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Re Smartdial Pty Ltd [2023] VSC 435 (27 July 2023)

Last Updated: 28 July 2023

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2023 00875

IN THE MATTER of SMARTDIAL PTY LTD (ACN 156 378 639)

BETWEEN:

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CORPORATIONS — Application to set aside statutory demand under s 459G of the Corporations Act 2001 (Cth) served by the defendant claiming amounts for unpaid taxation liability — Originating process identified grounds as being the existence of a genuine dispute under s 459H(1)(a) and that the demand was defective so as to give rise to substantial injustice under s 459J(1)(a) — Plaintiff abandoned those grounds and sought leave to file an amended originating process making a claim that there was ‘some other reason’ why the demand should be set aside under s 459J(1)(b) — Finding that such a ground was available by reference to the evidence in the supporting affidavit and plaintiff given leave to file an amended originating process — Tuta Healthcare v Nipro Asia Pty Ltd [2005] NSWSC 664 applied — Finding that plaintiff had not established there was some other reason why the demand should be set aside on the bases it contended — Application dismissed.

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TABLE OF CONTENTS

HIS HONOUR:

1 On 7 March 2023, Smartdial Pty Ltd (‘Smartdial’ or ‘plaintiff’) filed an originating process pursuant to s 459G of the Corporations Act 2001 (Cth) (‘Act’), seeking to set aside a statutory demand dated 8 February 2023 (‘demand’) and served on it by the Deputy Commissioner of Taxation (‘DCT’).^[1]
2 The demand claims that Smartdial is indebted to the DCT for $201,362.03 in respect of unpaid taxation liabilities. The schedule to the demand describes the debt as follows:

Running Balance Account deficit debt as at 7 February 2023 in respect of amounts due under the BAS provisions as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (“the ITAA 1997”) [BAS provisions include, generally: the goods and services tax provisions, the PAYG withholding provisions, the PAYG instalment provisions, the fringe benefits tax instalment provisions and the deferred company instalment provisions], administrative overpayments due under s 8AAZN of the Taxation Administration Act 1953 (“the TAA 1953”), administrative penalties due under Part 4-2 of Schedule 1 of the TAA 1953 and the general interest charge payable under section 8AAZF of the TAA 1953 and Part IIA of the TAA 1953, calculated up to and including 6/02/2023, being a debt due and payable by the company pursuant to section 8AAZH of the TAA 1953.

The demand was signed by Melinda Smith, who is a Deputy Commissioner of Taxation.
3 The demand was accompanied by an affidavit of Marcia Tukuafu, who is an officer of the Australian Taxation Office. The affidavit complies with s 459E(3) of the Act in that it verifies that the total of the amount of the debts is due and payable, complies with the Supreme Court (Corporations) Rules 2023 (Vic) (‘Corporations Rules’),^[2] and is in Form 7 of the Corporations Rules.

Smartdial’s originating process

4 The originating process states that the application is made under s 459G of the Act. It identifies the grounds on which the application is made as being:

(a) the statutory demand is defective, causing substantial injustice to the plaintiff; and
(b) there is a genuine dispute between the plaintiff and the defendant about the existence or amount of the debt to which the statutory demand relates.

5 The originating process sets out particulars as to how it is said that the demand is defective and causes substantial injustice (a reference to the terms of s 459J(1)(a) of the Act) and how it is contended that there is a genuine dispute in respect of the debt claimed in the demand (a reference to s 459H(1)(a) of the Act).
6 Aside from the claim for relief under ‘s 459J(1)’, there is no express reference in the originating process to a claim that the demand should be set aside for ‘some other reason’ under s 459J(1)(b) of the Act. Smartdial now seeks to agitate that specific statutory ground and applies to amend the originating process for that purpose.
7 The originating process claims that the demand is defective, either under the definition of ‘defect’ in s 9 of the Act, or within the ordinary meaning of that term by reason that:

(a) the statutory demand does not comply with s 459E of the Act as the DCT claims that Smartdial owes the DCT two or more debts but the statutory demand does not give a description of the individual debts and state their amounts;
(b) the total amount claimed in the statutory demand cannot be reconciled with information provided by the DCT subsequent to service of the demand and consequently appears to be misstated; and
(c) amounts claimed under the statutory demand by the DCT remained unexplained, despite the request for clarification made by Smartdial in that regard.

8 The originating process then contends that substantial injustice is suffered by Smartdial because of the defects in the statutory demand by reason that:

(a) the statutory demand does not give clear and sufficient information to enable Smartdial to determine whether it is liable for the amounts claimed by the DCT from Smartdial’s own records; and
(b) prior to service of the demand, Smartdial had not received notice from the DCT of the amount claimed in the statutory demand and is unable to identify or ascertain the amounts said to be owing by reference to information in Smartdial’s possession and control.

It is said that, as a consequence of these matters, Smartdial is deprived of the right to accurately assess whether or not the DCT is entitled to the amounts claimed.
9 As to the particulars of the genuine dispute, the originating process claims that a genuine dispute exists by reason that:

(a) correspondence with the DCT subsequent to service of the statutory demand attaching an Integrated Client Account Statement of Account dated 6 February 2023 shows that at least part of the amount claimed by the DCT under the statutory demand relates to administrative penalties under Part 4-25 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (‘TAA’);
(b) under s 298-10 of Part 4-25 of Schedule 1 of the TAA, unless the DCT decides to remit all of the penalty, the DCT must give Smartdial written notice of Smartdial’s liability to pay an administrative penalty;
(c) under s 298-15 of Part 4-25 of Schedule 1 of the TAA, an administrative penalty only becomes due for payment on the day specified on the notice, which must be at least 14 days after the notice is given to the entity;
(d) the DCT has not given Smartdial written notice of the administrative penalties claimed by the DCT in compliance with ss 298-10 and 298-15 of Part 4-25 of Schedule 1 of the TAA; and
(e) as the DCT has not given Smartdial the required written notice, the administrative penalties have not become due for payment.

10 The originating process seeks:

(a) a declaration that the Court is satisfied there is a genuine dispute between Smartdial and the DCT about the existence or amount of a debt to which the statutory demand relates;
(b) further or alternatively, a declaration that the statutory demand is defective, causing substantial injustice to the plaintiff;
(c) the statutory demand be set aside pursuant to s 459H and/or s 459J(1) of the Act.

