Panayi v Deputy Commissioner of Taxation

Under Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA), a company is required to withhold amounts from the wages it pays employees and to pay those withheld amounts to the Commissioner. The day on which the withholding occurs is referred to as the initial day and the day by which payment must be made to the Commissioner is referred to as the due day. The company is also required to lodge by the due day a statement notifying the Commissioner of the amount which has been withheld.

The TAA also imposes obligations on the directors from time to time of the withholding company. Those directors must cause the company to comply with its obligation to pay moneys which have been withheld. They continue to be subject to that obligation until the company makes that payment or an administrator is appointed to the company or the company begins to be wound up. Directors who are subject to that obligation at the end of the due day, and who were under that obligation before that time, are liable to pay to the Commissioner a penalty equal to the unpaid amount of the company’s liability.

Proceedings to recover that penalty cannot be commenced until the director has been given notice of the penalty. That notice must explain the circumstances in which the penalty will be remitted. Those circumstances changed with an amendment that took effect on 30 June 2012. The TAA also provides limited defences to claims for recovery of a penalty. Those defences were also amended and as amended applied to penalties due after 30 June 2012 as well as those due before 30 June 2012 which had not been paid, remitted or discharged before that date.

The Commissioner brought penalty proceedings in the District Court against the appellant as a director of AAMAC Transport (NSW) Pty Ltd (the Company). That penalty was in respect of moneys withheld by the Company between 1 May 2011 and 30 September 2011, which remained unpaid as at 6 November 2012 when the Commissioner served a notice of the penalty. On 24 June 2016 the primary judge entered judgment in favour of the Commissioner for the amount of $369,904.86: Deputy Commissioner of Taxation v Panayi [2016] NSWDC 113. The appellant, Mr Panayi, appeals from that decision.

The appellant defended those proceedings on three bases. First, he denied that he had been appointed or acted as a director of the Company at any relevant time. Secondly, he relied on the defence provided by s 269-35(1) by contending that illness and ignorance of his appointment as director made it unreasonable to expect him to take part in the management of the company at any relevant time. The illnesses he claimed included high blood pressure, high sugar levels, high cholesterol and poor eyesight due to cataracts. Thirdly, he maintained that his penalty liability had been remitted when the members of the Company resolved that it be wound up voluntarily. The success of this argument depended on the application of s 269-30 in its unamended form as in force before 30 June 2012.

The Company carried on a transport and logistics business which included the carriage and delivery of cargo containers from Botany Bay to various destinations in Sydney. In the period between 1 May and 30 September 2011, the Company withheld the following amounts which were required to be paid to the Commissioner on the due days specified below:

In February and March 2012, the Company lodged business activity statements (BAS) and instalment activity statements (IAS) which notified the Commissioner of the withholding of these amounts. Subsequently payments and credits reduced the amounts withheld in the first and second of the above periods by $63,042.14, leaving the unpaid amount of the Company’s liability as $369, 904.86, the amount for which judgment was entered.

On 6 November 2012, the Commissioner gave the appellant notice of his liability to pay a penalty equal to that amount. On 26 November 2012, the appellant, as a director of the Company, notified ASIC that at a meeting on that day it was resolved that the Company be wound up.

The primary judge found that the appellant had been appointed and acted as a director of the Company for the whole of the period from 1 January 2011 to (at least) November 2012: Judgment [135], [159]. The notice filed with ASIC notifying that the appellant had been appointed director and secretary of the Company on 1 January 2011 was prima facie evidence of that fact: Corporations Act 2001 (Cth), s 1274B(2). The evidence also showed that the appellant acted as director, and held himself out to others as doing so. In February 2011, the appellant, as chairman and the only person recorded as present, signed minutes of a meeting of directors of the Company at which it was resolved that the Company acquire from the appellant trucks and other equipment at an agreed price of $2,274,800. On 25 March 2011, the appellant, described as a director of the Company, signed an agreement for its purchase of the business of AAMAC Warehousing & Transport Pty Ltd. On 22 June 2011, the appellant, describing himself as the director, wrote to the liquidator of AAMAC Warehousing on behalf of the Company. On 26 November 2012, the appellant certified as correct, by signing, a document headed “Questionnaire for Directors and Officers” of the Company. That document described the appellant as a director of the Company and the person responsible for its day-to-day management. And on 26 November 2012, the appellant, described as a director of the Company, gave ASIC notice of the passing of a resolution that it be wound up voluntarily.

