ROCHE -v- DEPUTY COMMISSIONER of TAXATION
[2014] WASCA 194
•29 OCTOBER 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: ROCHE -v- DEPUTY COMMISSIONER OF TAXATION [2014] WASCA 194
CORAM: McLURE P
NEWNES JA
MURPHY JA
HEARD: 9 JUNE 2014
DELIVERED : 29 OCTOBER 2014
FILE NO/S: CACV 116 of 2013
BETWEEN: DESMOND JOHN ROCHE
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 [2013] WASC 302
File No :CIV 1230 of 2012
Catchwords:
Practice and procedure - Summary judgment - Taxation - Taxation Administration Act 1953 (Cth) s 269-25 of sch 1 - Director penalty notice not received by appellant - Whether posting was effective service on appellant - Whether s 269-25(4) excludes s 29(1) of Acts Interpretation Act 1901 (Cth) - Whether fresh notice must be served if estimate of unpaid liability in original notice reduced under s 268-35(1) of Taxation Administration Act - Taxation Administration Act s 268-55(2)
Legislation:
Acts Interpretation Act 1901 (Cth), s 29(1)
Income Tax Assessment Act 1936 (Cth), s 222AOC
Taxation Administration Act 1953 (Cth), sch 1, s 269-20, s 269-25, s 268-35(1), s 268-55(2)
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):
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; (2009) 239 CLR 27
Deputy Commissioner of Taxation (Cth) v Craddock [2006] VSC 408; (2006) 204 FLR 274
Deputy Commissioner of Taxation v McArdle [2003] QCA 282; [2004] 2 Qd R 495
Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354; (2007) 245 ALR 150
Deputy Commissioner of Taxation v Winters (1997) 37 ATR 209; (1997) ATC 4967
Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 199 CLR 370
Forsyth v Deputy Commissioner of Taxation [2004] NSWCA 474; (2004) 62 NSWLR 132
Kolistasis v Deputy Commissioner of Taxation [2005] NSWCA 186; (2005) 59 ATR 551
Re Bolton; ex parte Beane (1987) 162 CLR 514
Roche v Deputy Commissioner of Taxation [2013] WASC 302
Soong v Deputy Commissioner of Taxation [2011] NSWCA 26; (2011) 80 NSWLR 226
McLURE P: I agree with Newnes JA.
NEWNES JA: The respondent commenced proceedings against the appellant claiming the sum of $88,519.18 by way of penalties imposed pursuant to s 222AOC of the Income Tax Assessment Act 1936 (Cth) (the first penalty) and the sum of $758,449 by way of penalties imposed pursuant to s 269-20 of sch 1 to the Taxation Administration Act 1953 (Cth) (the second penalty), respectively. The respondent applied for summary judgment, which the master granted: Roche v Deputy Commissioner of Taxation [2013] WASC 302.
The appellant contends, in effect, that the master should have found that the appellant had an arguable defence in respect of each claim and accordingly should have dismissed the respondent's application for summary judgment.
For the reasons which follow, I would dismiss the appeal.
The background
The appellant was at all material times the sole director of Bremore Engineering (WA) Pty Ltd. Under the Income Tax Assessment Act and div 12 in sch 1 to the Taxation Administration Act (div 12), Bremore was required to withhold income tax from the salaries and wages of its employees and officeholders, and to remit the amount of that income tax to the Commissioner of Taxation (the Commissioner) on a monthly basis, together with a monthly business activity statement setting out the amount withheld.
Division 9 of pt VI of the Income Tax Assessment Act dealt with penalties for a director of a company where the company had failed to remit to the Commissioner an amount of income tax withheld from employees or officeholders.
Section 222ANA of the Income Tax Assessment Act set out the object, and an outline, of div 9. It stated, relevantly, that:
(1)The purpose of this Division is to ensure that a company either meets its obligations [to remit the amount withheld] or goes promptly into voluntary administration under Part 5.3A of the Corporations Act 2001 or into liquidation.
(2)The Division imposes a duty on the directors to cause the company to do so. The duty is enforced by penalties. However, a penalty can be recovered only if the Commissioner gives written notice to
the person concerned. The penalty is automatically remitted if the company meets its obligations, or goes into voluntary administration or liquidation, within 14 days after the notice is given.
Where a penalty was recovered, it was applied in reduction of the company's liability and conversely any amounts paid by the company reduced the amount of a penalty: s 222ANA(3).
Section 222AOB of the Income Tax Assessment Act provided, in substance, that persons who are directors from time to time on or after the first deduction day must cause the company to do at least one of the following on or before the due date for the amount withheld to be remitted:
(a)pay the amount withheld;
(b)make an agreement with the Commissioner under s 222ALA of the Income Tax Assessment Act in relation to the amount withheld;
(c)appoint an administrator under the Corporations Act 2001 (Cth); or
(d)begin to be wound up under the Corporations Act.
(Section 222ALA provided that the Commissioner could enter into an agreement with the company for payment of the amount owing by instalments.)