Smartdial’s supporting affidavit

11 Smartdial’s application was supported by an affidavit of Thomas Lindsay-Barker sworn 7 March 2023 (‘supporting affidavit’). Mr Lindsay-Barker, who is the sole director of Smartdial, states that Smartdial previously carried on business providing internet hosting services but it no longer contracts with new clients and that business has been wound down.
12 Mr Lindsay-Barker states that when he reviewed the demand, which claims a debt of $201,362.03, the amount claimed was unfamiliar to him. He did not recall Smartdial receiving any previous demands for such an amount and states that on review of Smartdial’s records, he was unable to understand how the DCT derived the sum of the alleged debt.
13 Mr Lindsay-Barker states that the description in the schedule to the statutory demand which is set out in paragraph 2 above and the accompanying affidavit did not assist him in understanding what the alleged debt related to. The affidavit of Marcia Tukuafu which accompanied the statutory demand described the debt in the same terms to that appearing in the schedule.
14 Mr Lindsay-Barker states that on 1 March 2023, i.e. after service of the demand, he telephoned the office of the DCT and spoke to a representative of the ATO. During the telephone call, Mr Lindsay-Barker sought details as to how the debt arose and why Smartdial had not received any prior communications in relation to it. He states that during the telephone call with the ATO’s representative:

(a) he was made aware that the DCT had previously attempted to write to Smartdial in relation to the debt by post, however the DCT had sent the correspondence to a post office box in Hawthorn, Victoria, which was no longer maintained by Smartdial;
(b) the DCT stated that the alleged debt arose from administrative penalties; and
(c) the DCT agreed to send Smartdial information which explained the alleged debt.

15 Mr Lindsay–Barker states that on 3 March 2023, Smartdial received correspondence from the DCT which purported to explain the alleged debt, including:

(a) an Integrated Client Account Statement of Account (‘Statement of Account’) of 6 February 2023; and
(b) three notices headed Penalty for Failure to Lodge Activity Statement on Time dated 1 February 2023 (‘ATO notices’).

16 Mr Lindsay-Barker states he assumes that the DCT attempted to send the Statement of Account and the ATO notices by post to Smartdial on or around the date that the documents are dated, 1 and 6 February 2023 respectively, but that those documents were never received by Smartdial at that time. The documents were apparently sent to Smartdial at the disused post office box address in Hawthorn.
17 Mr Lindsay-Barker states that Smartdial did receive the statutory demand from the DCT. The demand was sent to Smartdial’s registered office and principal place of business recorded in the ASIC records.
18 Mr Lindsay-Barker states, in a section of the affidavit entitled ‘Inability to understand the alleged debt’, that after reviewing the demand, the Statement of Account and the ATO notice, he is still unable to understand the source of the debt claimed in the demand. In that regard, he contends that in the correspondence Smartdial received in March 2023 purporting to explain the alleged debt:

(a) the amount claimed of $201,362.03 cannot be identified in or reconciled with the Statement of Account and ATO notices; and
(b) the Statement of Account of 6 February 2023:

(i) shows an opening balance of $199,429.19, which is not explained and the derivation of this opening balance is unknown;
(ii) records that penalties were imposed for Smartdial’s failure to lodge monthly activity statements during the relevant period, but this is inconsistent with the ATO notices which show that over the same period, penalties were imposed for the failure by Smartdial to lodge quarterly activity statements.^[3]

19 Mr Lindsay-Barker states that because of the inability to reconcile the alleged debt amounts and the DCT’s lack of explanation for the total debt and inconsistencies in the March correspondence, Smartdial is unable to understand the derivation of the alleged debt of $201,362.03 and is ‘unable to agree’ that this amount is owed to the DCT.

Mr Lindsay-Barker’s second affidavit

20 Mr Lindsay-Baker swore a second affidavit on behalf of Smartdial on 5 April 2023 (‘supplementary affidavit’). In the supplementary affidavit, he elaborates on matters raised in the supporting affidavit in respect of the penalties claimed by the DCT for failure to lodge documents. In the DCT’s correspondence of March 2023 containing the Statement of Account and the ATO notices, it identifies a ‘process date’ of 27 January 2023, an ‘effective date’ of 20 February 2023 and claims an amount of $16,816.17.
21 Mr Lindsay-Barker asserts that even if proper written notice had been given to Smartdial, these amounts were not payable by Smartdial as at the date of the demand.
22 His basis for contending this is that:

(a) under s 298-10 of Part 4-25 of sch 1 of the TAA, the DCT must give the taxpayer written notice of the taxpayer’s liability to pay an administrative penalty unless the DCT decides to remit all of the penalty; and
(b) under s 298-15 of Part 4-25 of sch 1 of the TAA, an administrative penalty only becomes due for payment on the day specified in the notice, which must be at least 14 days after the notice is given to the entity.

23 Mr Lindsay-Barker contends that Smartdial was not provided with the written notice of the itemised amounts pursuant to s 298-15 of the TAA, which provides that the itemised amounts become due for payment on the day specified in the notice which must be at least 14 days after the notice is given to the entities. He contends this provides further support for the contention that the demand is defective and the subject of a genuine dispute.
24 In a section of his supplementary affidavit under the heading ‘Some other reason’, Mr Lindsay-Barker also requests that the Court consider setting aside the demand for ‘some other reason’ in accordance with s 459J(1)(b) of the Act based on the relevant facts and circumstances raised in his affidavits. He accepts that while the originating process and the supporting affidavit did not expressly raise grounds to set aside the statutory demand pursuant to s 459J(1)(b) of the Act by express reference to that statutory provision, he contended (by way of submission) that the Court still had jurisdiction to make an order setting aside the statutory demand under s 459G based on s 459J(1)(b) given that s 459G does not require a relevant application or affidavit supporting it to identify a legal category, to plead the statutory provision or to nominate a cause of action.^[4] In addition, it was submitted that the Court may still regard the supporting affidavit filed in this proceeding as supporting an application based under s 459J(1)(b) given that the relevant facts and circumstances are raised ‘by necessary influence or by reasonably available inference’ in the supporting and supplementary affidavits.^[5]
25 Mr Lindsay-Baker states that in support of setting aside the statutory demand for ‘some other reason’ reliance is made on the facts and circumstances set out in the identified passages of the supporting affidavit and his supplementary affidavit.
26 He concludes his supplementary affidavit with a section headed ‘Administrative penalties not payable’. Mr Lindsay-Barker states that in relation to the administrative penalties claimed by the DCT in the March correspondence, he has been advised by his lawyer that the DCT has not complied with the legal requirements to impose these administrative penalties and the DCT has acted inconsistently with information in its Practice Statement and on the ATO website. In particular:

(a) as of the date of the statutory demand, the DCT had not given Smartdial the notice required for the administrative penalties to be payable as a debt; and
(b) while not necessarily binding on the DCT, because of the failure to provide notice, Smartdial has not received the opportunity to request remission of the administrative penalty from the DCT.

