Deputy Commissioner of Taxation v Paul Tannous

1. [1]

   These proceedings were commenced by Statement of Claim filed on 28 October 2014. By an Amended Statement of Claim filed on 23 February 2016, the plaintiff, the Deputy Commissioner of Taxation (the DCT), seeks to recover from the defendant, Mr Paul Tannous, an amount of $634,830 (after allocation of credits) plus interests and costs for which he is alleged to be liable pursuant to s 269-20 of Schedule 1 of the Taxation Administration Act 1953 (the TAA53). All references in this judgment to legislative provisions are to Schedule 1 of the TAA53 unless otherwise indicated. The claim for $634,830 includes an amount of $43,065 being a credit as a result of the company’s amendment to its self-assessment for PAYG tax for the period 10 October 2013 to 31 October 2013.

2. [2]

   The proceedings relate to the defendant’s liability for director penalties in respect of non-remittance of Pay As You Go (PAYG) withholding amounts by 1 Group Australia Pty Ltd (the Company).

3. [3]

   The Company was registered in New South Wales on 14 August 2007 and was at all relevant times a company incorporated or taken to be incorporated under the Corporations Act 2001. The defendant was the sole director as from its registration until 23 June 2014. In or around June 2014, the company sold its business to a “third party”.

4. [4]

   Eleven days after 23 June 2014, i.e. on 4 July 2014, the company entered voluntary administration.

5. [5]

   The DCT proceeds upon the basis that the defendant is liable to a penalty under Division 269 of Schedule 1 of the TAA53 in respect of unpaid PAYG amounts due to the Commissioner of Taxation by the company of which the defendant was a director.

6. [6]

   By Defence filed 5 March 2015, the defendant denies that the plaintiff is entitled to the amount claimed and pleads, inter alia, that it took all reasonable steps to cause the Company to comply with its obligations and caused a liquidator to be appointed to the Company on 4 July 2014.

7. [7]

   At the hearing and by agreement the issues in dispute were narrowed considerably. The defence of all reasonable steps was abandoned and the remaining dispute related to the service and alleged defectiveness of the Director Penalty Notices (DPNs). A separate submission was advanced by the defendant regarding whether or not the plaintiff had proved the debt underlying these proceedings.

8. [8]

   At the hearing the plaintiff was represented by Ms JD Little of counsel and the defendant was represented by Messrs NM Kirby and EWL Anderson of counsel.

Legislative Provisions

1. [9]

   Division 12 of the TAA53 headed “Payments from which amounts must be withheld” includes Subdivision 12-B entitled “Payment for work and services”. Within that Subdivision is s 12-35. That section requires, inter alia, an entity to withhold an amount from the salary or wages it pays to an individual as an employee.

2. [10]

   Division 16 of the TAA53 headed “Payer’s obligations and rights” includes Subdivision 16-B entitled “To pay withheld amounts to the Commissioner”. Within that Subdivision is s 16-70(1) which stipulates that “An entity that withholds an amount under Division 12 must pay the amount to the Commissioner in accordance with this Subdivision”.

3. [11]

   Division 255 of the TAA53 headed “General rules about collection and recovery” includes Subdivision 255-C entitled “Recovery proceedings”. Within that Subdivision are ss 255-45 and 255-50 which provide that certain documents are prima facie evidence. The sections are in the following terms:

4. [12]

   Division 269 of the TAA53 headed “Penalties for directors of non-complying companies” includes Subdivision 269-B entitled “Obligations and penalties”. Within that Subdivision is s 269-15 which imposes continuing obligations upon directors of companies. The section is in the following terms:

5. [13]

   Section 269-20 creates a liability for directors to pay a penalty. It is in the following terms:

6. [14]

   The following provisions impose a requirement on the Commissioner of Taxation to give notice to a director prior to being able to commence proceedings. They are in the following terms:

7. [15]

   In relation to the provisions of s 269-25 of the TAA53, s 29(1) of the Acts Interpretation Act 1901 (Cth) is in the following terms:

8. [16]

   Section 269-35 is entitled “Defences” and relevantly provides:

9. [17]

   Division 350 of the TAA53 headed “Evidence” includes Subdivision 350-A also entitled “Evidence”. Within that Subdivision is s 350-10 which deals with the evidentiary effect of official tax documents. Relevantly, the section is in the following terms:

The Deputy Commissioner’s Claim

1. [18]

   The plaintiff relied upon the following affidavits:

   1. (1)

      Affidavit of James Foster sworn 7 August 2015 (JF1);

   2. (2)

      Further affidavit of James Foster sworn 7 August 2015 titled “Affidavit of Service on Records (JF2);

   3. (3)

      Affidavit of James Foster sworn 23 October 2015 (JF3);

   4. (4)

      Affidavit of James Foster sworn 23 February 2016 (JF4); and

   5. (5)

      Affidavit of James Foster sworn 4 April 2016 (JF5).

2. [19]

   The plaintiff relied upon its written submissions dated 24 February 2016 (PWS).

