Deputy Commissioner of Taxation v Pedley
[2016] WADC 166
•1 DECEMBER 2016
DEPUTY COMMISSIONER OF TAXATION -v- PEDLEY [2016] WADC 166
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WADC 166 | |
| Case No: | CIV:1518/2015 | 8 NOVEMBER 2016 | |
| Coram: | REGISTRAR KINGSLEY | 1/12/16 | |
| PERTH | |||
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| PDF Version |
| Parties: | DEPUTY COMMISSIONER OF TAXATION MICHAEL PEDLEY |
Catchwords: | Practice Application for summary judgment Turns on own facts |
Legislation: | Nil |
Case References: | Canti v Deputy Commissioner of Taxation [2005] NSWCA 84 Deputy Commissioner of Taxation v Saunig [2002] NSWCA 390 Roche v Deputy Commissioner of Taxation [2015] WASCA 196 Shaw v Deputy Commissioner of Taxation, Rablin v Deputy Commissioner of Taxation [2016] QCA 275 Water Corporation v Cardno BSD Pty Ltd (2009) 66 SR(WA) 45 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
MICHAEL PEDLEY
Defendant
Catchwords:
Practice - Application for summary judgment - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
Plaintiff : Mr Scovells
Defendant : Mr Fickling
Solicitors:
Plaintiff : Jackson McDonald
Defendant : Nova Legal
Case(s) referred to in judgment(s):
Canty v Deputy Commissioner of Taxation [2005] NSWCA 84
Deputy Commissioner of Taxation v Saunig [2002] NSWCA 390
Roche v Deputy Commissioner of Taxation [2015] WASCA 196
Shaw v Deputy Commissioner of Taxation, Rablin v Deputy Commissioner of Taxation [2016] QCA 275
Water Corporation v Cardno BSD Pty Ltd (2009) 66 SR(WA) 45
1 REGISTRAR KINGSLEY: In May 2015 the Deputy Commission of Taxation (Deputy Commissioner) issued a writ against Michael Pedley (Pedley) claiming Pedley owed amounts in respect of income tax and director penalties. In relation to the director penalties the Deputy Commissioner pleads that Stellar Corporate Solutions Pty Ltd (Stellar) was required to withhold pay as you go withholding (PAYGW) amounts which it was obliged to remit to the Deputy Commissioner. The Deputy Commissioner pleads the total amounts of monies not remitted for the period 1 August 2013 - 30 November 2013 was $203,798.
2 The Deputy Commissioner pleads Pedley, by profession an accountant, was a director of Stellar. Pedley's personal liability to the director penalty arises by reason of the director penalty notice (DPN) regime set out in subsection 269-20(1) sch 1 Taxation Administration Act 1953 (TAA). By reason of Stellar's failure to remit the PAYGW, Pedley became liable to pay to the Deputy Commissioner a penalty in an amount equal to the unremitted amounts. By reason of payments and credits made the total amount pleaded as owing to the Deputy Commissioner is $159,767.79.
3 On 4 June 2015 Pedley filed a defence wherein in he pleads he was a director of Stellar from 26 September 2013 - 15 April 2014. Pedley goes onto plead that in March 2014 Stellar entered into a payment arrangement with the Deputy Commissioner and pursuant to that payment arrangement made payments totally $350,000.
4 Pedley goes onto plead that in August 2014 Pedley, on behalf of Yeldep Pty Ltd, agreed to sell its shares in Stellar to Craig Dale, now the sole director of Stellar. Pedley pleads the agreement provided, as terms, that Craig Dale and Nancy Dale (the guarantors) personally guaranteed to Pedley that Stellar would comply with the payment arrangement referred to in [3] above. Further, the guarantors would provide Pedley with evidence of payments made by Stellar to the Deputy Commissioner.
5 The sale of the shares did not proceed. Pedley pleads that he took all reasonable steps to cause the company to comply with its obligations pursuant to s 269-35(2)(a)(i) TAA.
6 On 15 July 2016 the Deputy Commissioner brought an application for leave to apply for summary judgment against Pedley pursuant to O 14 r 1 Rules of the Supreme Court 1971. The Deputy Commissioner seeks an order judgment be entered for the Deputy Commissioner for $167,861.79 together with further general interest charges from 12 July 2016 to date of payment together with costs.
7 The Deputy Commissioner's application is supported by the affidavit of Mark Simpson affirmed 12 July 2016 and by Andrea Joan Jennings sworn 15 July 2016.