Section 222AOC provided, in substance, that if s 222AOB was not complied with on or before the due date, each person who was a director of the company at any time in the period beginning on the first deduction day and ending on the due date was liable to pay the Commissioner by way of penalty an amount equal to the unpaid amount of the company's liability.
It was not in issue that, in the period 1 October 2009 to 31 October 2009, Bremore had withheld, for the purposes of div 12, an amount of $88,519.18 which it had failed to remit to the Commissioner. The appellant did not do any of the things specified in s 222AOB and accordingly became liable to a penalty in that amount.
As of 1 July 2010, pt VI of the Income Tax Assessment Act was repealed: Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) (amending Act). For present purposes, the relevant effect of the amending Act was to repeal the provisions relating to the power of the Commissioner to make and recover an estimate of an unpaid liability and to recover penalties, and to replace them with comparable provisions in the Taxation Administration Act.
By virtue of s 65(4) of pt 3 in sch 1 of the amending Act, div 269 in sch 1 of the Taxation Administration Act applies to penalties under the Income Tax Assessment Act as if they were penalties payable under div 269‑B in sch 1 of the Taxation Administration Act.
The object of div 269 is expressed to be, relevantly, 'to ensure that a company either … meets its obligations [to pay to the Commissioner estimates of PAYG withholding liabilities] or … goes promptly into voluntary administration … or into liquidation': s 269‑5. It seeks to do so by imposing on directors a duty to ensure that a company either meets its obligations to pay withheld amounts to the Commissioner or goes promptly into voluntary administration or liquidation: s 269‑15. The relevant provisions of div 269 are to similar effect to the superseded provisions of the Income Tax Assessment Act.
Critically for this case, div 269 provides that proceedings to recover a penalty cannot be brought until the end of 21 days after the director has been given notice of the penalty. The applicable provision is s 269‑25 of sch 1 of the Taxation Administration Act (cf previously s 222APE of the Income Tax Assessment Act, where the period was 14 days). It is as follows:
Commissioner must give notice of penalty
(1)The commissioner must not commence proceedings to recover from you a penalty payable under this Subdivision until the end of 21 days after the Commissioner gives you a notice under this section.
Content of notice
(2)The notice must:
(a)set out what the Commissioner thinks is the unpaid amount of the company's liability under its obligation;
(b)state that you are liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount because of an obligation you have or had under this Division; and
(c)explain the main circumstances in which the penalty will be remitted.
(3)To avoid doubt, a single notice may relate to 2 or more penalties, 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.
Section 269‑50 provides:
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.
The first penalty
On 3 September 2010, the respondent, as the delegate of the Commissioner, sent by post to the appellant a notice under s 269‑25 in respect of the amount of $88,519.18 for the period 1 October 2009 to 31 October 2009 (first DPN).
The second penalty
The respondent alleged that, in the period 1 November 2009 to 31 October 2010, Bremore had withheld further amounts for the purposes of div 12 which it had failed to remit to the Commissioner. In this instance, the relevant business activity statements had not been lodged by Bremore and the Commissioner was unable to ascertain the precise amount of the liability.
Under div 268 in sch 1 of the Taxation Administration Act, the Commissioner may make an estimate of the unpaid and overdue amount of tax withheld by an employer but not remitted (s 268‑10(1)). The amount of the estimate must be what the Commissioner thinks is reasonable (s 268‑10(1)). The Commissioner must give to the employer written notice of the estimate (s 268‑15), and the amount of the estimate becomes due and payable upon that notice being given (s 268‑20(1)).
Section 268‑35(1) enables the Commissioner subsequently to reduce the amount of an estimate. Under s 286‑35(2), where the Commissioner reduces the estimate, written notice must be given to the employer identifying the underlying liability and setting out the reduced amount. Under s 268‑55(2), if the amount of an estimate is reduced, the reduced estimate has effect, and is taken always to have had effect, as if the original amount of the estimate had been the reduced amount.
In respect of the period 1 November 2009 to 31 October 2010, the Commissioner made estimates of the amounts involved in the total sum of $826,965 and, on 2 December 2010, pursuant to s 268‑15, the respondent gave to Bremore notice of the estimate.
On 4 January 2011, the respondent served a notice under s 269‑25 in respect of that amount (second DPN).
After receipt of the notice of estimate, Bremore lodged business activity statements with the respondent which stated the actual amounts it had withheld for some of the periods referred to in the notice of estimate. The Commissioner subsequently reduced the amount of the estimate to $758,449 and, on 6 April 2011, gave Bremore written notice of the reduction, as required by s 268‑35(2).
The respondent's claim
Bremore was wound up on 5 July 2011. At that time, there remained unpaid the sum of $88,519.18 stated in the first DPN, and the sum of $758,449, being the amount stated in the second DPN as subsequently reduced.
On 13 February 2012, the respondent commenced proceedings against the appellant to recover those amounts. It then successfully applied to the master for summary judgment. It was not in issue that the respondent was entitled to sue to recover debts payable to the Commissioner.
