Roche v Deputy Commissioner of Taxation
[2015] WASCA 196
•24 SEPTEMBER 2015
ROCHE -v- DEPUTY COMMISSIONER OF TAXATION [2015] WASCA 196
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASCA 196 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:86/2014 | 18 MAY 2015 | |
| Coram: | BUSS JA NEWNES JA MURPHY JA | 24/09/15 | |
| 17 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | SEAN McDERMOTT ROCHE DEPUTY COMMISSIONER OF TAXATION |
Catchwords: | Practice and procedure Summary judgment Taxation Failure by company to remit tax withheld from employees to Commissioner of Taxation Taxation Administration Act 1953 (Cth) Penalty imposed on appellant as director Whether appellant took all reasonable steps to cause company to comply with obligations Section 26935 No evidence of any steps taken Whether s 26930(2) applied to penalties imposed prior to 30 June 2012 |
Legislation: | Tax Laws Amendment (2012 Measures No 2) Act 2012 (Cth), sch 1, item 8, item 9 Taxation Administration Act 1953 (Cth), sch 1, s 26930, s 26935 |
Case References: | ADCO Constructions Pty Ltd v Goudappel [2014] HCA 18 Canty v Deputy Commissioner of Taxation [2005] HCA Trans 670 Canty v Deputy Commissioner of Taxation [2005] NSWCA 84; (2005) 63 NSWLR 152 Deputy Commissioner of Taxation v Roche [2014] WASC 222 Deputy Commissioner of Taxation v Saunig (2002) 55 NSWLR 722; (2002) 43 ACSR 387 Miller v Deputy Commissioner of Taxation (1997) 98 ATC 4059 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : ROCHE -v- DEPUTY COMMISSIONER OF TAXATION [2015] WASCA 196 CORAM : BUSS JA
- NEWNES JA
MURPHY JA
- Appellant
AND
DEPUTY COMMISSIONER OF TAXATION
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : DEPUTY COMMISSIONER OF TAXATION -v- ROCHE [2014] WASC 222
File No : CIV 2705 of 2013
Catchwords:
Practice and procedure - Summary judgment - Taxation - Failure by company to remit tax withheld from employees to Commissioner of Taxation - Taxation Administration Act 1953 (Cth) - Penalty imposed on appellant as director - Whether appellant took all reasonable steps to cause company to comply with obligations - Section 26935 - No evidence of any steps taken - Whether s 26930(2) applied to penalties imposed prior to 30 June 2012
Legislation:
Tax Laws Amendment (2012 Measures No 2) Act 2012 (Cth), sch 1, item 8, item 9
Taxation Administration Act 1953 (Cth), sch 1, s 26930, s 26935
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr C S Williams
Respondent : Ms C H Thompson
Solicitors:
Appellant : Solomon Brothers
Respondent : ATO Legal Services Branch
Case(s) referred to in judgment(s):
ADCO Constructions Pty Ltd v Goudappel [2014] HCA 18
Canty v Deputy Commissioner of Taxation [2005] HCA Trans 670
Canty v Deputy Commissioner of Taxation [2005] NSWCA 84; (2005) 63 NSWLR 152
Deputy Commissioner of Taxation v Roche [2014] WASC 222
Deputy Commissioner of Taxation v Saunig (2002) 55 NSWLR 722; (2002) 43 ACSR 387
Miller v Deputy Commissioner of Taxation (1997) 98 ATC 4059
1 JUDGMENT OF THE COURT: This is an appeal from a decision of Master Sanderson, who found that the appellant was liable to the respondent in the sum of $3,409,317.56 by way of penalties pursuant to s 269-20 of sch 1 of the Taxation Administration Act 1953 (Cth) (the Act). The master ordered that summary judgment be entered for that amount, plus interest in the sum of $380,612.14 pursuant to s 32 of the Supreme Court Act 1935 (WA). The appellant contends that the master erred in concluding that the appellant had no arguable defence to the claim.
