Deputy Commissioner of Taxation v Kedwell [2019] NSWDC 610 | Case summary

District Court of NSW|2019-05-23

Plaintiff: Deputy Commissioner of Taxation Defendant: Nathan Joel Kedwell Representation: Counsel: Plaintiff: Mr A Narayan (solicitor) Defendant: Mr A Gerard

Solicitors: Plaintiff: Craddock Murray Neumann Defendant: Bridges Lawyers File Number(s): 2018/10725 Publication restriction: None

Introduction

The plaintiff by statement of claim filed on 11 January 2018 brings proceedings for the sum of $332,531.61 arising in respect of a Director Penalty Notice ("DPN") issued to the defendant on or about 28 September 2017 pursuant to Div 269 of Schedule 1 to the Taxation Administration Act 1953 (Cth) ("the TAA").
The Defence filed on 15 October 2018, in addition to other matters, pleads in paragraphs 8 and 9 as follows: "8. In response to paragraph 8 of the SOC the Defendant: (a) says that in part satisfaction of the Defendant's alleged liabilities to the Plaintiff detailed in paragraph 8 and 9 of the SOC, Synergy made payments to the Plaintiff, towards discharging the Defendant's alleged liabilities as detailed in paragraphs 8 and 9 of the SOC, on behalf of and at the direction of the Defendant, as follows: i. 20 October 2017 - $200,000; ii. 1 November 2017 - $85,000; iii. 13 November 2017 - $30,000, (b) further or in the alternative, says that in part satisfaction of the Defendant's alleged liabilities to the Plaintiff detailed in paragraphs 8 and 9 of the SOC, Synergy made payments to the Plaintiff in satisfaction of, and towards discharge of, those alleged liabilities of Synergy to the Plaintiff corresponding to the alleged liabilities of the Defendant as follows: i. 20 October 2017 - $200,000; ii. 1 November 2017 - $85,000; iii. 13 November 2017 - $30,000, thereby discharging the alleged liability of the Defendant, as set out in paragraphs 8 and 9 of the SOC, to the extent of the same amounts. (c) says that in part satisfaction of the Defendant's alleged liabilities to the Plaintiff detailed in paragraphs 8 and 9 of the SOC, Minerva BPO Pty Limited ACN 163 830 653 ("Minerva") made payments to the Plaintiff, towards discharging the Defendant's alleged liabilities as detailed in paragraph 8 and 9 of the SOC, on behalf of the Defendant as follows: iv. 23 January 2018 - $65,000; v. 24 January 2018 - $5,000; (d) further in the alternative to (c), says that in part satisfaction of the Defendant's alleged liabilities to the Plaintiff detailed in paragraphs 8 and 9 of the SOC, Minerva made payments to the Plaintiff in satisfaction of, and towards discharge of, those alleged liabilities of Synergy to the Plaintiff corresponding to the alleged liabilities of the Defendant as follows: vi. 23 January 2018 - $65,000; vii. 24 January 2018 - $5,000; thereby discharging the alleged liability of the Defendant, as set out in paragraphs 8 and 9 of the SOC, to the extent of the same amounts. (e) otherwise does not admit the balance of the paragraph. 9. In response to paragraph 9 of the SOC the Defendant: (a) repeats paragraphs 8(a) to 8(d) above; (b) otherwise does not admit the balance of the paragraph."
Paragraph 12 of the Defence provides as follows: "12. In further answer to the whole of the SOC, and in the alternative to the above, the Defendant says that: (a) on or about 23 January 2018, the Plaintiff informed the Defendant that the payments received by the Plaintiff, as set out in paragraphs 8(a) to 8(d) and 9(a) above, had been allocated by the Plaintiff to the alleged liabilities to the Plaintiff detailed in paragraphs 8 and 9 of the SOC and that such liabilities had been satisfied and that no further action would be taken by the Plaintiff against the Defendant in respect of the alleged liabilities in paragraphs 8 and 9 of the SOC (Plaintiff's Representation); (b) acting in reliance on the Plaintiff's Representation, which reliance the Plaintiff induced, the Defendant thereafter conducted his financial affairs on the assumption and/or expectation the payments received by the Plaintiff, as set out in paragraphs 8(a) to 8(d) and 9(a) above, had been allocated by the Plaintiff in satisfaction of the alleged liabilities to the Plaintiff detailed in paragraphs 8 and 9 of the SOC and that those liabilities were extinguished; (c) the allegations by the Plaintiff in paragraphs 10, 11 and 12 of the SOC are contrary to the Plaintiff's Representation; and (d) in the premises, the Plaintiff is now estopped from asserting otherwise than the Plaintiff's Representation and is precluded from maintaining paragraphs 10, 11 and 12 of the SOC> Particulars The Plaintiff's Representation was oral consisting of a conversation between the Defendant and the Plaintiff on 23 January 2018. The substance of the conversation so far as is material is that set out above at 12(a)."
Effectively, the defendant argues that the plaintiff's claim fails because: 1. the defendant paid the amounts of and the plaintiff received the amounts from the defendant of: 1. $200,000 on or about 19 October 2017; 2. $85,000 on or about 31 October 2017; 3. $30,000 on or about 10 November 2017; 4. $65,000 on or about 19 January 2018; and 5. $5,000 on or about 23 January 2018 for the express purpose of satisfying, and in full satisfaction of, the DPN debt thereby extinguishing it; or alternatively, 1. if that is not found to be so, common law estoppel, which operates as a rule of evidence within the proceedings, operates to establish the facts upon which the case is to be decided; namely that the plaintiff received the payments from the defendant and applied the payments in satisfaction of the penalty debt set out in the DPN and that, as at 23 January 2018, as an existing fact, only $3,223.46 was left unpaid in respect of the DPN. 2. If the representation had not been made to the plaintiff, he would have taken the steps set out in paragraph 51 of his affidavit of 26 March 2019, namely pay the DPN immediately or enter into a payment plan, engage lawyers to oppose the winding up of Synergy and to pursue creditors and borrowed money from Minerva or family members to fund these activities.