The primary judge rejected the appellant’s defence under s 269-35(1). As amended on 30 June 2012, that sub-section provided:

Her Honour held that there was no evidence that the appellant was at any time so ill that it would have been “unreasonable” for him to take part in the management of the Company: Judgment [64]. In support of that conclusion her Honour recorded at Judgment [63] that there was “no evidence of illness during the relevant period beyond a bare reference, in [the appellant’s] general practitioner’s letter, to diabetes and atrophy in one eye. Nor is there corroborating evidence from Company records (such as sick leave) …. To the contrary, all of the evidence suggests that [the appellant] was working full time on truck repairs and other related tasks, which I infer must have required some degree of physical wellbeing as well as an ability to see what he was doing.” Her Honour also found that at all relevant times the appellant knew that he had been appointed a director of the Company: Judgment [159]. That conclusion was based, in part, upon the fact that during the relevant period the appellant had signed documents acknowledging that he was a director and acted in that capacity in dealings between the Company and other parties.

The primary judge also rejected the appellant’s argument that the unamended form of s 269-30 continued to apply so as to remit his liability to pay a penalty. At this point it is convenient to set out that provision and the amended provision which replaced it, as well as the provisions which governed the application of the substituted s 269-30.

Prior to 30 June 2012, s 269-30 provided:

Tax Laws Amendment (2012 Measures No 2) Act (2012) (Cth) (the Amending Act) s 3, Sch 1, Div 3, item 8 amended s 269-30 by repealing the existing provision and substituting the following:

Item 9 in the same Division of the Amending Act further provided:

Subsections 269-15(1) and (2) of Schedule 1 to the TAA provide (before and after this amendment):

The relevant “obligation” of a company referred to in subsection (1) is the obligation to pay withheld amounts to the Commissioner.

Applying the decision of the Western Australian Court of Appeal in Roche v Deputy Commissioner of Taxation [2015] WASCA 196 at [56]–[58], the primary judge held that the amended form of s 269-30 applied to the appellant’s penalty because the appellant, as a director of the Company, did not stop being under the relevant obligation under s 269-15 until after 30 June 2012, the date of commencement of item 9. Applying that section as amended, sub-s (1) did not apply to effect a remission of the appellant’s penalty because the Company did not give the Commissioner any notification under s 16-150 within the period of three months after the due date for the payment of any of the withheld amounts: Judgment [162]–[163].

The Notice of Appeal contains the following grounds:

The references in grounds 3 and 4 are to s 269-35(1) as amended on 30 June 2012. The reference to s 269-30 in ground 6 is to the form of that section before it was amended on 30 June 2012.

The appellant’s written outline of submissions summarised the three defences raised before the primary judge as follows:

The outline then addressed the grounds of appeal as follows:

These paragraphs appear only to address ground 1 (para 12), ground 3 (paras 13 and 14), ground 6 (para 17) and grounds 7 and 8 (para 16). They do so without developing any substantive argument in support of each of those grounds.

In written submissions in reply, filed electronically late on the day before the hearing, the appellant advised that grounds 2 and 8 were not pressed. Short submissions were also made in relation to ground 6 with respect to the Commissioner’s reliance on the decision in Roche.

In his oral argument, counsel appearing for the appellant further confined the arguments made on appeal as follows.