2 The appellant requires an extension of time to appeal, the appeal notice having been filed out of time. On 17 September 2014, it was ordered that the application for an extension of time be referred to the hearing of the appeal.
3 We would refuse an extension of time to appeal and dismiss the appeal for the following reasons.
Background
4 At all material times, the appellant was a director of Fuel Tank & Pipe Pty Ltd (FTP). The appellant's father, Desmond Roche (Mr Roche), was the general manager of FTP from 2006 until about 2012, when Mr Geoffrey Wilton assumed that role. Mr Roche then became the construction manager.
5 The respondent alleged that in each of the 18 months between 1 June 2011 and 30 June 2011, between 1 September 2011 and 30 November 2011, and between 1 January 2012 and 28 February 2013, FTP had withheld amounts of PAYG tax from the wages and salaries of its employees and officers, pursuant to div 12 in sch 1 of the Act, but had failed to pay each amount withheld to the Commissioner of Taxation as required by sub-division 16-B in sch 1. The first of those payments to the Commissioner was due on 28 July 2011 and the last was due on 21 March 2013. The total amount FTP had failed to remit over that period was $3,454,437.00, but a payment of $45,119.44 had reduced that sum to $3,409,317.56.
6 The failure to pay the withheld tax to the Commissioner came to light when, between 12 April 2013 and 15 July 2013, FTP filed business activity statements (BAS) or instalment activity statements (IAS) which revealed the withheld but unremitted tax.Those statements were in each case filed late.The effect of their late filing is a matter that will be necessary to come back to in due course.
7 On 2 August 2013, the Commissioner issued a director penalty notice (DPN) under s 269-25 of sch 1 of theAct, requiring payment by the appellant of the sum of $3,409,317.56 by way of a penalty under s 269-20. On 23 August 2013, an administrator was appointed to FTP. It was wound up by order of the Supreme Court on 24 September 2013.
8 On 7 November 2013, the respondent commenced proceedings against the appellant to recover the penalty under s 269-20 and applied for summary judgment. That application was supported by an affidavit of an officer of the respondent, Ms Suzanne Bradshaw. Ms Bradshaw's affidavit contained a table setting out how the debt had accumulated, including the periods in which the tax had been withheld, the date upon which notification of it was to be lodged and the amount to be paid to the Commissioner, and the amount withheld in each of the relevant periods. The content of the table was not disputed. It was, relevantly, as follows:
Period of withholding | Due Date for lodgement and payment | Amount withheld $ |
1 June 2011 to 30 June 2011 | 28 July 2011 | 109,431 |
1 September 2011 to 30 September 2011 | 31 October 2011 | 285,710 |
1 October 2011 to 31 October 2011 | 21 November 2011 | 91,398 |
1 November 2011 to 30 November 2011 | 21 December 2011 | 86,546 |
1 January 2012 to 31 January 2012 | 21 February 2012 | 80,743 |
1 February 2012 to 29 February 2012 | 21 March 2012 | 118,625 |
1 March 2012 to 31 March 2012 | 30 April 2012 | 156,314 |
1 April 2012 to 30 April 2012 | 21 May 2012 | 127,084 |
1 May 2012 to 31 May 2012 | 21 June 2012 | 155,337 |
1 June 2012 to 30 June 2012 | 30 July 2012 | 196,255 |
1 July 2012 to 31 July 2012 | 21 August 2012 | 181,879 |
1 August 2012 to 31 August 2012 | 21 September 2012 | 272,027 |
1 September 2012 to 30 September 2012 | 29 October 2012 | 224,512 |
1 October 2012 to 31 October 2012 | 21 November 2012 | 244,172 |
1 November 2012 to 30 November 2012 | 21 December 2012 | 311,047 |
1 December 2012 to 31 December 2012 | 28 February 2013 | 242,156 |
1 January 2013 to 31 January 2013 | 21 February 2013 | 199,353 |
1 February 2013 to 28 February 2013 | 21 March 2013 | 371,848 |
3,454,437 |
9 The appellant advanced two defences to the claim: first, that he took all reasonable steps, within the meaning of s 269-35, to ensure that the directors caused FTP to comply with its obligations to remit the tax to the Commissioner on time and that, accordingly, he was not liable to a penalty; and secondly, that the directors had caused an administrator to be appointed to FTP within 21 days of the appellant being served with the DPN, with the result that the penalty was remitted pursuant to s 269-15 and s 269-30(1)(b).
