Deputy Commissioner of Taxation v Rojas (No. 2)

[2013] NSWDC 9

District Court

New South Wales

Case Title:	Deputy Commissioner of Taxation v Rojas (No. 2)
Medium Neutral Citation:	[2013] NSWDC 9
Hearing Date(s):	14 February 2013
Decision Date:	14 February 2013
Jurisdiction:	Civil
Before:	Gibson DCJ
Decision:	(1) Judgment for the plaintiff against the defendant for the sum of $145,238.06. (2) The defendant pay the plaintiff's costs. (3) Exhibits retained for 28 days.
Catchwords:	TAXATION - income tax - penalties - director of non-remitting company - whether notice served - whether "all reasonable steps" taken - failure of defendant to file evidence
Legislation Cited:	Income Tax Assessment Act 1936 (Cth), s 222AOD Taxation Administration Act 1953 (Cth), ss 255-45, 268-10, 268-15, 268-20, 268-25, 269-20(3), 269-35(3) and 269-50
Cases Cited:	Canty v Deputy Commissioner of Taxation (2005) 63 NSWLR 152; [2005] NSWCA 84 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 Deputy Commissioner of Taxation v Gleeson [2010] QSC 260 Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271 Robertson v Deputy Commissioner of Taxation [2010] ATC 20-174; (2010) 239 FLR 29; [2010] NSWCA 58
Texts Cited:	-
Category:	Principal judgment
Parties:	Plaintiff: Deputy Commissioner of Taxation Defendant: David Fernando Rojas
Representation
- Counsel:	Plaintiff: Mr D Jay Defendant: No appearance
- Solicitors:	Plaintiff: ATO Legal Services Branch Defendant: No appearance
File Number(s):	2012/396587
Publication Restriction:	None

JUDGMENT

1. These are proceedings for the recovery of debts due to the Commonwealth of Australia and payable to the Commissioner of Taxation. The defendant was, at the relevant time, a director of DFRS Mechanical (Aust) Pty Ltd (ACN 132 007 375) ("the company").

2. A defence was filed on 12 June 2012. That defence pleads, inter alia:

   (a)The defendant denies receipt of any correspondence from the Deputy Commissioner of Taxation and in particular denies being served with the director penalty notices (DPNs) (defence, paragraph 5, 16 and 34);

   (b)The defendant asserts a defence under s 269-35(3), namely that he took all reasonable steps to ensure the directors complied with their obligations under s 269-25;

   (c)In the alternative, he relies on the defence that there were no such steps he could have taken, in that all relevant events occurred prior to his becoming a director;

   (d)The defendant denies that certain amounts were outstanding and challenges the precision of the facts pleaded (paragraphs 14 and 15).

3. These proceedings were listed for hearing before me on 21 January 2013. The defendant was called outside the court three times but did not appear. As I have set out in my judgment on 21 January 2013, the plaintiff was not ready to proceed on that day. As the defendant is a litigant in person, and as substantial amendments (albeit in the defendant's favour) needed to be made to the pleading, I adjourned the hearing and made the following orders:

   (1)Defendant called outside Court 13D three times at 10:10am - no response.

   (2)On the application of the plaintiff for leave to amend the Statement of Claim filed on 8 December 2011, this application is granted subject to the following:

   (a)An Amended Statement of Claim is to be filed in the Registry no later than 4:00pm Thursday 24 January 2013, such Amended Statement of Claim to be served on the defendant by express post by 5:00pm 25 January 2013;

   (b)The hearing of these proceedings to be adjourned to Thursday 14 February 2013 before Gibson DCJ at 10:00am;

   (c)The defendant is to file any Amended Defence to the Amended Statement of Claim and all affidavits evidence in relation to paragraphs 5, 16 and 34 concerning the claim that he never received the DPNs by 4:00pm Monday 11 February 2013, such order to be a peremptory order;

   (d)Costs reserved (see oral judgment).

   (3)Grant leave to the plaintiff to file the following affidavits in court today:

   (a)Affidavits of Tim Manton dated 18 September 2012 and 21 January 2013;

   (b)Affidavit of David Nicholas dated 16 October 2012; and

   (c)Affidavit of Erin Stevenson dated 17 September 2012.

   (4)The plaintiff is to advise the defendant of these orders, and to provide a copy of the affidavit of Tim Manton dated 21 January 2013 by express post by 5:00pm 25 January 2013.

   (5)Matter stood over part heard to Thursday 14 February 2013 at 10:00am.

