Deputy Commissioner of Taxation for the Commonwealth of Australia v Harrison - [2000] WADC 173

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA -v- HARRISON & ANOR [2000] WADC 173

CORAM: DEANE DCJ

HEARD: 22 JUNE 1999

DELIVERED : 7 JULY 2000

FILE NO/S: CIV 3685 of 1998

BETWEEN: DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA
Plaintiff
AND
CARL ANTHONY HARRISON
First Defendant
MATTHEW VALENTINE DE PLEDGE
Second Defendant

Catchwords:

Income tax - Proceedings for recovery - Company not remitting prescribed payments systems deductions - Liability of company directors to pay penalty - Notices requiring payment of penalty - Service of notice - Income Tax Assessment Act 1936 s 222ALA, s 222AOB, s 222AOC, s 222AOD, s 222 AOE, s 222AOF, s 222AOJ and s 222AQA - Corporations Law s 164(3)(a)

Legislation:

Income Tax Assessment Act 1936

Corporations Law

Result:

Judgment for the plaintiff as against the first and second defendants in the sum of $31,434 with interest - First and second defendants to pay the plaintiff's costs of the action (including reserved costs) to be taxed

Representation:

Counsel:

Plaintiff:     Ms A Van den Brun
First Defendant             :     Mr R Griffiths
Second Defendant         :     Mr R Griffiths

Solicitors:

Plaintiff:     Australian Government Solicitor
First Defendant             :     Griffiths & Godecke
Second Defendant         :     Griffiths & Godecke

Case(s) referred to in judgment(s):

Deputy Commissioner for Taxation v Gruber (1998) 43 NSWLR 271
Deputy Commissioner for Taxation v McIntyre, unreported; SCt of Qld; No 5580 of 1996; 5 June 1997
Deputy Commissioner for Taxation v Taylor [1983] 2 NSWLR 139
Fitzgerald v Deputy Federal Commissioner of Taxation (1995) 95 ATC 4,587
Power v Deputy Commissioner of Taxation, unreported; DCt of Qld; 2174 of 1995; 12 December 1995
Re Scobie & Anor; ex parte Deputy Federal Commissioner of Taxation; (1995)95 ATC 4,525

Case(s) also cited:

