Deputy Commissioner of Taxation v Jayasinghe
[2025] VCC 766
•13 June 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-24-01719
| DEPUTY COMMISSIONER OF TAXATION | Plaintiff |
| v | |
| SAMPATH MIGARA JAYASINGHE | Defendant |
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JUDGE: | Her Honour Judge Kirton | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 April 2025 | |
DATE OF JUDGMENT: | 13 June 2025 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v Jayasinghe | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 766 | |
REASONS FOR JUDGMENT
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Subject:Taxation – director penalty regime
Catchwords: Taxation – defendant director of company with outstanding liabilities in respect of withholding tax and superannuation contributions
Legislation Cited: Taxation Administration Act 1953 sch 1 (‘Collection and recovery of income tax and other liabilities’); Civil Procedure Act 2010 (Vic); County Court Civil Procedure Rules 2018 (Vic); Corporations Act 2001 (Cth)
Cases Cited:Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27; Trkuljia v Google LLC (2018) 263 CLR 149; Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2012] VSC 163; Hausman v Abigroup (2009) 29 VR 213; [2009] VSCA 288; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473; Kolichis v Deputy Commissioner of Taxation [2014] WASCA 76; Deputy Commissioner of Taxation v Lawson (2017) ATC; Deputy Commission of Taxation v Todisco [2004] VSC 93; Deputy Commissioner of Taxation v Hooper [2005] VSC 69; Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191; Deputy Commissioner of Taxation v Epov [2008] NSWSC 1085; Deputy Commissioner of Taxation v Raskovic (2009) 75 ATR 359; Commissioner of Taxation v Orenelas [2016] FCA 457; Deputy Commissioner of Taxation v Lewer [2001] VSC 114; Lee v Deputy Commissioner of Taxation [2023 FCAFC 22; Silverbrook v Deputy Commissioner of Taxation [2020] NSWCA 95; Deputy Commissioner of Taxation v Vasiliades [2015] FCA 412; Naumcevski v Deputy Commissioner of Taxation [2019] NSWCA 72; Deputy Commissioner of Taxation v Hooper (2005) 58 ATR 522; Deputy Commissioner of Taxation v Epov [2008] NSWSC 1085; Deputy Commissioner of Taxation v Raskovic (2009) 75 ATR 359; [2009] NSWSC 281 at [22]; Snell v Deputy Commissioner of Taxation [2020] NSWCA 29; Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 199 CLR 370; Deputy Commissioner of Taxation v Clarke (2003) 57 NSWLR 113; Deputy Commissioner of Taxation v Holton [2016] VCC 516; Deputy Commissioner of Taxation v Lawson [2017] VSC 789
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | - | Christopher Melberzs, K&L Gates |
| For the Defendant | The Defendant appeared in person | - |
HER HONOUR:
Introduction
1By Writ and Statement of Claim dated 3 April 2024, the Deputy Commissioner of Taxation (the plaintiff) claimed from Sampath Migara Jayasinghe, (the defendant) the sum of $5,073,707.72. The claim was made in respect of unpaid director penalties imposed on the defendant in respect of unpaid taxation liabilities of Marine & Civil Pty Ltd (ACN 147 854 635) (the company).
Allegations in the Statement of Claim
2The plaintiff alleges that the company withheld PAYG tax under Division 12 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (the TAA) but failed to meet its obligations to make payments to the Commissioner under Subdivision 16‑B in Schedule 1 to the TAA. The plaintiff further alleges the defendant was at the relevant times, a director of the company, and was under an obligation under s 269‑15 in Schedule 1 to the TAA to cause the company to comply with its obligations under Subdivision 16‑B in Schedule 1 to the TAA. Following a reduction in the unpaid amount of the company’s withholding PAYG tax liabilities in the amount of $11,842.28, the plaintiff alleged the defendant became liable to pay a penalty to the Commissioner pursuant to s 269-20(1) of the TAA in respect of each amount withheld.