10 In support of the first defence, the appellant relied upon his own affidavit and an affidavit of Mr Roche.
11 The appellant's affidavit was brief. In it, the appellant said that he had been a director of FTP from 13 September 2006. From about 2011 he was attending university and did not attend FTP's premises or review FTP's affairs on a 'day to day basis'. He said that during this period he had regular discussions with his father concerning FTP's affairs and he also had periodic meetings (on average, approximately every three months or so) with his father and FTP's financial controller, Mr Bob Williams. The appellant said:
At these meetings, I was shown cash flow projections for FTP and Mr Williams provided me with an explanation of FTP's outstanding liabilities, FTP's expected expenses and FTP's expected revenue.
Annexed hereto … are copies of some cash flow projections. I do not specifically recall viewing these particular projections, but I do recall viewing projections similar to these.
I recall that, during about 2011 and 2012, what Mr Williams told me, and the cash flow projections that Mr Williams showed to me and explained seemed to indicate, that FTP would earn enough money to pay all of its liabilities. I did not attempt to stop FTP from trading because of what was explained to me by [Mr] Roche and Mr Williams.
12 The appellant said that, in early 2013, Mr Roche and Mr Williams told him that FTP had experienced cost overruns on two projects and would need an equity injection to meet those cost overruns. He said they subsequently told him that FTP had entered into negotiations with Alliance Capital Holdings Pty Ltd to that end and some time later told him that an agreement had been reached for Alliance Capital to purchase shares in FTP. However, according to the appellant, in mid-2013 Mr Roche and Mr Williams told him that the agreement with Alliance Capital was not going to proceed and not long afterwards Mr Roche told him that some employees of FTP had left to start their own business. After that, FTP 'substantively stopped trading' and an administrator was appointed.
13 Mr Roche's affidavit is concerned solely with an explanation of the circumstances in which FTP fell into financial difficulties, culminating in its administration and eventual winding up. Mr Roche says that he was involved in the affairs of FTP from its incorporation in 2006 until it entered into voluntary administration on 23 August 2013. He says that in about 2011 he observed that FTP was starting to experience cash flow difficulties, which he attributed to a slowing of activity in the mining sector as a result of the global financial crisis and the announcement of a Mining Resources Rent Tax, and to a dispute with a customer which led to FTP having to accept payment of a lesser amount than it was owed. He says that from this period until 2013 cash flow projections were regularly prepared, primarily by Mr Williams.
14 According to Mr Roche, in early 2013 it was identified that FTP would need an equity injection due to cost overruns on two projects and to that end negotiations were entered into with Alliance Capital. While an agreement in principle was reached for Alliance Capital to acquire shares in FTP, ultimately the agreement did not proceed.
15 The balance of the affidavit, pars 14 to 51, is concerned with events in 2013. Mr Roche there deals with the dispute with the customer and the departure of several employees of FTP to set up a competing business, the latter apparently being another matter which he considered to have been significant in FTP's ultimate insolvency.
16 Mr Roche's affidavit is silent on the appellant's involvement in the affairs of FTP and as to any information that the appellant was given as to its affairs.
