Deputy Commissioner of Taxation v Antonio Gelonesi [2005] NSWSC 542

New South Wales Supreme Court

Deputy Commissioner of Taxation v Antonio Gelonesi [2005] NSWSC 542 CITATION : This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 7 June 2005

JUDGMENT DATE : 17 June 2005

JURISDICTION : Common Law Division

JUDGMENT OF : Associate Justice Malpass at 1

DECISION : The notice of motion is dismissed; the defendant is to pay the costs of the notice of motion; the exhibit may be returned.

CATCHWORDS : Setting aside of default judgment - validity of notice before suit - service of statement of claim and other notices - bona fide defence on the merits - default, delay and explanation.

LEGISLATION CITED : Evidence Act 1995 (Commonwealth) s163

CASES CITED : DCT v Gruber (1997-1998) 43 NSWLR 271

Deputy Commissioner of Taxation (Plaintiff) PARTIES : Antonio Gelonesi (Defendant)

FILE NUMBER(S) : SC 10677/04

Mr P Rodionoff (Plaintiff) COUNSEL : Mr R D Marshall & Mr T Rickard (Defendant)

Australian Government Solicitor (Plaintiff) SOLICITORS : Pateman Legal (Defendant)

LOWER COURT JURISDICTION :

- 9 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Associate Justice Malpass