First, ground 7 was pressed in relation to the evidence of ASIC’s reasons for disqualifying the appellant from managing corporations for four years. It was submitted that s 59 (the hearsay rule) and s 91 (evidence of a decision in an Australian proceeding) of the Evidence Act 2005 (NSW) rendered this evidence inadmissible; that the wrongly admitted evidence “tainted” the trial judge’s adverse findings as to the appellant’s credit, and thereby affected the findings as to the appellant’s status as director and illness (the issues in ground 1 and 3); and that the admission of the evidence therefore occasioned a “substantial wrong or miscarriage” so as to enliven this Court’s power to order a new trial (this relief being sought at the hearing but not in the Notice of Appeal): Uniform Civil Procedure Rules 2005 (NSW), r 51.53. Thus, ground 7 was treated as a basis for grounds 1 and 3.

It ultimately became apparent that ground 7 was the only basis for grounds 1 and 3. Counsel for the appellant conceded that the only argument in relation to ground 1 proceeded from the inadmissibility of the ASIC report. He characterised ground 3 as a reason to order a retrial given the alleged admission of inadmissible material and the tainted credit findings. But he made no separate argument asserting error in the primary judge’s findings as to whether the appellant was, and knew he was, a director of the Company and whether he suffered from an illness making it unreasonable to expect him to take part in the Company’s management. It follows, if ground 7 fails, that grounds 1 and 3 do not arise.

Secondly, ground 6 was pressed. It was submitted that this Court should not follow the decision in Roche because it was plainly wrong: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [135]; [2007] HCA 22. Various arguments were made, including that item 9 was to be construed as applying the amended form of s 269-30 only to penalty liabilities arising on or after 30 June 2012.

In the course of those submissions, it was suggested that if the appellant’s argument was accepted it followed that the Commissioner’s penalty notice did not comply with s 269-25 because it did not correctly explain “the main circumstances in which the penalty will be remitted”. That submission was not made to the primary judge and, in any event, raises a false issue. If the appellant’s construction argument is accepted it would follow that the penalty was remitted by the happening of the winding up resolution. That would make it unnecessary to determine whether the penalty notice was deficient.

In a related argument, as I understood it, the appellant submitted that, because the Commissioner had not given him an earlier notice which set out the circumstances in which the penalty to which he was subject would have been remitted, it was not possible for him to take reasonable steps to ensure that one of the events in s 269-15(2) happened. That was said to have provided him with a defence under s 269-35(1) and (2), the rejection of which was the subject of grounds 4 and 5. Whatever be the merits of this argument, and irrespective of whether it was made to the primary judge, it was made clear that grounds 4 and 5 were only pressed if ground 6 was upheld. Accordingly, irrespective of whether ground 6 is upheld or rejected, the need to consider the argument made in support of grounds 4 and 5 will not arise.

ASIC is invested with the general administration of the Corporations Act, and, more specifically the power to disqualify persons from managing companies: Corporations Act, s 5B, 206F. The decision to ban the appellant was made in the exercise of the latter power. It was made by a delegate of ASIC appointed pursuant to s 102 of the Australian Securities and Investment Commission Act 2001 (Cth). Accordingly the decision was made and reasons given in the exercise of ASIC’s powers under that Act and the Corporations Act. The decision was produced by ASIC in answer to a subpoena to produce, and a copy of it was tendered. It may be inferred that the document, in a paper or electronic form, is part of the records kept by ASIC for the purpose of performing its functions, which include exercising powers conferred by those laws.