The decision of the master
17 The master observed that the appellant's evidence was striking for its lack of detail, commenting that it presumably reflected the appellant's lack of involvement in the day to day operations of the company: Deputy Commissioner of Taxation v Roche [2014] WASC 222 [22]. The master found that the appellant had failed to adduce evidence that he took any steps to cause the company to meet its obligations. He noted that there was no suggestion the appellant did not have access to FTP's books or that he was actively misled. In the master's view, the appellant simply did not take any interest in the affairs of the company and it could not, therefore, be said that he behaved reasonably [29]. The master found that pars 14 to 51 of Mr Roche's affidavit were irrelevant as they dealt with how FTP's fortunes declined, not with what steps the appellant took to cause the company to meet its obligations.
18 The master also rejected the appellant's contention that he was entitled, pursuant to s 269-30, to a remission of certain of the penalties by reason of the appointment of an administrator to FTP within 21 days of the service of the DPN.
19 The master noted that the appellant conceded that even if this defence was made out, it could only apply to penalties imposed prior to 30 June 2012. That was because, prior to 30 June 2012, s 269-30 had provided that a penalty was automatically remitted if an administrator was appointed to the entity within 21 days of the service of the DPN. However, s 269-30 was amended, with effect from 30 June 2012, to provide that a penalty was not remitted by the appointment of an administrator within that 21-day period to the extent that the entity had, contrary to s 16-150, failed to notify the Commissioner of the amount the entity was liable to pay by way of withheld tax on or before the due day for payment of that amount. It was not in issue that FTP had failed to notify the Commissioner of any of the amounts in question by the due date for their payment.
20 The question before the master, therefore, was whether the amendment to s 269-30 applied to penalties imposed on the appellant prior to 30 June 2012. The master rejected the appellant's argument that it did not and concluded that the penalties imposed on the appellant prior to 30 June 2012 were not remitted by the appointment of the administrator to FTP. Accordingly, the appellant had no arguable defence to any part of the claim and judgment was entered for the amount claimed by the respondent.
The grounds of appeal
21 There are three grounds of appeal. They can be sufficiently summarised as follows:
1. the master erred in law, alternatively in fact, in finding that the appellant had failed to adduce any evidence of steps he took to cause FTP to meet its obligations and he should have found that the appellant's evidence raised a triable issue that the appellant had taken all reasonable steps to cause FTP to meet its obligations;
2. the master erred in law, alternatively fact, in finding that pars 14 to 51 of Mr Roche's affidavit were irrelevant; and
3. the master erred in law in finding that the amendment to s 269-30 of sch 1 had effect in relation to penalties imposed upon directors prior to 30 June 2012 and he should have found that the amendment applied only to penalties imposed after 29 June 2012 as result of obligations that had been imposed on directors as at 29 June 2012.
Disposition of the appeal
Grounds 1 and 2
22 These grounds can conveniently be considered together as the material in pars 14 to 51 of Mr Roche's affidavit is said to be relevant to the steps the appellant took to cause FTP to comply with its obligations.
23 The starting point is the relevant statutory provisions.
24 Section 269-15 provides, relevantly:
(1) The directors (within the meaning of the Corporations Act 2001) of the company (from time to time) on or after the initial day must cause the company to comply with its obligation.
(2) The directors of the company (from time to time) continue to be under their obligation until:
(a) the company complies with its obligation; or
(b) an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or
(c) the company begins to be wound up (within the meaning of that Act).
26 Section 269-20 provides (relevantly):
(1) You are liable to pay to the Commissioner a penalty if:
(a) at the end of the due day, the directors of the company are still under an obligation under section 269-15; and
(b) you were under that obligation at or before that time (because you were a director).
(2) The penalty is due and payable at the end of the due day.
…
(5) The amount of the penalty … is equal to the unpaid amount of the company's liability under its obligation.
27 In s 269-10, the 'due day' is defined to mean, in effect, the day on or before which the company is obliged to pay the withheld amount.
28 Section 269-35 provides, relevantly:
(2) You are not liable to a penalty under this Division if:
(a) you took all reasonable steps to ensure that one of the following happened:
(i) the directors caused the company to comply with its obligation;
(ii) the directors caused an administrator of the company to be appointed under section 436A, 436B or 436C of the Corporations Act 2001;
(iii) the directors caused the company to begin to be wound up (within the meaning of that Act); or
(b) there were no reasonable steps you could have taken to ensure that any of those things happened.
