Commissioner for Australia Capital Territory Revenue v Highrise Concrete Contractors (Aust) Pty Ltd ACN 088 058 084

• Jurisdiction: Australian Capital Territory
• Judge: Mossop M
• Judgment Date: 21 November 2014
• Court: Supreme Court of ACT
• Docket Number: File Numbers: SC 100 of 2014
• Date: 21 November 2014

[2014] ACTSC 407

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Before:

Mossop M

File Numbers: SC 100 of 2014

Commissioner for Australia Capital Territory Revenue

(Plaintiff)

and

Highrise Concrete Contractors (Aust) Pty Ltd ACN 088 058 084

(Defendant)

Representation:

Counsel:

Mr A Spencer (Plaintiff)

Mr A O'Brien (Defendant)

Cases Cited:

Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728

Bhagat v Capital Global Custodians Ltd [2002] FCAFC 51

Clyne v Deputy Commissioner of Taxation (1982) 43 ALR 342

DCT v Broadbeach Properties Pty Ltd (2008) 237 CLR 473

Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Ltd [2012] FCA 363

Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Ltd (No 2) [2013] FCA 208

Deputy Commissioner of Taxation v Caporale Group Pty Ltd [2011] FCA 1189

Hall v Poolman (2007) 215 FLR 243

Seller v Deputy Commissioner of Taxation (2011) 282 ALR 80

Southgate Investment Funds Ltd v Deputy Commissioner of Taxation (2013) 211 FCR 274

Stead v State Government Insurance Commission (1986) 161 CLR 141

Legislation Cited:

Corporations Act 2001 (Cth)

Income Tax Assessment Act 1936 (Cth)

Payroll Tax Act 2011 (ACT)

Taxation Administration Act 1953 (Cth)

Taxation Administration Act 1999 (ACT)

CORPORATIONS — Application to adjourn an application to wind up company in insolvency — where tax liabilities remain unpaid — whether company is solvent but for the tax liabilities — whether the company has an arguable claim for review of the tax debts — whether discretion should be exercised to grant an adjournment

Introduction

1 By an Originating Process filed on 13 March 2014 the plaintiff ( the Commissioner) applies for an order under ss 459P and 461(1)(k) of the Corporations Act 2001 (Cth) ( Corporations Act) that the defendant ( Highrise) be wound up. The application under s 459P is based on Highrise's failure to comply with a statutory demand. The application under s 461(1)(k) asserts that it is just and equitable that Highrise be wound up. The Originating Process was amended on 17 September 2014 to seek, in addition, an order granting of leave nunc pro tunc pursuant to s 459P(2)(a) to permit the Commissioner to make the application. Ultimately this was not pressed as the parties accepted that such leave was not necessary.

2 By interlocutory process dated 22 September 2014 Highrise seeks an order that the hearing of the winding up application be adjourned until 14 days after the Appeal Tribunal of the Australian Capital Territory Civil and Administrative Tribunal ( ACAT) gives its decision in proceedings AA14/28 ( Appeal Proceedings). It also seeks an order extending the period within which the winding up application must be determined. The adjournment was sought under ss 459A or 467 of the Corporations Act.

3 Highrise also sought, by interlocutory process dated 1 May 2014, an order under s 459S of the Corporations Act giving leave to Highrise to oppose the application for winding up on the ground that there is a dispute regarding the debt the subject of the statutory demand to which the proceedings relate.

4 As it was ultimately argued before me, the outcome of the proceedings depends upon the success or otherwise of Highrise's application for an adjournment. Highrise accepted that if its application for an adjournment was not successful then the statutory provisions relating to its tax liabilities meant that it could not dispute the existence of the debt and displace the presumption of insolvency arising from the failure to comply with the statutory demand.

5 I had previously extended the time for the determination of the winding up application under s 459R of the Corporations Act. Following the reservation of my decision, I further extended the time until 30 November 2014.

Assessed tax liabilities

6 Highrise is presently subject to assessments under tax laws by both the Commissioner and the Commonwealth Deputy Commissioner of Taxation. The history and present status of those tax liabilities are as follows.

ACT payroll tax assessments

7 Highrise was incorporated in 1999. It carried out the business of concrete contracting until December 2011, at which point it ceased taking on new projects. There is some evidence that it continued to carry on work up until April 2013. Some of its activities related to projects located in the Australian Capital Territory. By 2012, Highrise had failed to register for payroll tax as required by s 86 of the Payroll Tax Act 2011 (ACT). It also failed to lodge payroll tax returns or pay payroll tax from August 2006 to February 2011. Highrise then failed to comply with several notices issued pursuant to s 82 of the Taxation Administration Act 1999 (ACT) ( TA Act 1999). Section 82 of the TA Act 1999 permits the Commissioner to serve a notice on a person requiring, inter alia, the person to provide the Commissioner with information or to produce documents or records in the person's control.

