Deputy Commission of Taxation v Elias

[2009] NSWSC 668

Reported Decision: 75 ATR 894

New South Wales

Supreme Court

CITATION:	Deputy Commission of Taxation v Elias [2009] NSWSC 668
HEARING DATE(S):	13 July 2009
JUDGMENT DATE :	13 July 2009
JUDGMENT OF:	Price J at 1
EX TEMPORE JUDGMENT DATE:	13 July 2009
DECISION:	(1) Judgment in favour of the plaintiff in the amount of $407,040.45. (2) The defendant to pay interest on the judgment pursuant to s 100 of the Civil Procedure Act 2005 in the sum of $67,367.96. (3) The defendant is to pay the plaintiff’s costs.
CATCHWORDS:	Income tax - tax withheld but not remitted by company - liability of director - service of penalty notice
LEGISLATION CITED:	Civil Procedure Act 2005 s 100 Acts Interpretation Act 1901 (Cth) s 28A, s 29 Evidence Act 1995 s 160 Income Tax Assessment Act 1936 (Cth) s 222AOB(1), s 222AOC, s 222AOC(1), s 222AOBAA, s 222AOBA, s 222AOF, s 222ALA s 222AOE, s 222AOG, s 222AOB(3) Taxation Administration Act 1953 (Cth) ss 16-75 Corporations Act 2001 (Cth)
CATEGORY:	Principal judgment
PARTIES:	Deputy Commissioner of Taxation Tina Elias
FILE NUMBER(S):	SC 2007/15603
COUNSEL:	Ms S Foda (Plaintiff) No appearance (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

PRICE J

13 July 2009

015603/07 Deputy Commissioner of Taxation v
Tina Elias
JUDGMENT

1 HIS HONOUR: These proceedings concern the recovery by the plaintiff from the defendant as a penalty recoverable pursuant to s 222AOC of the Income Tax Assessment Act 1936 (Cth) (the ITAA) the sum of $407,775.45 being tax withheld but not remitted by Key Formwork Systems Pty Limited (Key Formwork) of which the defendant was a director. Although a defence has been filed the defendant does not appear nor is she represented. The defendant was called three times outside the court. I am satisfied that the defendant was notified of the date of the hearing.

2 The principal issue raised by the defence was the contention that the

s 222AOE notice was not served on the defendant until 29 September 2005. As the defendant does not appear there is no evidence to support that contention.

3 The defence pleads that on 12 October 2005 an administrator was appointed to Key Formwork and pursuant to s 222AOG of the ITAA the penalty claimed must be remitted. Before considering this issue it is necessary to make the following findings of fact. I am satisfied on the balance of probabilities that:

(1) Key Formwork was at all relevant times a company incorporated or taken to be incorporated under the Corporations Act 2001.
(2) Key Formwork paid salaries and wages and was classified by the Australian Tax Office (ATO) as a large withholder pursuant to ss 16 - 75 of schedule 1 of the Taxation Administration Act 1953 (the TAA). The company was required to remit the tax withheld at each withholding event six to eight days after each event.
(3) Key Formwork withheld amounts for the purposes of Div 12 in schedule 1 of the TAA for sixteen periods. The first period of withholding was 2 July 2005 to 5 July 2005 and the sixteenth period was 17 August 2005 to 9 August 2005. The due dates are set out in the table at para 39 of the affidavit of Rebecca Hartman sworn 13 June 2008 (ex B). The amounts withheld were not paid by the due dates or at all. Steps were not taken to wind up Key Formwork on or before the due dates.
(4) The defendant was a director of Key Formwork continuously in the period beginning 2 July 2005 and ending on 25 August 2005. The relevance of the latter date is that the sum of $37,773, being the amount withheld but not remitted for the sixteenth period, was due on 25 August 2005.
(5) The defendant’s postal address is 8 Highland Crescent, Earlwood, New South Wales 2206. This is the same address as recorded in the Australian Securities and Investment Commission’s (ASIC) records.
(6) An administrator was appointed to Key Formwork on 11 October 2005.