The reasons of the master
The appellant raised several contentions in opposition to the application for summary judgment.
In relation to the first DPN, the appellant relied on two separate propositions. The first was that there was no evidence the DPN had been given by the Commissioner, as required by s 269‑25, as it was not signed by the Commissioner or a person authorised to sign on the Commissioner's behalf. That proposition relied on the form of the DPN, at the foot of which appeared the following endorsement:
Paul Duffus
Deputy Commissioner of Taxation
Delegate of the Commissioner of Taxation
Per:
It was submitted that the last part of that endorsement contemplated that it would be physically signed by someone on behalf of the Deputy Commissioner of Taxation. The printed name of the Deputy Commissioner of Taxation was not therefore 'in place of' his signature, as reg 45 in pt 6 of the Taxation Administration Regulations 1976 (Cth) required if the printed name was to have effect as his signature. Accordingly, the first DPN was not a valid notice under s 269‑25.
The master rejected that argument, finding that the printed name of the Deputy Commissioner was plainly sufficient for the purposes of reg 45 [13].
The appellant's second proposition was that it was arguable he had not been given the notice. That was based on an affidavit in which he swore that he had not received it. The respondent relied upon s 269‑25(4), arguing that it was immaterial whether the appellant had received it because s 269‑25(4) conclusively deemed a DPN to have been given upon it being left or posted by the respondent. The appellant, however, submitted that notwithstanding s 269‑25(4), s 29(1) of the Acts Interpretation Act1901 (Cth) applied to a notice under s 269‑25(1), except for the modification of the time of service. It was an open question whether, under s 29(1) of the Acts Interpretation Act, proof of non‑receipt can amount to proof of non‑delivery or non‑sending.
The master rejected that argument, finding that s 29(1) of the Acts Interpretation Act had no application and that once the notice was posted, as an officer of the respondent deposed that it had been, it was given for the purposes of s 269‑25(1).
In relation to the second DPN, the appellant submitted it was arguable first, that the DPN did not comply with s 269‑25(2) in that it did not, as it was required to do, set out what the Commissioner thought was the unpaid amount of the company's liability. That submission was developed as follows. More than 21 days after the DPN was given to the appellant, the Commissioner had reduced the estimate in the DPN. By virtue of s 268‑55, a reduced amount took effect and was taken always to have had effect as if it had been the original amount. Accordingly, at the time the DPN was given the Commissioner must be taken to have thought the amount of the liability was $758,449 (the reduced amount), whereas the DPN stated that the Commissioner thought the amount was $826,965.
The master rejected that argument, finding that a reduction in the amount did not invalidate the notice. He relied upon Deputy Commissioner of Taxation (Cth) v Craddock [2006] VSC 408; (2006) 204 FLR 274 [29].
Secondly, the appellant relied upon s 269‑15(3) which, so far as relevant, provides, in effect, that the respondent must not commence proceedings to recover a penalty while there is in force an arrangement with the Commissioner to pay the company's obligation by instalments. It was not suggested that such an arrangement was in force. Rather, the appellant submitted that the respondent was estopped from denying that an arrangement was in force. That submission was founded on an earlier instance where the respondent had not expressly responded to a request by the appellant to enter into an arrangement for repayment of a similar liability, but had implicitly agreed to it. It was contended that the circumstances in which the appellant had requested an arrangement in relation to this liability were similar to the circumstances in which he had requested an arrangement in respect of the earlier liability. In the absence of a response to the request in respect of this liability, the appellant was entitled to assume, as he did, that again the Commissioner had agreed to a payment arrangement.
The master found there was no substance in that. He considered the circumstances in which the Commissioner had entered into the previous arrangement were quite different and the appellant could not reasonably have assumed that that the Commissioner had agreed to a payment arrangement on this occasion [31].
The master held that the appellant had no arguable defence in respect of either penalty and gave judgment for the respondent.
The grounds of appeal
The grounds of appeal were, in substance, that the master erred in finding:
(1)that the first DPN constituted written notice to the appellant under s 269‑25(1), in circumstances where it was not signed by or on behalf of the Commissioner and did not bear the written, printed or stamped name of a Commissioner or delegate of the Commissioner in place of that person's signature;
(2)that the first DPN was posted by the respondent, in circumstances where it was the appellant's evidence that he had not received it;
(3)in relation to the first DPN, that s 269‑25(4) wholly excluded the operation of s 29 of the Acts Interpretation Act;
(4)that the second DPN constituted a valid written notice to the appellant under s 269‑25(1), in circumstances where a retrospective reduction had been made of the amount specified in the notice as owing by the appellant;
(5)in relation to the second DPN, that the appellant's evidence of an assumption he had formed as to a payment arrangement with the Commissioner was not credible;
(6)in relation to the second DPN, that the assumption which the appellant deposed to having formed as to a payment arrangement could not reasonably be held and was not induced by any conduct of the Commissioner.
