Deputy Commissioner of Taxation v Adrian Kevin Montagu as Director of Booze Boys Pty Ltd - [2018] WADC 97

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   DEPUTY COMMISSIONER OF TAXATION -v- ADRIAN KEVIN MONTAGU as Director of BOOZE BOYS PTY LTD [2018] WADC 97
CORAM:   DEPUTY REGISTRAR HARMAN
HEARD:   3 JULY 2018
DELIVERED          :   14 AUGUST 2018
FILE NO/S:   CIV 1733 of 2017
BETWEEN:   DEPUTY COMMISSIONER OF TAXATION
Plaintiff

AND

ADRIAN KEVIN MONTAGU as Director of BOOZE BOYS PTY LTD
Defendant

Catchwords:

Practice - Western Australia - Practice under the Rules of the Supreme Court 1971 (WA) - Summary judgment - Order 14 r 3 - Defendant's submissions

Legislation:

Taxation Administration Act 1953 (Cth), s 269-35 of sch 1

Result:

Application granted

Representation:

Counsel:

Plaintiff	:	Mr K Chu
Defendant	:	Mr B Duckham

Solicitors:

Plaintiff	:	Minter Ellison
Defendant	:	B W Duckham & Co from 16 June 2017; HWL Ebsworth Lawyers from 9 August 2018

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

Nil

DEPUTY REGISTRAR HARMAN:

