Mohd Nizam B Ismail v Comptroller of Income Tax
| Judge | Wong Shi Hui Janice AR |
| Judgment Date | 29 January 2014 |
| Neutral Citation | [2014] SGHCR 3 |
| Citation | [2014] SGHCR 3 |
| Court | High Court (Singapore) |
| Published date | 04 February 2014 |
| Docket Number | Originating Summons Bankruptcy No 90 of 2013 |
| Plaintiff Counsel | Mr See Chern Yang (Premier Law LLC) |
| Defendant Counsel | Ms Teh Ee-Von (Infinitus Law Corporation) |
| Subject Matter | Insolvency Law,Bankruptcy,Statutory demand |
| Hearing Date | 17 December 2013,07 January 2014,06 December 2013 |
A man drawing a considerable income finds himself in financial difficulty. He negotiates with the tax authority over his unpaid taxes and he says they reached an agreement. Under that agreement, the tax authority promised him a revised instalment plan for two months, and thereafter they will meet to discuss in good faith and reach a reasonable agreement for the future instalments. He also says that he was entitled to, and did, rely upon that promise and ordered his affairs with his other creditors in a particular way, so now the tax authority should not go back on that promise. It is on these facts that this court is asked to decide if a statutory demand served by the tax authority should be set aside.
BackgroundThis is an application by the plaintiff to set aside a statutory demand served on him by the defendant. The statutory demand was served in respect of an amount of $111,716.92, being unpaid taxes for the Years of Assessment 2010, 2011 and 2012.
The plaintiff deposed in his affidavit that since January 2012, he had been in touch with a Mr Sundramoorthy of the Inland Revenue Authority of Singapore (“IRAS”), in relation to a repayment plan over his unpaid taxes. In the course of those meetings, an instalment repayment plan was agreed, which the plaintiff adhered to throughout 2012. It is the plaintiff’s evidence that he had difficulties paying his taxes, due to liabilities pursuant to a divorce in 2011 and debts owed to various financial institutions. These difficulties were openly shared with Mr Sundramoorthy, and Mr Sundramoorthy did not raise objections to the plaintiff’s proposed repayment plans to IRAS as well as his other creditors.
On 15 January 2013, the plaintiff was retrenched by his former employer. The plaintiff informed Mr Sundramoorthy of the change of his employment status, and informed him that he would have difficulties adhering to the same repayment plan for 2013.
On 27 February 2013, the plaintiff met Mr Sundramoorthy, and it was agreed that IRAS would grant the plaintiff a revised instalment plan of $1,000 a month until March 2013. It was also agreed that they would meet again in March 2013 to discuss in good faith and reach a reasonable agreement regarding the future instalments. The plaintiff adhered to the revised plan.
On 20 March 2013, the plaintiff met Mr Sundramoorthy. The plaintiff deposed in his affidavit that it was agreed that:
(the “Agreement”).
On 2 May 2013, the plaintiff was informed by Mr Sundramoorthy that a new case officer, Mrs Kwan-Cho Seah Moi, had been assigned to his case. On the same day, Mrs Kwan sent an email to the plaintiff, stating that further extended or temporary instalment payment plans would not be considered. In her email, she also told the plaintiff to maintain sufficient funds in his bank account to make payment by Giro of his tax arrears on 6 May and 6 June 2013, failing which recovery action including legal proceedings would be taken against him.
On 13 May 2013, the defendant sent a letter to the plaintiff, asking him to maintain sufficient funds in his bank account to meet the full payment by Giro of $117,716.92, by 6 June 2013. The letter also stated that if payment was not made by 6 June 2013, actions to recover the outstanding amounts including legal proceedings would be taken against him.
On 16 May 2013, the plaintiff wrote a letter to the defendant. The plaintiff made reference to the Agreement, and stated that he would not be able to make payment of his tax arrears. On 28 May 2013, the defendant wrote to the plaintiff. The defendant noted that despite the plaintiff’s high assessable income for the Years of Assessment 2010 to 2013, his outstanding income tax and penalties were unpaid. The defendant reminded the plaintiff to pay the outstanding amounts by 6 June 2013, failing which actions to recover the outstanding amounts including legal proceedings would be taken against him.