Preliminary skirmishing
8 On 17 October 2016 Pedley filed an amended defence. Counsel for the Deputy Commissioner took issue with the amended defence on the basis the amendments included withdrawal of admissions. Counsel for the Deputy Commissioner submitted that admissions in a pleading can only be withdrawn after careful consideration by a court, citing Water Corporation v Cardno BSD Pty Ltd(2009) 66 SR(WA) 45. Counsel for Pedley submitted the amendments were minor amendments and the question whether leave should be given to withdraw those admissions could be determined at the hearing.
9 After hearing submissions I was of the opinion, referring to Water Corporation v Cardno as one example, that a court treats seriously any attempt to withdraw admissions in a pleading. Withdrawal of admissions will only be allowed after hearing evidence as to context and how the admissions came to be made in the first place.
10 After hearing further submissions from counsel for the Deputy Commissioner and Pedley as to the conduct of the O 14 application both counsel agreed the summary judgment application proceed on a single issue: Did Pedley have a 'reasonable steps' defence to the O 14 application.
Pedley's evidence
11 Pedley has filed two affidavits, the first sworn 6 October 2016 (Pedley's first affidavit) and the second sworn 17 October 2016 (Pedley's second affidavit). In support of Pedley's opposition to the O 14 application Pedley has filed an affidavit sworn by John Gallucio sworn 17 October 2016.
12 Pedley, in his first affidavit, confirms he was a director of Stellar. He deposes that, in or around March 2014, Stellar entered into a payment arrangement with the Australian Taxation Office (ATO) to discharge by instalments the DPN now sought by the Deputy Commissioner. Pedley attaches a letter from the ATO dated 5 July 2014 whereby the ATO refers to a recent request from Stellar regarding their outstanding account and agrees to accept an arrangement for payment by instalments. The ATO's letter of 5 July 2014 has a payment arrangement, commencing 6 June 2014 and concluding on 6 March 2015, for monthly instalments in the sum of $50,000 except for April 2015 when the payment was to be $13,788.26.
13 Pedley deposes that the sum of $200,000 was paid on 7 April 2014 pursuant to the payment arrangement and that payments of $50,000 were made in June and August 2014.
14 Pedley deposes as to his belief as to the solvency of the company when he resigned as a director on 15 April 2014. At the time Pedley resigned, Stellar was owed approximately $900,000 by the Department of Housing. Pedley deposes that he had no reason to believe that the monies would not be coming from the Department of Housing.
15 Pedley deposes that the accounts receivable of Stellar reflected receivables in excess of $900,000 coming from the Department of Housing. Pedley deposes he had no reason to contact the Department of Housing to check that the receivables were in fact due.
16 However, unbeknownst to Pedley, Craig Dale, a director of Stellar, had diverted payments from the Department of Housing to the personal bank account of Craig Dale. This is evidenced, Pedley deposes, in a letter dated 30 December 2013 addressed to the Department of Housing directing that monies be paid to a nominated bank account. Pedley deposes that that bank account is in the name of Five Day Holdings Pty Ltd, a company controlled by Craig Dale. Pedley deposes that Craig Dale was making some payments from his own accounts to Stellar to give the appearance that the Department of Housing was remitting funds.
17 Pedley goes onto depose that after he resigned from Stellar, Craig Dale sought to purchase his shares in Stellar. Craig Dale also sought to purchase John Gallucio's shares in Stellar. To give effect to the purchase Pedley, Gallucio and Craig Dale entered into a heads of agreement dated 4 August 2014.
18 Pedley deposes that when he sold his shares in Stellar he included in the sale agreement terms that Craig Dale and a Nancy Dale were to provide a guarantee in regards to the current payment arrangements with the Deputy Commissioner.
19 As an aside I note that Pedley, as a chartered accountant, seems unable to distinguish his personal capacity and his corporate capacity regarding the sale of shares. The shares in Stellar are in fact owned by Yeldep Pty Ltd. Whilst there is no evidence, from the way Pedley refers to his shares in Stellar, I take it that Yeldep is the corporate personification of Pedley. I find it remarkable that, as a chartered accountant, Pedley cannot distinguish between the personal and the corporate.
20 Gallucio deposes that Pedley in drafting the heads of agreement made sure that terms were included to provide that the taxation debt owing to the Deputy Commissioner be paid by Craig Dale.
The Deputy Commissioner's submissions
21 Counsel for the Deputy Commissioner submits that s 269-35(2) TAA requires objectively reasonable steps being taken including addressing each of the three outcomes listed in s 269-35(2)(a) TAA, citing Deputy Commissioner of Taxation v Saunig [2002] NSWCA 390 [19].