3In his defence, the defendant admitted he was appointed as a director on 3 January 2017, although he described his role as a ‘Special Purpose Director’. He said he received a letter from John Martin Neylon, Chairman and Director of the company who confirmed the appointment of a ‘Special Purpose Director’ and that the defendant was permitted to execute documents and necessary contracts on behalf of a third party in Sri Lanka. The defendant said he was not required to attend any meetings of the company nor to have any decision in the day to day running of the company, and that the appointment of him as a ‘Special Purpose Director’ was a requirement of the government of Sri Lanka to enable him to execute contracts in relation to development proposals submitted by the company to the government of Sri Lanka. Further, he denied he was liable as a director in respect of the claimed withholding PAYG tax or that he became liable to pay the penalties to the Commissioner in respect of each amount withheld. He said further, that pursuant to s 269-35(2)(a)(i) of Schedule 1 of the TAA, he is not liable to a penalty under Division 269 of the TAA 1953 because he took all reasonable steps to ensure that he as the sole director of the company caused the company to comply with its obligation, there were no reasonable steps he could have taken to ensure that any of the things in s 269-35(2)(a) of Schedule 1 happened, and pursuant to written terms of settlement dated 31 July 2023, the liquidator of the company and the company itself released and forever discharged him from all claims.
The Application
4By summons dated 15 November 2024, the plaintiff sought summary judgment pursuant to ss 61 and 63 of the Civil Procedure Act 2010 (Vic) (the CPA) and in accordance with Order 22 of the County Court Civil Procedure Rules 2018 (Vic) (the Rules) against the defendant. The plaintiff claimed the sum of $5,073,707.72 and interest pursuant to s 60 of the Supreme Court Act 1986.
Legal principles
Summary judgment
5Applications by a plaintiff for summary judgment are made pursuant to s 61 of the CPA. Section 61 provides that a plaintiff may apply to the court for summary judgment where a defendant's defence or part thereof has no real prospect of success. Section 63(1) provides that a court may give summary judgment if satisfied that a claim, a defence or a counterclaim (or part thereof) has no real prospect of success. Section 64 gives a court the option to refuse summary judgment and order that the proceeding go to a trial, even if there is no real prospect of success, if the court considers it is not in the interests of justice or a full hearing on the merits is appropriate.
6The principles are well known and not in dispute:
(a) the test for summary judgment under s 63 of the CPA is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;[1]
(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test”;[2]
(c) it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;[3]
(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence;[4]
(e) the view taken…is that the power to dismiss an action summarily is not lightly to be exercised but that…the “no real prospect of success” test is to some degree more liberal [and it] permits of the possibility of cases in which, although the plaintiff’s case is not “hopeless” or “bound to fail”, it does not have a real prospect of succeeding.”[5]
[1]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 [35] per Warren CJ and Nettle AJ (‘Lysaght’).
[2]Ibid.
[3]Ibid.
[4]Ibid.
[5]Trkuljia v Google LLC (2018) 263 CLR 149 [23] per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ, commenting on the test in Lysaght (n 1).
7To determine whether to grant summary judgment, the Court must be clearly satisfied that justice can be done on a summary application, as opposed to a usual trial process. Determination in favour of the applicant must be made cautiously, and only when there is no real question to be tried. As stipulated by Bell J, it is not sufficient for the party to have a merely arguable case. Rather, the case must have a real prospect of succeeding. A real prospect of success is one that is not fanciful or unreal even if the prospects are less than 50 per cent.[6]
[6]Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2012] VSC 163 at [12]
8It is also important that the above principles be considered in light of the legislative purpose of s 63 of the CPA to broaden the circumstances in which summary judgment might be ordered,[7] and the overarching purpose of the CPA of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute.[8] As per s 8(1) of the CPA, the Court must give effect to this purpose in the exercise and interpretation of its powers.[9] In doing so, the Court shall consider factors listed within s 9 when making any order or direction in a civil proceeding.
[7]Lysaght (n 1) [36], [41] per Neave JA.
[8]Civil Procedure Act 2010 (Vic) s 7(1).
[9]Civil Procedure Act 2010 (Vic) s 8(1).
9An application made pursuant to s 61 of the CPA is to be made in accordance with Part 2 of Order 22 of the Rules. As per Rule 22.05, the defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court. The requirement to show cause “imposes upon a defendant an evidential burden, or something akin thereto”.[10] As to the contents of the affidavit required by r 22.05:
The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.[11]
[10]Hausman v Abigroup (2009) 29 VR 213; [2009] VSCA 288 at [53] (footnote 13) citing Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87.
[11]Hausman (n 7) at [65].
Recovery of tax-related liabilities
10A tax-related liability as defined in s 255-1 of Schedule 1 to the TAA that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner. The Deputy Commissioner of Taxation may recover any tax-related liability in a court of competent jurisdiction.[12]
[12]Taxation Administration Act 1953 (Cth) sch 1, s 255-5(2).