The decision was attached to an affidavit filed on behalf of the Commissioner. Before that affidavit was read the following exchange occurred between senior counsel for Mr Panayi and the primary judge:

The question of the admissibility of the document was revisited before the close of the Commissioner’s case. In the course of the argument which followed, the appellant’s junior counsel suggested that the only issue to which the ASIC decision and reasons were relevant was the appellant’s credibility. Particular concern was expressed about the admissibility of the statement in para 39 of ASIC’s reasons that it “would appear that Mr Panayi engaged in ‘Phoenix’ activity by transferring the employees” of one company to another. That exchange focussed attention on the issue to which the tender was directed and led to the following formulation of that issue by the primary judge, with which the Commissioner’s counsel agreed:

No submission was made to the primary judge that the document, or more specifically, statements or representations in it, were not admissible to prove the history of the appellant’s activities as a director because of the hearsay rule (s 59). As a result no attention was directed in argument to whether the business records exception (s 69) applied to any such statements or representations. The appellant’s objection to the admissibility of the document remained that identified earlier by senior counsel, namely that the decision and findings of fact in the reasons were made in an Australian proceeding and, by reason of s 91, were not admissible to prove the existence of any fact that was in issue in that proceeding.

The primary judge accepted the Commissioner’s submission that s 91 did not apply to ASIC’s decision and reasons: Judgment [148(a)], [149]. Having regard to the definition of the expression “Australian or overseas proceeding” in the Dictionary to the Evidence Act (s 3(1)), that conclusion was plainly correct, as the appellant’s counsel eventually conceded in argument.

Section 91 provides:

The expression “Australian or overseas proceeding” is defined to mean “a proceeding (however described) in an Australian court or a foreign court”. The ASIC decision and reasons do not answer that description.

Whilst eventually accepting that argument was misconceived, the appellant’s counsel nevertheless maintained that the primary judge had erred in admitting the ASIC report because it contained “inadmissible hearsay”, and asserted that its admission had resulted in a “substantial wrong or miscarriage” (UCPR, r 51.53).

For the following reasons, neither of those submissions should be accepted. First, before the primary judge, counsel for the appellant did not object to the admission of the evidence on the ground that it infringed the hearsay rule. That rule provides that evidence of a “previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation”. In Perish v R (2016) 92 NSWLR 161 at [261]–[270]; [2016] NSWCCA 89, the Court of Criminal Appeal (Bathurst CJ, Hoeben CJ at CL, Bellew J) applied the consistent line of authority in that and in this Court (see Seltsam Pty Ltd v McGuinness (2000) 49 NSWLR 262; [2000] NSWCA 29; Gray t/as Clarence Valley Plumbing Services v Ware Building Pty Ltd [2013] NSWCA 271) holding that the words “not admissible” where they appear in provisions such as s 59 mean “not admissible over objection”. That Court also noted (at [264]) that the same conclusion has been reached by the Full Court of the Federal Court (Ryan, Jessup and Perram JJ) in Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149; [2011] FCAFC 74. In the absence of objection, the primary judge did not err in admitting ASIC’s decision and reasons into evidence, notwithstanding that it may have contained inadmissible hearsay.

Secondly, the appellant has not established, or sought to establish, that the representations or statements in the decision and reasons were not admissible under the business records exception (s 69), so that they might correctly be described as “inadmissible hearsay”. On the contrary, as appears to be the basis on which the primary judge proceeded, the document and representations contained in it were admissible under that exception.

Section 69 applies to a document which “forms part of the records belonging to or kept by a … body or organisation in the course of, or for the purposes of, a business” and contains a previous representation made in the course of or for the purposes of that business (s 69(1)). The operative provision, s 69(2), then provides that the hearsay rule does not apply to the document, in so far as it contains either a representation made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or a representation made on the basis of information directly or indirectly supplied by a person who might reasonably be supposed to have such personal knowledge.

For the reasons appearing in [31] above, the ASIC decision and reasons formed part of the records of a “business” which, as defined in the Dictionary, includes “an activity engaged in… by a person… exercising power under or because of… an Australian law…, being an activity engaged in or carried on… in the exercise of the power (otherwise than in a private capacity)”. ASIC is a body corporate and prima facie a “person” within this definition.