The plaintiff's claim is for recovery of penalties imposed under the Taxation Administration Act 1953 (Cth).
Each penalty emerged from the context of employment by Booze Boys Pty Ltd of its workforce. The first of the plaintiff's two cases had its origin in failure to remit income withheld from its employees; the other, in a series of assessments issued by the plaintiff under the Superannuation Guarantee (Administration) Act1992.
Upon the corporation failing to pay each amount withheld and each amount assessed by the date due its directors then became personally liable to pay a penalty to the plaintiff in the same amount. The sum of those penalties is the amount sought to be recovered by the action.
According to his amended defence, at all relevant times the defendant was a director of the corporation having been appointed on 23 September 2014.
As for the plaintiff's first case, the defendant admits that unspecified amounts withheld were not remitted by the corporation and that in respect of each amount withheld the defendant was obliged to cause the company to comply with its statutory obligation.
The balance of the plaintiffs pleading is either not admitted or denied. Thereby the plaintiff pleads the amounts withheld or assessed and draws upon particular statutory provisions to establish each amount due by the corporation as the amount of a penalty imposed on and recoverable from the defendant.
The manner in which the defendant has chosen to so respond to paragraphs of the statement of claim that assert more than one allegation of material fact renders those responses ambiguous. Upon the close of pleadings ambiguous responses are deemed admissions. The only such responses that are effective are to paragraphs by which the plaintiff puts a single allegation of material fact: those that plead the total of the penalties in each case.
Accordingly but for the arithmetic, I am satisfied that on the close of pleadings the plaintiff would establish each case against the defendant.
The only defence pleaded is put against the plaintiff's second case, that arising from failure to pay the amounts assessed. The defendant refers to s 269-35 of sch 1 of the Act and asserts that he 'took all reasonable steps as contemplated in that section including the conferral with professionals as to the future viability of the company.' Further that by virtue of s 268-35 (2)(a) of sch 1 of the Act he is not liable to a penalty.
The plaintiff presently seeks summary judgment. As the application was lodged outside the time limit expressed in O 14 he requires a grant of leave to apply. The question whether leave be granted is determined upon an exercise of discretion.
Such an application is not a step in litigation. The relevant rule simply expresses that leave is required where it is made after a specified time. Common sense dictates that if the substantive application would succeed then leave would be granted.
The power to award summary judgment is discretionary. It would only be awarded when it is clear that there is no defence. Whether that standard is achieved will be determined on an assessment of the sufficiency of the pleadings and of the evidence filed by each party. The onus on each party is no different to that on a party to any other interlocutory application: to ensure that there is support for any submission that it cares to make.
By his evidence, the statutory provisions upon which he relies and his certificate I am satisfied that the plaintiff would establish each case put in the statement of claim. It remains to consider whether either case is sufficiently clear to enter judgment alternatively whether there is any reason to dismiss the application.
In his pleading the defendant draws upon s 269-35 of sch 1 of the Act for the purpose of putting a case under s 268-35 (2)(a) of sch 1 of the Act. The latter provision expresses scope for an exercise of power. It could not relate to any defence. From the case he has outlined: that by reference to s 269-35 he has taken all reasonable steps I am satisfied that the defendant has mistakenly cited s 268-35 (2)(a) intending to refer to s 269-35(2)(a) of sch 1 of the Act. It and a related sub section are as follows:
(2)You are not liable to a penalty under this Division if;
(a)you took all reasonable steps to ensure that one of the following happened;
(i)the directors caused the company to comply with its obligation;
(ii)the directors caused an administrator of the company to be appointed under s 436A, s 436B or s 436C of the Corporations Act 2001;
(iii)the directors caused the company to begin to be wound up (within the meaning of that Act);
(3)In determining what are reasonable steps for the purposes of subsection (2), have regard to:
(a)when, and for how long you were a director and took part in the management of the company; and
(b)all other relevant circumstances.
The allegation that the defendant conferred with professionals as to the future viability of the company suggests that the conferral had been to one of the ends specified in that provision. The fact that no end is pleaded exposes the pleaded allegation as insufficient and thereby his recourse to the provision as unfounded.
Be that as it may the defendant has provided evidence that he submitted draws upon that provision sufficiently to defeat the application.
In order to establish a defence on the basis of the provision the defendant would provide evidence to demonstrate that in relation to any particular amount due, over a particular part of the period during which he had been under the pleaded obligation, he had taken all reasonable steps to ensure that one of the events specified in the provision had occurred. The particular part of the period lies between the date that the amount was due and the date 21 days after the date of issue of a notice of intention to commence proceedings for recovery of the relevant penalty.
For the purposes of the plaintiff's first case each of a series of amounts withheld was due on a specified date during the period 21 May 2015 to 21 October 2016. As for the second, each of a series of amounts assessed was due on a specified date during the period 22 October 2014 to 1 April 2015.