The issues for determination

The issues for determination are: 1. Whether the plaintiff paid the amounts for the express purpose of the DPN as claimed. 2. Whether the payments made by Synergy HR (Aust) Pty Ltd ("Synergy") and/or Minerva BPO Pty Limited ("Minerva") on to Synergy's RBA were improperly allocated to Synergy's other debts, rather than the defendant's DPN liabilities, in circumstances where the defendant had not advised the plaintiff at the time of making each of those payments that they were payment intended to pay his DPN liability; 3. Whether the plaintiff, or one of its officers, made a representation that the PAYG withholding liabilities (the basis of the defendant's DPN) had been satisfied and that no further action would be taken by the plaintiff; 4. Whether there was detrimental reliance on the representation such that it would be unconscionable for the plaintiff to rely on its statutory rights, meaning that the plaintiff is estopped from recovering the DPN liabilities from the defendant; 5. Whether the steps the defendant claims he would have taken (at paragraph 51 in his affidavit of 29 March 2019) could in fact have been taken; and 6. Whether the estoppel is of no effect in the face of a series of decisions stating that no conduct by the Commissioner's servants or agents can be thwarted by the doctrine of estoppel.

The statutory regime

The provisions in relation to a company's liability for PAYG withholding and the consequential director's obligations, which are helpfully set out in paragraphs 32 to 44 of the plaintiff's written submissions are not in dispute. The plaintiff's cause of action is in debt: Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285 at 312-313.

The evidence

The plaintiff relied upon the following affidavits: 1. Affidavit of Leanne Young sworn 31 October 2018 (Young October Affidavit); 2. Affidavit of Jinia Alam affirmed 1 November 2018 (Alam November Affidavit); and 3. Affidavit of Jinia Alam affirmed 9 May 2019 (Alam May Affidavit).
The defendant relied upon the following affidavits: 1. Affidavit of Nathan Joel Kedwell (26 March 2018); 2. Affidavit of Nathan Joel Kedwell (10 August 2018); and 3. Affidavit of Nathan Joel Kedwell (14 September 2018).
All deponents except Ms Leanne Young were cross-examined.
Credit is a significant issue in relation to the defendant. The plaintiff draws the court's attention to the following general areas of challenge: 1. The defendant failed to put into evidence any financial records or written communications concerning an alleged loan from another company, Minerva. 2. Although the defendant was aware of his obligations to keep and maintain books and records under s 286 Corporations Act 2001 (Cth), he failed to adduce them into evidence, in circumstances where the only inference that could be drawn was that the evidence would not have assisted him. 3. Much of the defendant's evidence amounted to his subjective understanding and belief, this being evidence against which the High Court has cautioned: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [35].