The person who for the purposes of s 69 made the relevant representations was ASIC’s identified delegate. Whether that delegate might reasonably be supposed to have had personal knowledge of any asserted fact, or made a representation on the basis of information directly or indirectly supplied by a person who might be supposed to have such personal knowledge, can only be answered by focussing on particular representations and the fact asserted in them. For present purposes these questions may be considered by reference to representations which on their face appear relevant to the issue identified by the primary judge in her reasons as justifying the document’s admission. That issue was whether, as the appellant claimed, “he was a poorly-educated, unsophisticated workshop employee who relied upon his brother to run the company” and accordingly not someone who was capable of and did perform tasks as the Company’s director over a long period of time, as the Commissioner maintained: Judgment [148(b)], [150]–[151].

In doing so it is sufficient to note that the representations in paras 8, 9, 13, 18, 20, 21, 22, 23, 26, 27, 30, 32 and 40 in ASIC’s reasons assert facts extracted from documents lodged with ASIC (paras 8, 9, 18 and 32) or repeat facts asserted by liquidators or receivers and managers in reports prepared by them under provisions of the Corporations Act (paras 13, 18, 20, 21, 22, 23, 27, 30 and 40). It can be inferred that the representations asserting these facts were made on the basis of information supplied by persons who might reasonably be supposed to have had personal knowledge of the facts asserted — those persons being the persons who prepared the document lodged with ASIC or the liquidator or receiver who prepared the report. On that basis, s 69(2) would be satisfied, making the document admissible to prove the facts asserted.

Thirdly, most of the information in the ASIC decision and reasons concerning the companies of which the appellant had been a director prior to his disqualification was sourced from documents which became, without objection, Exhibit E before the primary judge. Those documents consisted of liquidators’ reports to ASIC lodged in accordance with s 533 of the Corporations Act in relation to all but one of these companies.

In these circumstances, there was no “substantial wrong or miscarriage” justifying an order for a new trial. There was no error on the part of the primary judge in admitting the document. On the contrary, it was admissible to prove previous representations going to the issue identified by the primary judge as the basis for the tender. Furthermore, the subject matter of those representations was substantially established by other evidence which was not the subject of objection. In that circumstance, and taking account of her Honour’s reasons for holding that the appellant had knowingly been appointed and acted as a director of the Company and did not suffer from an debilitating illness, I am satisfied that the admission of the document, even if it had involved error, would not have affected her Honour’s ultimate conclusion as to the appellant’s liability.

Ground 7 is rejected. This makes it unnecessary to consider grounds 1 and 3 for the reasons appearing in [26]–[27] above.

The appellant submits that s 269-30 in its amended form did not apply to his liability under s 269-20 to pay a penalty because that penalty became due and payable before the commencement of the amendment on 30 June 2012.

Before the amendment, a director’s liability to pay a penalty under s 269-20 was remitted if the directors of the company stopped being under the obligation imposed by s 269-15(1) either before the Commissioner gave that director a penalty notice under s 269-25 or within 21 days after the Commissioner had done so. Under s 269-15(2), the obligation imposed by s 269-15(1) would stop if the withholding company either met its payment obligation or went into voluntary administration or liquidation (see [16] above). The practical, and no doubt intended, consequence of the 21-day allowance was to give the director a further opportunity to bring about one of the circumstances in which the remission of the liability would occur, and accordingly the penalty notice was required to highlight that opportunity (See, in relation to the object of similar provisions in earlier legislation, Deputy Commissioner of Taxation of the Commonwealth of Australia v Woodhams (2000) 199 CLR 370 at [36] (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ); [2000] HCA 10).

The amendment to s 239-30 restricted the opportunity to have a penalty remitted without the company meeting its payment obligation (see [14] above). In effect, initiating a voluntary administration or liquidation within 21 days of receiving a notice would not effect a remission unless it occurred within three months of the due day or the company had notified the Commissioner during that period of the withheld amounts it was obliged to pay.

The decision in Roche at [49]–[50] suggests that, to have this consequence, the notice of the withheld amounts must be given to the Commissioner on or before the due day. However, that does not accord with the language of the amendment which says that, to overcome the amendment, the company must give the notice on or before the “last day mentioned in column 2”, which is “the last day of the three months after the due day”.