On 10 June 2013, the defendant informed the plaintiff that his tax arrears of $117,716.92 had not been paid on 6 June 2013, and offered a final extension of two weeks for the amount to be paid. The plaintiff was told to make payment by 24 June 2013, failing which, bankruptcy proceedings or other legal action would be taken against him.
In his next letter of 18 June 2013, the plaintiff again made reference to the Agreement, and stated that he would not be able to pay his tax arrears in June 2013. The defendant in its response of 8 July 2013 offered to allow the plaintiff to pay his tax arrears by way of three monthly payments of around $39,238.97, from July 2013 to September 2013. It was reiterated that bankruptcy proceedings or other legal action would be commenced if this was not paid.
In the meantime, on 1 July 2013, the plaintiff secured employment as a partner of a law firm. His monthly income as a partner was $18,000.
On 22 August 2013, the defendant wrote to the plaintiff, informing him of a final payment plan: that he would be allowed to pay his tax arrears, and in addition his Year of Assessment 2013 tax, by way of monthly instalments of $13,000 a month. This payment plan envisaged instalment payments starting from 6 September 2013, with the last instalment of $5,769.32 to be paid in September 2014. It was reiterated that if the plaintiff failed to comply with this arrangement, bankruptcy proceedings or other legal action would be commenced against him.
On 5 September 2013, the defendant wrote to the plaintiff’s solicitors, informing them that the plaintiff would have an extension of time until 20 September 2013 to pay the first monthly instalment of $13,000. The defendant also gave the plaintiff up to 20 September 2013 to propose an alternate payment proposal.
On 20 September 2013, the plaintiff, through his solicitors, proposed to make monthly instalment payments of $6,000 from September 2013 to October 2015, and to make a final instalment payment of $5,769.32 in November 2015. On the same day, the plaintiff made payment of $6,000 to the defendant which was payment for the month of September 2013.
The plaintiff’s proposal was rejected by a letter from the defendant dated 3 October 2013. The defendant made reference to the many attempts to accommodate the plaintiff but said that it could not agree to the plaintiff’s proposal, given that the tax arrears had long been outstanding. The defendant indicated that it would commence proceedings to recover the tax arrears.
The defendant subsequently served a statutory demand on the plaintiff on 7 October 2013.
The applicationThe plaintiff filed this application on 21 October 2013 pursuant to r 97 of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) (“Bankruptcy Rules”) to set aside the defendant’s statutory demand. The plaintiff relied on rr 98(2)(b) and (e) of the Bankruptcy Rules. These rules provide that the court shall set aside a statutory demand, if the underlying debt is disputed on grounds which appear to the court to be substantial; or if the court is satisfied, on other grounds, that the demand ought to be set aside.
It is trite law that the test to be applied in an application to set aside a statutory demand is no different from the test to be applied for the grant of summary judgment pursuant to O 14 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed),
The plaintiff submitted that there are triable issues pertaining to the question of whether the debt was immediately due and payable to the defendant because:
The point at [20(c)] above relating to the certificate may be disposed of fairly quickly. The defendant had, in its affidavit resisting the application, exhibited a certificate setting out the total amount of tax owed by the plaintiff. This certificate was issued under s 89(4) of the Income Tax Act, which provides that:
In any suit under this section, the production of a certificate signed by the Comptroller giving the name and address of the defendant and the amount of tax, interest or penalty due by him shall be sufficient evidence of the amount so due and sufficient authority for the court to give judgment for that amount.
The defendant submitted that the certificate was incontrovertible evidence of the amount due, and gave authority to the court to grant judgment. In other words, the plaintiff could not, in the face of a certificate signed by the Comptroller of Income Tax and pursuant to s 89(4) of the Income Tax Act, dispute the underlying debt and the court should grant judgment based on the certificate.
However, the fact that there was a certificate under s 89(4) of the Income Tax Act...
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