Smartdial’s application to amend the originating process and its submissions in support of that application

27 Smartdial’s application was first returnable before Steffensen AsJ on 22 March 2023, when orders were made for the filing and service of affidavit evidence and submissions and for the matter to be set down for hearing on 2 June 2023.
28 On 18 May 2023, orders were made by consent by Steffensen AsJ, extending the time by which Smartdial was to file and serve an outline of submissions.
29 On 30 May 2023, the matter returned before Steffensen AsJ on the Court’s own motion by reason of Smartdial’s non-compliance with the orders made on 18 May 2023 for the delivery of submissions. On that occasion, Smartdial foreshadowed an application for leave to file an amended originating process. Orders were made listing that application for hearing before me on 28 June 2023, at the hearing of the principal application, together with extensions of time for delivery of outlines of submissions.
30 Significantly, in its written submissions, Smartdial expressly withdrew its application to set aside the demand on the grounds identified in the originating process, i.e. that the demand was defective and caused substantial injustice pursuant to s 459J(1)(a) of the Act and that there was a genuine dispute under s 459H(1)(a) of the Act. Instead, as foreshadowed in the supplementary affidavit, it sought an order in accordance with s 459J(1)(b) of the Act to set aside the demand on the ground of there being ‘some other reason’ why the demand should be set aside, a ground which was not expressly claimed in the originating process.
31 Smartdial contends that the jurisdiction of the Court to make the orders that it now seeks under s 459J(1)(b) arise by reason that:

(a) an application has been made within the statutory period for it to be set aside under s 459G;
(b) the application and supporting affidavit were filed and served on the DCT by the applicable deadline; and
(c) the supporting affidavit states the material facts which support Smartdial’s application under s 459J.

32 Smartdial’s submits that its proposed amended originating process does not seek to raise any additional allegations, material facts or circumstances, but only expressly seeks that the Court grant relief under s 459J(1)(b) of the Act. It contended that the grounds for relief under this sub-section are conveyed in Smartdial’s originating process and the supporting affidavit. On this basis, it submitted that the proposed amended originating process did not contravene the principle discussed by the Court of Appeal in Sceam Construction Pty Ltd v Clyne^[6] and that the Court may and should grant Smartdial leave to file the amended originating process.
33 In the alternative, it submitted that if leave is not granted, the Court still has the discretion to consider setting aside the statutory demand for ‘some other reason’ under s 459J(1)(b) without requiring an application or supporting affidavit to expressly identify the statutory provision of s 459J(1)(b).

The facts and submissions relied upon by Smartdial in its application to amend the originating process set aside the demand under s 459J(1)(b)

34 In its submissions, Smartdial concedes that $66,675.00 of the amount claimed by the DCT is due and payable by Smartdial in respect of liability for GST under Business Activity Statements despite, it says, the DCT not providing Smartdial with the required notice under s 155-10 of the TAA.
35 In essence, the basis of Smartdial’s application to set aside the demand under s 459J(1)(b) is its contention that the DCT’s claim in the demand for penalties for failure to provide a document as required and to lodge activity statements on time, are not currently due and payable. It accepts that charges and penalties can be imposed by the DCT under Part 4-25 of the TAA and penalties can be imposed for failure to provide documents as required under s 248-75 of the TAA. It also accepts that penalties for failure to lodge documents on time can be imposed under s 286-65 of the TAA. It contends however that for all penalties imposed under Part 4-25 of the TAA, (a) the DCT must give Smartdial written notice of Smartdial’s liability to pay an administrative penalty; and (b) an administrative penalty can only become due for payment on the day specified in the notice, which must be at least 14 days after the notice is given.
36 Smartdial contends that, despite the issue of the notice being drawn to the DCT’s attention, the DCT has not provided evidence that notice has been effected by, for example, sending notice of the penalties to Smartdial’s registered office or to one of Smartdial’s officers, its public officer or its attorneys or agents. The DCT states that on 31 July 2019, there was an attempt to give Smartdial notice of the penalties for failure to lodge documents, however Smartdial contends that that notice was not effective notice, given that it was not directed to a designated Address for Notice.
37 Section 298- 10 of the TAA provides:

Notification of liability
The Commissioner must give written notice to the entity of the entity’s liability to pay the penalty and of the reasons why the entity is liable to pay the penalty. The Commissioner may do so in any other notice he or she gives to the entity. The Commissioner is not required to give reasons if he or she decides to remit all of the penalty.

38 Section 298-15 provides:

Due date for penalty
The penalty becomes due for payment on the day specified in the notice, which must be at least 14 days after the notice is given to the entity.

39 Smartdial submits that the general interest charges which have been claimed have been correctly imposed to the extent that they apply to amounts owing under the original BAS statements, but to the extent that they apply to administrative penalties which have not become due for payment, they have not been correctly imposed, cannot be claimed and should be recalculated.
40 Smartdial submits that while it did not expressly refer to s 459J(1)(b), it contends that the supporting affidavit contains the material facts which entitle it to agitate such a ground. It submits that in the circumstances it would be unjust to allow the statutory demand to stand based on:

(a) a substantial proportion of the amount claimed by the DCT:

(i) is not due and payable (i.e. the penalties); or
(ii) has not been calculated correctly (i.e. the general interest charge); and

(b) Smartdial did not receive notice of the claimed amounts in circumstances where the statutory demand genuinely confused it.

