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FEDERAL COURT OF AUSTRALIA - GENERAL DIVISION

GRAYWINTER MANAGEMENT PTY LTD v DEPUTY COMMISSIONER OF TAXATION

Finn J

9 December 1996 - Melbourne

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Finn J    

Ex tempore reasons for judgment

   These two proceedings were instituted under s 459G of the Corporations Law. Their objects were to have set aside, or alternatively to have determined the substantiated amount payable under, two statutory demands served by the Deputy Commissioner of Taxation on Graywinter Properties Pty Ltd (Properties) and Graywinter Management Pty Ltd (Management) respectively.

   On 22 November 1996, Jenkinson J made orders in each proceeding (inter alia):

 (i)  determining the substantiated amount of each demand;

 (ii)  extending the period of compliance with the demands until 13 December 1996; and

 (iii)  for costs.

   The application before me is for a further extension of the time for compliance. While I entertain some doubt as to whether I have jurisdiction to grant such an extension, I am prepared in light of present authority (as I will indicate) to proceed on the assumption that I have power so to do.

   The particular debts founding the two demands were for unpaid group tax, in the case of Properties, going back 1991. As is apparent from my reasons for judgment in the related matter of Solicitors' Liability Committee v Carrick Lewis Gray and Winter (unreported, FCA, Finn J, 9 December 1996), Mr Gray, the present director and principal shareholder of the companies has executed two irrevocable authorities directing the SLC to pay to the Deputy Commissioner of Taxation, amounts due under the demands, out of a judgment of over $2.3 million that Gray & Winter were awarded against the SLC by Olney J on 9 August 1996. What prevents that payment being made is an order of Jenkinson J of 21 October staying execution of the judgment pending the hearing and determination of the SLC's appeal against it. I have today in those proceedings refused to vary the stay order to allow the payment to be made. The date on which the appeal from Olney J's judgment is to be heard is 11 March 1997.

   The present application is to have the time for compliance with the two demands extended until the hearing and determination of the appeal.

The jurisdictional question

   Under s 459G of the Corporations Law, a company can apply to the court for an order setting aside a statutory demand served on it. In the present proceedings both Properties and Management took this step.

   Of present relevance is s 459F(1) provides that:

   

If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.

   That failure provides a basis for applying to wind up the company on the ground of insolvency: see s 459Q and 459S of the Corporations Law. As I have noted the compliance date in these proceedings is 13 December 1996.

   Such power as the court has to extend the time for compliance is contained in s 459F(2). It provides relevantly, that:

   

The period for compliance with a statutory demand is:

 (a)  if the company applies in accordance with section 459G for an order setting aside the demand:

 (i)  if, on hearing the application under section 459G, or on an application by the company under this paragraph, the court makes an order that extends the period for compliance with the demand - the period specified in the order, or in the last such order, as the case requires, as the period for such compliance;

…

   The present applicants submit that, because this subsection clearly envisages (as it does) that a special application for an extension may be made under it, and equally clearly envisages (as it does) that extension orders may be made from time to time, it is open to them to apply for the additional extension sought in these proceedings.

   Were this matter free from authority, I would have to say that I would find it difficult to bring the circumstances of the present application within the terms of the subsection.

   As I have already indicated, Jenkinson J, on 22 November 1996, made orders which, in my view, had the effect of finally and fully disposing of the s 459G application. While not at all doubting that the power conferred by the subsection would allow special application, and application from time to time, for an extension while the s 459G application remained on foot, I find some difficulty in the view that that power subsists after the making of the orders determining the s 459G application and fixing the period for compliance. The language of the opening words of para (a) of the subsection seem to imply that: there be a "live" s 459G application at the time the extension order is sought.

   Be this as it may, on two occasions it has been held in this court in reliance upon the decision of the High Court in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 that, provided the application for an extension is brought before the efflusion of the period fixed for compliance, that period can be further extended notwithstanding that the s 459G application itself had been determined: see Livestock Traders International Pty Ltd v Thi Lam Bui (unreported, FCA, Jenkinson J, 7 October 1996); Graywinter Properties Pty Ltd v Dyer (unreported, FCA, Ryan J, 19 November 1996).