Simpson v Deputy Federal Commissioner of Taxation (1996) 96 ATC 4661

DEANE DCJ: In this action the plaintiff seeks recovery of a penalty it claims it is owed by the first and second defendants pursuant to Division 9, Part VI of the Income Tax Assessment Act 1936 (Cth) ("the Act"). The plaintiff requests that judgment be entered for it against the first and second defendants in the sum of $31,434 together with interest thereon pursuant to s 32 of the Supreme Court Act 1935.
Division 9 of the Act imposes penalties for directors of companies which fail to remit prescribed payments system deductions ("PPS deductions") to the Commissioner, or which fail to comply with an agreement with the Commissioner pursuant to s 222ALA of the Act to make such payments. Both the first and second defendants were directors of Redifix (WA) Pty Ltd ("the company") during the period relevant to the claim made by the plaintiff. The first defendant, Mr Harrison, was a director of the company from 29 August 1997 to 20 May 1998, the second defendant, Mr De Pledge, was appointed a director of the company in June 1996 and was still a director during the period April 1997 to October 1997. A third defendant, Mr Logan, is not a party in this particular application.
The company was obliged to, and did, deduct PPS payments from monies paid to contractors who worked for the company. Once such payments were deducted the company is obliged to remit those payments to the plaintiff and the contractors concerned are then given credit for the deductions when they file their income tax returns. In this case the plaintiff alleges that the company, having deducted PPS tax, has failed to remit it and in that sense the plaintiff did not have the benefit of those monies. Prior to 1993 if a company was wound up or a director of a company became bankrupt the plaintiff was given priority as an entity to which a debt was owed. This was no longer the case after 1993 and in lieu the penalty provisions of the Act were enacted. The general effect of these provisions obliges directors of a company to ensure that PPS deduction payments are made promptly and if they do not do so or the company is unable to make such payments the directors are then obliged to either place the company into voluntary administration or make an application to have the company wound up.
Where the financial difficulty being experienced by the company is temporary in nature it can enter into an agreement under s 222ALA of the Act as a result of which due dates for payments are set. In this case the plaintiff alleges that the company failed to remit PPS deductions to the plaintiff pursuant to Division 3A of Part VI of the Act for the months April 1997 to October 1997 inclusive. The due dates for payment of the PPS deductions are contained in par 6 of an affidavit dated 4 February 1999 sworn by Ms Stroud and filed on behalf of the plaintiff. The total deductions for that period totalled $41,434. The scheme works in such a way that payment of PPS deductions are to be remitted on a monthly basis being within 14 days after such deduction is made, for example, a deduction made in April 1997 would be due to be paid to the plaintiff by 14 May 1997.
In argument before the Court some confusion arose as to whether or not the company had paid $10,000 or $17,563 in reduction of the sum of $41,434. This confusion arose because the company paid $7,563.50 in February 1998 to the plaintiff which went to reduce the company's liability for PPS deduction payments for the month of November 1997. Here the plaintiff claims payment of PPS deductions for the period April 1997 to November 1997. The sum of $7,563.50 was in fact a PPS deduction payment which became due in December 1997 relevant to November 1997 deductions and therefore the payment of that sum is not relevant to the moneys claimed for the period April 1997 to November 1997 inclusive. I therefore accept the plaintiff's contention that the sum of $31,434 remains outstanding.
Section 222AOB(1) of the Act imposes an obligation on a person who is a director of a company on or after the first deduction date to cause the company to do at least one of four things on or before the due date:
(1)Comply with Division 3A of the Act with respect to each PPS deduction;
(2)Make an agreement with the Commissioner pursuant to s 222ALA of the Act;
(3)Appoint an administrator of the company under s 436A of the Corporations Law;
(4)Commence to cause the company to be wound up under the Corporations Law.
If a company fails to do any one of those things on or before the due date or dates, each person who is a director of the company on or after the relevant date or dates becomes liable to a penalty pursuant to either s 222AOC or s 222AOD of the Act. In this case the plaintiff alleges that the company did none of the four things contemplated by s 222AOB of the Act within the relevant timeframe. The penalty to which a director becomes liable is a penalty in the same amount as the amount of the unremitted PPS deduction or deductions.
