Deputy Commissioner of Taxation v O'Brien
[2020] WASC 91
•18 MARCH 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: DEPUTY COMMISSIONER OF TAXATION -v- O'BRIEN [2020] WASC 91
CORAM: ALLANSON J
HEARD: 9 MARCH 2020
DELIVERED : 9 MARCH 2020
PUBLISHED : 18 MARCH 2020
FILE NO/S: CIV 1375 of 2017
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND
KELLY O'BRIEN also known as KELLY JEAN O'BRIEN
Defendant
Catchwords:
Taxation - Proceedings for recovery of tax related liability - Where defendant does not appear - Where certificate is prima facie evidence of liability and amount
Legislation:
Bankruptcy Act 1966 (Cth), s 55
Rules of the Supreme Court 1971 (WA), O 34 r 2
Superannuation Guarantee (Administration) Act 1992 (Cth)
Taxation Administration Act 1953 (Cth), sch 1, s255‑45, div 269
Result:
Judgment for the plaintiff
Category: B
Representation:
Counsel:
| Plaintiff | : | C H Thompson |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Australian Government Solicitor |
| Defendant | : | No appearance |
Case(s) referred to in decision(s):
Nil
ALLANSON J:
These reasons were delivered orally immediately following trial.
The defendant, Kelly O'Brien, was at relevant times a director of the company, Bluenergy CMC Pty Ltd. The plaintiff brings this action to recover penalties imposed on Ms O'Brien in respect of liabilities for PAYG amounts withheld by the company but not remitted to the Commissioner of Taxation, and penalties imposed in respect of the company's superannuation guarantee charge.
Schedule 1 of the Taxation Administration Act 1953 (Cth) provides for the collection and recovery of income tax and other liabilities. In these reasons, unless specified otherwise, references to legislation are to the provisions of sch 1.
On 20 November 2019, this matter was listed for trial to commence on 9 March 2020.
Ms O'Brien did not appear at the trial, in circumstances that I refer to briefly at the end of these reasons. Under O 34 r 2 of the Rules of the Supreme Court 1971 (WA), a trial can proceed in the absence of a party. Ms O'Brien was aware of the trial date. I gave brief reasons at the time for why I exercised the discretion of the court to proceed with the trial.
The pleaded cases
The claim
The plaintiff's case in summary is that:
(1)Ms O'Brien, was at relevant times a director of the company;
(2)the company failed to meet its obligations to pay to the Commissioner of Taxation amounts withheld in relation to PAYG;
(3)as a director, Ms O'Brien was under an obligation to cause the company to comply with its obligation to the Commissioner;
(4)Ms O'Brien became liable to pay to the Commissioner a penalty in respect of each amount withheld, equal to the unpaid amount of the relevant amount withheld;
(5)Ms O'Brien was under an obligation to cause the company to comply with its obligations under the Superannuation Guarantee (Administration) Act 1992 (Cth);
(6)the Commissioner made default assessments of the company's superannuation guarantee shortfall and the superannuation guarantee charge payable on the shortfall for six quarters;
(7)Ms O'Brien became liable to pay a penalty to the Commissioner equal to the unpaid amount of the superannuation guarantee charge for the relevant quarters;
(8)the unpaid amount of each penalty is a tax related liability and is a debt due to the Commonwealth and payable to the Commissioner.
The total amount of the penalties that remain unpaid with respect to PAYG amounts withheld is $501,225; the total amount of the penalties that remain unpaid with respect to the superannuation guarantee charge is $775,442.17.
The defence
Ms O'Brien filed a defence in the proceedings in which she relied, in substance, on the defence under s 269-35.
She alleged that between 2014 and the present she has continued to suffer from clinical depression and anxiety and as a consequence of her illness delegated the day-to-day management of the company in circumstances where it was unreasonable to expect her to take part in the management of the company. She said that during that time she could not and did not take part in the management of the company.
The reply
In the plaintiff's reply, the plaintiff admitted that Ms O'Brien was diagnosed with depression, prescribed medication to treat her illness, and referred for treatment to a counsellor and a specialist psychiatrist. The plaintiff said that the defendant did not suffer from the illness for the entire relevant period between 1 October 2013 and 21 February 2017; that she took part in the management of the company during that period; and that she was capable of taking part in the management of the company during the relevant period. In short, while admitting the illness, the plaintiff did not admit facts which would be sufficient to establish the pleaded defence.