Ruling on application by Smartdial to amend the originating process

41 The authorities indicate that, while the originating process may be amended, the extent of the amendment will be constrained by the content of the affidavit filed in support of the application to set aside.^[7] That is to say, the Court will not allow an amendment to articulate a new ground of opposition if that new ground is not capable of being established by reference to the evidence contained in the supporting affidavit. If the ground which is sought to be agitated was not one which has been fairly notified by reference to the affidavit in support, then there would be no point in allowing an amendment to the application.^[8] The emphasis in the authorities is on the factual matters raised in the supporting affidavit, rather than determining the matter by consideration of provisions of the Act, to which there is express reference in the originating process. In MNWA Pty Ltd v Deputy Commissioner of Taxation (‘MNWA’), Rares J observed:

Importantly, s 459G does not require the application or affidavit supporting it to identify a legal category, to plead a statutory provision or to nominate a cause of action: cf Agar v Hyde (2000) 201 CLR 552 at 577–578 [64] per Gaudron, McHugh, Gummow and Hayne JJ. The jurisdiction of the Court to make an order setting the demand aside is enlivened if, at the hearing, the material facts and circumstances originally revealed in the initial affidavit under s 459G(3)(a) fall within the provisions of ss 459H(1) or 459J(1). As I have noted above the evidence and circumstances at the hearing can supplement the material facts and circumstances expressed or necessarily implied in the initial affidavit, including putting evidence into admissible form, but cannot expand the field of issues.^[9]

42 Whether or not the issue referred to by Smartdial in respect of failure to provide notice of the liabilities ultimately constitutes a ground under s 459J(1)(b), I consider that the supporting affidavit expressly raises^[10] the issue sought to be agitated in paragraphs 25 to 28 of the supporting affidavit, such that Smartdial should be permitted to agitate it. While I do not regard it as being strictly necessary for the originating process to be amended in order for such a ground to be agitated, I will allow the amendment which is proposed by Smartdial to the originating process.

Smartdial’s submissions that the demand be set aside under s 459J(1)(b)

43 Section 459J(1)(b) of the Act provides that:

(1) On an application under s 459G, the Court may by order set aside the demand if it is satisfied that
...

(b) there is some other reason why the demand should be set aside.

44 Smartdial contends, referring to the decision of Hoare Bros Pty Ltd v Deputy Commissioner of Taxation,^[11] that the discretion under s 459J(1)(b) may be exercised where it is ‘shown that the Commissioner’s conduct was unconscionable, was an abuse of process, or had given rise to substantial injustice’. Smartdial submits that the discretion is of broad compass and the Court may still exercise the discretion under that provision even where such type of conduct is not established.^[12] It accepts that the discretion should not be exercised unless it is ‘supported by some sound or positive ground or good reason which is relevant to the purposes for which the power exists’.^[13] In that regard, it submits that the purpose for which the power exists includes the quick resolution of the issue of solvency and the determination of whether a company should be wound up, without interposing disputes about debts, unless they are raised properly.^[14] Smartdial referred to the decision of the Full Court of the Federal Court in MNWA,^[15] in its reference to Kisimul Holdings Pty Ltd v Clear Position Pty Ltd (‘Kisimul’),^[16] where the Court of Appeal of the New South Wales Supreme Court held that the discretion under s 459J(1)(b) applied ‘wherever there is a need to counter some attempt at subversion of the intended operation of Part 5.4’. In Kisimul, s 459J(1)(b) was held to be a remedial provision that enabled the Court to deal with cases not within ss 459H or 459J(1)(a) ‘in a way that is just, having regard to the purpose of the legislation’.^[17]
45 In its submissions, Smartdial referred to a passage of MNWA as providing a summary as to how the discretion operates.^[18]

Section 459J(1)(b) gives the Court a discretion, that must be exercised judicially, to set aside a statutory demand if it is satisfied that there is some other reason, than on the basis of s 459H or 459J(1)(a), to do so. The discretion is unconfined except by reference to the subject matter, scope and purpose of Part 5.4 in the more general context of the Corporations Act: ... and, as the Court in Broadbeach at 237 CLR 497 [61] held, a relevant consideration that must be considered, in a case where Commissioner is seeking to recover a taxation debt, is that the debt is made due, payable and recoverable under the taxation laws and the demand is served in aid of a winding-up application.

46 At [115] of MNWA, Rares J observed:

The explanatory memorandum explained (at [688]) that the use of the expression ‘some other reason’ in Part 5.4, including s 459J(1)(b), was to ensure that the Court has power to set a demand aside ‘on the basis of the commercial justice of the matter, rather than on the basis of technical difficulties’.

47 Smartdial accepts that where the DCT issues a statutory demand, she has the benefit of the conclusive evidence provisions of the TAA which have the effect that a notice of assessment is conclusive evidence that the amounts and particulars of that notice of assessment are correct.^[19] Smartdial contends, however, that if the Court forms the view that the DCT has acted oppressively or unfairly by issuing a statutory demand, the appropriate course is for the Court to set the demand aside under s 459J(1)(b). In setting the statutory demand aside, the Court does not deny that the debt is recoverable, but ‘insists that the statutory demand procedure should not be used to apply a pressure for payment of an amount which ultimately be found not to be payable’.
48 Smartdial submits that the Court should set aside the statutory demand by reason of the DCT has not complied with the requirement to serve notice of such liabilities and a substantial proportion of the debt claimed in the demand is not due and payable. Further, the general interest charges which are claimed have been incorrectly applied to these administrative penalties and it follows that those claims are also not due and payable.

