A challenge to a winding up demand served on Lifestyle Homes (ACT) Pty Ltd over the omission of the words ‘of court’ went through 5 adjournments before being dismissed.
Mr Espinoza was the sole director of a company – Lifestyle Homes (ACT) Pty Ltd – that owed the ATO in excess of $4m.
A statutory demand was served by the ATO on the company requiring payment of $4.6m, subsequently reduced to $4.1m. The form of the demand incorrectly stated that the demand must be accompanied by an affidavit that complies ‘with the rules’, rather than ‘with the rules of court’.
He was confused
The omission of those two words ‘of court’ confused Mr Espinoza, though only, it seems, after his counsel, Mr G McDonald, advised him of the omission of those words. The affidavit did in fact comply with the rules of court.
Mr Espinoza challenged the validity of the demand as raising an issue of ‘substantial injustice’: s 459J.
He then went further, or his counsel did, to claim that the ATO’s model litigant status broadened the scope of ‘substantial injustice’ in s 459J.
The Judge
The Judge found Mr Espinoza was not relevantly confused by the omission of the words ‘of court’, and that the ATO’s error fell ‘far short of the kind of behaviour at which the model litigant obligations are directed’.
The Judge ordered the company to pay the ATO’s costs.
Further confusion?
It is not stated whether Mr Espinoza was also confused about his company’s tax obligations such that its liabilities came to exceed $4m.
It is also not stated whether the parties took genuine steps to resolve the dispute about the claimed confusion,[1] perhaps because there was no real dispute.
Case management – 5 adjournments?
The case involved 5 adjournments over several months; and the filing of affidavits, submissions and lists of authorities from both parties.
The matter is hardly an example of good case management aimed at achieving the overarching purpose of the civil practice and procedure provisions as required by Part VB of the Federal Court of Australia Act 1976.
See Lifestyle Homes (ACT) Pty Ltd v Deputy Commissioner of Taxation [2024] FCA 1376 (29 November 2024)
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[1] Under the Civil Dispute Resolution Act 2011.
