Deputy Commissioner of Taxation v Alexander

The evidence in these proceedings

1. The plaintiff relies upon the following affidavits which have been served in these proceedings: 1. the affidavit of Waael Mehana affirmed on 11 October 2019; and 2. the affidavit of Patrick Nicholas Cullen affirmed 8 October 2019.
2. The defendant has not provided any affidavit, report or tendered any document apart from the documents in the agreed bundle.
3. The plaintiff has prepared an agreed bundle to which no objection has been taken by the defendant. Essentially it consists of the pleadings, the affidavits, the internal records of the plaintiff and, separately, a bundle of relevant legislation.

The company

1. The defendant was appointed as a director of the company on 1 May 2012 and ceased to be a director on 15 March 2017. An administrator was appointed to the company on 20 September 2018 and the company was subsequently wound up pursuant to a creditor's voluntary winding up on 26 October 2018. It can be seen from the material tendered that the defendant's liability arises, if I may put it generally, in respect to the company's failure to pay to the Commissioner by the relevant due dates assessments for superannuation guarantee charge ("SGC") of the company pursuant to s 26 of the Superannuation Guarantee (Administration) Act 1992 (Cth) ("the superannuation legislation") for the quarters commencing on 1 July 2016 and 1 October 2016.

The statutory regime for the company's liability for the superannuation guarantee charge

1. Pursuant to s 33(1) of the superannuation legislation, an employer who has a superannuation guarantee shortfall for a quarter must lodge with the ATO a superannuation guarantee statement for that quarter. If an employer lodges a superannuation guarantee statement for a quarter then, pursuant to s 35 of the superannuation legislation, that statement has effect as an assessment of the employer's superannuation guarantee shortfall for the quarter and of SGC payable on the shortfall. However, if, as is the case here, an employer does not lodge a superannuation guarantee statement then the Commissioner may make a default assessment pursuant to s 36 of the superannuation legislation. The Commissioner may also amend any such assessment pursuant to s 37 of that Act.
2. For the purpose of director penalty provisions, pursuant to s 269-10(3) of Sch 1 to the TAA, an employer's SGC for a quarter under the superannuation legislation is treated as being payable on the day by which the employer must lodge a superannuation guarantee statement for the quarter under s 33 of the superannuation legislation, even if the charge is not assessed under that legislation on or before that day.

The plaintiff's position as director

1. The affidavit of Mr Mehana sets out at paragraphs 9 and 10 how he has identified the defendant as a director, namely by reviewing a copy of the ASIC extract, and that document is to be taken as prima facie evidence of the defendant standing as a director.
2. Essentially, the defendant does not dispute this is the case. His position is that, while he was named as a director, he was not a director with any financial knowledge, data-keeping or checking obligations, or indeed any information about the company's financial affairs generally. That is regrettable, but he is nevertheless a director for the purposes of the TAA. It is clear from the ASIC extract that at all relevant times the defendant was in fact a director of the company.

Director penalties imposed in respect of superannuation guarantee charges

1. Mr Mehana set out at paragraphs 11 and 12 the manner of computation of the charges, which is not in dispute, and that the service of the notices of assessment in accordance with the relevant provisions being sent by pre-paid post to the address provided. Service is not in dispute.

The director penalty notices and director's obligations

1. The defendant as a director of the company was under an obligation pursuant to s 269-15 of Sch 1 to TAA to cause the company to pay to the plaintiff the SGC amounts on or before the due dates. As a consequence of the defendant's failure to comply with that obligation, the defendant becomes liable to pay a penalty equal to that unpaid amount. It is not in dispute that the company did not lodge with the plaintiff superannuation guarantee statements within three months of the due dates pursuant to s 269-30 of Sch 1 to the TAA. This means the defendant is unable to obtain remission of the penalties in relation to the SGC amounts, other than by payment of the unpaid amounts.
2. At paragraphs 15 to 20 of his affidavit, Mr Mehana has helpfully set out the circumstances in which a notice and covering letter were sent and the impact that this has in terms of the defendant's liability. I am indebted to Mr Olthof for his careful analysis of a director's obligations under the TAA and, in particular, those as set out in Subdivision 269-B and 269-10, 269-15, 269-20(2) and 269-25. As noted previously, there is no challenge to service, so I need not deal with those issues further.