Evidence and submissions of the DCT

49 In opposing the application, the DCT relies on an affidavit of Nathan Pala of 19 April 2023. Mr Pala, an employee of the Australian Taxation Office, begins his evidence by describing the ATO’s accounting systems and records and then proceeds to describe the origin of the debt claimed in the demand. For that purpose, Mr Pala perused the records maintained by the DCT in respect of Smartdial.
50 Mr Pala states that the Commissioner of Taxation established a Running Balance Account (‘RBA’) in respect of the primary tax debts due by Smartdial and allocated debts due by Smartdial under the Business Activity Statement provisions, administrative overpayments due under s 8AAZN of the TAA and primary tax debts due as administrative penalties under Part 4-25 of the TAA to the RBA pursuant to s 8AAZD of the TAA.
51 Mr Pala states that from time to time the balance of the RBA account was in favour of the Commissioner and was accordingly an RBA deficit debt as defined in s 8AAZA of the TAA.
52 By operation of s 8AAZF(1) and Part IIA of the TAA, Smartdial became liable to pay the General Interest Charge for each day at the end of which there was an RBA deficit debt. Mr Pala deposes that at the end of each day for which the General Interest Charge was payable under s 8AAZF(1), the balance of the RBA account was altered in the Commissioner’s favour by the addition of the amount of the interest payable for that day pursuant to s 8AAZF(2) of the TAA.
53 Mr Pala exhibits an RBA statement for Smartdial produced pursuant to s 8AAZI^[20] of the TAA dated 17 April 2023, showing that Smartdial owed the DCT $201,362.03 in respect of RBA deficit debt as at 8 February 2023, the date that the statutory demand was prepared and sent to Smartdial.
54 Mr Pala then details the issue of the Notices of Assessment of Net Amount with respect to Smartdial’s GST periods which total $66,675. These are the subject of formal assessments in accordance with the TAA. As indicated above, Smartdial accepts that it is indebted to the DCT for this part of the claim.
55 Mr Pala also exhibits a Notice of Assessment generated on 31 July 2019 for penalties imposed for the failure to provide documents with respect to identified GST periods. Those penalties total $59,138.55.
56 Mr Pala exhibits a certificate titled ‘Certificate under Section 350-10(3) of the TAA’ in respect of the Notice of Assessment of Net Amount and Notice of Assessment of penalty for failing to provide a document. Section 350-10(3) provides that production of a certificate signed by a Deputy Commissioner^[21] under that provision is prima facie evidence that from the time specified on the certificate, an amount was payable under a taxation law. The certificate proceeds to certify pursuant to ss 350-10(3) and 350-12(2) of the TAA that assessments had been made for tax related liabilities for GST and ‘administrative penalty for failing to provide a document’ for identified periods, that notices in respect of those liabilities had been served on Smartdial for assessments issued on 31 July 2019, and that Smartdial had a tax-related liability for each liability referred to together with general interest charges on the unpaid amount of each such liability. It concluded by certifying that, from 19 April 2023, an amount of $221,916.88 was payable by Smartdial to the Commissioner of Taxation.
57 In response to Smartdial’s submissions, Mr Pala exhibits, apparently by recourse to the ATO’s records, correspondence between the ATO and Smartdial extending back to 2019. The ATO’s records reveal that on 10 April 2019, an ATO audit officer, Ms Williams, emailed the director, Thomas Barker, (apparently a reference to Mr Lindsay-Barker) with an attached letter which stated the requirement for Smartdial to lodge returns to avoid penalties. The attached letter noted that the company’s income tax returns for the financial years 2012 to 2018 were outstanding and that if such documents were not lodged by 12 May 2019, default assessments would issue and penalties may be charged of at least 75% of the tax owed together with late lodgement penalties and interest.
58 On 17 May 2019, Ms Williams again emailed Mr Lindsay-Barker, observing that no response had been received in respect of the letter sent by email on 10 April 2019 and foreshadowing the creation of default assessments using the information that the ATO held.
59 On 20 May 2019, Mr Lindsay-Barker replied by email to the ATO audit officer, stating: ‘Could you give me to the end of the week. I remain overseas and awaiting statements for this period from my ex-wife’. On 20 May, Ms Williams replied by email to Mr Lindsay-Barker, saying that he could have to the end of the week but it was indicated that if there was failure to comply, default assessments based on information that the Commissioner held would be generated.
60 On 29 July 2019, the DCT issued a letter headed, ‘We have issued you a default assessment’ and sent it to the post office box address in Hawthorn. Mr Pala indicates that there is no indication in the ATO records that the letter was returned.
61 On 22 November 2021, the DCT issued a letter to Smartdial addressed to its registered office in Malvern, Victoria^[22] providing account information and details of outstanding debts. That letter detailed Smartdial’s indebtedness at that time as totalling $272,277.27.
62 On 19 April 2023, Ms Smith, in her capacity as a Deputy Commissioner of Taxation, signed a certificate under s 8AAZJ^[23] of the TAA certifying that the sum of $201,362.03 was owing as at 8 February 2023 as an RBA deficit debt and was due and payable by Smartdial to the Commonwealth of Australia.
63 In her submissions, the solicitor for the DCT, Ms Davies, emphasized the prominent features of Mr Pala’s evidence going to the proof that the debt claimed in the demand was due and payable. She submitted that Smartdial’s position as outlined in its submissions seeking that the demand be set aside under s 459J(1)(b), when analysed, is misconceived and is without substance.
64 Ms Davies referred to the affidavit Nathan Pala the contents of which are summarised above. In particular, she noted Mr Pala’s evidence that a running balance account had been established for Smartdial in respect of the Business Activity Statement provisions, administrative overpayments due under s 8AAZN of the TAA and primary tax debts due as administrative penalties under Part 4-25 of Schedule 1 to the TAA. Ms Davies referred to the DCT’s evidence that primary tax debts were allocated to the RBA account as contemplated by s 8AAZD of the TAA. The balance of the RBA account was in favour of the Commissioner and was accordingly an RBA deficit debt under s 8AAZA of the TAA.
65 Ms Davies contended that pursuant to s 8AAZF(1) and Part II of the TAA, Smartdial became liable to pay the general interest charge at the end of each day for which there was an RBA deficit debt. The balance of the RBA account was increased in the Commissioner’s favour by the addition of the amount of the general interest charge payable for each such day pursuant to s 8AAZF(2) of the Act. She referred to the RBA Statement in evidence generated pursuant to s 8AAZI of 17 April 2023, which records entries in respect to the primary tax debts, administrative penalties and associated general interest charges for which Smartdial was liable up to and including 17 April 2023.
66 Ms Davies referred to the RBA statement which shows that, as at 8 February 2023, (the date on which the statutory demand was prepared), Smartdial owed $201,362.03 in respect of the RBA deficit debt. This is the amount of the debt claimed in the schedule to the statutory demand.
67 Ms Davies then addressed Smartdial’s submission that there had been a failure by the DCT to establish service of the various documents making up the DCT’s claim. She referred to Division 4 of the Taxation Administration Regulations 2017 (Cth) (‘Taxation Administration Regulations’), which is concerned with service of documents for the purposes of taxation laws. Regulation 14(1) provides:

The Commissioner may serve a document on a person for the purposes of the taxation laws by —
...