Disposition of the appeal
Ground 1
There is no merit in this ground. Regulation 45 in pt 6 of the Taxation Administration Regulations is as follows:
Presumption as to signatures
(1)Judicial notice must be taken of the names and signatures of the persons who are, or were at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner.
(2)A certificate, notice or other document bearing the written, printed or stamped name (including a facsimile of the signature) of a person who is, or was at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner in the place of the person's signature is taken to have been duly signed by the person, unless it is proved that the document was issued without authority.
The signature clause on the first DPN is set out above at [28]. The first DPN bore the printed name of the Deputy Commissioner, who was the delegate of the Commissioner. The fact that it also bore provision for it to be signed by another person on his behalf does not detract from that. It is to be taken as having been duly signed by the Deputy Commissioner.
Ground 1 should be dismissed.
Ground 2
I do not consider this ground to have any merit.
Section 269‑50 of the Taxation Administration Act provides that a notice under s 269‑25 may be given to a director by 'leaving it at, or posting it to, an address that appears, from information held by the Australian Securities and Investments Commission [ASIC], to be, or to have been within the last 7 days, [his or her] place of residence or business'.
An affidavit in support of the application for summary judgment was sworn on 8 January 2013 by Ms Wooler, an employee of the Australian Taxation Office. Ms Wooler says in the affidavit that she has no independent recollection of the matters set out in the affidavit and has prepared it on the basis of her practices and her examination of the respondent's records. On that basis, Ms Wooler states that she prepared the first DPN and a covering letter and placed them both in an envelope addressed to the appellant at his residential address. The residential address had been obtained from information held by ASIC. Ms Wooler says she posted the letter, duly stamped, in an Australia Post box on 3 September 2010 (a Friday) at 12.40 pm. Upon returning to her office, she completed a form setting out the details of the posting.
Ms Wooler says that as part of her duties she was required to enter on the respondent's computer system a file note of those dealings. It appears from an annexure to her affidavit that, at 9.33 am on 6 September 2010 (the following Monday), Ms Wooler entered on the computer system a note containing details of the mailing of the DPN and covering letter.
It was submitted on behalf of the appellant that the affidavit was not sufficient to establish that the DPN was posted. There was a factual issue as to whether it had been posted which required the matter to go to trial. That issue arose, it was submitted, from the following:
(1)for the purposes of the summary judgment application, it is to be assumed that the appellant did not receive the DPN;
(2)there was no evidence that the envelope was returned to the respondent;
(3)the appellant received DPNs sent by the respondent at his residential address both before and after this DPN was posted;
(3)no one on behalf of the respondent had actual knowledge that it was posted;
(4)the file note was not entered on the respondent's computer system on the day the DPN was said to have been posted but three days later, although it was to be inferred from the entry that it was Ms Wooler's practice to enter such matters on the day they occurred; and
(6)there was no explanation for the non‑delivery of the DPN other than a failure in the postal system or a failure in the respondent's system for posting mail, the latter being an issue the appellant has not been given an opportunity to investigate.
There is no significance in the fact that Ms Wooler's file note was not entered on the respondent's computer system on the Friday afternoon on which the notice was posted but on the following Monday morning. The details of its posting were recorded by Ms Wooler immediately after she returned to her office from posting the notice. That record corresponds with the details later entered on the respondent's computer system. I should add that it was not suggested there was any statutory obligation to enter the details on the computer system on the day the notice was posted or at all. It appears to have been simply an office procedure. The fact that the appellant did not receive the notice is not sufficient to cast doubt on the evidence of Ms Wooler, based on her contemporaneous record, that the notice had been posted.
There is no triable issue as to whether the DPN was posted. Ground 2 should be dismissed.
Ground 3
This ground raises a different issue about whether the notice was given to the appellant. It was submitted on behalf of the appellant that the master erred in finding that s 29 of the Acts Interpretation Act was excluded by s 269‑25(4) of sch 1 of the Taxation Administration Act.
Section 29(1) of the Acts Interpretation Act provides:
(1)Where an Act authorizes or requires any document to be served by post, whether the expression 'serve' or the expression 'give' or 'send' or any other expression is used, then the service shall be deemed to be effected by properly addressing, prepaying and posting the document as a letter and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
Section 269‑25(4) replaced s 222AOF of the Income Tax Assessment Act. The latter provision was the subject of consideration by the New South Wales Court of Appeal on two occasions, with diametrically opposite results. Section 222AOF was, relevantly, in the following terms:
If it appears from ASIC documents that a person is, or has been within the last 7 days, a director of the company, the Commissioner may give the person a notice under s 222AOE by leaving it at or sending it by post to, an address that appears from such documents to be, or to have been within the last 7 days, the person's place of residence or business.
In Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354; (2007) 245 ALR 150, a penalty notice under s 222AOE of the Income Tax Assessment Act (see now s 269‑25(1) of the Tax Administration Act) had been posted to the respondent. The respondent contended that it had not been delivered to her and she was not therefore liable for the penalty. It was held (Ipp and Basten JJA, Giles JA dissenting) that s 222AOF excluded the operation of s 29(1) of the Acts Interpretation Act. Accordingly, it was sufficient to satisfy the requirement of s 222AOE that the penalty notice was posted to the respondent [86].
In Soong vDeputy Commissioner of Taxation [2011] NSWCA 26; (2011) 80 NSWLR 226, a differently constituted Court of Appeal took the opposite view. In that case, penalty notices under s 222AOE had been posted to the appellant on 29 November 2007 and delivered to her house on 30 November 2007. On 14 December 2007, an administrator was appointed to the companies owing the withheld amounts. If the 14 day period under s 222AOE ran from the date of delivery, the penalty was automatically remitted. If it ran from the date of posting, the appellant remained liable for the penalties. The court held that it ran from delivery. It considered that the decision in Meredith was clearly wrong and should not be followed. Gzell J (with whom Allsop P, Giles, Hodgson and Tobias JJA agreed) held that s 222AOF did not exclude the operation of s 29(1) of the Acts Interpretation Act. The absence in s 222AOF of a requirement to properly address, prepay and post the document as a letter highlighted the work to be done by s 29(1) [51]. There was also nothing in s 222AOF which evinced an intention to exclude the provision of s 29(1) that, unless the contrary is proved, service is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of post.
The amending Act came into force before the decision in Soong was delivered. The Explanatory Memorandum which accompanied the amending Act contained, relevantly, the following:
Directors' penalties notices
[2.78] The rewrite has been drafted taking account of a number of court decisions on the application of Division 9. Where appropriate, the outcome of those decisions has been reflected in the rewrite.
[2.79] For example, the Meredith case concerned when the Commissioner has given a director penalty notice. The court decided that section 29 of the Acts Interpretation Act 1901 did not apply, so that a notice was given when it is posted (rather than when it is received).
[2.80] That result was the intended result under the current law but, to remove any possibility of a future misunderstanding, the rewrite clearly excludes the operation of s 29 of the Acts Interpretation Act 1901. This has not resulted in a policy change as it simply reflected the current state of the law as set out in the Meredith decision. (citations omitted; original emphasis)
The Explanatory Memorandum is, of course, no more than an aid to construction. It is not decisive of the meaning to be given to the relevant statutory provision and cannot be relied upon to displace the clear meaning of the statutory text. The starting point must always be the text of the statute itself. See ReBolton; ex parte Beane (1987) 162 CLR 514, 518; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; (2009) 239 CLR 27, 46 ‑ 47. As the plurality explained in Bolton, the function of the court is to give effect to the will of Parliament as expressed in the law (518).
It is to the legislation then that it is necessary to turn. At the expense of some repetition, it is helpful to juxtapose the critical provisions.
As noted above, s 29(1) of the Acts Interpretation Act provides:
(1)Where an Act authorizes or requires any document to be served by post, whether the expression 'serve' or the expression 'give' or 'send' or any other expression is used, then the service shall be deemed to be effected by properly addressing, prepaying and posting the document as a letter and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
Section 269‑25(4) of sch 1 of the Taxation Administration Act is as follows:
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.
Counsel for the appellant observed that, as was noted in Soong at [49], s 29(1) of the Acts Interpretation Act has two limbs. The first limb specifies the conduct that will constitute postal service in the absence of a contrary intention and the second limb determines the date of that service unless the contrary is proved.
It was submitted on behalf of the appellant that s 269‑25(4) relates only to the second limb and then only to a limited extent. Counsel argued that the only effect of s 269‑25(4) is to change the deemed time of service in the second limb from the ordinary course of post to the moment of posting. In other words, it merely amends the second limb of s 29(1) to provide, in effect, that 'unless the contrary is proved, [service of the notice is deemed] to have been effected at the time the Commissioner leaves or posts it' (ts 16 ‑ 17). It therefore leaves open the ability of the intended recipient to negative the deemed service by proving that the notice was not delivered at all or was not delivered at least 21 days before proceedings were commenced.
I accept that there is nothing in s 269‑25(1) which would indicate an intention to exclude what was described in Soong as the first limb of s 29(1). The requirements of properly addressing, prepaying and posting the document as a letter are not dealt with in s 269‑25(4) and are plainly consistent with the purpose of s 269‑25(1).
However, in my view it is clear that the second limb of s 29(1) is intended to have no operation. The construction contended for by the appellant is simply not open on the plain meaning of s 269‑25(4).
Under s 269‑25(1), the Commissioner must not commence proceedings until the end of 21 days after he or she 'gives' the director a notice under that section. Section 269‑25(4) provides that the notice is 'taken to be given' upon the Commissioner leaving it at or posting it to the address of the director. The clear intention is that the act of leaving or posting the notice constitutes the giving of the notice to the intended recipient for the purposes of s 269‑25(1). Upon the leaving or posting of the notice the requirements of s 269‑25(1) have been met. The obvious purpose is to avoid any question as to the time of delivery or any issue of non‑delivery of the kind now sought to be raised by the appellant and which might otherwise be open under s 29(1) of the Acts Interpretation Act.