17 June 2005

10677 of 2004 Deputy Commissioner of Taxation v Antonio Gelonesi

JUDGMENT 1 His Honour: The plaintiff was a director of New Horizons Corporation Pty Limited (New Horizons). Shortly after its incorporation, it entered into a contract to purchase the Horizons Golf Resort (the Resort). This took place some time in November 2000. There was delay in the completion of the purchase. Ultimately, it took place in about September 2001. During the period between exchange of contracts and completion, New Horizons played a management role. 2 New Horizons deducted moneys for payment of group tax, but failed to remit the moneys to the plaintiff. It is common ground that the defendant has a civil liability to pay unremitted group tax. However, that liability is contingent upon him receiving what has been called notice before suit (or directors' penalty notice). 3 The plaintiff has issued four notices. The first notice was issued on 9 April 2003 and related to 24 monthly periods extending from 1 March 2001 to 28 February 2003. The second notice was issued on 9 September 2003. The third notice was issued on 4 December 2003. The fourth notice was issued on 15 January 2004. 4 The first notice involves a large sum. The last three notices (the three notices) were each issued in respect of smaller periods and for lesser sums. 5 New Horizons fell into financial difficulties. On 5 March 2004, receivers and managers were appointed. On 6 March 2004, administrators were appointed. 6 The plaintiff commenced these proceedings on 10 March 2004. The default statement of claim claimed the moneys which were the subject of the four notices. There is evidence from a process server of service having taken place on 14 March 2004. No defence was filed. By letter dated 19 April 2004, the plaintiff notified the defendant of application having been made for default judgment (the defendant does not mention this letter in his affidavit). The default judgment was entered on 22 April 2004. The defendant says that he became aware of the existence of the statement of claim "some time" after the entry of judgment. On 1 July 2004, a bankruptcy notice was served on the defendant. 7 No action was then taken to set aside either the judgment or the bankruptcy notice. 8 There is evidence that on 20 July 2004, in a letter from his solicitor, that the defendant did not dispute his liability in respect of the judgment. On the same day, he made a statutory declaration disclosing the judgment debt as one of the debts presently owed by him. 9 Subsequently, there was further action to make the defendant bankrupt (inter alia, the plaintiff has a creditors' petition which was filed in or about January/February 2005). 10 On 12 May 2005, the defendant filed a notice of motion seeking to have the judgment set aside. The application came on for hearing on 7 June 2005. It was vigorously defended by the plaintiff. 11 The defendant has relied on three affidavits. Two of them were sworn by his solicitor (Mr Pateman). The third affidavit was sworn by the defendant himself. This material included, as an annexure, a copy of the affidavit sworn by the process server. 12 The plaintiff has relied on an affidavit sworn by Mr Wilson (an employee of the Australian Taxation Office). 13 The Court has a discretionary power to set aside a default judgment. The discretion is exercised having regard to the relevant circumstances of the particular case before the Court and so that justice is best served between the parties. The applicant bears the onus of satisfying the Court of entitlement to relief. 14 The defendant has identified three possible areas of defence. The first area relates to the first of the four notices. It is contended that this notice relates to a period of about six months (commencing 1 March 2001) during which New Horizons did not have a responsibility to pay group tax. 15 The second area of defence is a contention of non-service of the statement of claim. 16 The third area of defence is a contention of non-service of the three notices. 17 In defending the application, the plaintiff has identified two principal areas of opposition. Firstly, it says that the defendant has failed to demonstrate a bona fide defence on the merits. Secondly, it says that the defendant has failed to adequately explain his default and delay in the bringing of this application. 18 In addressing each of the three possible areas of defence, one of the tasks confronting the Court is the evaluation of the evidence relied on by the parties. There has been no cross-examination of any deponent. In these circumstances, the question of evaluation becomes not an easy task. 19 In his affidavit sworn 19 May 2005, the defendant deposed, inter alia, to the following:- 46. In the absence of access to relevant documentation I cannot definitively say when completion of the Transaction actually occurred however the Textron Mortgage and the Textron Fixed and Floating Charge, both dated 7 September 2001, support my recollection that completion occurred in or about August or September 2001, most likely on 7 September 2001. 47. It was only upon the completion of the Transaction that New Horizons assumed liability for the continuing former staff of Horizons. My recollection is that immediately after completion, New Horizons notified all continuing staff that Hew Horizons had taken over responsibility for their accrued entitlements and would be paying the wages from that point on. There was never an assumption of Horizon's liability for withholdings up to the date of completion of the Transaction. 48. I believe that on inspection of the relevant documentation in the hands of the Administrators and the Receivers and Managers, I can further verify the position to be that the Notice contains claims for withholdings over the period from March 2001 to November 2001 which are properly the responsibility of Horizons. I believe therefore that I can demonstrate to this Honourable Court that the Notice is invalid and that the Judgment should be set aside. 20 The defendant relies on what was said in DCT v Gruber (1997-1998) 43 NSWLR 271 at 274-5. It is said that Gruber's case establishes that the whole notice will be invalid if it contains inaccuracy in respect of the amount claimed for any of the months (a composite notice must correctly state the discrete liability in respect of each month). 21 The plaintiff makes the point that this evidence misconceives the critical question (it is not whether New Horizons had an obligation to pay wages – it is whether it in fact paid wages). The relevant section imposes liability on the entity that withholds an amount for group tax. The evidence does not directly address that matter. 