(b) if the person has given a preferred address for service that is a postal address—posting a copy of the document to that address; or

68 Regulation 15 provides:

(1) An address in Australia used by or associated with a person is a preferred address for service of the person if:

(a) it is of one of the following kinds of address:

...

(ii) a postal address;

...; and

(b) the person has given it to the Commissioner as an address for the service of documents by the Commissioner under a taxation law; and

(c) the designation of the address or other circumstances indicate that the person wishes the address to be used by the Commissioner in preference to other addresses of the person, whether generally or in specific circumstances.

69 Regulation 16 provides for a requirement to maintain a preferred address for service. It provides that:

If the person is required to give the Commissioner a preferred address for service for a purpose (for example, by the approved form for a return), the person must subsequently maintain a preferred address for service for the purpose.

70 Regulation 17 provides for a change or withdrawal of a preferred address for service. Sub-regulation (1) provides a person may change or withdraw a preferred address for service only by giving the Commissioner notice in the approved form. Here, Ms Davies says that the evidence is that the post office box number in Hawthorn was a preferred address for service used by Smartdial. It is said by Smartdial that it apparently abandoned that address but there is no evidence that Smartdial changed or withdrew the preferred address for service by giving the Commissioner notice in the approved form as the regulation requires.
71 On 31 July 2019, the DCT issued a Notice of Assessments of Net Amount with respect to Smartdial’s GST periods, which totalled $66,675.^[24] Mr Pala deposes that this document was served on Smartdial on or about the date of issue in accordance with the Taxation Administration Regulations.
72 On the same day, the DCT issued Notices of Assessments of penalty for failing to provide a document with respect to Smartdial’s GST periods, which totalled $59,138.55. These penalties were imposed for the quarters 1 July 2014 to 30 September 2014 until 1 April 2016 to 30 June 2016. Mr Pala’s affidavit exhibits Notices of Assessment of penalty in that regard. Mr Pala deposes that those Notices of Assessments were served on Smartdial on or about the issue date, in accordance with the Regulations. Ms Davies referred to the certificate under s 350-10(3) of the TAA in respect of the Notice of Assessments of net amount and Notice of Assessments of penalty in that regard signed under the hand of Ms Smith in her capacity as a Deputy Commissioner of Taxation.
73 Ms Davies also referred to the evidence of Mr Pala where he refers to the records maintained by the DCT which records communications between the ATO and taxpayers. The records reveal that on 10 April 2019, an ATO audit officer emailed Mr Lindsay-Barker attaching to the email a letter of that date in respect of Smartdial’s obligations to lodge returns to avoid penalties. On 17 May, Ms Williams again emailed the director, Mr Lindsay-Barker because there had been no response. On 20 May 2019, Mr Lindsay-Barker replied by email to the ATO officer, requesting further time. The letters attached to the emails from the ATO addressed the letters to the post office box address being used by Smartdial. No issue was taken with the nomination of that address by Mr Lindsay-Barker in the email exchange, despite the address’s appearance on the correspondence.
74 On 29 July 2019, the DCT issued a letter headed ‘We have issued you a default assessment’ addressed to the defendant at the post office box address in Hawthorn recorded on the ATO records. Mr Pala perused the ATO records and cannot locate any evidence that the letter was returned.
75 On 22 November 2021, the DCT issued a letter to Smartdial addressed to its registered office in Malvern, providing account information and details of outstanding debts. As at that date, the debt stood at $272,277.27.
76 In respect of the amount claimed in the demand, Ms Davies referred to the certificate under s 8AAZJ of the TAA signed by Ms Smith, in her capacity as a Deputy Commissioner of Taxation, noting a liability of $201,362.03.
77 Ms Davies submitted that there can be no substance to the submission that the demand should be set aside under s 459J(1)(b) on the basis that the amount claimed is not presently due and payable. The Commissioner has complied with its obligations by providing notice, in 2019, of the penalties which are now sought to be recovered. Notices of Assessment had previously been sent to both the Hawthorn address and the Wattletree Road address.
78 Ms Davies submitted that the application ought to be dismissed.

Legal principles

79 In Kisimul,^[25] the New South Wales Court of appeal observed that s 459J(1)(b) creates a remedial jurisdiction to set aside a statutory demand where ‘there is some other reason why the demand should be set aside’. The ‘other reason’ refers to a reason not otherwise provided by the Act as a ground for the setting aside of a statutory demand, namely a defect in the statutory demand as mentioned in s 459J(1)(a).
80 The discretion has been described as being of broad compass^[26] and is unconfined except by reference to the subject matter, scope and purposes of Part 5.4 in the more general context of the Act.
81 The Court of Appeal of the Australian Capital Territory in Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation^[27] held that the ‘other reason’ contemplated by s 459J(1)(d) extended to conduct ‘that may be described as unconscionable, and abuse of process, or which gives rise to substantial injustice’.
82 In Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd,^[28] Bryson J observed that the Court should not act under s 459J(1)(b) unless the decision to do so is supported by ‘some sound or positive ground or good reason which is relevant to the purposes for which the power exists’.
83 In Meehan v Glazier Holdings Pty Ltd, the Court said:^[29]

Although the wording of s 459J(1)(b) of the Corporations Act appears wide, its context and history requires reading it down to encompass in general terms only cases where the Court is satisfied that injustice will be caused unless the demand is set aside because of a defect relating to, but not in, the demand ...
It is not possible to set out fully the cases that might fall within s 459J(1)(b) nor if it were possible would it be wise to do so. The sort of case that will be covered will include gross defects in supporting affidavits and documentation and where the alleged creditor has made statements or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor's position.
A judge is not at liberty to set aside a demand under s 459J(1)(b) merely because he or she subjectively considers it fair to do so.