3. [20]

   As noted above, by Amended Statement of Claim filed 23 February 2016, the DCT seeks to recover from the defendant director penalties in the amount of $634,830 (after allocation of credits) plus interest and costs. As earlier noted, the claim includes an amount of $43,065 being a credit as a result of the Company’s amendment to its self-assessment for PAYG tax for the period from 1 October 2013 to 31 October 2013.

4. [21]

   Pursuant to Divisions 12 and 16 of the TAA53, in 2012 and 2013 the Company notified the DCT through the filing of self-assessed business activity statements (BAS) that it had withheld tax for nine periods comprising April, August and September 2012 as well as June, July, August, September, October and November 2013.

5. [22]

   The details of the Company’s liabilities under Subdivision 16-B of the TAA53 in respect of the amounts withheld for the purposes of Division 12, together with details of the due day of each amount withheld and details of the initial day in respect of each amount withheld, for the purposes of Division 269 of the TAA53, are as follows:

6. [23]

   The defendant in its Defence filed on 5 March 2015 asserted that the Company had paid the first and second amounts withheld, namely $108,050 and $81,958 respectively. The Amended Statement of Claim filed on behalf of the plaintiff reduced the amount of the debt claimed to $677,895, that is the amount after allowance for the latter two amounts.

7. [24]

   Accordingly, the amount claimed by the plaintiff is based on the Company’s self-assessed liability of the amounts due to the Australian Taxation Office (the ATO) subject to credits or payments in the amount of $43,065. The balance after credits or payments is $634,830.

8. [25]

   Despite withholding the money, the Company did not pay the withheld amounts which are claimed in these proceedings on or before their due dates nor had an administrator or liquidator been appointed.

9. [26]

   The defendant was the sole director of the Company from 14 August 2007 to 23 June 2014 and accordingly was a director as at each of the due dates. As a consequence and pursuant to s 269-20 of the TAA53, the defendant, as a director, became liable automatically to a penalty equal to the amount that the Company failed to remit.

10. [27]

    The plaintiff issued two DPNs in respect to the PAYG withholding amounts owed by the Company to the Commissioner of Taxation. The DPNs were issued on 23 August 2013 and 17 April 2014 respectively.

11. [28]

    The DPN is a “tax related liability” for the purposes of s 250-10 of the TAA53.

12. [29]

    As at 13 September 2013 (being the 21st day after the giving of the First Penalty Notice) and as at 8 May 2014 (being the 21st day after the giving of the Second Penalty Notice), the defendant had not acted in accordance with s 269-30 of the TAA53. That is:

    1. (1)

       The Company had not met its payment obligations in respect of the withholding amounts;

    2. (2)

       An administrator of the Company had not been appointed; or

    3. (3)

       The Company did not begin to be wound-up.

13. [30]

    As earlier noted, in or around June 2014, the Company sold its business to a third party. On 23 June 2014, the defendant ceased being a director. On 4 July 2014, the Company entered voluntary administration. On 6 August 2014, the Company entered into a voluntary winding up.

14. [31]

    The affidavits of James Foster sworn 7 August 2015 and 23 October 2015 (JF1 and JF3) set out the following material:

    1. (1)

       The BAS prepared and lodged by the Company;

    2. (2)

       ATO Statement of Account for the Company’s liabilities and credits under the BAS provisions; and

    3. (3)

       ATO Statement of Account for DPN liabilities.

15. [32]

    The plaintiff submitted that the Statement of Account, when read with the Company’s BAS, show how the liabilities were accrued and where the credits have been applied: [22] of PWS.

16. [33]

    The plaintiff further relied upon an evidentiary certificate to certify the amount of the debt in accordance with s 255-45 of the TAA53. The plaintiff submitted at [24] of PWS that the evidentiary certificate is prima facie evidence that:

    1. (1)

       The defendant has a tax-related liability under s 269-20 of the TAA53;

    2. (2)

       The defendant was served with the DPNs on 23 August 2013 and 17 April 2014 and such notices were issued under s 269-25 of the TAA53; and

    3. (3)

       The sum of $634,830 as at 23 October 2015 is a debt due and payable by the defendant in respect of this tax related liability.

17. [34]

    Additionally, the plaintiff relied upon s 255-50(1) of the TAA53 in respect of the claim for director’s penalties which provides that each statement or averment about a matter in the Statement of Claim is prima facie evidence of the matter.

18. [35]

    Further, on the production of the running balance account at Annexure “A” of JF3, pursuant to s 8AAZI(1) of the main TAA53, the statement becomes prima facie evidence that the amounts and the particulars in those statements are correct.

19. [36]

    Regarding the evidence of liability, the plaintiff submitted that the production of such prima facie evidence, in effect, places a factual onus upon the defendant to disprove the accuracy of the amounts and particulars in the certificate: Moore v Jack Brabham Holdings Pty Ltd (1986) 7 NSWLR 470 per Hunt J at 484. The plaintiff contended that the evidence served by the defendant does not challenge the fundamental pleaded facts in any material way.

