Deputy Commissioner of Taxation v Lim

[2019] WADC 106

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   DEPUTY COMMISSIONER OF TAXATION -v- LIM [2019] WADC 106

CORAM:   PRINCIPAL REGISTRAR MELVILLE

HEARD:   28 JUNE 2019

DELIVERED          :   26 JULY 2019

FILE NO/S:   CIV 1793 of 2018

BETWEEN:   DEPUTY COMMISSIONER OF TAXATION

Plaintiff

AND

TIONG PUAY LIM

Defendant

Catchwords:

Practice and procedure - Summary judgment application - Turns on its own facts

Legislation:

Nil

Result:

Summary judgment for the plaintiff

Representation:

Counsel:

Plaintiff	:	Mr K Chu
Defendant	:	In person

Solicitors:

Plaintiff	:	Minter Ellison
Defendant	:	Not applicable

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

Deputy Commissioner of Taxation v Heaton (1997) 35 ATR 540

SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138

Webster v Lampard (1993) 177 CLR 598

White v Johnston (1886) 8 ALT 53

PRINCIPAL REGISTRAR MELVILLE:

1. By way of a writ issued on 17 May 2018 the plaintiff commenced proceedings against Mr Lim who at all material times was the director of LG Recycling Pty Ltd (the company).  The basis of the action is that the plaintiff had made assessments of the shortfall in payments the company had made under the Superannuation Guarantee (Administration) Act 1992 (Cth), the company had not paid the assessed amounts and that the defendant having failed to cause the company to pay them was liable to a penalty equivalent to the amount of the shortfall. According to the records held by the Australian Investments and Securities Commission (ASIC) the defendant was at all material times the sole director of the company.

2. The assessments the plaintiff made were in respect of two periods constituted by:

   1.the quarters ending 30 June 2012, 30 September 2012, 31 December 2012, 31 March 2013 and 30 June 2013, and assessed a total amount of $33,839.54;

   2.the quarters ending 30 September 2013, 31 December 2013, 31 March 2014, 30 June 2014, 30 September 2014 and 31 December 2014, and assessed a total amount of $202,130.93.

3. In each case payment of the amounts assessed was due by the 28th day of the second month after the end of the respective quarter. For example, for the quarter ending 30 June 2012, the due date was the 28 August 2012. The last day of the quarter is the 'initial day' for the purposes of s 269‑10(5) of the Taxation Administration Act 1953 (Cth).

4. The defendant filed a memorandum of appearance on 29 May 2018.  The plaintiff filed an amended statement of claim on 10 October 2018.  He then filed this application for summary judgment on 11 February 2019 which was supported by an affidavit of Kenis Ling Fung Chu explaining the delay in bringing the application and by an affidavit of James Ford in support of the merits of the application.  The defendant filed his own affidavit sworn 30 April 2019 in opposition to the application.

5. By the Rules of the Supreme Court 1971 (WA) O 14 r 1(1) an application for summary judgment must be brought within 21 days after appearance or at any later time by leave of the court. As the application is out of time leave is therefore required.

6. The affidavit sworn by Mr Chu provides evidence that the memorandum of appearance whilst filed on the 29 May 2018 was not served on the defendant, the defendant only becoming aware of it when his application for default judgment was rejected by the court.  Mr Chu says the plaintiff first received a copy of the memorandum of appearance on 3 August 2018 and that the plaintiff and the defendant were in negotiations between 1 November 2018 to 8 February 2019 in an attempt to resolve the matter.  No explanation is given for the period 3 August 2018 to 1 November 2018.

7. In considering whether to grant leave to bring the application it is necessary for me to consider the explanation for the delay and any prejudice to the defendant by the delay, including any costs the defendant has unnecessarily incurred by the delay: Deputy Commissioner of Taxation v Heaton (1997) 35 ATR 540.

8. In this case some of the delay is been brought about by the failure of the defendant to serve the memorandum of appearance and negotiations between the parties.  The defendant has not filed a defence or apparently engaged in the other interlocutory proceedings in the action and appears to have incurred little, if anything, by way of expense as a result of the plaintiff not having brought this application at an earlier time.  In those circumstances I see no prejudice to the defendant.  Having further regard to the merits of the matter as discussed below, the plaintiff should be granted leave to bring the application.

