PARTIES:	ATHANASIOS ATHANASIOU PTY 		LTD

		v

		THE COMMONWEALTH OF 			AUSTRALIA (DEPUTY 				COMMISSIONER OF TAXATION)

TITLE OF COURT:	SUPREME COURT OF THE 
		NORTHERN TERRITORY

JURISDICTION:	SUPREME COURT OF THE 			NORTHERN TERRITORY 				EXERCISING TERRITORY 			JURISDICTION

FILE NO:	59 of 1997

DELIVERED:	11 September 1997

HEARING DATES:	3 April 1997

JUDGMENT OF:	MARTIN CJ

CATCHWORDS:

Corporations - Creditor’s statutory demand - Application to set aside demand - Whether substantial injustice to plaintiff - Rejection of offer to meet debt - Whether such rejection by creditor unreasonable 

Corporations Law, s459E(2)(e), (5),(6), s459J(1)(b)
Income Tax Assessment Act (Cth) 1936, s221F(12), s221R(1)

Re Aroora Pty Ltd (1993) 27 ATR 473 at 475 per Hayne J., followed
Chippendale Property Co Pty Ltd v DFC of T (1995) 95 ATC 4037 at 4047, 4049-4050, per Lindgren J., followed.
Forsayth NL v Juno Securities Ltd (1991) 4 WAR 376, referred to.

REPRESENTATION:

Counsel:

	Plaintiff:	Mr Davis
	Defendant::	Mr Silvester

Solicitors:

	Plaintiff:	F J Davis & Associates
	Defendant:	Australian Government Solicitor

Judgment category classification:	C
Judgment ID Number:	mar97039
Number of pages:	7

mar97039

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

No. 59 of 1997

		BETWEEN:

		ATHANASIOS ATHANASIOU PTY 		LTD
				Plaintiff

		AND:

		THE COMMONWEALTH OF 			AUSTRALIA (DEPUTY 				COMMISSIONER OF TAXATION)
				Defendant

CORAM:	MARTIN CJ.

REASONS FOR JUDGMENT

(Delivered 11 September 1997)

	These are the reasons for my order that the plaintiff’s application to set aside a statutory demand under s459E(2)(e) of the Corporations Law made by the defendant of the plaintiff be dismissed.  

	The “Creditor’s Statutory Demand” was in the prescribed form and asserted that the plaintiff owed the defendant $25,605.19, made up of a total of amounts described in the schedule and statements of account attached.  The required affidavit verifying that the amount claimed was due and payable was sworn by Andrew Charles Whittles.  The schedule (containing a summary of the accounts) provided the following detail:

“1.   -
		
2.   Total Section 221F(12)(b)(ii)(A) penalty described as “relevant penalty 4%” as more particularly set out in the statement of account hereunder	

$ 4 345.20	

3.   Total Section 221F(12)(b)(ii)(B) amount described as “additional tax” as more particularly set out in the statement of account hereunder	

$15 954.59	

Sub Total	
$20 299.79	

4.   Total Unpaid Prescribed Payments Deductions for the periods more particularly set out in the statement of account hereunder	

$NIL	

5.   Total Section 221YHJ(l)(b)(ii)(A) penalty described as “relevant penalty 4%” as more particularly set out in the statement of account hereunder	

$   209.20	

6.   Total Section 221YHJ(l)(b)(ii)(B) amount described as “additional tax” as more particularly set out in the statement of account hereunder	

$ 5 096.00	

Sub Total	
$ 5 305.40	

Total Amount Outstanding	
$25 605.19	

The Statement of Account appears hereunder on the following page”

	The penalties were for late payment of group tax instalment deductions and prescribed payment deductions.  Mr Whittles’ evidence also disclosed that the figures adjacent to the description of the debt in items 2 and 3 in the schedule, and those adjacent to the descriptions of the debt in items 5 and 6, together with the respective totals, had been transposed in the schedule.  The total claimed was not affected.