It is the case, however, that before a penalty or penalties can be recovered by it, the plaintiff must give notice pursuant to s 222AOE of the Act advising the directors that if within 14 days of being given notice they do not comply with s 222AOB(1) then the penalty will be remitted. Paragraph 16 of Ms Stroud's affidavit deposes that notices were sent to both the first and second defendants by prepaid post on 27 November 1997. The address in each instance to which the notice was directed was the last known address of each defendant as it appeared from ASIC (now ASC) records. It would appear that another person who was a shareholder as distinct from a director of the company also received a notice but in the scheme of things I do not consider that matter to be relevant in these proceedings. The second defendant concedes that he received a notice but the first defendant makes no such concession and can find no copy of the notice despite searching his papers. It would seem that the first defendant at the time resided at 19 Aberdere Way, Warwick, and it would appear that the notice that was sent to him was addressed to 19 Abdere Way, Warwick. It is important to note that the address of the first defendant on the relevant ASIC record is in fact 19 Abdere Way, Warwick, WA 6024.
Section 222AOF of the Act sets out the procedure as to how notice must be given to a director. The effect of the section is that if it appears from the relevant ASIC (or ASC) record that a person is or has been a director of the company within the last seven days, the Deputy Commissioner may give the person notice pursuant to the Act by either (1) leaving it at or (2) sending it by post to an address that appears from such records to be or have been within the last seven days that person's residence or place of business. From the material available to it I consider that the plaintiff has complied with the provisions of s 222AOF in relation to giving notice to the first defendant. Furthermore, in Deputy Commissioner for Taxation v Gruber (1998) 43 NSWLR 271 the New South Wales Court of Appeal held at p 277 of that decision that the Deputy Commissioner was entitled to refer to and rely upon an extract from ASIC (or ASC) records to determine the address of a director. It was said that a notice may be validly served in accordance with s 222AOF of the Act even if it is not in fact received by the addressee and in that regard the Court accepted the observations in Deputy Commissioner for Taxation v Taylor [1983] 2 NSWLR 139 at 143 where Lee J stated "but the very fact that a mode of service other than personal service is permitted, of itself ordinarily means that service will be complete when the requirements stipulated for service have been fulfilled".
I take this view despite the submission on behalf of the first defendant that the provisions of s 222AOF have not been complied with. The basis for this submission seems to be founded in a commentary on s 222AOF of the Act contained in Vol 10 of Australian Tax Practice. There the commentator makes reference to the explanatory memorandum to the Insolvency (Tax Priorities) Legislation Amendment Bill 1993 whereby it was said s 222AOF of the Act will ensure that notices are sent to current addresses by requiring the Commissioner to send the notice to an address within seven days of obtaining the address from the ASC. It was said that this provision is of critical importance, as no liability may be recovered from a director until 14 days after the director is given a notice in accordance with s 222AOE of the Act. It is further noted that the provisions make it imperative that the directors of companies ensure that the ASC's record of their addresses are up to date. There is nothing in the relevant legislation which says that a notice must be sent to a director's address within seven days of obtaining the information from the ASC (or the ASIC). In my view it is an interpretation only of the section by the authors of the commentary. That is a view held by the Court in Deputy Commissioner for Taxation v McIntyre, unreported; SCt of Qld; No 5580 of 1996; 5 June 1997. There, Derrington J confirmed at p 7 of the report when considering the operation of s 222AOF of the Act "… it is required that the Commissioner give the notice in various ways one of which is by sending it by post to an address that appears from the documents to be or to have been within the last seven days the person's place of residence or business. In other words, the two sections (with reference to s 222AOE) read together do not require any proof that the person received it but merely require that a notice be given by that particular means, and if the means in some way failed to be effective that does not detract from the obligations of the Commissioner under the Act".
Pursuant to s 222AOE of the Act, a penalty otherwise payable by a director under s 222AOC or s 222AOD of the Act, will be remitted if within 14 days after such notice having been given the director has paid the amount of the PPS deductions to the Commissioner or has entered into an agreement with the Commissioner pursuant to s 222ALA of the Act or has placed the company in administration or liquidation.

