Deputy Commissioner of Taxation v Clark

The Deputy Commissioner of Taxation (DTC) brought proceedings against Mr Clark and Mrs Clark, seeking to recover amounts owed by a company of which they were the sole directors. The dispute concerned the company's liability for debts incurred while it was insolvent, and the directors' potential liability for those debts under section 588FGB of the Corporations Act 2001 (Cth). The matter was heard by the Court of Appeal of New South Wales.

The primary legal issues before the Court of Appeal were: (1) what constitutes a "good reason" for a director's non-participation in the management of a company, as required to establish a defence under section 588FGB(2)(b); and (2) whether the irreducible expectation of participation in management, or the abolition of the requirement for two directors, affected the interpretation of "good reason" in that section. The Court also considered whether the *ejusdem generis* rule of statutory interpretation was relevant to the construction of "good reason".

The Court reasoned that the defence under section 588FGB(2)(b) requires a director to demonstrate a "good reason" for their non-participation in management. It held that accepting a directorship at another's request, without more, does not constitute a good reason for failing to participate in management. The Court rejected the argument that the abolition of the requirement for two directors altered the meaning of "good reason" or that the *ejusdem generis* rule applied. The irreducible expectation of participation in management was considered relevant to the question of whether a director had a good reason for non-participation.

The Court of Appeal allowed the appeal with costs.