Prima facie evidence provisions
11In a proceeding to recover a tax-related liability, s 350-20(1) of Schedule 1 to the TAA provides that a statement or averment about a matter in the plaintiff’s complaint, claim or declaration is prima facie evidence of the matter. Evidence may be given by way of affidavit.[13] A certificate signed by the Commissioner is prima facie evidence that the amount of a tax related liability is payable from that time and that the particulars stated in the certificate are correct.[14] Such certificates and prima facie evidence provisions are commonly used and relied upon in court proceedings.[15]
[13]Taxation Administration Act 1953 (Cth) sch 1, s 350-25(a).
[14]Taxation Administration Act 1953 (Cth) sch 1, ss 350-10(3) and 350-12.
[15]Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473; [2008] HCA 41 at [38]; Kolichis v Deputy Commissioner of Taxation [2014] WASCA 76 [23]; Deputy Commissioner of Taxation v Lawson (2017) ATC 20-644; [2017] VSC 789 [19] and the cases there cited. See, more recently, Lee v Deputy Commissioner of Taxation; Silverbrook v Deputy Commissioner of Taxation [2020] NSWCA 95 [75]-[79].
12A certificate under s350-10(3) of Schedule 1 to the TAA is not conclusive evidence of liability for the amount claimed and it does not alter the burden of proof, although it may be determinative where the taxpayer does not go into evidence.[16]
[16]See, for example, Deputy Commissioner of Taxation v Vasiliades [2015] FCA 412 [6]; Naumcevski v Deputy Commissioner of Taxation [2019] NSWCA 72 [69]; Deputy Commissioner of Taxation v Hooper (2005) 58 ATR 522; [2005] VSC 69 [7].
13To displace prima facie evidence, a defendant must do more than simply plead that the quantum of the tax debt is incorrect.[17]
[17]DCT v Epov [2008] NSWSC 1085 [32]; See, also Deputy Commissioner of Taxation v Raskovic (2009) 75 ATR 359; [2009] NSWSC 281 [22].
Directors Obligations and Penalties
14The director penalty regime in Division 269 of the TAA provides for penalties to be imposed on directors of non-complying companies. This is to ensure companies pay amounts of tax withheld under Division 12 to the Commissioner in accordance with Subdivision 16-B and the superannuation guarantee charge.
PAYG Withholding
15Amounts of withholding tax must be paid to the Commissioner in accordance with s 16-70 by the due dates set out in s 16-75.
Superannuation Guarantee Charge
16An employer who has a superannuation guarantee shortfall is required to lodge a statement by the date specified in s 33 of the Superannuation Guarantee (Administration) Act 1992 (SGAA).
17Pursuant to s 37, the Commissioner may amend any assessment (as defined in ss 6 and 39 of the SGAA). The Commissioner must give written notice of the amendment to the person liable to pay the SGC.
Director Penalty Regime
18Section 269-10(1) identifies the obligations a director must cause the relevant company to comply with. The obligations arise if the company withholds an amount under Division 12 and the company is obliged to pay the Commissioner the amount in accordance with subdivision 16-B on or before a particular day. They also arise where a company is obliged to pay superannuation guarantee contributions under the SGAA after a quarter ends.
19Section 269-15(1) provides that directors of a company are required to cause the company to comply with its obligations. Directors remain under their obligation until the company complies with its obligations, an administrator is appointed[18] to the company or the company is wound up.
[18]Corporations Act 2001 (Cth) ss 436A – 436C.
20A director is liable to pay a penalty if the obligations of the director pursuant to s 269-15 are not complied with by the due date.[19]
[19]Corporations Act 2001 (Cth) s 269-20(1).
21The amount of the penalty is equal to the unpaid amount of the company’s liability under its obligations.[20]
[20]Corporations Act 2001 (Cth) s 269-20(5).
22The Commissioner must not commence proceedings against a director to recover a penalty unless the Commissioner has given 21 days’ notice. This is done by way of a director penalty notice which sets out what the Commissioner thinks is the unpaid amount of the company’s liability under its obligation.[21]
[21]Snell v Deputy Commissioner of Taxation [2020] NSWCA 29 (n 18) [38]-[39] (meaning of ‘thinks’ in Corporations Act 2001 (Cth) s 269-25(2)(a)).