As for the last date of the particular part of each period, the plaintiff issued four such notices. What the plaintiff designates as the first and second director penalty notices are each dated 9 March 2017; the third, 8 April 2017; and the fourth, 12 March 2017. The first, second and third relate to the plaintiff's first case and the fourth, to the second. I note that the third notice identifies a single amount due, each of the others specifies a number of amounts due.
Accordingly the relevant part of the period for the last failure to remit is roughly five months and each other failure or assessment would generate a longer relevant period. Those parts would steadily increase in length to that for the earliest assessment, roughly 29 months.
Prior to considering the defendant's evidence it is worth recording that his submissions are only effective to the extent that they are supported by evidence: even if the pleaded defence had been sufficient it would have no utility for present purposes.
There is no evidence that relates to the end outlined in s 269‑35(2)(a)(i).
The only evidence that relates to the end specified at par (ii) of the provision is at pars 20 and 21 in which the defendant deposes that in the week commencing 6 March 2017 consideration was given to placing the corporation into administration 'because this appeared to be the only option' and that he communicated to the corporation's accountant that it was necessary to put the corporation into administration.
Engagement of s 269-35 on the basis of s 269-35(2)(a)(ii) would only be had upon evidence of engagement in the process of appointment. There is no evidence that any such step was taken. In my opinion the content of pars 20 and 21 is of no utility to the end of establishing that the defendant would have recourse to that feature of the statutory defence.
The only evidence that relates to the particular end specified by s 269‑35(2)(a)(iii) is in pars 22 to 25 where the defendant outlines contact he had with an accountant and a proposed liquidator. Although at par 22 he deposes that he 'think(s) their appointment was on Wednesday, 22 March 2017', at par 25 he deposes that on 31 March 2017 the paperwork to effect the appointment of a liquidator was put in place. At par 25 he also refers to a meeting of directors held on 31 March 2017 and he identifies the minutes of that meeting. They record the passing of a resolution that a liquidator be appointed.
The balance of the evidence at pars 22 to 25 relates to the period after 28 February 2017 that may be taken as support for the proposition put at par 26: that the defendant took all reasonable steps to ensure that the corporation would be wound up.
As for the prospect that the liquidator was appointed on 22 March 2017 the evidence is vaguely expressed and contradicted by the import of the resolution passed on 31 March 2017. At the hearing there was no submission that a liquidator had then been appointed.
In order to defeat an application for summary judgment a respondent only needs to establish a submission that the applicant's case is not clear. Regardless the sufficiency of the respondent's case a result in favour of an applicant follows upon the exercise of discretion.
In relation to the statutory provision the defendant did not actually submit either that all or any part of the evidence that I have canvassed would establish ground or grounds for a defence under any paragraph of s 269-35(2)(a) of sch 1 of the Act, only that it was sufficient to found the submission that he had 'not wasted a minute' and had 'moved as quickly as he could'. Because the evidence upon which the defendant drew was that relating to the period from 28 February 2017 to 31 March 2017 I take it to be the case that it is only to that part of each relevant period that the submission would relate. There is no evidence that relates to the balance of each relevant part of each period.
The significant question that emerges is the impact of the submission on each case put by the application.
It is patent that the submission is not satisfactorily supported: firstly there is no evidence that accounts for days during the period from which it emerges; secondly that period is only a component of a larger period established by the statutory defence over which each amount was due; Thirdly the fact that action had been taken would only have significance for the purpose of the statutory defence if it was to one of the specified ends. Evidence of mere activity would not establish recourse to the defence. Finally it would be undermined by the fact that the resolution reveals that the defendant had not moved quickly at least towards one of the specified ends.
Ultimately the submission and the evidence upon which it draws stands to be considered other than under s 269-35(2)(a) of sch 1 of the Act.
I suspect that the defendant would draw upon the same evidence for the submission that he had presented a sufficient case to establish the proposition at s 269-35(2)(b) of sch 1 of the Act. It and a related subsection are as follows:
(2)You are not liable to a penalty under this Division if;
…
(b)there were no reasonable steps you could have taken to ensure that those things happened.
(3)In determining what are reasonable steps for the purposes of subsection (2), have regard to:
(a)when, and for how long you were a director and took part in the management of the company; and
(b)all other relevant circumstances.
As the scope of the evidence in the balance of the defendant's affidavit would bear upon s 269-35(2)(b), I will consider that submission after I have canvassed the balance of the evidence and submissions put against the application.
The defendant submitted that dismissal of the application would also be justified by evidence within the scope of s 269-35(1) of sch 1 of the Act. It is as follows:
(1)You are not liable to a penalty under this Division if, because of illness or for some other good reason, it would have been unreasonable to expect you to take part, and you did not take part in the management of the company at any time when:
(a)you were the director of the company; and
(b)the directors were under the relevant obligations under subsection 259-15(1).
According to his pleading and evidence the defendant would satisfy the conditions specified at s 269-35(1)(a) and s 269-35(1)(b).