4. I have now received evidence (Exhibit C) that, in accordance with those orders, the plaintiff served copies of the amended statement of claim filed 23 January 2013 and the affidavit of Mr Manton affirmed 21 January 2013, these being sent by express post on 23 January 2013. The plaintiff also served a copy of my ex tempore judgment, which included the orders that I had made. In addition, my associate forwarded a copy of the judgment to the defendant.

5. An order of particular relevance in relation to the proceedings before me today is that I directed the defendant not only to file any amended defence (in the event that one was required) but also affidavit evidence in relation to paragraphs 5, 16 and 34 containing claims that he never received the DPNs, such affidavits to be filed by Monday 11 February 2013. There has been no compliance with that order.

6. The hearing of these proceedings was adjourned to Thursday 14 February 2013, namely today. The defendant has been called twice outside the court three times at 10:00am and 10:05am and there was no appearance. Having noted these preliminary matters, I now turn to a consideration of the plaintiff's claim.

The background to this claim

1. The defendant was a director of the company from 1 March 2010 until a liquidator was appointed on 2 September 2011 by court order. The plaintiff seeks to recover damages and costs in respect of the DPNs for actual and estimate liabilities in accordance with the figures set out in the amended statement of claim. During the hearing the plaintiff has indicated that interest has been waived.

2. There are two bases for the plaintiff's claim:

   (a)A DPN served on the defendant for actual liabilities that the company accrued (the Actual Liabilities DPN);

   (b)A DPN served on the defendant following service of a notice of estimated liabilities determined by the plaintiff in circumstances where the company failed to lodge Business Activities Statements ("BAS") (the Estimated Liabilities DPN).

3. I shall deal with each of these in turn.

The Actual Liabilities DPN

1. This is based on a notice issued by the plaintiff after the company failed to remit money to the Australian Taxation Office ("ATO") for amounts withheld from employee's salaries for Pay As You Go ("PAYG") tax liabilities. This DPN relates to 13 periods and totals $135,766.00 (see the affidavit of Erin Stevenson affirmed 17 September 2012, annexure E, page 16). The company withheld monies from its employees income tax to remit to the ATO, but failed to comply with its obligations to pay these sums to the ATO.

2. The relevant period over which the failure to remit from employees' retained salary covers the periods 1 December 2008 to 31 December 2008 and 1 December 2009 to 31 December 2009. An amount for payments/credits allocated by this DPN is also included.

3. As the company failed to remit the money withheld, the defendant, from the time he commenced as a director of the company, became automatically liable to a penalty equal to an amount that the company had failed to remit by reason either of s 222AOD of the Income Tax Assessment Act 1936 (Cth) ("ITAA 1936") or s 269-20(3) of the Taxation Administration Act 1953 (Cth) ("TAA 1953"). The provisions of ITAA 1936 apply in respect of liabilities prior to 1 July 2010, and the provisions of TAA 1953 applied to liabilities after that date.

The Estimated Liabilities DPN

1. Mr Rojas commenced as sole director of the company on 1 March 2010.

2. On about 9 September 2010 the ATO completed an audit into the BAS for the company. The audit determined that no BAS had been lodged for certain periods between 2008 and 2010. On 5 July 2010 Mr Rojas agreed to lodge outstanding BAS. The ATO determined the PAYG withholding liability using records supplied by Mr Rojas as follows:

Period	PAYG amount withheld
01/01/2010 - 31/01/2010	$14,000
01/02/2010 - 28/02/2010	$14,000
01/03/2010 - 31/03/2010	$14,000
01/04/2010 - 30/04/2010	$14,000
01/05/2010 - 31/05/2010	$14,000
01/06/2010 - 30/06/2010	$14,000
Total	$84,000

The relevant legislation

1. The legislation enabling the plaintiff to take action to recover unpaid PAYG is as follows. Division 268 of Sch 1 of TAA 1953 provides a scheme to take prompt and effective action to recover unpaid PAYG. The relevant sections are set out below:

   "26810 Commissioner may make estimate

   Estimate

   (1) The Commissioner may estimate the unpaid and overdue amount of a liability (the underlying liability) of yours:

   (a) under section 1670 in this Schedule (requirement to pay to the Commissioner amounts you have withheld under the Pay as you go withholding rules); or

   (b) to pay superannuation guarantee charge for a *quarter under section 16 of the Superannuation Guarantee (Administration) Act 1992, to the extent the superannuation guarantee charge has not been assessed before the Commissioner makes the estimate.