20. [37]

    The plaintiff relied upon the affidavit of evidence of Mr Foster to support the following:

    1. (1)

       Each DPN was addressed to the defendant at the address recorded in the ASIC searches dated 23 August 2013 and 17 April 2014. Copies of the ASIC searches were annexed at Annexure “A” of JF2. Copies of the DPNs and covering letters were annexed at Annexure “B” of JF2 and at Annexure “A” of the JF4;

    2. (2)

       The DPNs were placed in envelopes and bore the correct postage. Copies of the sealed and stamped envelopes showing the correct address were annexed at Annexure “C” of JF2 and at Annexure “B” of JF4; and

    3. (3)

       The envelopes were posted. The postage reports entitled “Service of Director Penalty Notice” annexed at Annexure “D” of JF2 evidenced that DPNs were posted at the “post box outside the post office in World Square, Goulburn Street, Sydney, CBD”.

21. [38]

    As discussed below, the defendant admits receiving the Second Penalty Notice shortly after its postage.

22. [39]

    In respect of the First Penalty Notice, the defendant contended that he did not receive the notice until late October 2013. He relies upon a letter from the DCT dated 28 October 2013 which refers to the First Penalty Notice being returned to the ATO two months after its original postage date. The plaintiff submitted that this contention does not assist the defendant because proof of receipt is not a necessary element of the “giving” of a DPN pursuant to ss 269-25(4) and 269-50 of the TAA53. Rather, it was submitted, service is effected by the giving of the notice.

23. [40]

    The plaintiff repeated its above submission that the DCT has the benefit of prima facie evidence that the DPNs were served, namely the certificate under s 255-45 as discussed above.

24. [41]

    Regarding the service of the DPNs, the plaintiff noted that there is no dispute between the parties as to the giving of the Second Penalty Notice. In respect of the First Penalty Notice, the plaintiff submitted that there is no issue given that the defendant’s denial of receipt creates no effective challenge to the defendant’s liability for the reasons stated above.

Defences

1. [42]

   As noted above, the defendant filed a Defence on 5 March 2015 in which it alleges, inter alia that it:

   1. (1)

      Took all reasonable steps to cause the Company to comply with its obligations; and

   2. (2)

      Caused a liquidator to be appointed to the Company on 4 July 2014 (Presumably this is an error and should refer to the Company entering into voluntary administration).

2. [43]

   The defendant relied upon his written submissions dated 4 April 2016 (DWS). As discussed below, the issues in dispute were considerably narrowed in those submissions and at the date of the hearing.

3. [44]

   As the plaintiff’s written submissions were drafted prior to the filing of the defendant’s submissions, the reasonable steps defence and the authorities on the matter were outlined in detail. In essence, the plaintiff submitted that the ambit of the defence has been construed narrowly with the Courts taking a rigorous stand on directors who fail to remit withholding tax: Deputy Commissioner of Taxation v George (2002) 55 NSWLR 511; [2002] NSWCA 336; Deputy Commissioner of Taxation v Stenner (2003) 53 ATR 316; [2003] QDC 53; Deputy Commissioner of Taxation v Moss (2003) 53 ATR 442; [2003] VSC 294; and Canty v Deputy Commissioner of Taxation (2005) 63 NSWLR 152; [2005] NSWCA 84.

4. [45]

   The plaintiff then examined the evidence of the defendant in support of the reasonable steps defence and submitted the following:

   1. (1)

      The evidence of the defendant is conspicuous for its paucity: [43] PWS.

   2. (2)

      The contention that the defendant was justified in taking no steps to appoint an administrator or liquidator because of a contractual obligation he created is simply unsustainable: [43] and [52]-[54] PWS;

   3. (3)

      Pursuant to s 269-10 of the TAA53, the defendant’s obligation to take all reasonable steps relevantly arose on the date the relevant amounts were withheld, namely 1 April 2012. There is a complete absence of evidence by the defendant as to any steps taken for the extended time for which these amounts were withheld. On this basis alone, the defendant cannot satisfy the Court that he took all reasonable steps as he is silent as to what actions he took, if any, prior to approximately November 2013: [46] PWS;

   4. (4)

      The conduct to be considered for the purposes of a defence under s 269-35 is conduct during the period of time prior to the service of the DPNs as any steps taken after this time cannot be regarded as an attempt to comply with the director’s obligations under s 265-15 as the breach has already crystallised: [47] PWS; and

   5. (5)

      All of the events identified by the defendant postdate the service of the DPNs and do not assist the defendant in establishing a defence under s 265-15 of the TAA53: [49].

The Defendant’s Evidence and Submissions

1. [46]

   The defendant relied upon on his affidavit sworn 22 September 2015 (PT).

2. [47]

   In that affidavit, the defendant deposed that in early October 2013, he instructed an accountant to enter into a payment arrangement at a rate of $60,000/month with the plaintiff in respect of the outstanding liability on the Running Balance Account: [3] PT.