The submission draws on an inference that prior to 25 October 2010 he suffered from hip pain; on evidence that a manager had been appointed to the business conducted by the corporation in the period between 25 October 2010 and 28 February 2017; and on evidence that on 10 August 2015 he was diagnosed as having osteoarthritis.
At par 9 of his affidavit the defendant deposes that in the relevant period he was medically indisposed and thereby his availability to participate in management of the business restricted.
I take it to be the case that at par 9 the defendant intended to attribute his indisposition to hip pain and/or osteoarthritis. The dimensions of the period or periods of indisposition are not expressed. There is no evidence of any period of any degree of actual incapacity. There is no evidence of any particular impact of either hip pain or osteoarthritis upon the defendant's capacity to undertake his responsibilities as director. There is no evidence to indicate that at any time during any relevant period either the pain or the condition had any impact on the extent to which the defendant engaged with his responsibilities as director of the corporation.
Accordingly it is impossible to assess the significance of the evidence that he had been so indisposed and thereby his availability to participate in management of the business restricted. On the scant evidence provided whilst arguably it would be open to draw inferences there is no reason to do so. The defendant is obliged to support the submission that due to his reliance upon the statutory provision the application ought to be dismissed. He has provided no evidence of any difficulty in bringing evidence to do so.
I am not satisfied that at any time commencing from the date one month after the date of his appointment the defendant was medically incapacitated. Whilst I have no doubt that his diagnosis of 10 August 2015 would have been preceded by a period during which he had suffered from the diagnosed condition, I have no idea when that period had commenced. The extent the defendant would have been incapacitated from engaging in his responsibilities as a director either within such a period or after the diagnosis is not the subject of any evidence other than that he was restricted. In my opinion in the context that I have expressed that evidence permits consideration of actual engagement, whether from time to time or to a limited extent is not significant. There is insufficient evidence to establish what impact osteoarthritis had on the defendant in his role as director of the corporation.
I note that there is no evidence that suggests that after 28 February 2017 the defendant had either been so indisposed or restricted in undertaking his responsibilities as director.
The defendant gives evidence that over each relevant period up until 28 February 2017 the only business undertaking of the corporation was managed by a Mr Baker. He draws upon evidence that relates to features of the management of the business to submit that over the period of Baker's management it was unreasonable to expect the defendant to undertake his responsibilities as a director of the corporation.
Before addressing the evidence upon which he relies to support that submission I will record that the statutory provision establishing a defence in those terms specifies that such a conclusion would apply to the whole of the period of his directorship. Further, that the other limb of the defence is that during the relevant period the director did not undertake any such responsibility.
There is sufficient evidence to establish that the corporation engaged Baker to manage its commercial undertaking. At particular parts of par 5 of his affidavit with reference to both the operation of the business and Baker the defendant builds a case for the propositions expressed at pars 5(i) and 5(j) as follows:
5(i)By reason of such appointment of Mr Baker and my personal work responsibilities, I rarely attended the Premises and I did not take part in the management of the Business.
…
5(j)During the course of the management of the Business by Mr Baker, I only ever reviewed annual accounts of the company professionally prepared by Messrs Adamo Accounting. I did not receive any other periodic statements or accounts. I say that perusing such accounts, I had no reason to be concerned or to be involved in the management of the Business.”
I note that even at those points the defendant reveals that he did engage with his responsibilities as a director. It is open to consider that Ademo had generated other records.
The balance of the evidence suggests two reasons for the defendant's attendances at the premises at which the business was conducted being rare: firstly his employment by a third party and secondly his view of the competence of Baker. As for the first, the defendant deposes that under the terms of his employment he had been precluded from involvement in the business of the corporation. There is no evidence of the defendant's ongoing employment. Indeed it is open to consider that such employment ceased on 30 September 2016. As for the second, it is at best implicit that the defendant had considered Baker to be competent.
At its commencement in par 5 the defendant deposes that in the period from April 2015 to 21 October 2016 pars 5(a) to 5(m) would establish that it would have been unreasonable for him to take part in the management of the corporation. None of the evidence in those subparagraphs either alone or in combination supports that proposition or is expressed to relate to the whole of that period. In any event the relevant period for the purposes of the plaintiff's cases extends on each side of that period.
The plaintiff was able to point to parts of the defendant's evidence that revealed that during the relevant period the defendant had active oversight of the operation of the business and that the management agreement provided for engagement by the directors in its business operations.
I am satisfied that a manager of the business had been appointed and remained so engaged in the period between 25 October 2010 and 28 February 2017. Ultimately it is not necessary to engage with the question of Baker's managerial competence because the engagement of a competent manager of the business would not necessarily have any impact on a director of its corporate owner.