23A director penalty notice does not by itself impose a liability or create a right of action but is a temporal condition to the Commissioner’s power to commence proceedings to recover the penalty.[22]
[22]Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 199 CLR 370 (Woodhams) at [19].
24A penalty is remitted if, before or within 21 days after the Commissioner gives the director penalty notice, the director stops being under the obligation because the company’s liability has been discharged, an administrator has been appointed, or the company has been wound up.
25A director is under an obligation to comply from the time the company comes under an obligation and the obligation continues beyond the due date until the company’s liability has been discharged, an administrator has been appointed, or the company has been wound up; the three matters outline in s269-15(2).
26Directors of non-complying companies are liable to penalties equivalent to the amounts which the company has failed to remit.[23]
[23]Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 199 CLR 370 at [4]-[5] and [13] (n 19).
27A director penalty notice is given at the time it is left or posted.[24]
[24]Corporations Act 2001 (Cth) s 269-25(4) (Acts Interpretation Act 1901 s 29 has no operation).
Evidence on the application
28When the application came on for hearing on 2 April 2025, the plaintiff relied upon:
(a) Affidavit of Christopher John Melberzs affirmed on 21 March 2025;
(b) Affidavit of Namitesh Prasad affirmed on 15 November 2024 (Prasad Affidavit);
(c) Plaintiff’s outline of submissions dated 9 December 2024;
(d) Plaintiff’s further outline of submissions dated 31 March 2024;
(e) Plaintiff’s list of authorities dated 9 December 2025; and
(f) Proposed orders dated 2 April 2025.
29The defendant relied upon:
(a) Defendant’s defence to statement of claim dated 31 March 2024;
(b) Affidavit of Sampath Migara Jayasinghe affirmed on 6 December 2024 (First Jayasinghe Affidavit);
(c) Affidavit of Sampath Migara Jayasinghe sworn on 1 April 2025 (Second Jayasinghe Affidavit);
(d) Defendant’s outline of submissions dated 31 March 2025; and Defendant’s submissions in reply dated 1 April 2025.
Does the defendant’s defence have no real prospect of success?
Defendants’ Submissions
30The defendant did not dispute the following matters:
(a) The company was incorporated on 14 December 2010;[25]
(b) the defendant became a director on 3 January 2017;[26]
(c) the Director Penalty Notice was served on him on 8 May 2018;[27]
(d) the company was wound up in insolvency on or about 21 August 2018 and Robert Michael Kirman was appointed as liquidator of the company;[28] and
(e) the company failed to pay to the Commissioner, by the relevant due dates, actual amounts withheld under the PAYG withholding provisions in the sum of $5,073,607.72.[29]
[25]Affidavit of Namitesh Prasad affirmed on 15 November 2024 (‘Prasad Affidavit’), 16 of Exhibit NP-1.
[26]Prasad Affidavit (n 22), 18 of Exhibit NP-1.
[27]Prasad Affidavit (n 22), 11 [15], 66–76 of Exhibit NP-1.
[28]Prasad Affidavit (n 22) 19 of Exhibit NP-1.
[29]Prasad Affidavit (n 22), 11 [13], 13 [26–27], [155–161] of Exhibit NP-1.
31However, the defendant disputed he had become liable to pay to the Commissioner a penalty of an amount equal to each unpaid amount. He relied on five grounds in his defence.
32First, the defendant submitted he was appointed as a ‘Special Purpose Director’ on behalf of the company to engage in business contracts with the Sri Lankan government and was not a director in the general sense. He said that on or about December 2015, a business associate, Dr Chris Brown, introduced him to John Martin Neylon who was the chairman and director of the company at the time. Throughout 2016, the defendant was engaged by the company as a broker and facilitator to secure building contracts for the company in Sri Lanka. The defendant represented the company in negotiations with Sri Lankan government officials from the Ministry of Health, with the total value of the project being around $40,000,000.00. The defendant was informed by Sri Lankan authorities that before further negotiations could proceed, the company would have to be represented by a director. The defendant executed a letter of consent on or about 3 January 2017 and received a letter from John Neylon on 3 January 2017 confirming the defendant’s appointment as a ‘Special Purpose Director’ of the company.[30] The defendant submitted that the reason for the defendant’s appointment was a requirement of the government of Sri Lanka and the appointment enabled the defendant to execute documents and necessary contracts.[31]
[30]Affidavit of Sampath Migara Jayasinghe affirmed on 6 December 2024 (‘First Jayasinghe Affidavit’) 2, [7].