Agreed facts
The parties filed a statement of agreed facts. Much of the agreed statement is formal. With respect to the director penalty notices issued to Ms O'Brien, the parties agreed:
(1)Ms O'Brien was the sole director of the company between 24 August 2012 and 13 April 2016.
(2)Between August 2012 and April 2016, the company notified the Commissioner, through the lodgement of business activity statements, of amounts it withheld from the salary and wages of its employees, in the form of PAYG withholding.
(3)Between August 2012 and April 2016, the company was liable to make superannuation payments to its employees' superannuation accounts.
(4)The Commissioner issued assessments of superannuation guarantee charge to the company for six quarterly periods, pleaded in the statement of claim.
(5)On 27 January 2017, the Commissioner issued a director penalty notice under s 269-25 to Ms O'Brien in the amount of $501,225 for PAYG withholding.
(6)On 27 January 2017, the Commissioner issued a director penalty notice under s 269-25 to Ms O'Brien in the amount of $775,482.17 for superannuation guarantee charge.
(7)The director penalty notice in each case required Ms O'Brien to ensure the amount stated in those notices were paid, or to come to an arrangement to pay the amounts, within 21 days.
The agreed facts include facts relevant to the illness defence arising under s 269-35. The parties agreed that the relevant period during which any defence is required to be established in respect of Ms O'Brien's liability in respect of the superannuation guarantee charge is 1 October 2013 to 17 February 2017. The relevant period in respect of the PAYG withholding liability is 1 July 2015 to 17 February 2017. As I indicated to counsel in the course of discussion, I do not necessarily agree that the relevant period ended on 17 February 2017, rather than the date the administrator was appointed to the company, 22 March 2016. It is, however, not relevant to the outcome.
The defence under s 269-35
The defence under s 269‑35 appeared to be the only defence on which Ms O'Brien relied.
Division 269 prescribes penalties for directors of non-complying companies. The object of the Division, set out in s 269-5, is to ensure that a company either meets its obligations or goes promptly into voluntary administration or liquidation.
By s 269-15, the directors of a company must cause the company to comply with its taxation obligation, and the directors continue under their obligation until the company complies with its obligation, an administrator is appointed, or the company begins to be wound up.
The defence provided by s 269‑35, provides, in effect, that a director is not liable to a penalty under div 269 if, because of illness or for some other good reason, it would have been unreasonable to expect them to take part, and they did not take part, in the management of the company at a time when they were a director of the company and the directors were under the relevant obligation under s 269‑15(1).
By s 269-35(4), for the purposes of these proceedings, which are proceedings to recover a penalty payable under div 269, Ms O'Brien must prove the matters mentioned in s 269-35(1) if she is to rely on that subsection.
Ms O'Brien did not appear at trial and called no evidence. The matters agreed in the plaintiff's reply, and in the statement of agreed facts, are not sufficient to establish the defence under s 269-35.
The plaintiff provided to the court at trial a certificate under s 255-45 stating that, at 9 March 2020, the amount of $1,276,707.17 was a debt due and payable by Ms O'Brien to the Commonwealth of Australia in respect of the tax‑related liability for director penalties under div 269 of sch 1. Section 255-45 provides, in effect, that a certificate stating that a person named in the certificate has a tax‑related liability, and that the sum specified in the certificate is, at the date specified in the certificate, a debt due and payable by that person to the Commonwealth, is prima facie evidence of those matters in proceedings to recover an amount of the tax‑related liability.
The certificate also deals with when the notices of a director penalty were served on Ms O'Brien pursuant to s 269-25. Those matters are also the subject of agreed facts. These proceedings were commenced more than 21 days after the Commissioner gave Ms O'Brien written notice under s 269-25.
With Ms O'Brien not having appeared at trial and offering no evidence, there is nothing to displace the prima facie effect of the certificate. I am satisfied as to the tax‑related liability and the amount owing, and that judgment should be entered for the plaintiff.
As an addendum to these reasons, I record the following. On the second last working day before trial, Ms O'Brien, who had been represented throughout, filed a notice of change of representation, advising the court that she intended to represent herself. The following day, her husband, by email, advised the court that Ms O'Brien was taking steps to go into bankruptcy. On the morning of the trial the court received a letter, by email, from a registered trustee, advising that Ms O'Brien had filed a debtor's petition and statement of affairs in accordance with s 55 of the Bankruptcy Act 1966 (Cth). It seems likely that she will be declared bankrupt, but that has not yet occurred. The provisions in the Bankruptcy Act staying proceedings are not yet engaged. The plaintiff wished to proceed to judgment, and, in my opinion, is entitled to do so.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson18 MARCH 2020
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