3. [48]

   The defendant also deposed that shortly after he made this request, the accountant rang him to inform that the ATO had advised that they had issued a DPN against him. The defendant responded that he did not know what a DPN was and that he had not received anything. The accountant informed him that the ATO would re-send the notice.

4. [49]

   The defendant’s evidence was that he received a letter on 31 October 2013 from the plaintiff dated 28 October 2013 which enclosed a DPN dated 23 August 2013. A copy of that letter was annexed at Annexure “B” of PT. At [7] the defendant deposes that:

5. [50]

   He stated that he continued to instruct the accountant to negotiate a payment arrangement with the plaintiff but that this request was rejected by the plaintiff in a letter dated 7 November 2013. A copy of this letter was annexed at Annexure “C” of PT.

6. [51]

   The defendant stated that in about August 2013 he made the decision to try and find a purchaser to buy the Company: [10]. In November 2013, following negotiations with three prospective purchasers, he said he entered into a heads of agreement to sell the Company: [12]-[15]. He said that part of the agreement for the sale of the business was that he would ensure the Company continued to trade until the settlement date. His evidence was that he was contractually bound to continue to trade the business and could not put the Company into liquidation or have an administrator appointed to it as that would have been a breach of the agreement: [18].

7. [52]

   The defendant admits receiving the Second Penalty Notice shortly after its postage: [22]. He repeats his above submission that during this time he was contractually bound to continue to trade the business of the Company and could not appoint a liquidator or administrator.

8. [53]

   At [25] and [26] of his affidavit, the defendant stated:

9. [54]

   The defendant concluded by providing evidence regarding the payments made to the ATO between 19 July 2011 and 30 July 2013 totalling $2,170,858.

10. [55]

    In essence, it was submitted that the plaintiff did not serve the first DPN. In respect of both DPNs, the defendant submitted that the notices did not comply with the TAA53 in that they failed to explain or accurately state the main circumstances in which the penalties would be remitted: [2] DWS.

11. [56]

    In relation to the submission that the first DPN was not served, the defendant noted that s 269-25 displaces the effect of s 29 of the Acts Interpretation Act so that notice is deemed effected at the time of posting rather than at the time it would be delivered in the ordinary course of post. The defendant submitted at [12] DWS that:

12. [57]

    The defendant submitted that while courts have often commented that proof of non-receipt is insufficient to rebut the presumption of service by post, courts have consistently held that proof of non-delivery is sufficient: [13] DWS. In support of this submission, the defendant cited: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 95, 96; [1983] HCA 25; Deputy Commissioner of Taxation v Contract Synergies Administration Pty Ltd (2011) 292 ALR 713; [2011] FCA 743 per Jacobsen J at [10]; In the matter of Leasing Holdings Pty Ltd (formerly Charlie Lovett Pty Ltd) [2015] NSWSC 771 per Black J at [32]; Re Rustic Homes Pty Ltd (1988) 49 SASR 41 per von Doussa J; Jones v Superannuation Complaints Tribunal (2011) 198 FCR 71; [2011] FCA 1255 per Besanko J at [44]; Deputy Commissioner of Taxation v Healy [2014] WADC 35 at [43]; and Repatriation Commission v Gordon (1990) 100 ALR 255; [1990] FCA 619 per Spender J at 265.

13. [58]

    The defendant submitted that in this case “there is proof of non-service by way of the DCT’s admission that the DPN was returned to on 24 October 2013”: [15] DWS.

14. [59]

    Prior to outlining the defendant’s submissions which allege that the DPNs were defective, it is convenient to note the relevant wording contained in both DPNs:

15. [60]

    As extracted above at [12], the wording of s 269-25(2)(c) is:

16. [61]

    Regarding the submission that neither of the DPNs comply with s 269-25(2)(c), it was submitted that:

    1. (1)

       The DPNs do not explain the circumstances in which the penalty will be remitted (rather they simply purport to state them); and

    2. (2)

       They do not accurately state those circumstances. In particular, they misstate the director’s obligation set out in s 269-15(2)(c).

17. [62]

    The defendant submitted at [17] that:

18. [63]

    The defendant submitted that this is an important distinction as a company “being” wound up means that it is presently in the process of being wound up whereas “causing a company to begin to be wound up” connotes a preliminary step: Deputy Commissioner of Taxation v Saunig (2002) 55 NSWLR 722; [2002] NSWCA 390 at [33]-[35]. The defendant observed that in Saunig, the Court held that a company begins to be wound up when the director takes steps to achieve that end (such as applying for leave to commence proceedings or commencing winding up proceedings): [18] DWS.

19. [64]

    The defendant concluded by submitting that a notice will be invalid when it is misleading as to the particulars concerning how to achieve a remittal: Deputy Commissioner of Taxation v Zammitt (2014) 284 FLR 212; [2014] NSWCA 104. The defendant submitted that stating the wrong requirements for a remittal of personal liability is equally material to a notice bearing the wrong date (as was the case in Zammitt) and must yield the same result of invalidity: [19] DWS.

