This is a case about the the collection of NSW payroll tax and the Chief Commissioner’s use of the Statutory Demand procedure in the Corporations Act 2001.
- The issue was whether an estoppel can extend (or alter the start date) for a statutory time period – in this case, the 21 days, in which a recipient of a Statutory Demand, must apply to the Court, to have it set aside.
- The short answer was that it could not.
The following are relevant:
- Boss Constructions (NSW) Pty Ltd owed a debt of $489,069 to the Chief Commissioner of State Revenue in respect of unpaid payroll tax and interest.
- The parties had both been assuming that it was on 29 June 2017, that the Chief Commissioner served a statutory demand on the taxpayer, (requiring payment of that amount under s 459E(1) of the Corporations Act 2001).
- A company has 21 days (from the time the Statutory Demand is served) in which to apply to have the Demand set aside (under s459G). Failing that, the company must either pay the amount within the demand period, or it will be presumed to be insolvent, under s459C(2), and thus have to produce evidence of its solvency, to avoid having a liquidator appointed.
- On these calculations, the 21 days in which to apply (to have the Notice set aside) expired on 20 July 2017, and the taxpayer made its application on that date.
- The Chief Commissioner, however, changed his mind and contended that the statutory demand had been served two days earlier: on 27 June 2017, and the taxpayer’s application (to set the notice aside) was served too late.
- After a separate hearing of this issue, the primary judge found that the statutory demand had been served on 27 June 2017.
- However, the primary judge also found that the Chief Commissioner was estopped from denying that the statutory demand was served on 29 June 2017 as the parties had both proceeded on the basis that the Demand was served on 29 June 2017, such that it would be unconscionable to have the Chief Commissioner deny this.
- The primary judge, therefore, found that the time prescribed, by s 459G(2), did not expire until 20 July 2017. The Chief Commissioner appealed from that decision.
The main issue on the appeal was whether an estoppel could operate in the manner found by the primary judge.
The Court of Appeal unanimously held that an estoppel could not operate to effectively extend the time limitation imposed by s 459G(2).
- The requirement that an application under s 459G(1) be made within the time prescribed defined the jurisdiction of the court to entertain such an application, and neither the agreement of the parties nor the operation of an estoppel could confer jurisdiction which was withheld by the section.
- The Court said that both the text of s 459G and the policy behind the legislation supported this conclusion.
However, the Court also held that the parties should be directed to provide further submissions on whether leave to appeal should be revoked because the proceedings where hypothetical.
- The Court noted that s 459C(2) provided that a statutory demand only created a presumption of insolvency in proceedings for the winding up of a company within three months after the company had failed to comply with the statutory demand, and that this time had elapsed by the time of the hearing of the appeal.
(Chief Comr of State Revenue v Boss Constructions (NSW) Pty Ltd  NSWCA 270, NSW Court of Appeal, Bathurst CJ; Leeming JA; Sackville AJA, 16 November 2018.)
[LTN 233, 3.12.18; Tax Month – December 2018]
CPD (comprehension) questions
- Is the only connection of this case, to NSW payroll tax, that the Chief Commissioner was trying to recover unpaid Payroll Tax?
- Is it true that both parties had assumed that the Statutory Demand had been served on 29 June 2017 and that the taxpayer had, by applying to have the demand set aside, on 20 July 2017, had done so, within the required 21 days?
- Did the Chief Commissioner subsequently change his mind, about the date of service, and argue that it was 2 days earlier (making the taxpayer’s application to the Court, out of time?
- Did the court at first instance find that the Demand was served 2 days earlier (that is to say: on 27 June 2017)?
- Did that result in the primary judge finding that the application (to set the Demand aside) was made out of time?
- Did the Court of Appeal agree, on this estoppel point?
- Was the result that the Court held the application (to set the demand aside) was invalid?