22 Counsel for the Deputy Commissioner submits that it is a defence if a director proves that they took all reasonable steps to ensure that the directors of a company complied with the obligations, or that there were no such steps that a director could have taken. However, this means the director must prove they took reasonable steps during the whole of the period between the breach of the obligation on the due date and the expiry of the DPN. Proof that nothing could have been done at various times during the period would not establish that nothing could have been done at other times: Canty v Deputy Commissioner of Taxation [2005] NSWCA 84 [45] - [46].
23 Further, counsel for the Deputy Commissioner submits that the taking by a director of all reasonable steps requires that each of the alternative events be addressed, either by taking reasonable steps to ensure the event happened or declining to do anything on the basis there were no reasonable steps that the director could have taken to ensure the event happened (Roche v Deputy Commissioner of Taxation [2015] WASCA 196 [35]).
24 The counsel for the Deputy Commissioner submits Pedley provides no evidence that he took any steps to cause an administrator of the company to be appointed, or that Pedley caused the company to begin to be wound up.
25 Counsel for the Deputy Commissioner submits that at no time did Pedley seek professional advice as to the solvency of Stellar nor inform himself of the solvency of the Stellar. Pedley has relied entirely upon the statements of the co-director Craig Dale without any focus on his duties as a director and, as the accountant for Stellar, without any focus on his duties to inform himself.
Pedley's submissions
26 Counsel for Pedley relies to two decisions, Shaw v Deputy Commissioner of Taxation;Rablin v Deputy Commissioner of Taxation [2016] QCA 275, which had been delivered on 1 November 2016.
27 In Shaw and Rablin an order, on a summary judgment application, was made at first instance that Shaw and Rablin pay monies to the Deputy Commissioner of Taxation. At first instance, Shaw (principally), and Rablin, the directors of a company, gave evidence of the steps that they took in an endeavour to refinance the company to meet its ATO obligations.
28 The evidence of Shawby way of affidavit disclosed that there were a number of telephone calls between Shawand the manager of St George Bank over a 3 week period seeking responses in relation to a request to increase the operating limit of the corporation. Further, Shawdeposed that in late March 2015 he engaged a business specialist consultant firm for advice and in April 2013 a debt factoring company was approached to refinance the St George Bank facility. Between May 2013 - June 2013 further discussions were taking place with St George Bank and settlement of the finance facility was finally effected in September 2013.
29 The evidence of Rablin was that at all times he was aware Shawwas liaising with St George Bank, that Shaw had engaged specialist consulting firms and that St George Bank would not agree to the refinance of the debt factoring facility until the sale of the company took place.
30 On appeal the Court of Appeal allowed the appeal and set aside the orders made on the summary judgment application.
31 Counsel for Pedley refers to comments by Handley JA in Roche, endorsed by Gotterson JA in Shaw and Rablin to the effect that the defences under s 269-35(2) are cumulative and not mutually exclusive. Handley JA goes onto say [40] that a person under the duty, who acted reasonably in choosing one of the possible events and took all reasonable steps to bring it about would, to that extent, make out the par (a) defence, although no attempt was made at that stage to achieve compliance in any other way. At [41] Handley JA goes onto say that if reasonable steps taken in pursuit of one option fail non-compliance, and the obligations of the director or former director, will continue. The director or former director will therefore have to show reasonable steps to achieve compliance in another way.
32 Thus counsel for Pedley submits that in having set up a payment arrangement and having entered into the heads of agreement, Pedley has taken all reasonable steps and therefore has a defence in this action.
Discussion
33 The Deputy Commissioner's application is pursuant to O 14 Rules of the Supreme Court. Whilst the principles surrounding an application for summary judgment are well known it is worthwhile to remember that the power to order summary disposal should not be exercised unless it is clear there is no real question to be tried. It remains that 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 disposal ought be ordered.
34 Whilst the factual background to Shaw and Rablin can be distinguished from the factual background in this matter, in my opinion it would be improper to determine this action in a summary way. From Shaw and Rablin it may the case that it was enough for Pedley to set up the payment arrangement, and secure the guarantees under the heads of agreement, to establish a reasonable steps defence. It remains open whether Pedley did sufficient to ensure compliance with the payment arrangement, and upon ascertaining non-compliance, consider other steps.
35 This is a factual question. In my opinion, the trier of fact must determine from all that Pedley did, or could have done, and from what Pedley knew or ought to have known, whether reasonable steps have been taken. It would not be proper to determine those factual questions in a summary manner.
36 Accordingly, for these reasons the Deputy Commissioner's application is dismissed.
37 I will hear counsel on the form of orders, and the further progress of this action and on costs.
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