In this case, the Company did not within three months of any due day (see [6] above) notify the Commissioner under s 16-150 of any of the withheld amounts that it was obliged to pay. By 30 June 2012, nearly seven months had passed since the latest of those due days. That meant that, if the amended form of s 269-30 applied to the appellant’s penalty, it could not be remitted by the Company going into voluntary administration or liquidation, notwithstanding that this occurred within 21 days of the Commissioner giving a penalty notice. It also followed that the appellant could not be given a penalty notice providing an opportunity to bring about a remission of his penalty liability other than by causing the Company to make the outstanding payment.

In the course of the appellant’s oral argument, this outcome was variously described as giving the amendment a “retrospective” operation, as altering “the nature and content” of any debt due as at 30 June 2012 and as “unfair”. It was correctly accepted that whether the amended form of s 269-30 applied and how it applied in the circumstances of this case depend on the proper construction of item 9 and the terms of the amended provision. In approaching that question, the appellant relied on the presumption that legislation is not taken to be intended to have a retrospective operation in the absence of clear words.

The common law principles invoked by this argument require careful consideration as to the meaning of retrospectivity in its application to statutes. It is common to distinguish between two such meanings: Coleman v Shell Co of Australia Ltd (1943) 45 SR (NSW) 27 at 30–31 (Jordan CJ); The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 at [57] (McHugh and Gummow JJ); [1998] HCA 20; Adco Constructions v Goudappel (2014) 254 CLR 1 at [44]­–[45], [48] (Gageler J); [2014] HCA 18. First, a law is retrospective “in the true sense” or, perhaps more precisely, retroactive if it “provides that as at a past date the law shall be taken to have been that which it was not”: R v Kidman (1915) 20 CLR 425 at 443 (Isaacs J). The Amending Act clearly did not operate in this way in relation to s 269-30. Secondly, a law is retrospective in an “extended” sense if it is “understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events”: Maxwell v Murphy (1957) 96 CLR 261 at 267 (Dixon CJ), 285 (Fullagar J). The submissions for the appellant must be taken to adopt this second meaning.

At the date of the amendment, the only relevant "right or liability" of the appellant defined by reference to past events was his liability to pay the penalty. If the amendment had increased the quantum of that penalty, the common law presumption may have had some application. But, as it happened, all that the amendment altered was the appellant’s opportunity to have his liability remitted by initiating the voluntary administration or winding up of the Company. The amendment did not in that respect affect his liability, which had not been remitted prior to 30 June 2012. The substance of the appellant’s complaint, and the source of the asserted unfairness, was the loss of an opportunity to take advantage of s 269-30 in its unamended form. But that opportunity was a “mere right (assuming it to be properly so called) existing in the members of the community or any class of them to take advantage of an enactment, without any act done by an individual towards availing himself of that right”: Abbott v Minister for Lands [1895] AC 425 at 431 (Lord Herschell LC); Colley v Futurebrand FHA Pty Ltd (2005) 63 NSWLR 291 at [31] (Handley JA, Giles JA agreeing); [2005] NSWCA 223. There was no accrued right which had come into existence by the operation of the unamended provision on events that occurred before 30 June 2012. The common law presumption was therefore not engaged.

That conclusion might have been otherwise if the appellant’s liability had been remitted prior to 30 June 2012 and the amendment purported to revive the liability. But the amendment cannot have such an operation. Item 9 in the Amending Act provides that the amendment applies to a penalty if the directors stop being under that obligation on or after 30 June 2012. That condition is satisfied in the appellant’s case; it would not have been satisfied if he had initiated the winding up before 30 June 2012. Even if the common law presumption against retrospectivity had applied, item 9 is expressed with sufficient clarity to rebut it. Accordingly, the amended form of s 269-30 applied and prevented the winding up of the Company on 26 November 2012 from having the effect of remitting his penalty.