[31]Defendant’s Defence dated 31 March 2024.
33Second, the defendant understood that as a ‘Special Purpose Director,’ he was not required to attend any board meetings of the company nor have any decision in the day to day running of the company or in any financial matter or financial decision without consent of the directors of the company.[32] The defendant submitted that prior to his appointment as a ‘Special Purpose Director’ of the company, he made no enquiries as to the financial position of the company nor any enquiries as to the company’s tax liability to the Australian Taxation Office (ATO).[33] The defendant further submitted he does not recall executing any ASIC documentation.[34]
[32]Defendant’s Defence dated 31 March 2024.
[33]First Jayasinghe Affidavit (n 27) 3, [14].
[34]Affidavit of Sampath Migara Jayasinghe sworn on 1 April 2025 (‘Second Jayasinghe Affidavit’) 2, [7].
34Third, the defendant submitted that he continued progressing negotiations with Sri Lankan authorities upon receiving the director’s penalty notice (DPN) on 8 May 2018 which alleged outstanding tax liabilities. The defendant contacted John Neylon expressing his concern that this had not been disclosed to him earlier. The defendant submitted that John Neylon told him there were outstanding tax liabilities the subject of a payment plan, that this was being managed and was of no concern to the defendant. The defendant submitted that in good faith based on that advice, he continued progressing negotiations with the Sri Lankan authorities as the agreements were nearing completion.
35Fourth, the defendant submitted that on or around June 2023, he had entered into a Deed of Settlement which the defendant understood to be a full and final settlement of any liability associated with the company. The defendant completed payment of instalments listed in the Deed.
36Fifth, the defendant denies any allegations that he was a director of the company in the normal course of business and denies any involvement with the company during the period when the debts may have been incurred.[35]
[35]First Jayasinghe Affidavit (n 27) 3, [18].
Plaintiff’s Submissions
37The Deputy Commissioner submitted that as a director of the company, the defendant was under a continuing statutory obligation to ensure that the company complied with its obligation to pay to the Commissioner the PAYG obligation.
38The defendant’s submission that he was appointed as a ‘Special Purpose Director’ and did not participate, nor was required to participate, in the day-to-day management of the company or in any of the company’s financial matters is not an established defence under s 269-35. The plaintiff submitted that the defence in s 269-35(1) is not easily established where the director has participated in the management of the company at any stage during the relevant period in respect of which he [or she] was under a relevant obligation.[36] The basic requirement of the law is that directors are subject to a ‘core, irreducible requirement of involvement in the management of the company’ and whether a director knows it or not, he [or she] has a duty to exercise reasonable care and diligence in the discharge of his or her duties, with the standard of reasonableness being largely an objective one.[37] Further, leaving the responsibility for the affairs of a company to another person, such as not participating in the management of a company ‘in good faith’ will not be sufficient to constitute ‘good reason‘ for the purposes of s 269-35(1).[38]
[36]Plaintiff’s Outline of Submissions, paragraph 46; Snell v Deputy Commissioner of Taxation [2020] NSWCA 29 [49] (n 18).
[37]Deputy Commissioner of Taxation v Clarke (2003) 57 NSWLR 113 [174] (Hodgson JA).
[38]Deputy Commissioner of Taxation v Clarke (2003) 57 NSWLR 113 [124], [133] and [167] (Spiegelman CJ) (n 34).
39The Deputy Commissioner submitted that the concept of a “Special Purpose Director” is not recognised in the Corporations Act 2001 (Cth). The defendant was appointed as a director of the company on 3 January 2017 and was a director at all relevant times.[39] An agreement between directors cannot operate to override the statutory duties and obligations of a director and the deliberate decision not to participate in the management of the company whilst remaining a director is not a good reason.[40]
[39]Prasad Affidavit (n 22) 3, [6]–[29] of Exhibit NP-1.
[40]Snell v Deputy Commissioner of Taxation [2020] NSWCA 29 [89] (n 18).
Analysis
40In relation to the defendant’s first submission that his role as a ‘Special Purpose Director’ of the company solely to negotiate and execute contracts on behalf of the company in Sri Lanka, I accept the Deputy Commissioner’s submission that that the concept of a ‘Special Purpose Director’ is not recognised in the Corporations Act 2001 (Cth). There is no dispute that he was recorded by ASIC as one of the directors of the company.[41]
[41]Prasad Affidavit (n 22) [16]–[29] of Exhibit NP-1.