In my opinion the defendant has not established support for his submission that management of the business of the corporation by Baker had any impact on the discharge of the defendant's obligations as a director.
Apart from the defendant's submissions that were directed to the statutory provisions that I have considered, he also raised three other matters for consideration.
The first was that he had not received the director penalty notices.
In fact the defendant's evidence is that prior to being shown a copy after the action was commenced, he had not seen a notice issued on 9 March 2017.
Be that as it may, the relevant statutory provision relating to communication in the form of such notices requires the plaintiff to issue such a notice addressed to the defendant and send it to that address. No significance attaches to the fact that such a notice had not been received.
For the sake of completeness two such notices issued on 9 March 2017 addressed to the defendant and the other two a short time later. He gives no evidence in relation to the balance. I am satisfied that each notice was sent to the defendant.
The second was that the assessments the subject of the plaintiff's second case are dated after the date upon which payment is due.
According to the plaintiff's evidence the assessments upon which he relies are amended assessments. His case is founded on those amended assessments. I take it to be the case that the date upon which payment was due was not amended. In my opinion the result that the amount due under each amended notice is recorded as having been due on a date prior to the date of its issue is interesting but nothing more.
The last of those matters is that the amended notices were sent by the plaintiff to the address of the manager of the business conducted by the corporation.
The defendant deposes that until 30 June 2015 the notified address of the corporation 'for income tax returns' had been Adamo Accounting, as up to that time Adamo had been responsible for ongoing lodgements with the plaintiff and that from April 2016 the notified address was changed to the residential address of Mr Baker.
The significance that the defendant attaches to the fact that the address of the notices is as they state is not the subject of any evidence, however his submission suggested some improper motive on the part of Baker.
There is no evidence of the arrangements that were either put in place or were intended to be put in place after June 2015. Perhaps of more significance is the fact that there is no evidence of what would have transpired had the amended notices been received at whatever address either had been or had intended to be notified to the plaintiff. In particular would the envelopes containing the notices have been opened and/or considered and/or acted upon by someone other than Baker?
Absent any useful evidence it is open to consider that apart from the fact that the particular change of notified address had not been authorised by the corporation, nothing significant that flows from the fact that the notices were sent by the plaintiff to Baker's residential address.
None of those three matters has any bearing upon either of the plaintiff's cases. By those three matters the defendant has not established any basis for dismissal of the application.
As I indicated earlier I would reflect upon the defendant's submissions and his evidence in the context of considering the prospect that the application should be dismissed on the basis of recourse to s 269‑35(2)(b) of sch 1 of the Act of the Act, it and its related subsection are as follows:
(2)You are not liable to a penalty under this Division if;
…
(b)there were no reasonable steps you could have taken to ensure that those things happened.
(3)In determining what are reasonable steps for the purposes of subsection (2), have regard to:
(a)when, and for how long you were a director and took part in the management of the company; and
(b)all other relevant circumstances.
Taking into account all of the defendant's evidence including that to which I have not referred there is no evidence to the effect that at any relevant time during the periods that the defendant had been obliged to require the corporation to act that there was any impediment to him taking steps to any of the ends specified in s 269-35(2)(a).
The fact that the corporation commenced to be wound up on 31 March 2017 reveals that absent evidence of any impediment to that end by an earlier date, there was no reason for that step not being taken earlier.
The defendant's submission that drew upon s 269-35(2)(b) was unsupported.
As I earlier considered, in the application the plaintiff has established each of its cases. The defendant has failed to support his submissions that the application be dismissed. Upon reflection there is no reason to exercise discretion in favour of the defendant as there is no reason to put any issue in the action to trial.
In my opinion in the context of the application the plaintiff has made out a clear case for judgment to be entered for the amount specified in his certificate.
It follows that leave be granted and judgment be entered for the amount specified in the plaintiff's certificate.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
LW
COURT OFFICER
13 AUGUST 2018