Section 222ALA agreement

Annexure "IS-3" to Ms Stroud's affidavit shows that on or about 9 December 1997 the company entered into an agreement with the Commissioner pursuant to this section of the Act ("the agreement"). As this was within 14 days of notice being sent on 27 November 1997 the penalty was remitted. Both the first and second defendants in their respective affidavits, sworn in opposition to the application for summary judgment, in effect say that they had no knowledge of the agreement being executed by the third defendant on 9 December 1997 and that such knowledge only came to their attention in late June 1998. They claim there was no agreement between the plaintiff and the company, but it is submitted on their behalf if the Court were to conclude that a s 222ALA agreement does exist then it is an agreement between the plaintiff and the third defendant, Mr Logan, who was the managing director of the company. It is argued that if Mr Logan entered into such an agreement with the plaintiff he did so without the knowledge or authority of either the first or second defendant. There was no board meeting with respect to discussing the matter nor does any documentation exist authorising Mr Logan to enter into the agreement on behalf of the company.
When one examines Annexure "IS-3" to Ms Stroud's affidavit, on its face it appears to be an agreement between the plaintiff and the company which specifies that the company owes the plaintiff particular liabilities as set out in the schedule to the agreement, being liabilities pursuant to the remittance provisions of the Act. Within that document it is contemplated that the company would pay the plaintiff the amounts of moneys contained in the schedule on the dates specified. Apart from Mr Logan's signature as the managing director of the company there is no reference to any agreement between Mr Logan and the plaintiff in that document. Further, the agreement is sealed with the company seal of Redifix (WA) Pty Ltd, which I accept the plaintiff was entitled to assume meant that Mr Logan had the authority to affix the common seal of the company to the agreement and witness it. In my view in all of the circumstances which include the very clear wording of the agreement, it is an agreement between the plaintiff and the company (s 164(3)(a) of the Corporations Law).
I take the view that the s 222ALA agreement was properly entered into on behalf of the company as a result of which it was required to pay to the plaintiff the sum of $31,434 on or before 22 December 1997. The company failed to do so.
As a result of this breach of the agreement pursuant to s 222AQA(1) of the Act an obligation was cast upon the first and second defendants to cause the company to comply with the agreement. It is the case that a similar obligation was cast upon the third defendant but for the purposes of this application that does not need to be considered. Section 222AQA(2) of the Act contemplates that where a company contravenes an agreement each person who was a director of the company at any time during the period, beginning on the day when the agreement was made (9 December 1997) and ending on the day of contravention of the agreement (22 December 1997) is liable to pay to the Commissioner an amount equal to the balance payable under the agreement. There is no issue that between those dates both the first and second defendants were directors of the company.
This is not the end of the matter, however, because pursuant to s 222AQD of the Act a director has a defence to s 222AQA if they can satisfy certain matters set out in s 222AQD, namely:
(1)The director proves that because of illness or for some other good reason he did not take part in the management of the company at any time during the period referred to in s 222AQA(2) (here the period is 9 to 22 December 1997 inclusive) when the person was a director; s 222AQD(2); or
(2)The director proves that he took all reasonable steps to ensure that the company complied with the agreement; s 222AQD(3);
Provided that;
(3)If the director was a director of the company at the time that the agreement was entered into, he had reasonable grounds to expect and did expect that the agreement would be complied with.
In this instance both the first and second defendants argue pursuant to s 222AQD(2) that for various reasons deposed to in their respective affidavits they did not take part in the management of the company during the relevant time. The first defendant says that his role was to deal with the marketing and sale of the products of the company whilst the second defendant says that his role was to oversee and manage on site construction of the products of the company. They each depose to the fact that Mr Logan, the third defendant, managed the company from early 1997 and in August 1997 he was appointed the managing director. According to the first defendant's affidavit, Mr Logan had the exclusive function of managing the financial affairs of the company and this was a role which Mr Logan guarded somewhat jealously. Both the first and second defendants say they received reports from Mr Logan from time to time as to the general and financial situation of the company and nothing they were told gave them cause for concern. This situation altered, however, towards the end of 1997 when it came to the attention of both the first and second defendants that the company was experiencing financial difficulties which included the accrual of arrears payments to the plaintiff. They both claim that upon enquiring further about the matter the third defendant assured them that the problems were only temporary and in addition they were advised that the difficulty involving arrears of payments to the plaintiff had been resolved.
The second defendant in his affidavit claims that nonetheless he was concerned to pay greater attention to administrative matters involving the company and when he endeavoured to obtain more information from company records regarding payments by the company to the plaintiff, he met with violent resistance on the part of the third defendant and was advised in a fairly blunt manner to cease prying into areas that did not concern the second defendant. According to the affidavit of the first defendant, he was present at the time of this incident and was subsequently informed by the third defendant that the difficulties with the plaintiff had been resolved and that the third defendant had guaranteed the plaintiff that he would pay the outstanding arrears and that $7,000 of these moneys would come from the third defendant's own funds. The first defendant says he was reassured by this and in the circumstances did not want to create further difficulties with the third defendant.
By reason of the defence raised on behalf of the first and second defendants in this regard they must demonstrate their respective failure to take part in the management of the company. There is no suggestion in this case that failure to do so on the part of either the first or second defendant was by reason of illness. It is then necessary to consider whether there is any evidence supporting some other good reason for this failure if such failure is found. Neither the first nor second defendant claimed that they took all reasonable steps to ensure that the company complied with the agreement because it is their contention that they knew nothing about the agreement and hence could not take reasonable steps to ensure compliance with it. In addition, both the first and second defendant in effect say that there were no reasonable steps that they could have taken in any event because they say that the maladministration of the company by the third defendant was concealed from them.