84 In Saferack Pty Ltd v Marketing Heads Australia Pty Ltd,^[30] Barrett J observed that the operation of s 459J(1)(b) is not confined to cases coming within established categories such an unconscionability or abuse of process, but instead the paragraph applies whenever there is a need to counter some attempted subversion of the statutory scheme.^[31]
85 Assaf observes that the foregoing decisions demonstrate that, although the power conferred by s 459J(1)(b) is wide, it is not unlimited and the exercise of that power must be tempered, and informed by, by the policy and purpose underlying Part 5.4.^[32] That is, the sound or positive ground, or good reason to set aside a demand under s 459J(1)(b), must be one that is consistent with promoting the legislative scheme.
86 As has already been observed, in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (‘Broadbeach’),^[33] the High Court emphasised that the application of s 459J(1)(b) in the context of statutory demands served by the Deputy Commissioner of Taxation must have regard to the legislative policy which provides for the recovery of tax debt. The High Court observed:^[34]

Keane JA [in Neutral Bay Pty Ltd v DCT], expressing disapproval of what had been said to the opposite effect by Olney J in Kalis Nominees Pty Ltd v Deputy Commissioner of Taxation,^[35] held that the scope of the discretion conferred by par (b) of s 459J(1) should be determined by the subject matter and purposes of the Corporations Act, to the exclusion of “the tax law”^[36]. But, as remarked earlier in these reasons, Pt 5.4 contemplates that the “debts” in respect of which statutory demands may issue will include “tax debts” in the sense given to that expression in these reasons. The “material considerations”^[37] which are to be taken into account, on an application to set aside a statutory demand, when determining the existence of the necessary satisfaction for par (b) of s 459J(1) must include the legislative policy, manifested in s 14ZZM and s 14ZZR of the Administration Act, respecting the recovery of tax debts notwithstanding the pendency of Pt IVC proceedings.

87 Assaf observes:^[38]

Any appeal to undefined notions of fairness on the ground that a concluded assessment or other quantification against a taxpayer is the subject of a challenge initiated by the taxpayer under the taxation legislation is foreign to the operation of s 459J(1)(b) in a case involving a demand for the recovery of unpaid taxation or more particularly to the exercise of the discretion under that section.

88 Reference is made by the authors of Assaf to the decision of Black J in Re Oztec Pty Ltd,^[39] a case involving a company seeking to set aside a statutory demand served by the Deputy Commissioner of Taxation by arguing that an audit which gave rise to the relevant tax debt was ‘unfair’. The application was dismissed by Black J by reason that such a matter was not a matter which would give rise to an abuse of process or other reason to set aside the demand for the purpose of s 459J(1)(b) where a genuine dispute as to the amount of the debt could not be established. Black J also rejected the company’s argument regarding disruption to its business that would ensue from a statutory demand which had not been set aside. He noted that the plurality of the High Court in Broadbeach emphasised that matters of this kind were ordinary incidents of reliance by the Deputy Commissioner of Taxation upon the statutory demand system and accordingly could not provide a basis for setting aside a statutory demand so issued.

Consideration

89 In my opinion, Smartdial’s submission that the demand should be set aside on the ground of there being ‘some other reason’ within the meaning of s 459J(1)(b) cannot be sustained. I agree with the submissions of Ms Davies, the solicitor for the DCT, that Smartdial’s contentions are misconceived, are without foundation and that Smartdial is indebted to the DCT for the amount claimed in the demand.
90 At the outset, Smartdial accepts that the debt for $66,675 is due and payable in respect of assessed liability due under Business Activity Statements for the period 1 July 2014 to 30 June 2016.
91 Smartdial contends, however, that that part of the DCT’s demand which claims penalties imposed for Smartdial’s failure to provide a document as required and to lodge BAS on time are not currently due and payable. It accepts that the DCT has power under the TAA to impose such penalties but says that because of the failure by the DCT to serve written notice on Smartdial of such liabilities, which liabilities can arise only 14 days after notice is given, mean that there is presently no debt due and payable in respect of such penalties and for the interest attributable to those penalties.
92 I do not accept that submission. I consider that the evidence of Mr Pala establishes that the DCT has complied with the provisions of the Taxation Administration Regulations by service of the requisite documents at Smartdial’s ‘preferred address for service’ within the meaning of that phrase in the Regulations. The evidence indicates the preferred address adopted by Smartdial was the post office box address in Hawthorn to which reference has been made. It is not to the point, as Mr Watson-Barker contends, that Smartdial ceased maintaining that post office box at some point. As the regulations extracted above provide, if there is a change or withdrawal of preferred address for service, notice must be provided to the Commissioner in the approved form. Smartdial, which bears the onus in this application, has put on no evidence that it effected a change in the preferred address for service by giving the Commissioner notice in the approved form.
93 Mr Pala’s evidence is that the DCT issued a notice of assessment of net amount with respect to the liability of Smartdial for the GST periods which totalled $66,675 on 31 July 2019. On the same day, a Notice of Assessment for penalty totalling $59,138.55 was served on Smartdial. Mr Pala deposes that those documents were served in accordance with the Taxation Administration Regulations. This is confirmed by the certificate of Ms Smith, a Deputy Commissioner of Taxation, who certified such matters under s 350-10(3) of the TAA.
94 The evidence is clear that Mr Lindsay-Barker was aware from communications which are extracted above between him and an officer of the ATO in April and May 2019 that the DCT foreshadowed that default assessments would be issued. This took place on 31 July 2019. There then followed a period of inactivity on the ATO’s part as the Commissioner apparently did not pursue taxation debts during the period of the Covid pandemic. I am satisfied, however, that the DCT complied with the obligations under the to serve the requisite notices in 2019 under Taxation Administration Regulations thus giving rise to the liability now claimed in respect of the assessments for GST liability and penalty for failure to provide a document.
95 I am also satisfied that it follows that the DCT was entitled to impose interest charges on the outstanding liability and that, together with the BAS liability and the penalties for failure to lodge documents, Smartdial is indebted to the DCT in the sum claimed in the demand. This is confirmed and established by the RBA statement in evidence which records that at the date of the demand, 8 February 2023, Smartdial was indebted to the DCT for $201,362.03 as an RBA deficit debt. The RBA statement is prima facie evidence of such liability and aside from the contentions in respect of failure to provide notice, Smartdial has not sought to displace the effect of the RBA statement.
96 In my view, Smartdial has not established that there is any feature of the matter, in particular the manner in which the DCT has conducted herself in relation to Smartdial’s affairs which would warrant any finding of unconscionability, oppression or unfairness by the issuing the demand. This is particularly so in the context of a statutory demand issued to recover a taxation debt; as the High Court observed in Broadbeach,^[40] this is a relevant consideration which must be considered in the context of the application of s 459J(1)(b).
97 As such, there is no factual aspect of the matter that attracts the jurisdiction of s 459J(1)(b) to rectify any injustice or to ‘counter some attempted subversion of the [intended operation of Part 5.4]’.^[41]
98 In the circumstances, Smartdial’s application must be dismissed. As to costs, at the hearing of this application, Ms Davies indicated that the DCT would not be seeking an order for costs against Smartdial in the event that Smartdial’s application was unsuccessful.
99 I will make orders accordingly.