4 Section 222AOB(1) of the ITAA is as follows:

“(1) The persons who are directors of the company from time to time on or after the first deduction day must cause the company to do at least one of the following on or before the due date:
(a) comply with its obligations in relation to deductions (if any) and amounts withheld (if any) whose due date is the same as the due date;
(b) make an agreement with the Commissioner under section 222ALA in relation to the company 's liability under a remittance provision in respect of such deductions (if any) and amounts withheld (if any);
(c) appoint an administrator of the company under section 436A of the Corporations Act 2001 ;
(d) begin to be wound up within the meaning of that Act.”

5 Non-compliance with the obligations imposed by s 222AOB automatically renders a director liable to pay to the Commissioner by way of a penalty an amount equal to the unpaid amount of the company’s liability: s 222AOC(1) ITAA.

6 There is a continuing obligation imposed by s 222AOB(3) to bring about compliance if the payment required by s 222AOB(1) is not made.

7 Before recovering a penalty from a director the Commissioner must give notice to the director setting out the details of liability and the available options to discharge the liability. Section 222AOE is as follows:

“The Commissioner is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice that:
(a) sets out details of the unpaid amount of the liability referred to in subsection 222AOC(1), (1A) or (2) (whichever relates to the penalty); and
(b) states that the person is liable to pay to the Commissioner , by way of penalty, an amount equal to that unpaid amount, but that the penalty will be remitted if, at the end of 14 days after the notice is given:

(i) the liability has been discharged; or
(ii) an agreement relating to the liability is in force under section 222ALA ; or
(iii) the company is under administration within the meaning of the Corporations Act 2001 ; or
(iv) the company is being wound up.”

8 Section 222AOG provides:

“ Remission of penalty if section 222AOB, 222AOBAA or 222AOBA complied with before notice period ends
If:

(a) a penalty is payable by a person under this Subdivision; and

(b) section 222AOB , 222AOBAA or 222AOBA (whichever relates to the penalty) is complied with at a time when the Commissioner has not yet given the person a notice under section 222AOE , or within 14 days after the Commissioner gives the person such a notice;

the penalty is remitted because of this section.”

9 The imposition of the penalty may be avoided under s 222AOE(b)(i) - (iv) if, prior to the end of fourteen days after the notice is given:

(a) the unpaid liability in question is discharged; or

(b) a section 222ALA agreement is in force to discharge
the liability; or
(c) the company is in administration within the meaning
of the Corporations Act 2001; or
(d) the company is being wound up.

10 In the present case the administrator was appointed on 11 October 2005.

11 Section 222AOF provides for the method of service of a notice under s 222AOE (hereinafter referred to as ‘DPN’):

“(1) If it appears from ASIC documents that a person is, or has been within the last 7 days, a director of the company , the Commissioner may give the person a notice under section 222AOE by leaving it at, or sending it by post to, an address that appears from such documents to be, or to have been within the last 7 days, the person 's place of residence or business .
Note: Sections 28A and 29 of the Acts Interpretation Act 1901 are also relevant to giving a notice under section 222AOE.

(2) In this section:
"ASIC document" means a return :

(a) lodged with the Australian Securities and Investments Commission under section 205A , 205B or 346C of the Corporations Act 2001 ; or
(b) lodged with a person under a law that, for the purposes of the Corporations Act 2001 , is a previous law corresponding to section 205A, 205B or 346C of that Act.”

12 Service may also be effected by the ActsInterpretation Act 1901 (Cth).

13 Section 28A of the Acts Interpretation Act provides:

“ Service of documents
(1) For the purposes of any Act that requires or permits a document to be served on a person, whether the expression "serve", "give" or "send" or any other expression is used, then, unless the contrary intention appears, the document may be served :
(a) on a natural person:
(i) by delivering it to the person personally; or
(ii) by leaving it at, or by sending it by pre-paid post to, the
address of the place of residence or business of the
person last known to the person serving the document;
or

(b) on a body corporate--by leaving it at, or sending it by pre-paid post to, the head office, a registered office or a principal office of the body corporate.