(3) In determining what are reasonable steps for the purposes of subsection (2), have regard to:
(a) when, and for how long, you were a director and took part in the management of the company; and
(b) all other relevant circumstances.
30 It was submitted on behalf of the respondent that in order to establish a defence under s 269-35(2)(a) it was necessary for the appellant to consider each of the specified options. It was not sufficient for the appellant simply to establish that he took all reasonable steps in respect of one of the options without regard to whether steps should also, or instead, be taken in respect of one or more of the other options. The respondent argued that there was no evidence the appellant had taken any steps to cause FTP to remit the tax or that he had turned his mind to the other options, that is, the appointment of an administrator or the commencement of winding up proceedings.
31 What it was necessary for a director to do to establish a defence under the corresponding provisions previously contained in the Income Tax Assessment Act 1936 (Cth) was considered in Canty v Deputy Commissioner of Taxation [2005] NSWCA 84; (2005) 63 NSWLR 152. At the relevant time, s 222AOB(1) of the Income Tax Assessment Act required the directors, on or before the due date, to cause the company to do at least one of the following: to pay the withheld tax; to make an agreement with the Commissioner under s 222ALA; to appoint an administrator; or to begin to be wound up. Section 222AOC provided, relevantly, that it was a defence for a director to prove (par (a)) that he or she took all reasonable steps to ensure the directors complied with s 222AOB(1), or (par (b)) that there were no such steps that he or she could have taken.
32 Handley JA (with whom Beazley and Santow JJA agreed) explained the effect of the defence under s 222AOC as follows:
The defence under par (a) is that the person 'took all reasonable steps to ensure that the directors complied with subsection 222AOB(1)'. Compliance would be achieved if any one of those events were to occur. Thus if payment was made there is no need for an agreement, an administrator, or a liquidator. If payment was being pursued the other courses would for the time being be unnecessary and counterproductive. If payment is out of the question or cannot be achieved the person bound must address the other steps. If winding up then becomes the preferred option there will be no need for the time being to seek the appointment of an administrator.
The defences under par (a) and par (b) are cumulative not mutually exclusive. A defendant may establish that there was nothing that could reasonably be done to achieve payment. He or she may also establish that there was no point in attempting to negotiate an agreement with the Commissioner. In such a case the defence under par (b) would succeed pro tanto leaving the defence under par (a) to address the remaining options.
In other cases the defence under par (b) may succeed in relation to all options, so that the defence under par (a) need not be considered. If the only feasible options are the appointment of an administrator or a liquidator a person under the duty, acting reasonably, may decide to seek a winding up. If so, he or she will not be acting unreasonably by doing nothing to secure the appointment of an administrator at that stage. The converse will also be true.
Thus 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. A person who acted reasonably in choosing between the alternatives but failed to take all reasonable steps to bring about the selected event would fail, as would a person who acted unreasonably in choosing the option to be pursued.
If reasonable steps taken in pursuit of one option fail, non-compliance and the obligation of the director or former director will continue. The director or former director will therefore have to take reasonable steps to achieve compliance in another way. If non-compliance continues long enough before a notice is served each of the four options will eventually have to be addressed and the subs (3) defences will have to cover all options [37] - [41].
33 The High Court refused special leave to appeal from the judgment of the Court of Appeal in Canty. Gummow and Hayne JJ said they saw no reason to doubt the correctness of the conclusion of the Court of Appeal. See Canty v Deputy Commissioner of Taxation [2005] HCA Trans 670.
34 In our view, although the statutory provision considered in Canty was not in identical terms to s 269-35(2)(a), Handley JA's reasoning is equally applicable to s 269-35(2)(a).