It follows that I agree with the Western Australian Court of Appeal that the amended s 269-30 applies to penalties for which the director became liable before 30 June 2012 which were the subject of a continuing obligation under s 269-15 as at that date: Roche, esp at [56]–[58]. This Court should follow that decision.

Ground 6 is rejected. Accordingly, for the reason given at [30] above, grounds 4 and 5 do not arise.

The following observations reflect the views of all of the members of this Court. The course we adopted, when confronted by what amounted to a substantially new case presented without notice by counsel for the appellant, was to permit his being heard to the full extent sought by him. The written outline of submissions which had been supplied was so exiguous that virtually every submission advanced on behalf of Mr Panayi was new. It occupied 2½ generously spaced pages, and the parts of it which address anything other than uncontentious facts are extracted above at [21]–[22].

That course should not be taken as an indication that a similar course would invariably follow in the face of similar conduct. Still less should it be understood that particular costs sanctions, including those addressed to the legal practitioners involved, would not apply. In particular, the practice of filing anonymous submissions electronically on the day before an appeal (cf. UCPR, r 51.36(1)(d)), or supplying a large bundle of material on the morning of the hearing, represents prima facie a serious breach of the obligations owed by a litigant and his, her or its legal practitioners under Civil Procedure Act 2005 (NSW), s 56(3), (4). The phrase “prima facie” allows for the possibility of an explanation which might excuse the litigant or the legal practitioners. Had the Court been of the view that there was any unfairness to the respondent to the appeal, it would likely have adopted a different course, both in relation to the way in which the appeal was heard and in the exercise of its discretion as to costs. Because it was rapidly apparent that the new points being advanced on behalf of Mr Panayi lacked substance, it was not necessary to take that course in this case.

The appeal should be dismissed with costs.

LEEMING JA: I agree with Meagher JA that the appeal should be dismissed with costs, and with his Honour’s reasons. In particular, I agree with what his Honour has said at [59]–[60] about the conduct of the appeal. Without detracting from any aspect of those reasons, I wish by way of elaboration, to provide further reasons on the question of the operation of the Amending Act.

Ground 6 asserted error in the conclusion of the primary judge, in conformity with what had been held in Roche v Deputy Commissioner of Taxation [2015] WASCA 196, that the amendments effected to the Taxation Administration Act 1953 (Cth) by the Tax Laws Amendment (2012 Measures No 2) Act 2012 (Cth) (the Amending Act) applied to the penalties incurred by Mr Panayi in 2011. Meagher JA has reproduced the relevant provisions.

Mr Panayi’s written submissions made no mention of the operation of the Amending Act. The oral submissions made on his behalf contended that it was unfair for the primary judge to have relied upon the amendments effected by the Amending Act for two reasons.

The first was that:

There is, with respect, nothing to that part of the complaint. The Company at all times was obliged to pay amounts of withheld tax. Mr Panayi, who for the purposes of resolving this ground must be taken to have been a director in accordance with the finding of the primary judge, was in breach of his obligation to cause the Company to pay the tax withheld. The Act imposed a penalty upon a director in breach of his or her obligation. The Commissioner sued to recover that penalty. It was for the Commissioner to allege the material facts on which his claimed entitlement to sue to recover the penalty imposed by statute was based.

But it was not for the Commissioner to allege in his statement of claim that any possible defence was not made out. Still less was the Commissioner obliged in his statement of claim to deny that the Amending Act did not apply. To the contrary, it was for the defendant to allege the defences upon which he relied, which included in this case (although only in the amended defence) that he maintained that the Amending Act did not apply and that the Company had commenced being wound up within 21 days of the giving of the director penalty notice.

And in any event, the amended defence was served more than a year before the trial. Mr Panayi’s amended defence crystallised an issue as to the law which applied to the penalty on which the Commissioner sued. That issue was indeed determined by the primary judge, and after full argument. There was no suggestion of any surprise. The submission based on the Commissioner’s pleading must be rejected.