(2) Nothing in subsection (1):

(a) affects the operation of any other law of the Commonwealth, or any law of a State or Territory, that authorizes the service of a document otherwise than as provided in that subsection; or
(b) affects the power of a court to authorize service of a
document otherwise than as provided in that subsection.”

14 Section 29 of the Acts Interpretation Act provides:

“ Meaning of service by post


(1) Where an Act authorizes or requires any document to be served by post, whether the expression "serve" or the expression "give" or "send" or any other expression is used, then unless the contrary intention appears the service shall be deemed to be effected by properly addressing prepaying and posting the document as a letter, and unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post.

(2) This section does not affect the operation of section 160 of the Evidence Act 1995.”

15 Section 160 of the Evidence Act 1995 is as follows:

“ 160 Postal articles

(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.
(2) This section does not apply if:
a) the proceeding relates to a contract, and
(b) all the parties to the proceeding are parties to the contract, and
(c) subsection (1) is inconsistent with a term of the contract.
(3) In this section:
working day means a day that is not:
(a) a Saturday or a Sunday, or
(b) a public holiday or a bank holiday in the place to which the postal article was addressed.”

16 There is no issue raised in the defence concerning the form of the DPN. I find that the notice, which is annexure B to the affidavit of Gregory Phillips sworn 28 May 2008, complies with the requirements of s 222AOE of the ITAA.

17 Mr Phillips derived the address of the defendant from the company extract of Key Formwork obtained from ASIC. That address is 8 Highland Crescent, Earlwood, New South Wales 2206. He prepared the DPN to be sent to that address. He placed the original notice and covering letter into an envelope addressed to the defendant at 8 Highland Crescent, Earlwood, New South Wales 2206. He sealed the envelope, affixed stamps and placed the envelope in an Australia Post box on the corner of Elizabeth and Market Streets, Sydney, New South Wales 2000 at 9.25 am on 19 September 2005.

18 The notice was given to the defendant by sending it out by post on 19 September 2005 to the address that appears from the ASIC document to be her place of residence within the last seven days. The plaintiff has complied with s 222AOF of the ITAA.

19 In accordance with s 222AOF of the ITAA, the notice being posted on 19 September 2005, the fourteen day period in relation to s 222AOG of the ITAA runs from 19 September 2005 to 3 October 2005. Alternatively, if s 28A and 29 of the Acts Interpretation Act and s 160 of the Evidence Act 1995 apply to the service of the DPN as the DPN was posted on 19 September 2005, (a Monday), the DPN is deemed to have been served on 23 September 2005, (a Friday). The 14-day period in relation to s 222AOG of the ITAA would then run from 23 September 2005 to 7 October 2005.

20 As has been submitted by the plaintiff it makes no difference to the defendant’s position whether the 14-day period is 19 September 2005 to 3 October 2005 or 23 September 2005 to 7 October 2005. There is no evidence to suggest any written agreement was entered into between the plaintiff and the defendant in accordance with s 222ALA of the ITAA from 19 September 2005 to 7 October 2005 so as to comply with s 222AOB of the ITAA.

21 The administrator was appointed on 11 October 2005, which date falls after either of the relevant periods.

22 I am satisfied that the amounts referred to in the DPN were not paid between 19 September 2005 and 7 October 2005 or at any time since. There is no evidence that steps were taken to wind up Key Formwork between 19 September 2005 and 7 October 2005. Accordingly the defendant has not complied with s 222AOB of the ITAA in relation to the DPN and the defendant is liable for the penalty.

23 Further affidavit material was filed today which calculates that the amount of pre-judgment interest is the sum of $67,367.96. Accordingly, I make the following orders:

(1) Judgment in favour of the plaintiff in the amount of $407,040.45.
(2) The defendant to pay interest on the judgment pursuant to s 100 of the Civil Procedure Act 2005 in the sum of $67,367.96.
(3) The defendant is to pay the plaintiff’s costs.

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