35 So, compliance with s 269-35(2)(a) requires the director to have taken all reasonable steps to ensure that one of the three alternative events specified happened. The taking by the director of 'all reasonable steps to ensure', within s 269-35(2)(a), requires that each of the alternative events be addressed, either on the basis of taking reasonable steps to ensure the event happened or declining to do anything about that particular event on the basis that there were no reasonable steps that the director could have taken to ensure that the event happened. See, generally, Miller v Deputy Commissioner of Taxation (1997) 98 ATC 4059, 4063 - 4064 (Mason P, Beazley JA agreeing).
36 In the present case, it was submitted on behalf of the appellant that it was at least arguable that he took all reasonable steps to ensure the directors caused FTP, first, to comply with its obligations to remit the withheld tax and, secondly, when it was evident that was not possible, to cause an administrator to be appointed. He did so, it was submitted, between mid-2011 and early 2013, by the regular discussions with his father concerning FTP's affairs and by the periodic meetings with his father and Mr Williams at which he considered cash flow projections and received explanations from Mr Williams as to FTP's outstanding liabilities, expected expenses and expected revenue, all of which indicated that continuing trading would result in FTP paying all of its liabilities, including its tax obligations.
37 It was on that basis, it was submitted, that the appellant implicitly agreed to FTP continuing to operate until 2013 when, following the collapse of the proposed arrangement with Alliance Capital, it became evident that there were no longer any reasonable steps the appellant could take to cause FTP to comply with its obligations, whereupon FTP ceased to trade and the appellant caused an administrator to be appointed (pars 18, 21 submissions, ts 3).
38 Counsel for the appellant argued that the master had fallen into error by failing to consider whether allowing FTP to continue trading in those circumstances arguably constituted the taking of all reasonable steps by the appellant to cause FTP to comply with its obligations.
39 It was further contended that the master had erred in concluding that pars 14 to 51 of Mr Roche's affidavit were irrelevant. That evidence, it was submitted, demonstrated that FTP's inability to comply with its taxation obligations arose as a result of particular, unforeseeable, events in 2013 and thereby demonstrated the point at which there was no reasonable prospect of FTP being able to meet its taxation obligations, at which point the appellant caused an administrator to be appointed.
40 In our respectful view, the master was correct to find that the appellant had no arguable defence to the claim. To establish a defence under s 269-35(2), the appellant was required to prove that from the time he came under the obligation in s 269-15 he took all reasonable steps to ensure that one of the s 269-35(2)(a) events occurred or that there were no reasonable steps that he could have taken to ensure that any of those events happened. The evidence, which, as the master observed, was conspicuous for its paucity, fell a long way short of that. The contention that, prior to the appointment of the administrator, it was reasonable for the appellant to take no steps in light of the information provided to him by Mr Roche and by Mr Williams at their periodic meetings is simply unsustainable.
41 In the first place, beyond vague generalities the appellant does not say what information he was given nor does he explain the basis upon which he concluded that that information and the cash flow projections provided by Mr Williams 'seemed to indicate, that FTP would earn enough money to pay all of its liabilities'. The cash flow projections attached to his affidavit, which he says are representative of the ones he was shown, are no more than projections and do not contain any information about the actual amounts of tax withheld or any amounts paid or payable to the Commissioner. There was nothing contained in them that would have enabled the appellant to establish whether or not FTP was in fact meeting its obligations to the Commissioner.
42 Secondly, the appellant does not suggest that at the regular meetings with Mr Williams, at which he says Mr Williams 'provided … an explanation of FTP's outstanding liabilities', the appellant was misled or inadequately informed as to the state of FTP's liabilities, including the steadily mounting arrears owing to the Commissioner. Had the appellant been misled or inadequately informed, no doubt he would have said so in his affidavit. If the appellant was kept adequately informed of FTP's liabilities to the Commissioner, he would have been aware throughout the period of 18 months in question that FTP was continuously failing to meet its obligations to the Commissioner.