The Issues at the Hearing

1. [65]

   As earlier noted, at the hearing the issues in dispute were narrowed and, in particular, counsel for the defendant did not press the defence originally made regarding the reasonable steps taken to cause the Company to comply with its obligations.

2. [66]

   The issues that were pressed at the hearing related to the evidentiary certificates, the alleged defectiveness of both DPNs and the service of the first DPN.

3. [67]

   In oral submissions, Ms Little again observed that pursuant to s 255-45 of the TAA53, the evidentiary certificates are prima facie evidence of the matter in the proceeding to recover an amount. Additionally Ms Little drew attention to s 350-10(3), (3A) and (4) of the TAA53 which are extracted above (T41:27-42:2).

4. [68]

   As to the evidentiary certificates, Mr Anderson for the defendant submitted that both certificates constitute a previous “representation” made by the DCT as to, inter alia, the amount owing by the defendant to the ATO (T42-44). Accordingly, the submission proceeded, both certificates are “clearly” hearsay representations and were therefore admissible only if they fall within one of the relevant exceptions in the Evidence Act 1995. Mr Anderson submitted that the only possible exception under which the certificates could be admitted is under the business record provisions but that the certificates could not fall under this exception because they were documents created in contemplation of court proceedings.

5. [69]

   Mr Anderson submitted that in order to comply with s 255-45 of the TAA53, which as noted above stipulates that an evidentiary certificate is prima facie evidence of a matter in a proceeding, the person who provides the certificate must also be the same person swearing the accompanying affidavit (T43:45-47).

6. [70]

   Mr Kirby expanded upon the above submissions and reiterated that it is for the plaintiff to prove the debt underlying these proceedings and submitted that it has failed to do so (T44:16-30). Mr Kirby submitted that the fact that within the plaintiff’s evidence there are two documents which record two different amounts owed by the defendant, namely $824,838 and $634,830, meant that the Court was presented with “two figures which are both prima facie true and correct figures of the debt due and owing to the Deputy Commissioner by the defendant” (T47-10-48-10). Mr Kirby added that the two figures “cannot both be true therefore they cannot be accepted either of them. Neither of them carries any prima facie weight, and the debt claimed has not been proved” (T49-14-16).

7. [71]

   Mr Foster was cross-examined on the error regarding the quantum of the plaintiff’s claim and the resulting amendment to the total figure claimed from $824,838 to $634,860.

8. [72]

   Following Ms Little’s objection to this line of cross-examination on the basis of relevance, Mr Kirby submitted that the questions were directed to the broader question of whether the plaintiff has proved its case and, in particular, whether the evidence of Mr Foster should be accepted, having regard to the errors contained in his affidavits regarding service and quantum (T27:37-45).

9. [73]

   The explanation proffered by Mr Foster for the error regarding quantum was that the defendant had not remitted either the first or second amounts withheld, namely $108,050 or $81,958, in full but rather had made numerous small part payments. (T29:9-45).

10. [74]

    Ms Little again objected and observed that the only dispute put before the Court on the morning of the hearing had concerned the contents and service of the DPNs and submitted that the defendant should accordingly be precluded from raising a dispute concerning quantum given the pleaded matters (T33:37-45).

11. [75]

    Mr Foster was cross-examined on the contents of his affidavits and in particular [17] and [18] of JF2, which are in the following terms:

12. [76]

    Mr Foster’s evidence at [4] to [7] of JF4 was as follows:

13. [77]

    Annexure “D”, to which Mr Foster referred, includes a narrative that was put on the ATO system on 28 October 2013 by an authorised officer of the plaintiff. This narrative includes the comment “Returned – envelope marked return to sender”. The narrative noted the following:

14. [78]

    During cross-examination, Mr Foster was unable to say why JF2 did not include reference to the 28 October 2013 narrative (T25:31-32).

15. [79]

    In relation to the service of the First Penalty Notice, Ms Little submitted the following as to why the proposition that evidence of non-delivery would not be sufficient to overcome the presumption created by s 269-25 of the TAA53 that notice has been given:

    1. (1)

       Section 29(1) of the Acts Interpretation Act, unlike s 269-25 of the TAA53, expressly indicates that service is deemed to have been effected unless the contrary is proven. Conversely, service of a notice under s 269-25 of the TAA53 is not dependent upon receipt or delivery. Reliance in this respect was placed the decisions of Roche v Deputy Commissioner of Taxation (2014) 290 FLR 268; [2014] WASCA 194 at [62]; and Deputy Commissioner of Taxation v Aitken [2015] WADC 18 at [22] (T36:4-37:22)

    2. (2)

       As the giving of notice does not require delivery, the very fact that the mail was returned via Australia Post supports the notion that it was posted (T37:24-27).