22 He further deposed to the following:- 22. At the time of being advised of the Statement of Claim and the Judgment I did not seek to question the claim made by the Plaintiff/Judgment Creditor because I had assumed that the Notice (recalling that I was unaware of the Additional Notices), the Statement of Claim and the Judgment were all reflective of the actual entitlement of the Plaintiff/Judgment Creditor as against me. 23. It was only recently when discussing the matter with other parties that I came to the realisation that the Notice claimed a significant sum of money was owing by New Horizons when that really was not the case. I depose to that basis in paragraphs below. Had I been aware of this fact at the time I would naturally have sought to defend the Statement of Claim and at all times disputed my liability as alleged. 23 Before proceeding further, I should mention that no further detail has been given as to the generality of what is deposed to in paragraph 23 of the affidavit (inter alia, in respect of "recently"). 24 The defendant further deposed to the fact that certain of the documentation which would permit him to accurately verify the liabilities on which the judgment debt is calculated is now in the possession of the external administrators of New Horizons and that this has been the case since early March 2004. 25 He also deposes to the issue of subpoenas which were returnable on 25 May 2005. His material fails to disclose what happened on either 25 May 2005 or thereafter concerning production of documents by, inter alia, the administrators. The matter was raised by the Court during submissions, but it failed to elicit any further information. 26 The defendant has certainly had ample time to conduct what investigations it may wish to pursue in relation to the matter. 27 As has been earlier said, there is evidence of personal service of the statement of claim on the defendant and the deponent (the process server) has not been cross-examined. There is no denial of service. Whilst there is not recollection of personal service, there is a distinct recollection of other contemporaneous matters. 28 In his affidavit, the defendant deposes to the following:- 18. I have absolutely no recollection of ever being personally served with the Statement of Claim. My understanding is that the relevant affidavit of service that the Plaintiff/Judgment Creditor relies upon suggests that service took place at 9.06 am on 14 March 2004 at my residence in Collaroy. This day was a Sunday and the Receivers and Managers and the Administrators had been appointed to New Horizons just 9 days beforehand. My specific recollection is that I spent entire weekends in the first month after the appointments of the external controllers to New Horizons up at the Golf Resort operated by New Horizons, attempting to deal with paperwork and issues. The Resort is located at Port Stephens, roughly a 2.5 hour trip by car from Sydney. 19. I distinctly recall that I had returned from the US just before this weekend, this being the first time I was back in Australia after the appointment of the Receivers and Managers and the Administrators. I therefore was keen to devote the whole weekend to dealing with the newly appointed external administrators and issues arising at the Resort. I therefore travelled to the Resort by motor vehicle early Saturday morning and stayed over Saturday night in order to be able to devote a whole day on Sunday to the issues arising. I did not return to Sydney until Monday. 20. I have on various occasions vigorously searched and sought to locate the Statement of Claim at my home where I would have kept it, in the event that I had received it in the post or some other way. I have not been able to locate the document. 29 In relation to the service of the three notices, the plaintiff has the benefit of the presumptions provided by s163 of the Evidence Act 1995 (Commonwealth) which provides as follows:- 163 Proof of letters having been sent by Commonwealth agencies (1) A letter from a Commonwealth agency addressed to a person at a specified address is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) to have been sent by prepaid post to that address on the fifth business day after the date (if any) that, because of its placement on the letter or otherwise, purports to be the date on which the letter was prepared. (2) In this section: business day means a day that is not: (a) a Saturday or a Sunday; or (b) a public holiday or bank holiday in the place in which the letter was prepared. letter means any form of written communication that is directed to a particular person or address, and includes: (a) any standard postal article within the meaning of the Australian Postal Corporation Act 1989 ; and (b) any envelope, packet, parcel, container or wrapper containing such a communication; and (c) any unenclosed written communication that is directed to a particular person or address. 30 The evidence offered by the defendant on this matter is to be found in paragraphs 13 and 14 of his affidavit. Those paragraphs depose as follows:- 13. I have no recollection and no record of having received any of the Additional Notices upon which the judgment is based. I was first aware of the Additional Notices when my solicitor advised me of their existence. All documentation that I had in my possession which relates to the affairs of New Horizons is now in the possession of the appointed Administrators and the Receivers and Managers. I delivered this documentation to those external controllers immediately after they were appointed. 14. I inspect my mailbox at my residence at 8 Norfolk Street, Collaroy for all correspondence on a daily basis. On or about the dates of the Additional Notices I was travelling a lot in order to try to generate business for myself so it was not possible for me to check my mailbox daily on those occasions. 31 Again, there is no denial of having received any of the three notices. In my view, the material relied on by the defendant is not sufficient to raise doubt about the presumption. 32 After carefully considering the material that has been placed before the Court by the defendant and the submissions advanced on his behalf, I am left with the view that the defendant has failed to discharge the onus borne by him to demonstrate an entitlement to relief. 33 What is offered by him, I do not find to be persuasive. Indeed, it does not seem to me to be impressive. It has qualities of, inter alia, vagueness, generality and indirectness. I prefer the evidence that is relied on by the plaintiff. 34 I am not satisfied that the defendant has an arguable defence, on the merits, to the plaintiff's claim or any part thereof. I am not satisfied that any of the alleged defences can be said to be bona fide. 35 Little is advanced to explain the default and delay. What there is falls well short of providing an adequate explanation for it. 36 The application has the character of a last ditch stand to avoid bankruptcy. 37 In my view, the matters of the length of the delay and the inadequate attempt to explain both the default and the delay are of themselves sufficient to defeat this application. 38 The notice of motion is dismissed. The defendant is to pay the costs of the notice of motion. The exhibit may be returned. **********