Supreme Court New South Wales Medium Neutral Citation: In the matter of Climbform Australia Pty Limited [2016] NSWSC 1977 Hearing dates: Thursday, 17 March 2016 Date of orders: 17 March 2016 Decision date: 17 March 2016 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Originating process dismissed with costs Catchwords: CORPORATIONS – winding up – insolvency – setting aside creditor's statutory demand – whether grouping provisions in payroll tax legislation apply even though company not liable to pay payroll tax – valid grouping – whether there was debt owing as at that date – held, plaintiff failed to show there is genuine dispute as to existence of debt, and debt is conclusively established by notice of assessment Legislation Cited: (CTH) Corporations Act 2001, s 459G (NSW) Payroll Tax Act 2007, s 72, s 81 (NSW) Taxation Administration Act 1996, s 119 Cases Cited: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41 In the matter of Gemaveld Pty Ltd [2012] NSWSC 582 Print National Australia Pty Ltd v Chief Commissioner of State Revenue [2012] NSWSC 297 Category: Principal judgment Parties: Climbform Australia Pty Limited ACN 158551467 (plaintiff) Department of Finance Services and Innovation trading as Chief Commissioner of State Revenue ABN 77456270638 (defendant) Representation: Counsel: P Beazley (solicitor)(plaintiff) R Yezerski (defendant) Solicitors: Beazley Boorman Lawyers (plaintiff) Matthews Folbigg Pty Ltd (defendant) File Number(s): 2015/368092 Judgment (ex tempore) 1. By originating process filed on 15 December 2015, the plaintiff Climbform Australia Pty Ltd seeks an order pursuant to (CTH) Corporations Act 2001, s 459G, setting aside a creditor's statutory demand for payment of debt dated 3 December 2015 and served on the plaintiff by the defendant Chief Commissioner on or about 7 December 2015. 2. The demand was for $264,043.58, comprised of amounts described in the Schedule to the demand, which may be summarised as payroll tax levied pursuant to (NSW) Payroll Tax Act 2007 by an assessment issued on 5 June 2015 for the year 1 July 2013 to 30 June 2014 (and interest thereon), and in another assessment issued on the same date for the period 1 July 2014 to 27 May 2015 (and interest thereon). The assessment was made in circumstances where, although the company was not itself liable to pay payroll tax, the Commissioner has taken the view that the "grouping" provisions of the Payroll Tax Act apply to it. The plaintiff contends, essentially, that there was no "valid grouping" as at 5 June 2015; that there was no debt owing by the principal debtor as at that date; that it is not just to impose liability on the plaintiff; and that these matters at least give rise to a sufficiently arguable dispute as to warrant the demand being set aside. 3. The first obstacle to these submissions is (NSW) Taxation Administration Act 1996, s 119, which provides that production of a notice of assessment, or a document signed by the Chief Commissioner purporting to be a copy of the notice of an assessment, is conclusive evidence of the due making of the assessment, and that the amount and all particulars of the assessment are correct, except in objection review proceedings when it is prima facie evidence only. It is well established that such provisions have the effect that when a creditor's statutory demand relies on such an assessment, it cannot be said that there is a genuine dispute as to the debt. [1] In those circumstances, there cannot be a genuine dispute as to whether Climbform owes the amount demanded as in these proceedings, under s 459G, the assessment is conclusive evidence of the existence of the debt. [2] That is sufficient to dispose of the application to set aside the demand, although I will come to the merits in due course. (Although Part 10 of the Taxation Administration Act contemplates review proceedings in a Court in some circumstances, that is only so when objection has been taken to the decision of the Chief Commissioner under Part 10 in the first place, in which case the Chief Commissioner's decision on the objection can then be the subject of review. None of that has happened in the present case). 4. Notwithstanding these obstacles, I turn to the merits of the application. The plaintiff submits that as at the date of the grouping, being 5 June 2015, Mr Laukka was no longer in control of the company that was liable to pay tax, as a liquidator had been appointed, and therefore, the commissioner could no longer rely on s 72 of the Payroll Tax Act. Accordingly, it was said there was "no valid grouping". 5. In order to deal with that submission, it is necessary to understand a little of the background facts, and how the grouping provisions work. 6. Another company – now called ACN 164 255 136 Pty Ltd, formerly HLHG Pty Ltd – was liable to pay payroll tax. It went into voluntary liquidation on 27 May 2015, owing payroll tax. Esa Matti Laukka became a director of HLHG on 13 June 2013 and remained a director when it went into liquidation. He was also the sole shareholder in HLHG. 7. The company the subject of these proceedings – Climbform Australia Pty Ltd – has three shareholders: Bradley John Hannon holds two ordinary shares, Salemade Pty Ltd holds sixteen ordinary shares, and Esa Matti Laukka holds sixty-two ordinary shares. Mr Laukka is the sole director of Climbform, and its sole secretary, having been appointed in both of those capacities on 25 May 2012. 