There is no merit in ground 3 and it should be dismissed.
Ground 4
It was submitted on behalf of the appellant that the second DPN did not constitute a notice under s 269‑25 because it did not comply with the requirements of s 269‑25(2), in that it did not set out what the Commissioner thought was the unpaid amount of Bremore's liability.
The argument can be summarised as follows. The second DPN set out, as s 269‑25 required that it do, the amount the Commissioner thought was the unpaid amount of Bremore's liability. That amount was said to be the sum of $826,965. Subsequently, after the 21 day period had elapsed, the Commissioner reduced the amount of the estimate to $758,449. By virtue of s 268‑55, the reduction in the estimate took effect, and was taken always to have had effect, as if the amount of the original estimate had been the reduced amount. It follows, it was submitted, that, by definition, the Commissioner must be taken always to have thought that the amount of Bremore's unpaid liability was $758,449, whereas the DPN stated that the Commissioner thought that the amount of Bremore's unpaid liability was $826,965. The second DPN did not therefore comply with s 269‑25(2) and it was not open to the Commissioner to commence proceedings for the amount claimed. To enable proceedings to be commenced, a fresh DPN would have to be given to the appellant and a further 21 day period elapse.
It was submitted that Craddock, on which the master relied, was based on different legislative provisions and it could not be presumed that the current provisions would lead to the same result (ts 20).
In Craddock, the Commissioner, having not received business activity statements for the period 1 June 2003 to 28 February 2005 from a company of which the Craddocks were directors, made an estimate of the unremitted tax in the sum of $248,259. Notice of the estimate was sent to the company. Under s 222APB of the Income Tax Assessment Act, the notice had the effect that the Craddocks were personally required within 14 days to cause the company to take one of the courses set out in s 222AOB, failing which the Craddocks became personally liable, by way of penalty, to pay an amount equal to the unpaid amount of the estimate. No payment was made by the company and no such action was taken by the Craddocks. The effect of s 222APE was that no recovery action could be taken against the Craddocks until 14 days after they had been given a notice which 'sets out the unpaid amount of the estimate' and which was otherwise substantially to the same effect as the notice now required by s 269‑25. Notice under s 222APE was given to the Craddocks. Subsequently the company lodged business activity statements for some months and, based on those, the Commissioner reduced the estimates to $201,467 and sent to the company notice of the reduction. Legal proceedings were later commenced to recover that amount from the Craddocks as a penalty.
The Craddocks contended that the Commissioner had failed to satisfy the requirement in s 222APE to serve a notice which 'sets out details of the unpaid amount of the estimate'. That was because under s 222AKA a reduced estimate had effect and was taken always to have had effect as if the original amount had been the reduced amount (see now s 268‑55 of the Taxation Administration Act). Therefore the notice under s 222APE incorrectly stated the estimate to be $248,259 whereas the estimate was, and was taken always to have been, $201,467. The notice, it was argued, was invalid.
Cavanough J rejected that contention. His Honour considered that the purpose of s 222AKA was to ensure the estimate system did not unreasonably cause the company or its directors to be liable for a greater amount than the underlying liability [36]. Where an estimate was reduced, the result of s 222AKA was that the liability provision ‑ s 222APC ‑ had effect and was taken always to have had effect as if the original amount was the reduced amount; that is, the company and the directors were liable, and were taken always to have been liable, for the reduced amount. That, however, did not require any alteration in the notice served under s 222APE. In his Honour's view, where an estimate was reduced, s 222AKA did not deem a notice previously sent under s 222APE to have referred to the reduced estimate. The references to 'estimate' in s 222APE were to the original estimate and a notice setting out the original estimate was valid and effective notwithstanding that the estimate may have subsequently been reduced.
Cavanough J considered that the construction contended for by the Craddocks was also unlikely because it would open up the recovery process to abuse. It would enable a company to release information to the Commissioner in dribs and drabs, with the result that estimates were being continuously revised and new notices had to be served, each giving a further 14 days before recovery action could be taken [44].
In the present case, counsel for the appellant did not explain why the changes to the legislation should lead to a different result and I do not consider that they do. In the first place, it is clear from the Explanatory Memorandum that the amending Act was not intended to involve policy changes but simply to improve the legislation by rewriting it using plain English and modern drafting techniques. While it is acknowledged that whenever the wording of legislation changes the meaning could change, it is stated to have been an important aim of the amendments to minimise any changes in meaning.
Secondly, and more importantly, on their proper construction the statutory provisions applicable in this case do not lead to a different result.
The comparable provision to s 222AKA in the Taxation Administration Act is s 268‑55, which is expressed to apply to div 269. It is, relevantly, as follows:
When revocation or reduction takes effect
Scope
(1)This section applies for the purpose of the following:
(a)Subdivision 268‑C (Liability to pay estimates);
(b)section 268‑60 (refund of overpayments);
(c)Subdivision 268‑E (Late payment of estimates);
(d)Division 269 (Penalties for directors of non-complying companies).