	The detailed statements of account attached to the schedule showed the position correctly.  The plaintiff had not been misled.  It had not disputed the calculation of the debt with the defendant and did not seek to do so before the court.  Its solicitor had written to the defendant, after receipt of the demand, putting forward a proposal for payment of the amount claimed, but that offer was rejected and details of it are referred to later in these reasons.  It appeared from correspondence that there had been other arrangements made for the payment of the bulk of the amount demanded.  Other unspecified attempts made by Mr Michael Athanasiou, a Director of the plaintiff, to come to arrangements for payment had been rejected by the defendant prior to the giving of the demand.  Mr Athanasiou deposed as well that the plaintiff was solvent, but said that during the period of November 1996 until the first week in March 1997, the company had not engaged in any business because of wet weather.  All of that evidence went to showing efforts which the plaintiff said it had made to pay the amount claimed by way of instalments, because circumstances had arisen which were beyond its control and which meant that its cash flow had been interrupted.

	The plaintiff primarily relied upon s459E(5) of the Corporations Law which relevantly provides that the demand under s459 may relate to a liability under certain provisions of the Income Tax Assessment Act (Cth) 1936 including “section 221F (except subsection 221F(12))”.  Part of the sum demanded, $5,305.40 is described in the schedule as being a penalty and additional tax under s221F(12).  The argument was that since the Corporations Law states that a demand might relate to a liability under the provisions of the Income Tax Assessment Act, and since a liability under s221F(12) was excepted from those provisions, a demand could not be made if it included a liability under s221F(12).  Subs(5) is to avoid doubt, it is not intended to limit the generality of a reference in the Corporations Law to a debt (s459E(6)).

	Whatever else may be said about s459E(5) and (6), it is plain that the penalty and additional tax calculated under s221F(12) are payable under Division 2 of Part VI of the Income Tax Assessment Act and are a debt due to the defendant (s221R(1)).  They do not need to be included in the scope of s459E(5).

	I see no reason to depart from what was said by Hayne J. in Re Aroora Pty Ltd (1993) 27 ATR 473 at p475, followed by Lindgren J. in Chippendale Property Co Pty Ltd v DFC of T (1995) 95 ATC 4037 at 4047. 

	The Court must presume that a company is insolvent if, during or after the three months ending on the day when an application is made for an order that an insolvent company be wound up, the company has failed to comply with the statutory demand.  The presumption operates except so far as the contrary is proved for the purposes of the application to wind up the company.  The court may set aside a demand if it is satisfied that (a) because of a defect in the demand a substantial injustice will be caused unless it is set aside, or (b) there is some other reason why it should be set aside (s459J(1)).

	If there was any defect in the demand because of the transposition of the figures in the schedule, I am not satisfied that any substantial injustice has been or will be caused to the plaintiff because of that.

	Mr Athanasiou claimed that the plaintiff was solvent, but produced no evidence to support that contention.  It can not be accepted as the fact simply because he asserts it.  In any event, it may not of itself be enough to cause the court to exercise its discretion and set aside a demand (Chippendale Property Co at p4049-4050).  It is suggested in the course of reasoning in that case that s459J(l)(b) may be a vehicle to have a demand set aside on the ground that it was unreasonable for a creditor to refuse to accept an offer of a debtor to meet the debt.  Neither party referred to any other authority dealing with that suggestion, but I note that in Forsayth NL v Juno Securities Limited (1991) 4 WAR 376 the Full Court of the Supreme Court of Western Australia said that a security proposed by a debtor was not such as ought to have been to the reasonable satisfaction of the creditor.  That was a plain case, but provides support for the view that the court can examine the material before it and determine whether a demand should be set aside for the reason that the creditor should have been reasonably satisfied with security or composition offered.  Assuming that jurisdiction, I do not find that ground established.  The demand was served on 6 March 1997.  By letter of 20 March, the solicitor for the plaintiff offered to pay the sum demanded by a payment of $6,000 no later than 30 April, and $3,000 on the 15th of each month thereafter with a review on the 15th of each month by the defendant “with the option of increase as a reflection of the Companies” (sic) current trading position”.  No material was advanced as to why such an offer should have reasonably satisfied the defendant.  The reasons for rejecting the offer given by the defendant were based upon the time frame being excessive, the breach of previous payment arrangements, and the fact that the defendant had paid to the plaintiff $103,602.14 in early December 1996.  It clearly considered that it was not satisfied with the offer for payment of instalments when to its certain knowledge the plaintiff had received from it more than enough to enable it to pay the sum demanded in a lump sum.  There is nothing to indicate that it should have been reasonably satisfied with the offer.  

	An application to extend time for compliance with the demand was also refused.  That was because there was nothing before the court to show that the sum claimed could be paid in the extended time and no other reason was advanced for that application.

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