The second reason was that:

This submission is distinct from the first. It is not based on an alleged technical failure to plead an element of the cause of action, or a denial of procedural fairness. Instead it is rhetoric directed to a submission as to statutory construction. Mr Panayi claimed that the legal proposition which flowed was that the Amending Act “had no operation with respect to debts due prior to the commencement of the 2012 measure”. It was said:

He submitted that it would be wrong to construe the amendment in a way which fixed upon the general purpose in a tax act of raising revenue, being the danger against which the joint judgment had warned in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [51]. He submitted that there was a particular purpose manifested by the Amending Act, which was to ensure notification of the company’s indebtedness to the Commissioner. He submitted that item 9 was to be construed together with the other provisions of the Act, and that it was to be given the meaning such that:

In light of the elaborate way in which Mr Panayi’s submissions as to purpose were made, it is as well to recall that the danger to which the joint judgment in Alcan pointed at [51] was “the danger that the text did not receive the attention it deserves”. Especially in a case like this, where the legislation is carefully and precisely drafted, the starting point is the statutory text, which Meagher JA has reproduced.

The point of item 9 is to delineate the facts and circumstances to which the amendments effected by the Amending Act apply. Item 9 is described as “Application of amendment”. The criterion governing the application of the amendment turns upon the time at which the directors of a company “stop being under the relevant obligation under s 269-15” of Schedule 1 to the Taxation Administration Act. If that time precedes 30 June 2012, then the amendment does not apply. If that time occurs on or after 30 June 2012, the amendment does apply. The relevant obligation under s 269-15 applies when a company becomes liable to pay certain amounts of withheld tax to the Commissioner. Under s 269-15(2), directors of that company “continue to be under their obligation” until the company complies with its obligation, an administrator is appointed or the company begins to be wound up.

It is clear that the criterion selected is not the time at which the Company is required to make a payment. The item is expressed in terms to be “in relation to a penalty under Div 269” (emphasis added). The penalty is that imposed on the director.

Moreover, and more importantly, the criterion selected by item 9 is not when the director becomes liable to pay a penalty. To the contrary, Parliament has selected a later time as the criterion of the application of the Amending Act, namely, whether a director has stopped being under his or her obligation. That legislative choice presupposes that the director has been, but has subsequently ceased to be, under an obligation to cause the Company to comply with its obligations.

Thus, not only does the statutory language provide no support for a construction that the criterion for operation of the Amending Act is the time at which the Company became obliged to pay withheld amounts to the Commissioner, but it is in the teeth of any such construction, once it is seen that a director can only stop being under a relevant obligation after he or she has earlier come under that obligation.

There is no difficulty in fixing a legal meaning to the critical words “stop being under the relevant obligation”. Section 269-15 was unamended by the Amending Act. Although that section does not use the language of “stop being under the relevant obligation”, it uses the functionally equivalent language of “continue to be under their obligation until”. There is no other circumstance which could satisfy the words “stop being under the relevant obligation”. Mr Panayi made no submission to the contrary.

It is not disputed that throughout almost the entirety of 2012, Mr Panayi continued to be under the obligation to ensure that the company would comply with its obligation to pay the withheld tax. In particular, he did not stop being under that obligation before 30 June 2012.

There is nothing in the context or purpose to suggest any different legal meaning should be given to item 9. I would not accept that there is any substance in the invocation by Mr Panayi of unfairness. It is to be recalled that at all times, Mr Panayi was in breach of his obligation to cause his company to pay tax which had been withheld from its employees and not paid to the Commissioner.

Independently of what was held in Roche, I would form the same view that no alternative reading is available. There is no basis for the construction for which Mr Panayi contended. Still less is there any substance in the submission to which Mr Panayi was forced, in accordance with Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492, namely, that the decision of the Court of Appeal of Western Australia was plainly wrong.

SIMPSON JA: I agree with Meagher JA. I also agree with the additional observations of Leeming JA.