   (1A) For the purposes of this Division, your superannuation guarantee charge for a *quarter is treated as being payable on the day by which you must lodge a superannuation guarantee statement for the quarter under section 33 of the Superannuation Guarantee (Administration) Act 1992, even if, on that day, the charge has not been assessed under that Act.

   Amount of estimate

   (2) The amount of the estimate must be what the Commissioner thinks is reasonable.

   (3) In making the estimate, the Commissioner may have regard to anything he or she thinks relevant.

   Example 1: In the case of an underlying liability under section 1670 (requirement to pay to the Commissioner amounts you have withheld under the Pay as you go withholding rules), the Commissioner may have regard to information about amounts you withheld under the Pay as you go rules before the period in relation to which the underlying liability arose.

   Example 2: In the case of an underlying liability to pay superannuation guarantee charge for a quarter, the Commissioner may have regard to information about your contributions to RSAs and complying superannuation funds for earlier quarters.

   Only one estimate for each liability

   (4) While the estimate is in force, the Commissioner cannot make another estimate relating to the underlying liability.

   (5) For the purposes of subsection (4), the estimate is in force if:

   (a) the Commissioner has given you notice of the estimate; and

   (b) the estimate has not been revoked; and

   (c) your liability to pay the estimate has not been discharged.

   26815 Notice of estimate

   Commissioner must give notice of estimate

   (1) The Commissioner must give you written notice of the estimate.

   Content of notice

   (2) The notice must:

   (a) identify the underlying liability; and

   (b) specify the date of the estimate; and

   (c) set out the amount of the estimate; and

   (d) state that the amount of the estimate is due and payable; and

   (e) explain how you may have the amount of the estimate reduced or the estimate revoked.

   (3) To avoid doubt, a single notice may relate to 2 or more estimates, but must comply with subsection (2) in relation to each of them.

   When notice is given

   (4) Despite section 29 of the Acts Interpretation Act 1901, a notice under subsection (1) is taken to be given at the time the Commissioner leaves or posts it.

   Note: Section 28A of the Acts Interpretation Act 1901 may be relevant to giving a notice under subsection (1).

   Subdivision 268C-Liability to pay estimates

   Table of sections

   26820 Nature of liability to pay estimate

   26825 Accuracy of estimate irrelevant to liability to pay

   26830 Estimate provable in bankruptcy or winding up

   26820 Nature of liability to pay estimate

   Liability to pay amount of estimate

   (1) You must pay to the Commissioner the amount of the estimate if the Commissioner gives you notice of the estimate in accordance with section 26815. The amount is due and payable when the Commissioner gives you the notice.

   Note: The amount of the estimate may be reduced, or the estimate revoked, under Subdivision 268D.

   Liability to pay amount of estimate is distinct from underlying liability

   (2) Your liability to pay the amount of the estimate is separate and distinct from the underlying liability. It is separate and distinct for all purposes.

   Example: The Commissioner may take:

   (a) proceedings to recover the unpaid amount of the estimate; or

   (b) proceedings to recover the unpaid amount of the underlying liability; or

   (c) proceedings of both kinds.

   Discharging one liability discharges other liabilities

   (3) Despite subsection (2), if, at a particular time, one of the liabilities to which this subsection applies is discharged, to the extent of an amount, for either of the following reasons, each of the other liabilities to which this subsection applies is discharged to the extent of the same amount:

   (a) an amount is paid or applied towards discharging the liability;

   (b) the liability is discharged because of section 26940 (Effect of director paying penalty or company discharging liability).

   (4) Subsection (3) applies to whichever of the following liabilities are in existence at the particular time:

   (a) your liability to pay the amount of the estimate;

   (b) the underlying liability;

   (c) a liability of yours under a judgment, to the extent that it is based on a liability referred to in paragraph (a) or (b).

   (5) Subsection (3) does not discharge a liability to a greater extent than the amount of the liability.

   26825 Accuracy of estimate irrelevant to liability to pay

   You are liable to pay the unpaid amount of the estimate even if:

   (a) the underlying liability never existed or has been discharged in full; or

   (b) the unpaid amount of the underlying liability is less than the unpaid amount of the estimate.

   Note 1: Section 26840 revokes the estimate if you give the Commissioner a statutory declaration, or file an affidavit, to the effect that the underlying liability never existed.

   Note 2: Subdivision 268D provides ways in which you can challenge the estimate or its amount."