The circumstances leading to the issuing of the DPN

The defendant became a director of Synergy on the same date as the date of incorporation of the company, namely 19 March 2015. He remained a director of Synergy up until the date of liquidation which is 7 March 2018.
The defendant's written submissions make few references to the affidavits of Mr Kedwell. These affidavits paint a picture of a company in significant financial difficulty from more or less the first year of its operation.
Synergy operated a business providing payroll administration services to small to medium businesses. At all relevant times, the defendant was the sole person responsible not only for Synergy's business activities, but also the keeping of all books and records (affidavit of 26 March 2018 at paragraph 7). His role as the keeper of these records is of particular importance given the plaintiff's submissions concerning the failure to produce any Synergy accounting or business records in these proceedings.
From time to time, Synergy employed other persons and was thus liable for payment for those employee's wages and superannuation entitlements, as well as for PAYG withholding tax. Synergy periodically invoiced its clients for liabilities incurred in respect of the relevant employees, including the PAYG withholding tax. As is set out above, the defendant's liability for director penalties arises in respect to Synergy's failure to pay by the relevant due dates actual amounts withheld under PAYG for the periods commencing 1 October 2016 and 1 January 2017.
A DPN was issued on 28 September 2017. This related to Synergy's PAYG withholding liabilities for the period commencing 1 October 2016 and 1 January 2017.
On 20 October 2017, the defendant made the first of a series of payments which are discussed in more detail below.
A full list of these payments is as follows: 1. 19 October 2017 - $200,000: This payment was applied by the plaintiff to Synergy's June 2016 Goods and Services Tax ("GST") liability. 2. 31 October 2017 - $85,000: Of this sum, $83,892.15 was applied to Synergy's June 2016 GST liability and $1,107.85 to Synergy's December 2016 GST liability. 3. 10 (or 13) November 2017 - $30,000: This was applied to Synergy's December 2016 income tax withholding ("ITW") liability. 4. 19 January 2018 - $65,000: This was applied to Synergy's December 2016 GST liability. 5. 23 January 2018 - $5,000: This sum, applied to the December 2018 ITW liability, is the only sum credited to the DPN, which occurred as a result of the defendant's telephone call of the same day (23 January 2018).
The amounts of these payments, which are recorded in the bank statements for Synergy and Minerva, are not in dispute. At that time, Synergy's total outstanding liability for the period between 28 September 2017 and 23 January 2018 (namely the period between the DPN and the final payment), as recorded on the Synergy RBA, varied between $1,109,396.27 and $755,226.85. The amounts which were paid add up to $385,000. The DPN at that time was for $384,301.
One of the defendant's main submissions is that the mathematical similarity of these two sums is a significant factor in the determination as to whether each of the above payments was for the purpose of reducing the DPN or in relation to Synergy's overall debt situation. Counsel for the defendant's submissions state at paragraph 20: "20. In contrast, there is no objective "synergy" between the Payments and the total Synergy RBA Balance at any point in time."
The Australian Tax Office ("ATO") commenced a series of telephone conversations with the defendant, the first of which occurred on 27 October 2017. At that stage, a total of $673,992.34 was outstanding and no payment plan had been requested. A statutory demand was sent on 31 October 2017 and, on 8 November 2017, the defendant contacted the ATO.
It is quite clear, from the transcript of that conversation, that it was in relation to Synergy's taxation liabilities. At no time during the course of that conversation did the defendant request the ATO to allocate the first and second payments made on Synergy's behalf to the DPN liabilities of the defendant. To the contrary, he said: "Yeah I've just gotta call you guys to sort out a payment plan, I just paid a $285,000 off whatever it was. … I've just got a large client who's paying in sort of sporadically so I've gotta get them…get the money and give it to you guys." (Transcript 8 November 2017)
There is no mention of the DPN; the defendant merely repeats his desire to set up a payment plan for Synergy's debts, and makes it clear that the moneys paid are for the company's debts. He does not identify the source of the funds as being funds obtained from sources other than Synergy. In fact the moneys are now stated to have come from Minerva, another company controlled by the defendant, and to be a loan of some kind, not repayment of debts owed by "a large client" to Synergy.
The ATO officer says he/she will "actually look into setting up a payment arrangement for you" and asks if the defendant has access to the online services. He says he has used the portal before and has "the aus key" on his computer. The ATO officer waits while the defendant logs in and the defendant says that the amount owed was "already well down". There is discussion about interest owing and the current sum that Synergy owes. The ATO officer carefully goes through the necessary items to put down, such as reference numbers. A payment plan of $25,000 is proposed, with "first payment by next Friday", with subsequent payments of around $51,000 thereafter. The defendant is given a number to call if the line drops out while this is done. The call does in fact drop out, but the defendant does not call back.
The ATO officer then calls a Support colleague about a payment arrangement for the $590,435.17 owing. This colleague notes the defendant's prior history of being late with lodgements and payments as well as a DPN (on his CAC 3 account, not the CAC 2 account), adding "we're taking legal action against him including a garnishee notice for the DPN. For these reasons, the case has to be referred on to another department.
