the Court with evidence probative of solvency. 12 Next, where a company has been the subject of a winding up order, a director of that company who seeks to appeal against that order requires the approval of the liquidator or of the Court under s 471A of the Act: HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd [2002] FCA 1638; Rodgers v CJS Panels Pty Ltd [2001] VSC 470; Binetter v Commissioner of Taxation (2011) 198 FCR 49. Mr Meehan has not sought the consent of the liquidator. Mr Meehan requires the Court's approval. If he had applied, that approval would have been refused for the same reasons that there should not be an extension of time to file the application for review. 13 Finally, even if those hurdles were overcome, the review application would fail. The substance of the complaints made by the Company about the review is that it required more time to put material before the Court to demonstrate to the Commissioner (and to the Court) that the Commissioner's claim was overstated. The application to wind up the Company was served on 12 November 2013. The hearing was adjourned on three occasions – 13 December 2013 (by consent), 17 February 2014 (by consent) and 31 March 2014 (by order of the Registrar). At the hearing on 2 May 2014, Mr Meehan sought to have the statutory demand set aside on the basis that the debt owed was only around $15,000. In my view, the Company has had more than sufficient time to address these issues. 14 The Company also complains that the Registrar misunderstood and discounted the evidence that was put on by the Company. Two aspects should be noted. The Company does not dispute that it is indebted to the Commissioner. It simply disputes the quantum. The Company does not assert that it is solvent and it has not adduced any evidence which addresses that issue. There is, however, a second related matter. On any hearing of the review, Mr Meehan would need leave from the Court to raise arguments about the statutory demand. Where the application to wind up a company in insolvency is based on a failure by the company to comply with a statutory demand, the company may not without the leave of the Court rely on any ground in opposition to the application that the company could have relied on in an application to set aside the demand: s 459S(1) of the Act. Moreover, the Court must not grant leave unless it is satisfied that the ground is material to proving that the company is solvent: s 459S(2). Put simply, on a review of the winding up order, solvency remains a core issue. That core issue has not been addressed. PREJUDICE? 15 Since the making of the winding up order, the liquidator has incurred costs and disbursements of more than $11,000. Neither the Company nor Mr Meehan has offered to meet those costs and disbursements or provide evidence that the costs and disbursements will be paid. CONCLUSION 16 Finally, I should note that each of the matters referred to in these reasons for decision were set out in the written submissions that were filed on behalf of the Commissioner and served on the Company. 17 For those reasons, the application for an extension of time in which to seek review of the Registrar's order is dismissed. The costs of the application are to be taxed if not agreed. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: 23 June 2014