   In the David Grant case Gummow J (with whom all members of the High Court agreed) , in referring to the power to extend time granted by s 459F, observed that an extension given under para (a) of subs (2) may itself be extended on further application. This unqualified, but general, statement has been treated in the two decisions to which I have referred as allowing extension applications for so long as the period for compliance has not expired.

   Notwithstanding my own misgivings, I am prepared for now accepted reasons to follow the course previously endorsed in the above decisions. In so doing I necessarily am accepting, that the power to extend time cam be exercised for reasons unrelated to settling the validity of the demand or the amount payable under it, and for settling the time appropriate for payment of that demand in consequence. In the present matter, the application for an extension of time having been made within the time for compliance, it needs to be considered on the merits.

The present application

   The circumstances must be fairly exceptional before a court would grant an extension of time in which to comply with the period set when the court makes orders both settling the substantiated amount and the date from which the demand was to have effect: cf s 459H. In such a case the company's indebtedness is no longer the subject of contention.

   Having said this, I am prepared albeit with some hesitation, to conclude that the present is such a case.

   The essence of the application is that full provision has now been made (via K Gray's Irrevocable Authorities) for the payment of the two demands and that payment is to be made out of a valid and subsisting judgment. All that precludes immediate payment is the stay of execution of the judgment pending the appeal that has been set down for hearing in just over three month's time.

   As I understand it, the Deputy Commissioner of Taxation's opposition to the application is that, in the absence of acceptable evidence as to the financial circumstances of the companies, they should not be relieved of the obligation of complying with the notices. One or both of them, it is said, may well be insolvent, the evidence in relation to Properties (though contested) suggests as much, and the appropriate place in which to have this issue ventilated is in proceedings under Pt 5.4 of the Corporations Law. Further, in such a state of evidence, to require the Deputy Commissioner at best, to accept payment from the SLC in the future may well merely condemn the Deputy Commissioner to the receipt of a preference that will be recoverable in a subsequent liquidation.

   It is the case that I have no satisfactory evidence before me which would allow me to arrive at a provisional view as to the present financial position of either of the companies. While I contemplated granting an adjournment to allow such evidence to be procured, it seemed to me in the end undesirable in the context of Pt 5.4 proceedings to have in effect a preliminary hearing on the matter of solvency, the very matter towards which the Pt 5.4 procedures are directed. For this reason I have excluded from consideration the present need for such evidence.

   In these circumstances I have concluded that no injustice will be done in granting the extension sought. First, I have no reason for believing that, in the period from now until when the appeal in the SLC proceedings is determined, there is likely to be any significant change in the circumstances of the two companies. Secondly, if the appeal is unsuccessful, the debt to the Deputy Commissioner will be paid by the SLC. If the appeal is successful the Deputy Commissioner will be in the same position as it is now. Thirdly, while it has been argued that even if paid the Deputy Commissioner might well find itself in the position of a preferred creditor in the subsequent liquidation of the companies (so that an extension could in any event be without actual beneficial effect), such a contingency is not a matter on which I consider it necessary to speculate in these proceedings.

   In my view, because the arrangements now in place to secure payment of the tax debt are such, and because the period of its deferment is likely to be relatively short, the granting of an extension of time will not unduly impede the Deputy Commissioner in the prosecution of the rights given it by Pt 5.4 and will, subject to the fate of the appeal, allow for the payment of the debt, which, but for the order of this court could be presently paid. I note, additionally, that some part of the indebtedness sought to he recovered dates back to 1991. There seems no compelling reason for urgency now.

   In both applications then, I will order that the period for compliance with the statutory demands, the subject of orders of Jenkinson J on 22 November 1996, be extended until 21 days after the hearing and determination of the appeal in VG546 of 1996, or until further order.