When revocation or reduction takes effect
(2)If the amount of the estimate is reduced, the estimate has effect, and is taken always to have had effect, as if the original amount of the estimate had been the reduced amount.
There is, in my view, no reason why s 268‑55(2) should be read in the way contended for by the appellant and good reason why it should not.
As with its predecessor, s 222AOE, a notice under s 269‑25 does not create or alter a director's liability but is simply a notice before action which removes a prohibition on commencing recovery proceedings. It has two purposes. The first is to inform the recipient of the amount the Commissioner thinks at the time the notice is issued is the unpaid amount of the company's liability. The second is to inform the recipient of the alternative courses available which will result in remission of the penalty, the object being to encourage the recipient to take such steps as are necessary to bring about the result that one of those courses is followed: see Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 199 CLR 370 [36]; Deputy Commissioner of Taxation v McArdle [2003] QCA 282; [2004] 2 Qd R 495 [14] ‑ [15]; Forsyth vDeputy Commissioner of Taxation [2004] NSWCA 474; (2004) 62 NSWLR 132 [47]. The notice is to give the director a last chance to negate the penalty: see Kolistasis v Deputy Commissioner of Taxation [2005] NSWCA 186; (2005) 59 ATR 551 [26].
In my view, the meaning contended for by the appellant is not consistent with the language or purpose of s 268‑55(2). Section 268‑55(2) is in its terms directed to the effect of the reduced estimate on the liability of the employer or, under s 268‑55(1)(d), of a director of the company. The evident purpose is to ensure that where the original estimate is reduced, the liability to pay the reduced amount is retrospective to the due date for payment of the original estimate. Thus, for instance, a payment of the reduced amount, whenever made, will be sufficient to discharge the liability from the date it is made, and the general interest charge which, under subdiv 268‑E, accrues on an estimate which remains unpaid at the end of seven days after the Commissioner gives notice of the estimate, will be taken to have accrued on the reduced amount from the end of seven days after notice of the original estimate, regardless of when the estimate was reduced.
So far as it relates to div 269, s 268‑55(2) is directed to the effect of the reduced estimate on the amount the director is liable to pay to the Commissioner by way of a penalty. What is made retrospective is the effect of the reduced estimate on the amount for which the director is liable as a penalty, not the Commissioner's state of mind under s 269‑25(2)(a). Section 268‑55(2) is not directed to the content of the notice before action required under s 269‑25. The content of a valid and effective notice is specified in s 295‑25. Relevantly, the Commissioner must set out in the notice the amount he thinks is the unpaid amount of the company's liability at the time the notice is issued. There is nothing in the statutory scheme to suggest that a notice which is valid and effective when given, ceases to be valid and effective if the Commissioner's estimate of the unpaid amount is subsequently reduced. It is not necessary for the purposes of div 269 that a fresh notice should be given setting out the reduced estimate.
Indeed, if it had been intended that a fresh notice must be given in those circumstances it is to be expected that that would have been expressly provided for, rather than left to be divined by the rather elusive process advanced by the appellant. It is significant that while express provision is made for notice to be given to an employer of any reduction in an estimate (s 268‑35(2)), no such provision is made for notice of a reduction in an estimate to be given to a director liable for a penalty.
Moreover, a requirement to serve a fresh notice whenever an estimate is reduced would potentially leave div 269 open to undue delay and even abuse. As Cavanough J explained in Craddock in relation to the predecessor to div 269, a requirement to serve a fresh notice each time an estimate is reduced could have the result that the directors of a company who are aware that the estimate is greater than the underlying liability might, by design or otherwise, unduly forestall any recovery action by giving the Commissioner, by dribs and drabs, statutory declarations under s 268‑40(1) or business activity statements as to the underlying liability, for different periods included in an estimate [44].
In my view, it is clear that so far as s 268‑55 applies to div 269, it does not have the effect asserted by the appellant. The giving of the second DPN entitled the Commissioner to commence proceedings to recover the reduced amount. The Commissioner was not required to serve a fresh notice. The master correctly found there was no triable issue.
Ground 4 should be dismissed.
Grounds 5 and 6
The appellant contended, in substance, that the master should have found that it was arguable the respondent was estopped from denying that an arrangement with Bremore in respect of its liability had been or would be entered into pursuant to s 269‑15(3). The argument was as follows.
The year before the second DPN was served the respondent had served on the appellant a DPN in respect of a different liability of Bremore. On that occasion, the appellant had written to the respondent, both in his own right and on behalf of Bremore, proposing that Bremore enter into an arrangement for payment of the liability. The respondent did not reply within the (then) 14 day period within which the appellant was required to take certain action if he was to avoid the penalty. The respondent did not, however, take steps to enforce Bremore's liability or the penalty, and subsequently sent to Bremore payment slips which accorded with the proposed arrangement. That is, the respondent impliedly accepted the arrangement. Bremore paid the amount outstanding in accordance with the arrangement, resulting in the remission of the penalty.
