Bonvista Pty Ltd v Deputy Commissioner of Taxation [2009] NSWSC 887

New South Wales Supreme Court

CITATION : Bonvista Pty Ltd v Deputy Commissioner of Taxation [2009] NSWSC 887 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 24 August 2009

JUDGMENT DATE : 24 August 2009

JURISDICTION : Equity

JUDGMENT OF : Windeyer AJ

DECISION : Decision of Registrar confirmed. Originating process dismissed.

CATCHWORDS : CORPORATIONS – Corporations Act – Application to set aside statutory demand – Application to amend originating process by seeking an order extending time for compliance until determination of objection lodged to Income Tax Assessment – Review of Registrar's decision refusing amendment – Concession that if amendment sought not allowed originating process should be dismissed – Whether claim under amendment futile and doomed to fail and should not be allowed – Held futile.

LEGISLATION CITED : Corporations Act 2001 (Cth) ss459F(2)(a)(i), 459G Uni\form Civil Procedure Rules r 49.19

CATEGORY : Principal judgment

CASES CITED : Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41

PARTIES : Bonvista Pty Ltd (P) Deputy Commissioner of Taxation (D)

FILE NUMBER(S) : SC 3439/09

COUNSEL : I S Young (P) B L Jones (D)

SOLICITORS : Paul Bard Lawyers (P) ATO Legal Services Branch (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER AJ

MONDAY, 24 AUGUST 2009

3439/09 BONVISTA PTY LIMITED v DEPUTY COMMISSIONER OF TAXATION JUDGMENT 1 HIS HONOUR: This is an application for a review of a decision of Senior Deputy Registrar Musgrave made on 11 August 2009 dismissing an application by the plaintiff for leave to amend the Originating Process, which was filed in these proceedings on 26 June 2009. The Originating Process was an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand served on the plaintiff company by the Deputy Commissioner of Taxation, being a demand for payment of what was stated to be an income tax debt of $952,713.16, which amount comprised a claim for an income tax debt for the year ended 30 June 2003 of $643,482.82 together with a penalty of $307,001.25 and a general interest charge of $2,229.54. 2 The statutory demand was served on 5 June 2009. Proceedings to set it aside were filed on the last available date. 3 On 2 June 2009 the day before the statutory demand was signed, the plaintiff company lodged an objection with the Australian Taxation Office in respect of the amended assessment. 4 That objection has not been dealt with. The Commissioner has sought some additional information which on the evidence has not yet been provided so that it is not known when the objection will be dealt with. 5 The application dealt with by the Senior Deputy Registrar was to file an Amended Originating Process under which the claim to set aside the statutory demand was maintained, but there was sought in the alternative an order under s 459F(2)(a)(i) "that the period for compliance be extended until 21 days after the defendant has determined the objections lodged by the plaintiff with the defendant on 2 June 2009". 6 The decision of the Senior Deputy Registrar was given orally on his dismissing the application and no written copy of his reasons is available. Nevertheless, I have been told without objection, and it appears to be agreed between the parties, that the Registrar refused the amendment on the basis that it would be useless or futile because the claim it has sought to add was doomed to fail. 7 A review, which is the subject of r 49.19 of the Uniform Civil Procedure Rules, is not in the nature of an appeal and is more in the nature of a rehearing, but nevertheless the Court on such re-hearings gives attention to, if it can, the reasons of the Registrar. I do not think the fact that the reasons are not available to me should prevent my determining this matter as the parties have really agreed that the decision of the Registrar was based on the finding that the amendment would be futile. 8 It is accepted by the plaintiff that the original claim to set aside the statutory demand must fail. That is because counsel for the plaintiff accepts that the decision of the High Court of Australia in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41 is binding so that the assessment creates the debt, and that the fact objection has been lodged does not go to the existence of that debt. Thus it follows that this Court would not have set aside the statutory demand because the debt is an existing debt which has not been paid and which according to the evidence cannot be paid. 9 The question then is whether or not the proposed amendment could bear on this situation. Section 459F(2)(a)(i) is the relevant section upon which the plaintiff relies, founding the argument upon the wording of section 459F2(A)(i). What the plaintiff contends is that not only on the hearing of an application under s 459G referred to at the commencement of the wording in the paragraph (i), but also "On an application by the company under this paragraph" there is power in the Court to order an extension of time. 10 The defendant for the purposes of this application concedes that there is such a power and I proceed on that basis, although if that is the position then it would appear to me arguable that it would have been necessary to make the application within the time limited by the statutory demand, but whether or not that is the position is not the subject of any final determination by me, and it may be in any event the amendment would backdate that particular alternative claim to the date upon which the originating process was filed. In addition it would seem to me to be extraordinary that the application could fall within s 459F(2)(a) of the Act because a company makes an application to set aside a statutory demand which is found to fail. Again the argument was not raised by the defendant. 11 What the plaintiff seeks under the amendment sought is an extension until the Commissioner has determined the objection. The question is whether it is doomed to fail or whether there is a question which should go to trial. 12 It is accepted that if the amendment is not allowed then the application to set aside the statutory demand must be dismissed. 13 I have come to the conclusion that it would not be a proper exercise of discretion to allow the amendment. The effect of a successful outcome of the amendment would be to subvert the provisions of the Income Tax Assessment Act and the decision of the High Court of Australia in the Broadbeach case, which makes it clear that the assessment raises the debt and that any objection to it is not a ground for disputing that debt. By relying on the words "Or on application by the company under this paragraph" that is really what the plaintiff is attempting to do. In those circumstances I consider an argument that those words in s 459F can be used for that purpose must fail. 14 I should add that in any substantive proceedings brought by Deputy Commissioner of Taxation for the winding up of the plaintiff company the claim which it has now endeavoured to add may be able to be articulated in those substantive proceedings or at least that was a concession made in Broadbeach. The defendant here if given information sought to enable consideration of the objection, may consider that it is appropriate for the winding up proceedings to be adjourned pending the determination of the objection, but that is a matter for the Deputy Commissioner of Taxation or the Court for the future not now. Amendment should be allowed if a claim could succeed but the amendment sought would appear to me to be an attempt to avoid the provisions of the Income Tax Assessment Act. This decision receives some support from the decision in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9 (26 March 2008) as to legislative intention although the facts in that case were quite different. 15 In those circumstances the application before me, which was filed on 17 August 2009, for a review of the decision of the Senior Deputy Registrar fails and that decision should be confirmed. In Court when delivering judgment I ordered that the interlocutory process seeking review should be dismissed but on consideration of the rules I think the proper order is to confirm the decision subject of review.