8 On 13 March 2012 the Commissioner issued an assessment ( the Assessment). The assessment was for amounts due as at 29 February 2012, referable to unpaid payroll tax for the period between 1 July 2005 and 29 February 2012, penalty tax and interest. The amount assessed in the Assessment was $678,177.26. Highrise did not pay the amount identified in the Assessment.

9 On 3 December 2012, Highrise commenced proceedings in the ACAT for review of the Assessment. Shortly before the matter was listed for hearing, additional evidence was served by the Commissioner. This led to Highrise seeking that the hearing date be vacated and the proceedings adjourned. The Commissioner did not oppose the adjournment. The application for an adjournment was refused, although the evidence does not disclose the reasons for that decision. The proceedings were heard by the ACAT on 25 and 26 June 2013.

10 On 17 October 2013 the Commissioner served a statutory demand dated 11 October 2013 ( the Demand) based on the Assessment for an amount of $781,872.40.

11 By Originating Process filed on 1 November 2013, Highrise applied to the Supreme Court of New South Wales to set aside the Demand under s 459G of the Corporations Act. Highrise's application to set aside the Demand was fixed for hearing on 5 March 2014. On that date, Highrise consented to orders dismissing its Originating Process and ordering it to pay the Commissioner's costs of the proceedings. Those costs remain unpaid. They have not yet been subject to formal assessment. While the estimates of the parties varied, those costs are at least $18,000.

12 The ACAT, which had reserved its decision on Highrise's application in June 2013, delivered its decision on 23 May 2014. The reasons for the 11 month delay in giving its decision are not explained by the evidence.

13 On 26 June 2014 Highrise appealed from the decision of the ACAT to the Appeal Tribunal of the ACAT ( Appeal Tribunal). That appeal was on two grounds. The first was that the ACAT had failed to accord Highrise procedural fairness by reason of the refusal of an adjournment of the hearing in circumstances where the Commissioner had filed and served a lengthy affidavit without leave of the ACAT or consent of Highrise shortly before the hearing was due to commence. The other ground was that the ACAT had failed to properly exercised its function because it had acted under dictation in adopting the practice and procedure of the Commissioner in relation to requiring the taxpayer to produce source documents, rather than deciding for itself whether or not the assessment was excessive.

14 The order sought in the appeal to the Appeal Tribunal is that the decision of the ACAT be set aside and the application be determined by the Appeal Tribunal or be remitted for hearing again before the ACAT. The Appeal Tribunal heard the appeal on 25 September 2014 and reserved its decision. That decision remains reserved.

Commonwealth income tax assessments

15 On 11 November 2013 the Commonwealth Deputy Commissioner of Taxation ( Deputy Commissioner) issued amended assessments for income tax payable by Highrise in relation to the years ended 30 June 2009, 2010 and 2011 and an assessment for the year ended 30 June 2012. At the same time, the Deputy Commissioner issued notices of assessment for ‘shortfall penalties’ for 2009, 2010 and 2011. On 8 February 2013 the Deputy Commissioner issued a further amended assessment in respect of the 2008 financial year. Highrise objected to the assessment and amended assessments. Those objections were disallowed. The total of the amended assessments and penalties said to be due for the financial years ending 2008, 2009, 2010, 2011 and 2012 is $1,020,295.82.

16 Highrise filed Applications for Review dated 4 December 2013 and 30 May 2014 in the Administrative Appeals Tribunal ( AAT) in relation to the decisions to disallow the objections. Those applications for review were dismissed on the application of the Deputy Commissioner by reason of the failure of Highrise to comply with a direction of the Tribunal. On 10 October 2014 orders were made by the AAT reinstating Highrise's applications for review. These orders were made as a consequence of an application by Highrise.

Submissions

17 Highrise seeks an adjournment of the winding up application. Highrise accepted that if that application is unsuccessful, then the orders sought by the Commissioner will be made. That is because Highrise accepted that tax debts are conclusive and recoverable, notwithstanding the pendency of any objection or application for review. In relation to ACT payroll tax, the relevant legislative provisions are contained in the TA Act 1999. Section 134 of the TA Act 1999 provides that the production of a notice of assessment is conclusive evidence of the due making of the assessment and that the amount and...