43 Thirdly, if the appellant was in fact unaware of the position, that could only have been because over that period he made no effort to ascertain it. It was incumbent upon the appellant to ascertain what FTP's duties in relation to tax instalments deducted from employees' wages were and to ensure that some system was in place which would ensure compliance: see Deputy Commissioner of Taxation v Saunig [28]. If the meetings with Mr Williams did not enable the appellant to establish whether FTP was complying with its obligations to the Commissioner it was incumbent upon the appellant to make further enquiry. There was no evidence that the appellant ever made any enquiries. It is not suggested that the appellant lacked ready access to the books and records of FTP, or to employees who could have provided him with the necessary information. Plainly, had any enquiry been made FTP's continuous failure to meet its obligations to the Commissioner would have been revealed. The appellant could only have been unaware of that failure if he had not taken the trouble to make such enquiry.
44 There was no evidence that the appellant ever took any steps to satisfy himself there was a system or process in place to ensure that FTP's obligations to the Commissioner were complied with. There is nothing to suggest that the appellant ever turned his mind to the matter.
45 It is unnecessary to consider whether or to what extent a director may rely on information or assurances given to him or her by other directors or employees of the company in order to satisfy the requirements of s 269-35(2)(a). There was no evidence that the appellant received any information or assurances upon which he could reasonably have relied, or that he took any other steps to ensure that one of the s 269-35(2)(a) events occurred, in circumstances where he knew or ought to have known that FTP was continuously failing to meet its obligations to the Commissioner.
46 We do not accept the appellant's contention that the master erred in finding that pars 14 to 51 of Mr Roche's affidavit were irrelevant. In the circumstances, the financial difficulties FTP experienced from June 2013 do not bear upon whether, in respect of the indebtedness to the Commissioner which had accrued between July 2012 and March 2013, the appellant took all reasonable steps to ensure that one of the s 269-35(2)(a) events occurred. There is also nothing contained in Mr Roche's affidavit from which it could be concluded that FTP's ultimate inability to pay the debt arose simply from unforeseen events that occurred from June 2013. To what extent (if any) the rather incoherently described events from June 2013 were a factor in FTP's ultimate inability to pay the Commissioner, or in FTP's insolvency, is not evident.
47 We would dismiss grounds 1 and 2.
Ground 3
48 The amendment to s 269-30 by the addition of subsection (2) was made by item 8 of sch 1 of the Tax Laws Amendment (2012 Measures No 2) Act 2012 (Cth). Item 8 is contained in pt 1 div 3 of sch 1. Item 9 in pt 1 div 3 of sch 1 of that Act deals with the application of the amendment and it is upon the proper construction of item 9 that this ground turns.
49 As mentioned above, prior to 30 June 2012 the effect of s 269-30 was that a penalty imposed on a director was automatically remitted if (among other things) an administrator was appointed to the withholding entity within 21 days of the service of the DPN on the director. With effect from 30 June 2012, s 269-30 was amended by the addition of subsection (2), which provides that a penalty is not remitted by the appointment of an administrator within that 21-day period to the extent that the entity had, contrary to s 16-150, failed to notify the Commissioner of the amount the entity was liable to pay by way of withheld tax on or before the due day for payment of that amount.
50 As amended, s 269-30 provides, relevantly, as follows:
(1) Subject to subsection (2), a penalty of yours under this Division is remitted if the directors of the company stop being under the relevant obligation under s 269-15:
(a) before the Commissioner gives you a notice of the penalty under section 269-25; or
(b) within 21 days after the Commissioner gives you notice of the penalty under that section.