41Second, the defendant’s second submission that as a ‘Special Purpose Director’, he was not to have responsibility in the day to day running of the company or in any financial matter or financial decision without consent of the directors of the company, is not a defence under the TAA. While I accept the defendant’s evidence that he was advised at the time of his appointment as a ‘Special Purpose Director’ that he would have no capacity to effect the financial decisions and management of the company nor have any decision in the day to day running of the Company, or in any financial matter or financial decision without consent of the directors of the company, [42] the defendant was at all relevant times, a director of the company by law and subject to director obligations. I accept the Deputy Commissioner’s submissions that any agreement between directors cannot operate to override the statutory duties and obligations of a director.
[42]First Jayasinghe Affidavit (n 27) 2-3, [8], Exhibit SMJ1 dated 3 January 2017.
42Third, the defendant’s submission that he, in good faith relied on the advice of John Neylon to not be concerned about the outstanding tax liabilities after having received the director penalty notice on 8 May 2018 is not an available statutory defence to the penalties imposed by Division 269.[43] Based on the evidence, the director penalty notice was issued to the defendant in May 2018. Within 21 days after written notice of the penalty was given to the defendant, the defendant was required to either discharge their liability, appoint an administrator or have the company placed into liquidation. None of those occurred. I accept the Deputy Commissioner’s submission that a reason will not amount to a ‘good reason’ (within the meaning of s 295‑35(1)) where the directors of a company have agreed to divide responsibilities for the management of the company, or of businesses conducted by the company, between themselves[44] or have appointed another person to carry out that role.[45]
[43]Taxation Administration Act 1965 (Cth) s 269-35(5).
[44]Deputy Commissioner of Taxation v Holton [2016] VCC 516 at [50].
[45]Deputy Commissioner of Taxation v Lawson [2017] VSC 789 at [47] – [51] (n 12).
43Fourth, while I accept that the defendant genuinely thought that the liabilities he took on and the payments he made under the Deed of Settlement may have provided him with a complete release and forever discharged him from all claims relating to the company including any tax related liability or penalty, this belief is not supported at law. The plaintiff was not a party to the Deed of Settlement. The Deed did not address the director penalty notice or the defendant’s liability under the TAA. The Deed does not provide a release for those liabilities to the Commissioner.
44Fifth, the argument that the defendant was not a director of the company in the normal course of business and that he was not involved with the company from when the debts were incurred, is misconstrued. A director is liable to pay a penalty if the obligations of that director pursuant to s 269-15 are not complied with by the due date.[46] Section 269‑20(3) of Schedule 1 deals with penalties in respect of persons who become directors after a due day and states that a person will be liable to pay to the Commissioner a penalty if:
(a) after the due day, they become a director of the company and began to be under an obligation under s 269-15; and
(b) 30 days later, they are still under that obligation.
[46]Taxation Administration Act 1953 (Cth) sch 1, s 269-20(1).
45The defendant was appointed as a director of the company on 3 January 2017. While I accept the defendant may not have known or understood he was a director of the company for the purposes of the Corporations Act 2001 (Cth) and for discharging director’s duties in accordance with Division 269 of Schedule 1 of the TAA, the outstanding PAYG liabilities unpaid by a company fall to be paid personally by a director of that company. The defendant does not have a real prospect for success in the discharge of his director obligations.
Conclusion and orders
46For the reasons above I am satisfied that the defendant’s defence does not have a real prospect of success. I accept it is appropriate to summarily determine the proceeding and award judgment for the plaintiff for the amount of $5,073,607.72 and interest pursuant to s 60 of the Supreme Court Act 1986 (Vic).
47Subject to any matters that the parties bring to my attention on the question of costs, I propose to order that the defendant pay the plaintiff’s costs of the proceeding, including reserved costs and the costs of and incidental to the summons, on the standard basis, to be taxed in default of agreement.
48I invite the parties to prepare draft orders to give effect to these reasons.
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Certificate
I certify that these 15 pages are a true copy of the judgment of her Honour Judge Kirton delivered on 13 June 2025.
Dated: 13 June 2025
Mahi Joshi
Associate to Her Honour Judge Kirton
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