    3. (3)

       Even if evidence of non-delivery were sufficient to displace the presumption of service, it is not sufficient to simply prove proof of non-delivery by a returned envelope. Rather, a defendant must proof that the envelope was not claimed: DCT v Contract Synergies Administration Pty Ltd, supra, at [17] (T37:31-43).

    4. (4)

       In this case there was tendered evidence that the envelope was opened and the documents were removed and stapled to the envelope (T37:45-38:21).

16. [80]

    In oral submissions, Mr Kirby submitted that s 269-25(4) creates a rebuttable presumption of delivery and that in this case the presumption had been rebutted by the fact that the letter was returned. The suggestion that the envelope was open upon return, it was argued, is not supported by the evidence and was more likely opened through the internal process of the correspondence team (T59:4-6). Finally, the delay of two months in the return of the envelope more readily allows the Court to draw the inference that the “mail got lost somewhere and only found its way home after some extended trip” (T59-40-41).

17. [81]

    In oral submissions, Ms Little observed that the reliance upon the words “if the director causes the company to begin to be wound up” at [17] of DWS is unfounded as this language does not appear in the TAA53 but is taken from the case of Saunig, supra, which concerned s 222AOB of the Income Tax Assessment Act 1936 (Cth) (the ITAA): (T38:23-40:43).

18. [82]

    Ms Little submitted that there is no material difference between the wording “the company is being wound up” contained in the DPNs and the wording “the company begins to be wound up” contained in s 269-25(2)(c): (T39:18-42).

19. [83]

    Ms Little took issue with the defendant’s reliance upon the case of Saunig, supra, as establishing that the Court in that case held that a company begins to be wound up when a director takes steps to achieve that end such as applying for leave to be wound up in insolvency (T40:13-43). Rather, Ms Little observed that the question before the Court in Saunig was whether the director had taken all reasonable steps to comply with s 222AOB of the ITAA.

20. [84]

    Ms Little took further issue with the defendant’s reliance upon the case of Zammitt, supra, that case was said to have established the principle for the proposition that a notice was invalid for setting the wrong date. Ms Little responded that that principle was the decision of the judge at first instance but had been overruled by the decision of the five judge bench: (T39:47-51:1-2).

21. [85]

    Ms Little drew the Court’s attention to Power v Deputy Commissioner of Taxation (2013) 248 FLR 42; [2013] NSWCA 428 at [32] where Emmett JA observed that when examining whether a notice complies with s 269-25, it is necessary to determine the legislative objective of the requirements of that provision and whether the notice achieves that object.

22. [86]

    Mr Kirby submitted that the two DPNs are defective for two reasons. Firstly, there is a failure, as the TAA53 requires, to explain the main circumstances in which the penalty will be remitted (T50:38-47). Mr Kirby expanded this point by submitting that the DPNs could have complied with s 269-25(2)(c) by providing “advice or information about, for example, the way that a company might be placed into administration [or] a way that a company might be wound up…” (T51:48-51:5).

23. [87]

    Secondly, the DPNs misstated the main ways in which the penalty may be remitted. Mr Kirby added:

24. [88]

    Mr Kirby added that in order for the DPNs to properly explain the main ways in which a penalty can be remitted, the focus of the notices should be on s 269-35 rather than s 269-15 as submitted by the plaintiff (T54:22-31). It is convenient at this point to note that during oral submissions, I drew Mr Kirby’s attention to s 269-30 and the fact that this section must be read together with s 269-25 (T54:38-40). Mr Kirby withdrew his submission regarding the irrelevance of s 269-15 (T55:8-14).

25. [89]

    Mr Kirby maintained the submission that there is a material difference between the wording of “the company begins to be wound up” contained in s 269-15 and the wording of “the company is being wound up” contained in the DPNs. He submitted the following:

CONSIDERATION

1. [90]

   There is no dispute that the defendant was a director of the company at the relevant times, nor is there any dispute in respect of the amounts withheld by the company.

2. [91]

   Pursuant to s 269-25 of the TAA53, and as extracted above, a notice is taken to be given at the time the Commissioner leaves or posts it. The section expressly excludes the presumption of delivery under s 26(1) of the Acts Interpretation Act.

3. [92]

   Section 269-50 of the TAA53 stipulates that the Commissioner may give notice under s 269-25 by “leaving it at, or posting it to, an address that appears, from information held by ASIC, to be, or to have been within the last seven days, your place of residence or business”.

4. [93]

   The effect of these two provisions is that the DCT does not need to satisfy the Court that a notice was actually received by the defendant. In order to satisfy the notice provisions of the TAA53 the DCT need only satisfy the Court that a stamped envelope with the penalty notice has been placed in a post box with the correct address.

5. [94]

   As noted by Tobias AJA in Zammitt, supra, the majority in Deputy Commissioner of Taxation v Meredith (2007) 245 ALR 150; [2007] NSWCA 354 decided that a DPN which was proven to have been posted but found not to have been received or delivered, was nevertheless "given" for the purposes of s 222AOE of the 1936 Act on the date it was posted.