2. The plaintiff sent an estimate of liability notice to the company on 3 September 2010 addressed to its accountant.

3. The Estimated Liability DPN is based on a notice in which the company failed to remit monies to the Deputy Commissioner of Taxation for estimated amounts issued by the Deputy Commissioner of Taxation pursuant to TAA 1953 s 268-10(1). After notifying the company of the estimated liability, the defendant was served with a DPN for the estimates for the period 1 January 2010 to 31 January 2010 to 1 June 2010 to 30 June 2010 on 19 November 2010.

4. Pursuant to subsection 268-20(1) in Sch 1 to the TAA 1953, the amount of each estimate became due and payable when the Commissioner gave the company written notice of the estimate.

5. An estimate issued by the Commissioner may be reduced or revoked in accordance with Sub Div 268D of Sch 1 of TAA 1953. The DPN estimates were reduced by the Deputy Commissioner of Taxation pursuant to s 268-35(1) in Sch 1 of TAA 1953. The company was notified in writing of the reductions of the estimates on 24 February 2011.

6. The amended statement of claim includes an amount for payments/credits in respect of the Estimated Liability DPN.

The defendant's grounds of defence

1. The first and most significant concern is whether or not the DPN were served.

2. The plaintiff relies on the affidavit of Erin Stevenson, who has described both the creation and service of each DPN. Her affidavit of 17 September 2010 annexes the correspondence (annexures B, C, D and E).

3. The relevant provision for notice is s 269-50 of TAA 1953, which provides:

   "269-50 How notice may be given

   The Commissioner may give you a notice under section 269 25 by leaving it at, or posting it to, an address that appears, from information held by the Australian Securities and Investments Commission, to be, or to have been within the last 7 days, your place of residence or *business."

4. A DPN sent to an address as it is set out in the ASIC records will satisfy the requirements of service: Robertson v Deputy Commissioner of Taxation [2010] ATC 20-174; (2010) 239 FLR 29; [2010] NSWCA 58 at [10].

5. The ASIC search reveals that the defendant's address is the same as the address to which the notices are directed (see annexures A and F to the affidavit of Ms Stevenson of 17 September 2010).

6. A notice is validly served even if it is not in fact received by the addressee if this provision is complied with: Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271 at 277.

7. The defendant has served no evidence as to service or otherwise explained how it is that he asserts the notices have not been validly sent to him in accordance with the appropriate legislative requirements.

8. This defence is not made out.

Challenges to issues of liability generally

1. The affidavit material includes all relevant supporting documents including the BAS prepared by the company (affidavit of Mr Manton of 18 September 2012, annexures F1-F13), the ATO statement of account for the company's liabilities and credits under the BAS provisions and the ATO statement of account for DPN liabilities. In each matters, the plaintiff relies upon an evidentiary certificate to certify the amounts of the debt, in accordance with s 255-45 of TAA 1953, which amounts to prima facie evidence of the matters relied upon: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [38] per Gummow ACJ, Heydon, Crennan and Kiefel JJ.

2. The onus of proof in satisfying the court that the debt is not due and owing shifts to the director once this certificate has been provided: Deputy Commissioner of Taxation v Gleeson [2010] QSC 260. The defendant once again has served no evidence, and has therefore failed to discharge the onus of proof.

Whether "all reasonable steps" were taken

1. The defendant relies on s 269-35(3) and contends that he took all reasonable steps to ensure the directors complied with their obligations. There is no evidence to support this pleading and I reject this defence. Nor is there any evidence to support the contention that there were no steps he could have taken.

2. I formally note that, an administrator having been appointed on 2 September 2011, this was substantially more than 21 days after each of the DPNs was served, that date being 19 November 2010.

3. Finally, the fact that a person was not a director for the whole of the period, or at the time of service of the DPN, or at the time when the relevant failures occurred, is irrelevant: Canty v Deputy Commissioner of Taxation (2005) 63 NSWLR 152; [2005] NSWCA 84; TAA s 269-20(3) (and see former ITAA s 222AOD).

Concluding remarks

1. The defendant has not made out any of the challenges to liability or quantum and accordingly there should be judgment against him in the sum of $145,238.06.

2. The defendant is to pay the plaintiff's costs.

Orders

(1)Judgment for the plaintiff against the defendant for the sum of $145,238.06.

(2)The defendant pay the plaintiff's costs.

(3)Exhibits retained for 28 days.

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