When the appellant received the second DPN he again wrote to the respondent proposing that Bremore enter into a payment arrangement. The respondent did not reply within the 21 day period specified in s 269‑25(1); that is, by 25 January 2011. The appellant argues that he reasonably assumed the respondent's failure to reject the proposal for a payment arrangement within the 21 day period meant that, as with the earlier DPN, the respondent had accepted, or would accept, a payment arrangement. According to the appellant, had he not held that assumption he would have caused Bremore to enter into voluntary administration or be wound up within the 21 day period, thereby avoiding the penalty.
The appellant's counsel accepted the general principle that statutory authorities cannot be estopped from carrying out their statutory duties. He argued, however, that an estoppel of a similar nature, in similar circumstances, was found to be arguable in Deputy Commissioner of Taxation v Winters (1997) 37 ATR 209; (1997) ATC 4967, and that was sufficient to give rise to a triable issue.
It is unnecessary to consider the last point. The claim for an estoppel must fail on the facts. There are material differences between the two sets of circumstances relied upon by the appellant which are fatal to his argument.
On the earlier occasion, the DPN, which was sent on 15 January 2010, related to unpaid PAYG in the sum of $291,142.56. At the same time, the respondent served a statutory demand on Bremore in relation to that sum. On 29 January 2010, Bremore paid an amount of $50,000 and wrote to the respondent in response to the statutory demand proposing payment of the debt by a further four weekly instalments of $50,000 each and the balance of $41,142.56 on 3 March 2010; that is, to pay the whole amount within a period of less than two months. At the same time the appellant wrote to the respondent in response to the DPN, enclosing a copy of Bremore's letter. The respondent did not reply to the appellant's correspondence and after the expiry of the statutory period took no steps to enforce payment. It subsequently sent to Bremore payment slips to enable payment to be made in accordance with the proposed instalments. The debt was paid in full by Bremore by 3 March 2010, extinguishing the penalty.
However, the position in relation to the second DPN was quite different.
The letter from the respondent dated 4 January 2011 which accompanied the DPN contained the following:
We may commence action for recovery of the penalty without further warning unless, at the end of 21 days from the date on which the enclosed notice is given to you, the penalty has been remitted or an arrangement that covers the company's obligation is in force under section 255‑15 in Schedule 1 to the TAA 1953.
You might also note that we would be reluctant to enter into any payment arrangement to pay an estimate where the underlying liability has not been ascertained.
On 9 January 2011, the appellant wrote to the respondent acknowledging receipt of the DPN and saying (relevantly):
As noted these amounts are based on estimates and I will therefore work with the Company to have the forms lodged so that the actual liabilities can be established.
Your letter notes that you may commence action for recovery unless the penalty has been remitted or an arrangement that covers the Company's obligation is in force. Accordingly I would like to make a suitable arrangement to achieve that. As you may be aware the Company has been in this position previously and a suitable arrangement was entered into and satisfactorily concluded.
…
I will accept your advice as to a minimum monthly payment that would be acceptable to finalise this matter.
On 21 January 2011, the appellant wrote on behalf of Bremore to the respondent as follows:
We note that you have issued estimate of liability for withholding amounts.
Please be advised that we will work with our external accountants to have the outstanding statements lodged progressively over the next few weeks. We will then appreciate the opportunity to discuss with you further to arrange a satisfactory payment arrangement.
Apart from the substantial difference between the amounts involved ($291,142.56 and $758,449, respectively), there were at least two clear differences between these circumstances and the circumstances of the previous occasion.
First, the appellant's liability was based on an estimate, not an ascertained amount. That was because the appellant had failed to lodge the business activity statements necessary to enable the respondent to calculate the actual liability. The appellant knew that the respondent was not in a position to calculate the actual liability and he was aware from the respondent's letter of 4 January 2011 that the respondent would be reluctant to enter into a payment arrangement on the basis of an estimate.
Secondly, there was no payment arrangement for the respondent to accept, impliedly or otherwise. Unlike the previous occasion, no payment arrangement was proposed by the appellant or Bremore. The appellant had simply invited the respondent to suggest a minimum monthly payment to discharge the debt, an invitation which, consistent with his previously expressed reluctance to enter into a payment arrangement based on an estimate, the respondent had not taken up.
In the circumstances, the appellant could not reasonably have assumed that the respondent had agreed, or would agree, to a payment arrangement under s 255‑15. Nor was there anything in the respondent's conduct which might reasonably have induced such an assumption. The fact that the respondent did not reply to the appellant's letter of 9 January 2011 within the 21 day period could not reasonably have done so. The master correctly found that there was no triable issue on the estoppel argument.
Grounds 5 and 6 should be dismissed.
Conclusion
I would dismiss the appeal
MURPHY JA: I agree with Newnes JA.
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