The power to order summary judgment

1. In SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 at [20] the Court of Appeal said:

   The power to order summary judgment is one that should be exercised with great care: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial, that summary judgment ought properly be granted: Agar v Hyde[2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales[2006] HCA 27; (2006) 226 CLR 256 [46].  And whilst the court may determine any difficult question of law on such an application, it will usually be appropriate to leave the determination of such questions for trial: see Theseus Exploration NL v Foyster.

2. The case brought by the plaintiff is set out in the amended statement of claim.  The facts pleaded in the statement of claim if proven, establish the plaintiff's case against the defendant.

3. The plaintiff is assisted in this application by reason of a number of legislative provisions found in the Taxation Administration Act.  These provisions provide that in any proceeding to recover an amount of a tax related liability, a statement about a matter in the plaintiff's complaint, claim or declaration is prima facie evidence of the matter (s 255-50(1)).  Further, certain documents specified under the Taxation Administration Act in s 350-10 are prima facie evidence and the production of a document that appears to be a copy of, or extract from, any document (the original document) made or given to an entity for the purposes of a taxation law signed by the commissioner is evidence of the matters set out in the document to the same extent as the original document would have been evidence of those matters.

4. Finally, the plaintiff tendered a certificate under s 255-45 in sch 1 of the Taxation Administration Act to the effect that as at 28 June 2019, the amount of $234,133.39 was a debt due and payable by the defendant to the Commonwealth of Australia.  This too, is prima facie evidence of the fact the defendant owes this money.

5. These evidential provisions enable the plaintiff to establish a claim to summary judgment as of a result of simply making the allegations in the statement of claim and producing relevant copies of the assessments and the notices.  These evidential provisions effectively put the onus on the defendant to produce evidence that undermines the plaintiff's prima facie case, which in the context of this application means to demonstrate that there is a triable issue.  Once the assessments are made, no argument can be made that the tax has not been correctly assessed and therefore not payable in the context of an application of this nature.  Any challenge to the accuracy of the assessment needs to be made under other provisions of the tax legislation and in another forum.

6. Between the averments contained in the amended statement of claim and the documents attached to the affidavit of Mr Ford, which include copies of the assessments sent to the company and copies of the default notices sent to the defendant at his residential address disclosed in ASIC records at the relevant times, it is established that the plaintiff has a prima facie case.

7. Division 269 of the Taxation Administration Act sets out the legislative regime for imposing penalties on directors of companies failing to comply with their obligations to make the necessary payments under the Superannuation Guarantee (Administration) Act.  The division starts by stating that directors of the company have a duty to ensure the company either meets its obligations to pay the withheld amounts under that Act, or goes promptly into voluntary administration or liquidation under the Corporations Act 2001 (Cth).

8. By s 269-15(1) the directors of the company (from time to time) on or after the initial day must cause the company to comply with its obligations. By s 269-15(2) the directors of the company continue to be under their obligation until:

   (a)the company complies with this obligation; or

   (b)an administrator of the companies appointed under s 436A, s 436B or s 436C of the Corporations Act 2001; or

   (c)the company begins to be wound up within the meaning of that Act.

9. In this case, the initial dates are as stated in [2] above.

10. By s 269-20 the director is liable to pay the penalty if at the end of the due day the director of the company is still under the obligation imposed on him under s 269-15. By s 269-25(1) the commissioner must not commence proceedings to recover a penalty from a director until the end of 21 days after the commissioner gives the director a written notice under this section.

11. The evidence produced by the plaintiff shows that as at the initial dates the defendant was under the obligation to cause the company to comply and that the commissioner issued the written notice under s 269‑25(1) more than 21 days before commencing these proceedings.

12. The defendant raises several issues in his affidavit.  They appear to be:

    1.The company was in financial difficulties in 2013 and 2014 and it was not possible to comply with some of the notices due to a lack of working capital.

    2.The first penalty notice was posted to 43 Southacre Drive Canningvale on 18 November 2014 when he was no longer living there, the property having been sold and settled on 10 November 2014.

    3.He did not receive the penalty notices issued 10 October 2015.