In any event a director relying on a defence pursuant to s 222AQD of the Act cannot do so unless the proviso to that section is satisfied, namely that if the director was a director of the company at the time that the agreement was entered into, he had reasonable grounds to expect and did expect that the agreement would be complied with.
It is necessary to examine, relevant to the defence upon which the first and second defendants seek to rely, the evidence as to whether or not they took part in the management of the company. It is argued on behalf of the plaintiff that as both the first and second defendants considered reports given to them from time to time by the third defendant, Mr Logan, they were in effect taking part in the management of the company. In this submission counsel for the plaintiff relies on Power v Deputy Commissioner of Taxation, unreported; DCt of Qld; 2174 of 1995; 12 December 1995. At p 5 of that decision Morley DCJ observed:
"Further, proof of this defence requires proof that Power did not participate in the company's management. Power's depositions in an affidavit include that he did not participate in Power Administration's management; but, by his other depositions, it seems that Power received and considered O'Callaghan's weekly and monthly company management reports (O'Callaghan being another director who had sole conduct and control of the financial affairs of Power Administration and the company supplying supporting services to it) upon which Power relied to be induced to believe that all deductions had been remitted. To have any prospect of succeeding Power must be able to prove, according to the civil standard, that he did not participate at all in the company management, the reports of which he seems to have received and on which he placed reliance. To prove the defence being considered Power must prove no participation by him at the material times in the company's management."
During December 1997 the financial difficulties of the company were discussed as between Mr Logan and both the first and second defendants. For this reason I accept the submission on behalf of the plaintiff that neither the first nor the second defendant can demonstrate that they took no part in the management of the company.
Even if this could be demonstrated by either or both of them as I have said there is no suggestion that it would have been by reason of illness as there is no evidence to that effect. To complete a consideration of this matter it is necessary to consider in any event whether even if either the first or second defendant could demonstrate such non‑participation it was for a good reason other than illness. In Power's case Morley DCJ observed "to be good the alleged reason must be that which would be concluded to have been so by the notional reasonable person's mind acting under appropriate directions about the nature of Power's director's duties and functions in and about the management of the company; so, to constitute a some other good reason the phenomenon particularised and proved to have been in existence must have the quality of justifying a director's not having participated in his or her company's management or of precluding or disabling her or him from so participating. That just stated is, in my judgment, the manifest legislative intent of the applicable legislation, but particularly as of ss 222AOI and 222AOJ". The onus of proving such lies upon the person seeking to take advantage of the section.
Despite the varying and distinct roles and responsibilities of both the first and second defendants in the management of the company nonetheless they each had a statutory duty as a director to ensure that PPS deduction payments were made to the plaintiff and I accept the submission that in that sense they were required to take part in the management of the company. In Deputy Commissioner for Taxation v McIntyre (supra) Derrington J observed; "it does not fall to a director of a company who deliberately remains unconcerned as to the affairs of the company to claim that there was thereby a good reason for not taking part in its management".
It is also argued on behalf of the first and second defendants that as they were unaware of the existence of the agreement they could take no reasonable steps to ensure the company complied with it. As they were both directors of the company at the time the agreement was entered into, neither the first or second defendant can rely on a defence under s 222AQD(2) or (3) of the Act unless they can satisfy the proviso contained in s (5). As a matter of logic, if either the first or second defendant were unaware of the agreement it would not have been possible for them to form a view that there were reasonable grounds to expect that the company would comply with the agreement on the date that it was entered into. In this case there is no evidence to support the claim by either the first or second defendant that they did expect the company would comply with the agreement as at that date.
In relation to this aspect of the matter it is submitted on behalf of the first and second defendants that the mischief which s 222AQD seeks to address is concerned with the type of situation where a director has attracted a personal liability through fault in remitting payments to the plaintiff and then has that liability remitted by entering into a s 222ALA agreement which that director has no intention of honouring, for example, by way of placing himself in a position to ensure that he cannot take steps to comply with the agreement, for example, by going overseas or putting the company into voluntary liquidation. As against this it is said that s 222AQD is not aimed at a director or directors who do not act in such a cynical fashion. No authority was advanced to support this interpretation of the legislation and there is nothing that I can see in the wording of s 222AQD of the Act which contemplates that a person such as a director must have knowledge or implied knowledge of an agreement. In the absence of this in my view the section must be interpreted strictly.
I have previously decided in these reasons that the agreement is an agreement between the plaintiff and the company. Even if that was not my finding and there was no agreement between the plaintiff and the company the first and second defendants would still have to demonstrate that an agreement pursuant to s 222ALA exists otherwise the plaintiff can rely on the argument that both the first and second defendants are liable for payment of the moneys in any event because each of them were sent a notice pursuant to s 222AOE of the Act and none of the actions contemplated in s 222AOB(1) occurred within the 14 day period stipulated. Therefore if the company did not enter into the agreement, the first and second defendants are liable to a penalty pursuant to s 222AOC and s 222AOD of the Act. The second defendant, Mr De Pledge, was a director of the company between April and December 1997 and is therefore liable to a penalty pursuant to s 222AOC of the Act. The first defendant, Mr Harrison, became a director of the company on 29 August 1997 and pursuant to s 222AOC his liability is relevant to the months of August, September and October of 1997. However, within 14 days of 29 August 1997 s 222AOB of the Act had still not been complied with and therefore the first defendant, Mr Harrison, is liable to a penalty pursuant to s 222AOD for the earlier months of April, May, June and July 1997.