8. When HLHG went into liquidation, the Commissioner lodged a proof of debt with respect to the payroll tax owing by HLHG. The Commissioner also by letter of 5 June 2015, advised Climbform that under the grouping provisions of Payroll Tax Act and Taxation Administration Act, Climbform and HLHG were "grouped", so that Climbform was jointly and severally liable for the payroll tax payable by HLHG. 9. Payroll Tax Act, s 81 provides that if a member of a group fails to pay an amount that a member is required to pay in respect of any period, every member of the group is liable jointly and severally to pay that amount to the Chief Commissioner. If two or more persons are jointly and severally liable to pay an amount, the Chief Commissioner may recover the whole amount from any of them, and a person who pays an amount in accordance with a liability imposed by s 81 has such rights of contribution or indemnity from the other as are just. The section applies whether or not the person was an employer during the relevant period. 10. Payroll Tax Act, s 72, provides that if a person or set of persons has a controlling interest in each of two businesses, the persons who carry on those businesses constitute a group. Relevantly, for the purposes of the section, a person has a controlling interest in a business if, in the case of a business carried on by a corporation, the person is a director of the corporation and is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation, or the person can directly or indirectly exercise, control the exercise of, or substantially influence the exercise of, more than 50% of the voting power attached to the voting shares issued by the corporation. As will be apparent from the share structure and directorships to which I have referred, Mr Laukka was, in respect of HLHG, the sole director and thus, for the purposes of s 72, was entitled to exercise more than 50% of the voting power at meetings of the directors of HLHG. He also held more than 50% of the voting power attached to the voting shares in the general meeting. In respect of Climbform, he was again a director who was entitled to exercise more than 50% of the voting power at meetings of the directors and he held more than 50% of the votes in a general meeting. Accordingly, Mr Laukka had, for the purposes of s 72, a controlling interest in the business of HLHG, and also a controlling interest in the business of Climbform. 11. In those circumstances, without any decision or action of the Chief Commissioner, those corporations together constituted a group for the purposes of s 72(1). Payroll Tax Act, s 79, permits the Chief Commissioner to make decisions excluding persons from a group in certain circumstances but no decision is required to include persons in a group. It is a legal consequence of s 72 that Climbform and HLHG relevantly constituted a group. 12. The plaintiff's next submission was that it could not be said that HLHG had failed to pay an amount that it was required to pay under the Payroll Tax Act, so as to engage s 81(1). Essentially, the argument was that HLHG, having gone into liquidation, was no longer required to pay the debt, because enforcement proceedings against it were stayed by operation of the Payroll Tax Act. That submission fails to have regard to the terms of the Payroll Tax Act and the manner in which it imposes liability to pay tax on employers, and misconceives the nature of the stay of proceedings that arises upon a company going into liquidation. 13. Payroll Tax Act, s 9, provides that a person who is liable to pay payroll tax must pay the tax within certain timeframes. That section imposes the requirement to pay the tax. That requirement does not evaporate just because the employer is or becomes insolvent, or goes into some form of insolvent administration. There has been a requirement to pay, and there has been a failure to pay as required. The statutory stay does not obliterate the obligation to pay a debt. 14. In my view, there is no tenable argument against the proposition that s 81(1) was engaged; that in those circumstances, as a matter of law Climbform was jointly and severally liable for the amount of the tax liability, and that the Chief Commissioner was entitled to recover that amount from Climbform. 15. The plaintiff submitted that it was unjust for the Commissioner to exercise the "grouping powers" in circumstances where the other employer, HLHG, in respect of whom Climbform would have a right of indemnity, had gone into liquidation. While it is true that s 81(4) provides that, in the case of joint and several liability, the party who pays the liability has such rights of contribution as are just, that does not import into the grouping provisions any requirement that it be just that joint and several liability is visited on a grouped entity. Moreover, the argument overlooks the circumstance that no exercise of discretion or decision is involved in "grouping", but rather, that that is a direct legal consequence of the operation of s 72. 16. Accordingly, in my view, none of the matters raised by the plaintiff begin to show a genuine dispute as to the existence of the debt referred to in the statutory demand. Moreover, the debt is conclusively established by the notice of assessment. Thus, the application under s 459G must be dismissed. The balance of the relief claimed in the originating process, in the absence of any objection and review proceedings under Part 10 of the Taxation Administration Act is incompetent, and ought also be dismissed. 17. The Court therefore orders that the originating process be dismissed with costs. ********** Endnotes 1. Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [51], [54], [55] and [56], and Print National Australia Pty Ltd v Chief Commissioner of State Revenue [2012] NSWSC 297 at [17] which applies the same principles in the context of the state legislation. 2. Broadbeach Properties at [57]–[58], and In the matter of Gemaveld Pty Ltd [2012] NSWSC 582 at [3]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 June 2018