6. [95]

   Meredith was overruled by a five judge bench of the Court of Appeal in Soong v Deputy Commissioner of Taxation (2011) 80 NSWLR 226; [2011] NSWCA 26. The Court unanimously held that a DPN was "given" under s 222AOF for the purposes of s 222AOE when it was delivered rather than when it was posted. Special leave to appeal to the High Court from the decision in Soong was refused.

7. [96]

   On 29 November 2011, the Commonwealth Parliament, in response to the decision in Soong, enacted the Tax Laws Amendment (2011 Measures No. 7) Act 2011 (Cth) which inserted Schedule 7 into the TAA53 in the following terms:

8. [97]

   I accept, as Ms Little observed in her oral submissions, that the provisions of s 269-25 are to be contrasted with the provisions of s 29 of the Acts Interpretation Act.

9. [98]

   Section 269-25, Notice, is a provision that specifically addresses the giving of a written notice of penalty under that provision.

10. [99]

    Subsection 2 of s 269-25 specifies matters which must be set out, stated or explained in a notice under that provision.

11. [100]

    As to the giving of notice, under the subheading “When Notice is Given”, subsection 4 of s 269-25 is in the following terms:

12. [101]

    Subsection 4 accordingly is to be seen in contrast to the provisions of s 29(1) of the Acts Interpretation Act which is extracted at [15]. That section provides for the “deeming” of service unless the contrary is proved. In that respect it operates in the form of a presumption, though expressed as a deeming provision.

13. [102]

    Section 269-25(4) is not a deeming provision. It is expressed to operate despite s 29 of the Acts Interpretation Act and expressly provides, without qualification, that a notice under subsection (1) “is taken to be given at the time the Commissioner leaves or posts it”.

14. [103]

    On the evidence in the present proceedings, I am satisfied that the letter was posted pursuant to s 269-25 and that that fact is sufficient for the purpose of proving the “giving” of the notice.

15. [104]

    I accept the submission made by Ms Little that the cases dealing with s 29(1) have no relevance in the interpretation of s 269-25. Receipt or delivery do not form part of the latter provision, unlike in cases to which s 29 of the Acts Interpretation Act applies.

16. [105]

    The clear operation of subsection 4 is reinforced by its opening words “Despite s 29 of the Acts Interpretation Act 1901…” In so providing, s 269-25(4) reinforces the fact that reference to “delivery” has no part to play or relevance to the “giving” of a Notice under the provisions.

17. [106]

    In Roche, supra, the Court (Newnes JA) with whom McLure P and Murphy JA agreed, stated at [62]:

18. [107]

    See also DCT v Aitken, supra.

19. [108]

    As earlier noted, Mr Kirby in his oral submissions sought to argue that the provisions of subsection (4) merely create a presumption and as such it was in the nature of a deeming provision: (T58: 5-10).

20. [109]

    He sought to argue that the subsection does not refer to the fact that service is effected and that the submission of Ms Little sought to draw a distinction between service and giving “that amounted to a difference without a distinction”: (T58: 15-20).

21. [110]

    Proceeding upon the basis that subsection (4) is in the nature of a provision that creates a presumption, it was submitted that, like all presumptions, it is rebuttable: (T58: 30-40).

22. [111]

    For reasons set out above, I do not, with respect, consider that there is any substance to the submissions relied upon by Mr Kirby as to the construction and application of the provisions of subsection (4). The words of the section, as I have stated above, expressly and plainly provide that, upon compliance with the provisions of the section, the notice is deemed to have been “given” such compliance. As I have earlier stated this has been well established by the evidence in this case.

23. [112]

    Mr Kirby sought to raise a further argument based upon the evidence of the return of the notice as disclosed in JF4.

24. [113]

    Mr Kirby relied upon the evidence of the return of the notice as evidence that could rebut the fact that the letter was given, relying upon an argument that this was analogous to rebutting a presumption under s 29 of the Acts Interpretation Act.

25. [114]

    The evidence of the fact that the letter was returned in October 2013 is, at best, as was submitted by Ms Little, ambiguous. It is not evidence, in my view, that could establish that the letter was not posted or sent to the required address: see DCT v Contract Synergies Administration Pty Ltd, supra, per Jacobson J at [17].

26. [115]

    I have accordingly concluded that the provisions of s 269-25 were met and that it has been established that the first notice to the defendant was given.

27. [116]

    As noted above, s 269-25(2) specifies the required content of a Notice of Penalty.

28. [117]

    Subsection (2)(c) it will be recalled is in the following terms:

29. [118]

    The argument for the defendant to the effect that the First and Second Notices do not comply with the latter provision is that they did not explain the circumstances in which the penalty would be remitted but simply purported to state them and did not accurately state those circumstances. In particular it was said that there was a misstatement of the director’s obligations set out in s 269-15(2)(c).

30. [119]

    The point taken was that the Notices did not state the penalty would be remitted in terms of subparagraph (c) but they had said that the penalty would be remitted “…if, at the end of 21 days after the date of this notice…(c) the company is being wound up.”