Once again this is not the end of the matter, however, because there are defences available to directors under s 222AOJ of the Act which are in very similar terms to the defences set out in s 222AQD, so once again it is a defence if a director can prove that due to illness or for some other good reason he did not take part in the management of the company during the relevant time or if a director can prove that he took all reasonable steps to ensure compliance with the agreement or that there were no reasonable steps he could have taken to ensure compliance with that agreement.
As regards the first defendant, the relevant period for showing this defence is available as from the date he became a director on 29 August 1997 to 14 December 1997 and in relation to the second defendant the relevant period for making out the defence is from 1 April 1997 to 14 days after notice was given on 27 November 1997. I have already canvassed the material which in my opinion prevents a finding that either of the defendants did not take part in the management of the company and that any failure to do so was by virtue of illness or some other good reason. Those same matters apply in this regard.
Consideration must be given to s 222AOJ(3) of the Act in order to consider whether or not either of the defendants have proved that they took all reasonable steps to ensure that the company complied with s 222AOB or alternatively that there were no such steps that either of the defendants could have taken. Despite the specific roles assigned to each of the directors of the company, including the first and second defendants, that did not absolve them from their general duties as a director of a company. From the material contained in their respective affidavits neither the first nor the second defendant seemed to have made any active enquiries as to the financial state of the company before December 1997. It was at that time they say they were made aware by the third defendant, Mr Logan, of certain financial and cash flow problems facing the company. Despite being warned of the problem at that time neither the first nor the second defendant seemed to have been sufficiently concerned enough to immediately begin more actively investigating and attempting to rectify the problem. The first defendant seemed to have been content to rely on assurances from Mr Logan that all was well as a result of a board of directors' meeting of the company in early February 1998. A similar situation existed in relation to the second defendant whom one would have thought by virtue of the rather aggressive behaviour towards him by Mr Logan prior to this time, would be uneasy in relation to any such assurances given to him by Mr Logan.
The second defendant concedes he received a notice pursuant to s 222AOE of the Act and even if the first defendant did not receive such an item it is curious that given that they both aware as at December 1997 of the difficulties the company was facing, the second defendant did not mention receipt of the notice to the first defendant. It is clear that they were both present at the board of directors' meeting in February 1998 when the question of payment of moneys to the plaintiff was discussed, albeit with a degree of reassurance on the part of Mr Logan.
It would seem that relations between Mr Logan and the first and second defendants deteriorated markedly in 1998 and there is a suggestion that this made it difficult for the first and second defendants to inform themselves, for example, by way of inspection of company records, as to what was occurring in relation to the company. This, however, is beyond the period when both the first and second defendants were obliged to take all reasonable steps to ensure compliance with their obligations as directors under s 222AOB of the Act. In my view neither of them have demonstrated that there were no reasonable steps that could have been taken by them in this regard.
I cannot accept the submission on behalf of the first and second defendants that Power v Deputy Commissioner for Taxation does not preclude the Court taking a liberal approach in matters of this nature. This is so even where it may be the case that directors have particular roles and responsibilities in a company and are on the face of it confined to fulfilling those roles. The statutory duties imposed upon directors are onerous and strict in my view. In Fitzgerald v Deputy Federal Commissioner of Taxation (1995) 95 ATC 4,587 French DCJ imposed a liability upon a person who was not only no longer a director but had held that position for a period of 17 days. Her Honour observed that; "it is the responsibility of a new director at or prior to taking up appointment to make enquiries of the relevant offices of the company as to whether there were any moneys owing to the Commissioner". This strict view runs counter to a suggestion that persons in the position of the first and second defendants are entitled to assume that someone such as Mr Logan, occupying the position as financial or managing director of a company, will not act fraudulently or engage in a maladministration of the company. It may be difficult and unpalatable for one director to check and satisfy himself objectively as to the appropriate behaviour on the part of other directors, but this is by implication what the legislation would seem to require. I take this view despite the commentary regarding s 222AOJ(3)(b) in Vol 10 of Australian Tax Practice. There is was said that an extremely narrow interpretation of the section would result in all directors always being liable for omissions of the company and such an interpretation would in the commentator's opinion fail to have regard to the realities of corporate life. In my view this could possibly be the case but it does not address what I understand to be the philosophy underpinning the relevant legislation. The authorities which also include in Re Scobie & Anor; ex parte Deputy Federal Commissioner of Taxation; (1995)95 ATC 4,525 do not support a more liberal interpretation.
For the above reasons I order that there be judgment entered for the plaintiff against the firstnamed defendant and secondnamed defendant in the sum of $31,434 with interest thereon pursuant to s 32 of the Supreme Court Act. I further order that the first and second defendants do pay the plaintiff's costs of the application (including any reserved costs), and of the action, such costs to be taxed.