Was there an arrangement?

1. If the plaintiff entered into an arrangement under s 255-15 to Sch 1 of the TAA with the company to pay the amount of an SGC liability, copies of the correspondence leading up to the agreement and the agreement itself are retained by the plaintiff in relation to the SGC liabilities account, as well as being noted in the ATO narratives system. This means that there is not only an electronic record but also a paper file as well as entries in the ATO narratives system which record conversations between the parties and are often a vital tool in determining whether or not an agreement has been reached. In his defence, the defendant has asserted that: "The company entered into arrangements pursuant to s 255-15(1) of the schedule of the Taxation Administration Act 1953 with the Australian Tax Office to meet tax obligations. The defendant has no detailed knowledge of the particulars of this arrangement. The defendant has no record of the particulars of the arrangement with the ATO and cannot access the company's records as the company has gone into administration and all company records are with the administrator."
2. Statements in a pleading are essentially a joinder of issue rather than a statement of evidence. I note, however, that I need not pursue this issue further as the defendant has acknowledged in a very frank and proper fashion that any agreements that were in place between the plaintiff and the company are not only matters about which he appears not to have been informed or provided with copies but could not have related to the superannuation sum the subject of this claim because that claim arose after the company went into liquidation.
3. I have sympathy for the defendant by reason of the personal difficulties arising when there is a family business structure which gets into trouble, which is all too often a feature of DPN claims of this kind; but, in practical terms, I accept Mr Mehana's statement at paragraph 23 of his affidavit that: "From an examination of the company extract and narratives maintained by the plaintiff in relation to the SGC amounts, there is no extant agreement between the plaintiff and the company or the defendant under s 255-15 of Sch 1 to the TAA in respect of the amounts the subject of this claim."
4. I also note in relation to this issue, and indeed generally, the evidentiary provisions under s 350-10(1) of Sch 1 to the TAA and the existence of certificates and their prima facie validity under s 255-45 of Sch 1 to the TAA.

Are these proceedings "unconscionable and inequitable"?

1. The defendant complains in paragraphs 13 and 14 of the defence that he understands that the plaintiff has issued a statement of claim with respect to a director's obligations against one or the other or perhaps both of the other directors and submits that: "It is unconscionable and inequitable for the plaintiff to commence proceedings for the recovery of the amount of the same debt from two (or three) parties."
2. Mr Olthof has helpfully drawn my attention to the provisions of s 269-40 of the TAA which provides effectively any amounts recovered from the defendant operate as a set-off against the other sums. There is no potential for multiple claims and the plaintiff is not obliged to sue all directors in the same litigation. This would be the case even if that section had not been enacted, but it was enacted specifically for purposes such as the present.

Conclusions concerning the evidence

1. As a director, the defendant is under an obligation to cause the company to pay by the due date each of the amounts of SGC claimed in this case, or alternatively take up one of the other steps set out in s 269-15 of Sch 1 to the TAA. As a consequence of the defendant's failure to do so, and because no administrator had been appointed to the company, or the company wound up before the due dates came into effect, the defendant becomes liable for a penalty in an amount equal to the unpaid amount of the SGC. It is not in dispute that proper notice was given and received or that the company did not lodge with the plaintiff's superannuation guarantee statement within three months of the due dates, and thus the defendant is unable to achieve remission of the penalties other than by payment of the unpaid amounts.

The judgment sum, interest and costs

1. I note that payments and credits totalling $2,460.46 have reduced the defendant's liability and that this is accounted for in the slight alteration of the sum originally sought in these proceedings.
2. I note the plaintiff has produced a certificate under s 255-45 of Sch 1 of the TAA. I note the observations of Pagone J in Deputy Commissioner of Taxation v Vasiliades [2015] FCA 412 at [6] and consider that it is appropriate that there should be judgment on that basis, notwithstanding the fact that a defence to the claim has sought to make out a complete defence on the three grounds set out above.
3. The defendant does not dispute the entitlement of the plaintiff to seek costs.
4. I note that counsel for the plaintiff has confirmed, in the course of his oral submissions, that there is no claim for interest.

Orders

1. Accordingly, I make the following orders: 1. Judgment for the plaintiff for the sum of $101,607.85. 2. Defendant pay plaintiff's costs. 3. Exhibits retained until further order.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 June 2020