SCHEDULE OF PARTIES

^[1] In the supporting affidavit of the sole director of Smartdial Pty Ltd, Mr Thomas Lindsay-Barker, he states that the demand was served ‘on or around 8 February 2023’. Although the application was filed on 7 March 2023, the DCT did not contend that the application was not made within the time prescribed by s 459G of the Corporations Act 2001 (Cth) (‘Act’).

^[2] See r 5.2.

^[3] Emphases in text of affidavit.

^[4] In this regard, Mr Lindsay-Barker referred to the decision of the Full Court of the Federal Court in MNWA Pty Ltd v Deputy Commissioner of Taxation [2016] FCAFC 154; (2016) 250 FCR 381, 408 [117] (Rares J) (‘MNWA’).

^[5] Referring to Sceam Construction Pty Ltd v Clyne [2021] VSCA 270; (2021) 64 VR 404, 415 [39] (Ferguson CJ, Sifris and Walker JJA) (‘Sceam’). I note that in the supplementary affidavit, reference is made to ‘supporting affidavits’ in the plural but the only affidavit filed and served within the statutory period was the supporting affidavit, Mr Lindsay-Parker’s first affidavit sworn 6 March 2023.

^[6] Sceam (n 5).

^[7] See, eg, Tuta Healthcare v Nipro Asia Pty Ltd [2005] NSWSC 664, [13].

^[8] See Farid Assaf, Assaf’s Winding Up in Insolvency (LexisNexis, 3^rd ed, 2021) [5.38]. Assaf goes on to say that provided the initial affidavit in support sets out the evidence to make good a particular ground of opposition, an amendment of the application to add the previously unarticulated ground will be allowed.

^[9] MNWA (n 4) 408 [117].

^[10] Sceam (n 5) [39].

^[11] (1996) 62 FCR 302, 317–18.

^[12] Citing HC Legal Pty Ltd v Deputy Commissioner of Taxation (2013) 87 ATR 379, 388–9 [44]–[45] (Murphy J).

^[13] Citing Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd [1996] NSWSC 199; (1996) 20 ACSR 746, cited with approval in Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229, 240 [59] (Young CJ in Eq) (‘Meehan’).

^[14] Citing MNWA (n 4) 408 [117] (Rares J).

^[15] Ibid 405 [103].

^[16] [2014] NSWCA 262, [24]–[25] (Barrett JA) (‘Kisimul’).

^[17] Ibid.

^[18] MNWA (n 4) 409 [124] (Rares J).

^[19] Taxation Administration Act 1953 (Cth) s 350-10 (‘TAA’). Further, according to s 8AAZH(1) of the TAA, a tax debtor is liable to pay any debt owing on a running balance account (‘RBA’) which is due and payable at the end of that day. Debts are allocated to an RBA on the ‘effective date’ of the relevant amount.

20. ^[20] Section 8AAZI of the TAA (n 19) provides:

RBA statement to be evidence

(1) The production of an RBA statement:

(a) is prima facie evidence that the RBA was duly kept; and

(b) is prima facie evidence that the amounts and particulars in the statement are correct.

(2) In this section:

RBA statement includes a document that purports to be a copy of an RBA statement and is signed by the Commissioner or a delegate of the Commissioner or by a Second Commissioner or Deputy Commissioner.

^[21] Section 350-15 of the TAA (n 19) provides:

Judicial notice of signature

All courts, and all persons having by law or consent of parties authority to hear, receive and examine evidence, must take judicial notice of the signature of every person who is or has been:

(a) the Commissioner; or

(b) a Second Commissioner; or

(c) a Deputy Commissioner; or

(d) a delegate of the Commissioner;

if the signature is attached or appended to an official document for the purposes of a taxation law.

^[22] Also the address given by Mr Lindsay–Barker in his affidavits.

^[23] Section 8AAZJ of the TAA provides:

Evidentiary certificate about RBA transactions etc.

(1) In proceedings for recovery of an RBA deficit debt, a Commissioner’s certificate stating any of the following matters in respect of a specified RBA is prima facie evidence of those matters:

(a) that no tax debts (other than general interest charge on the RBA deficit debt) were allocated to the RBA after the balance date shown on a specified RBA statement for the RBA;

(b) that general interest charge is payable on the RBA deficit debt, as specified in the certificate;

(c) that payments and credits were allocated to the RBA, as specified in the certificate;

(d) that a specified amount was the RBA deficit debt on the date of the certificate.

(2) In this section:

Commissioner’s certificate means a certificate signed by the Commissioner or a delegate of the Commissioner, or by a Second Commissioner or Deputy Commissioner.

^[24] The Notice of Assessment is at page 26 of the exhibit to Mr Pala’s affidavit.

^[25] (n 16) [18] (Barrett JA, Beazley P agreeing at [40], Gleeson JA agreeing at [41]).

^[26] See Assaf (n 8) [8.47] and cases cited at n 211.

^[27] [2005] ACTCA 3; (2005) 157 ACTR 22, 26 [27].

^[28] [1996] NSWSC 199; (1996) 20 ACSR 746, 757.

^[29] Meehan (n 13) 240 [60]–[61] (emphases added).

^[30] [2007] NSWSC 1143; (2007) 214 FLR 393 (‘Saferack’).

^[31] Ibid 401 [33].

^[32] Assaf (n 8) [8.48].

^[33] (2008) 237 CLR 473 (‘Broadbeach’).

^[34] Ibid 496 [61] (Gummow ACJ, Heydon, Crennan and Kiefel JJ).

^[35] (1995) 31 ATR 188, 193.

^[36] [2007] QCA 312; (2007) 25 ACLC 1341, 1361.

^[37] See House v The King (1936) 55 CLR 499, 505.

^[38] Assaf (n 8) [8.98].

^[39]  [2012] NSWSC 1234. 

^[40] Broadbeach (n 33) 497 [61].

^[41] Saferack (n 30).