(2) The following table has effect:
When appointing administrator or winding up company does not affect penalty
If the company's obligation is to pay to the Commissioner, on or before the due day, an amount in accordance with Subdivision 16-B (obligation to pay withheld amounts to the Commissioner), and, because of paragraph 269-15(2)(b) or (c) (an administrator is appointed or the company begins to be wound up), the directors stop being under the relevant obligation after the last day of the 3 months after the due day, subsection (1) does not apply to the extent the company does not, on or before the [due day], notify the Commissioner under section 16-150 of the amount the company is obliged to pay. [items and columns in the table omitted]
The amendment [to s 269-30] applies, in relation to a penalty under Division 269 in Schedule I to the [Act], if the directors of the relevant company stop being under the relevant obligation under section 269-15 in that Schedule on or after the commencement of this item.
52 The appellant contended, in substance, that it is at least arguable that the amendment to s 269-30 did not apply in respect of any penalties to which he became liable prior to 30 June 2012. Rather, such penalties were governed by s 269-30 as it existed prior to 30 June 2012, under which a penalty was automatically remitted if an administrator was appointed within 21 days of the service of the DPN. As an administrator was appointed to FTP within 21 days of the service of the DPN, the penalties imposed on the appellant prior to 30 June 2012 had been automatically remitted. The amount owing in respect of those penalties was $1,166,068.50.
53 The appellant (correctly) did not dispute that the amendment applied to penalties to which he became liable on or after 30 June 2012, amounting to $2,243,249.
54 The appellant's argument was as follows. A director's obligation under s 269-15 and the imposition of a penalty are not co-extensive. A director's obligation under s 269-15 arises on the day upon which the company withholds tax that it is obliged to pay to the Commissioner: s 269-10, s 269-15. A penalty is imposed upon a director under s 269-20(1) only if the director's obligation under s 269-15 persists beyond the due date for payment of the tax to the Commissioner. Where, as at 30 June 2012, the director's obligation had arisen, but the due date for payment of the withheld tax did not occur (and the penalty therefore did not arise) until after 30 June 2012, it was clear that the amendment applied. However, the amendment did not specifically deal with the situation where the director was under an obligation and, as at 30 June 2012, the due date for payment of the withheld tax had passed, so that, as at that date, liability for the penalty had already arisen.
55 It was submitted that if the amendment applied in the latter situation, the result would be that, as at 30 June 2012, the director's existing right to an automatic remission of the penalty by the appointment of an administrator within 21 days of service of the DPN would have been taken away. The personal liability of the director would thereby have been substantially increased. The Act should not be construed as having that effect unless such an intention appears with reasonable certainty: ADCO Constructions Pty Ltd v Goudappel [2014] HCA 18 [27]. Counsel for the appellant argued that it was at least arguable that such an intention did not appear with that certainty.
56 We do not accept that submission. Suffice it to say that we do not consider there is any doubt that the amendment to s 269-30(2) was intended to apply to a penalty to which a director had become liable prior to 30 June 2012. In our view, item 9 could not be read otherwise.
57 Item 9 provides that the amendment applies in relation to a penalty 'if the directors of the relevant company stop being under the relevant obligation under s 269-15 … on or after [30 June 2012]'. The criterion, therefore, is not when the director became liable for the penalty; that is, whether the director became liable for the penalty on or after 30 June 2012. The criterion is whether the directors stopped being under the relevant obligation under s 269-15 on or after 30 June 2012. Had the legislature intended to confine the operation of the amendment to particular penalties, namely, penalties that were imposed on or after 30 June 2012, it would have been an easy matter to say so. It has not. Instead, it has provided that the amendment has effect in relation to a penalty if the directors stopped being under the relevant obligation under s 269-15 on or after 30 June 2012.
58 A director stops being under a s 269-15 obligation only upon the happening of one of the events specified in s 269-15(2); that is, the tax is paid, an administrator is appointed to the company or the company begins to be wound up. In the present case, the appellant stopped being under the obligation on 23 August 2013, when an administrator was appointed to FTP. The amendment therefore applies to the penalties for which the appellant became liable prior to 30 June 2012.
59 We would dismiss ground 3.
Conclusion
60 We would refuse an extension of time to appeal because none of the proposed grounds has any merit. The appeal must be dismissed.
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