31. [120]

    As earlier stated, the submission was that there was a failure to comply with subsection 2(c) and that such notices were invalid where it is misleading as to the particulars concerning how to achieve a remittal: DWS at [19].

32. [121]

    Section 269-15 expressly provides that the obligation of directors to cause the company to comply with its obligations, continues until “(c) the company begins to be wound up (within the meaning of that Act)”.

33. [122]

    I do not consider that there is any material difference in meaning or concept between the phrase “…the company begins to be wound up” and the phrase used in the first and second notices, “…is being wound up”.

34. [123]

    Section 269‑15 is directed to ensuring that the obligation of the directors of a company, in particular to make sure that withholding taxes are paid, subsist until the processes of winding up begin.

35. [124]

    Section 269-25, I accept as argued by Ms Little, is concerned with the issue as to when the penalty will be remitted.

36. [125]

    The word “begins” in the subparagraph “The company begins to be wound up” refers to the taking of the first step in the action or process to winding up the company. That is in accordance with the ordinary meaning of the word “begins” as in starting or commencing from the first part of a process.

37. [126]

    The phrase used in the notices “…is being wound up” indicates a process that commences with the first step in the process and accurately states the position under the TAA53 concerning directors’ obligations. An application seeking leave to bring proceedings to wind up the company would plainly be embraced within and form part of the winding up process.

38. [127]

    For the above reasons I have concluded that there is no material difference between the phrase “begins to be wound up” and the formulation “is being wound up”.

39. [128]

    Having concluded that there is no substance to the defendant’s submission as to the alleged invalidity of the notices upon the basis discussed above, the notices were valid notices under the provisions of s 269-25.

40. [129]

    Finally, it is necessary to refer to two matters that arose during the course of the hearing but which were not the subject of any written submissions. The first was the contention made by Mr Kirby in the course of his oral submissions that it was for the plaintiff to prove its debt underlying the proceedings and it was his submission that it had failed to do so: (T44: 15-25).

41. [130]

    It is unnecessary here to set out the argument that then ensued on this issue. It is recorded in the transcript at T44-49.

42. [131]

    The underlying debt and liability of the plaintiff was, in my opinion, established by the evidence of Mr Foster including in particular paragraphs [7]-[20] of JF1.

43. [132]

    There is no basis for the submission made that the plaintiff had failed to prove the debt underlying proceedings.

44. [133]

    Finally, the further point, not included in the defence or written submissions for the defendant, concerned a contention that the certificate under s 255-45 of the TAA53 (a copy of which was marked as Annexure “G” to JF1) and the second certificate issued by and signed by the DCT constituted a previous “representation” by the DCT as to, inter alia, the amount owing by the defendant to the ATO. In that respect it was argued that the certificates consisted of “hearsay representations” and therefore were inadmissible unless they fell within the business records provisions of the Evidence Act.

45. [134]

    I do not consider there is any foundation for this point in relation to the certificates.

46. [135]

    The certificate under s 255-45 certified three matters:

    1. (1)

       That the defendant has a tax-related liability, namely penalties arising under s 269-20 of the TAA53;

    2. (2)

       Notices issued under s 269-25 of the TAA53 were served on 23 August 2015 and 17 April 2014 in relation to that tax related liability; and

    3. (3)

       The amounts mentioned as at the specified dates constituted a debt due and payable by the defendant to the Commonwealth of Australia in respect of the tax-related liability referred to in the certificate.

47. [136]

    I note that quite apart from the abovementioned certificates there is a considerable body of evidence that establishes the tax-related liability, the penalties referred to in paragraph 1 of the certificate.

48. [137]

    Pursuant to s 255-45 of the TAA53, the DCT can rely upon an evidentiary certificate as prima facie evidence of the matters asserted therein. The DCT has an additional evidentiary advantage in that pursuant to s 255-50, provides that every statement or averment in its Statement of Claim is prima facie evidence of the matter.

49. [138]

    Additionally, the evidence, as earlier stated, strongly supported the proposition that the notices were “given” within the meaning of the legislation.

50. [139]

    As to the amounts said to be due and payable by the defendant, the evidence plainly established the debt and the amounts specified and sued for in the Amended Statement of Claim.

51. [140]

    I do not consider in any event that the certificates constitute hearsay evidence. The certificates, signed by the DCT and dated, were valid certificates under the legislation and carried statutory force in establishing the facts to which they relate pursuant to s 255-45 of TAA53.

52. [141]

    Accordingly, the certificates were admissible to prove the matters referred to.

53. [142]

    For the reasons set out above, the plaintiff is entitled for judgment against the defendant.

    1. (1)

       I order judgment in favour of the plaintiff against the defendant in the amount of $634,830.

    2. (2)

       Unless the defendant lodges written submissions with my Associate within 14 days seeking a contrary costs order, then the order of the Court is that the defendant pay the plaintiff’s costs of the proceedings.