    4.He suffered from sleep apnea and as a result was for 'most of the time' unable to travel to Picton, being the premises from which the company operated from some unspecified time in 2013 to oversee the operations.

    5.He resigned as director of the company 'around the end of 2013' and after that continued working as manager.  Unfortunately the resignation as director was not updated with ASIC.

    6.The company was wound up by court order on 19 August 2015 and deregistered on 13 August 2016.

13. The fact the company was not in a position to comply with some of the notices does not assist the defendant.  All it does is demonstrate the need for the defendant, if he was a director at the time, to have taken steps to have the company placed into administration.

14. The fact he did not receive the penalty notices does not assist him in defending this application.  By the Taxation Administration Act s 269‑25(4) a notice is taken to be given at the time the commissioner leaves or posts it. In the case of the first period the notice was posted on the 18 November 2014. In the case of the second period the notice was posted on the 10 October 2015. In each case, the address was ascertained from a search of ASIC records conducted that same day and the notice posted to the relevant address.

15. By s 28A of the Interpretation Act 1901 (Cth) a document may be served on a natural person at the place of residence or business of the person last known to the person serving the document.

16. By s 269-50 of the Taxation Administration Act the commissioner may give the penalty notice by posting it to an address that appears from information held by ASIC to be or to have been within the last seven days the defendant's place of residence or business.

17. In my view the combination of these three provisions lead to the conclusion that the notices have been given in accordance with the legislation and was given on 18 November 2014 and 10 October 2015 respectively.

18. Whilst the defendant by reference to the fact he had sleep apnoea and was for 'most' of the time unable to travel to Picton, invites the inference that because of illness or some other good reason he did not take part in the management of the company at any time that the company was under an obligation to make payment, and it was unreasonable to expect that he do so, he does not actually say this was the case.  Further, assuming he was a director of the company, then he was the sole director of the company and any defence he might otherwise have had under s 269‑35 does not arise.

19. The defendant swears that around the end of 2013 he was no longer the director of the company, having resigned.  Unfortunately no record of the resignation has been produced including, in particular, any at ASIC record corroborating this fact.  However, in the context of a summary judgment application it has been held that if a version of the facts is put forward by the defendant which is not inherently incredible, then in the absence of an opportunity to cross-examine, it is incumbent on the court to proceed on the basis that it will ultimately be accepted at the trial of the action: White v Johnston (1886) 8 ALT 53; Webster v Lampard (1993) 177 CLR 598, 608.

20. When consideration is given to the following, namely, that the defendant was the sole director of the company and had been since 1 October 2010, the equivocation as to the time of his resignation as director being 'until around the end of 2013', that the Corporations Act 2001 by s 201A requires a minimum of one director for a proprietary company, that he continued 'working as manager', that he gives no evidence as to the appointment of another director to replace him, the absence of an ASIC record that he was no longer the director of the company, the absence of an ASIC record of the appointment of another director of a company that continued in existence and appears to have continued to operate until winding up commenced on 19 August 2015, the fact that the ASIC history of office bearers and shareholders suggests family members were involved in the business as officeholders and as a shareholder, and the defendant's evidence that his sleep apnoea precluded him 'most of the time' driving down to Picton to 'oversee the operations', one is compelled to the view that the plaintiff continued on as the controlling mind of the company in the capacity of a director even if only a de facto director.

21. I am left with the conclusion that the evidence that the defendant had resigned as director or was no longer the director as at 'until around end of 2013' is inherently implausible.

22. By s 269‑20(1) and s 269‑20(2) of the Taxation Administration Act directors are liable to pay to the commissioner a penalty if at the end of the 'due day' the defendant is still under an obligation under s 269‑15 of the Taxation Administration Act and he was under that obligation at or before that time.  The penalties are due and payable at the end of the due day.

23. The last 'initial day' was 31 December 2014.  The last 'due day' was 28 February 2015.  Accordingly, the defendant as a sole director at the time was liable for all of the penalties that had become due and payable at the end of all the pleaded due days the last of which being 28 February 2015.  The fact that the company commenced to be wound up on 19 August 2015 is irrelevant.

24. Accordingly, the plaintiff is given leave to bring the application and judgment should be entered for the plaintiff in the sum of $234,623.79.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

KT
Court Person

26 JULY 2019