The next call occurs after the third payment, made in November 2017. On 6 December 2017 the defendant calls to say the line dropped out during his November conversation, but he made a payment of $30,000. He wants to know if he can make a payment arrangement and he was passed on to the appropriate officer. He tells that officer: "Sorry yeah I thought I'd already done a payment arrangement and I was working towards it. Umm, umm hopefully that's all on file. … I've gone to pay you a second payment and they've blocked my accounts so I can't actually even give you the money." (Transcript 6 December 2017 call)
The ATO officer says "sorry Nathan I cannot see any payment arrangements on the account", to which the defendant responds by insisting that there was one and that "we'd already discussed the amounts, she was just putting it in place". He urges the ATO officer to give her a call and chat to her to confirm this but the ATO officer says that she could not have approved such a payment. The defendant says "can we organise one now then" because the account had been blocked by the ATO, according to what the defendant had been told by his bank. The defendant then complains that money was missing from his St George account. However, the ATO officer notes that the garnishee orders issued by the ATO had in fact expired. The defendant then says: "Ok. All right, well it's not a wasted call, I don't know what time you guys work until, but I need to get in…if she didn't put in the payment arrangement I'm going to need to set it up again."
The ATO officer replies that it was not simply a matter of a payment arrangement; the garnishee would need to be withdrawn as well. The defendant says that he thought that was "a one off" but the ATO officer explains that a statutory demand had been issued. He then asks what terms the defendant proposes for the payment arrangement option. He adds: "And then whatever payment arrangement proposal you are making your [sic], you actually need to tell us where the funds will be coming from. And you also need to demonstrate to us how you will actually be able to meet your ongoing obligations." (Transcript 6 December call)
The defendant replies that he "would just keep paying you as I assumed I was", referring back to the source of the funds described in the earlier conversation. He repeated that the previous officer was "just waiting for authorisation, we had already negotiated everything". The conversation ended shortly after.
The next conversation occurred on 19 January 2018. The defendant's opening statement was: "ATO Staff: [redacted] speaking, how can I help? Caller: Yeah hi um, I just need to talk to someone about payment plans and… debts… I've spoken to a couple of people before, um I just really want to make sure it's in place. ATO Staff: Yep no problem, what's your tax file number? Caller: Uhh I don't have it can I give you the ABN? ATO Staff: Yeah that should be fine. Caller: Oh no I've got a tax file number here, [redacted]. ATO Staff: And did you say you just want to double check if a payment plan is in place for you? Caller: Well yeah I spoke to um, in I think it was in October, sorry November last year, um and I believed it was in place umm, and then I called up again- ATO Staff: Did you receive any phone calls? Caller: No I spoke to someone um and it was to um… but then I called again because something happened with one of my accounts and someone… it may not have been in place, I just don't know where it's up to. I started making a payment as per our discussion but then I don't know what's going on."
The defendant then described previous payments: "Caller: Yeah I've just paid $105k, um so that should split it… between the income tax and the integrated account so the income tax should now be fully paid… ATO Staff: Yep. Caller: It will be paid it's just slow people over Christmas not paying so… ATO Staff: There's a lot of background noise, am I on loud speaker? Caller: No. ATO Staff: Okay, in regards to the income tax, I can see there's an amount payable there, of $38,660.38. Caller: Yep, I've just paid that. ATO Staff: And in regards to the integrated client account, the CAC account, there's an amount payable there of $570,240.05. Caller: Yeah so I've just paid the 38 in total and 65 to the integrated, and I'll probably pop in another hundred next week… (Inaudible). ATO Staff: Yep, there's also another debt on another CAC account, the director penalty payment. There's a payment there um of, I think that's where, you made a $1,000 payment towards that debt on the 13th of November 2017, and the running balance on that one is $383,223.46. Caller: Sorry, director penalty… which… $1000? Was that from part of the 370? ATO Staff: No, it's actually… so there's 383,223 on one account and there's another account with 570,240. Caller: How could that be, so this business… ATO Staff: Yeah, director penalty… just give me a moment I'm going to look into that further, I haven't got too many of these ones. Caller: It has to be the same amount, and I didn't put $1000 to it, unless somebody internally put that in… ATO Staff: Bear with me… I can see there's extensive notes on the account, is it okay if I pop you on hold for a few minutes while I read all the notes? Caller: Yeah yeah, read through it. ATO Staff: Thank you. HOLD ATO Staff: Thanks for holding Nathan, sorry about the wait. Okay I've looked into that and it looks like the case has been referred to a case officer. So what I'm going to do now just to clarify, because it does look like a direct []sic penalty payment that is separate, but just to clarify, they're looking after this debt at this point in time so I'm going to go through to them, advise them that you called and they should be able to take another call and give you more understanding of what that direct [sic] penalty is relating to. Is that okay? Caller: Yeah. HOLD ATO Staff: Thanks for holding there, sorry about the wait. Okay so I've tried numerous times to get in contact with the case officer looking after this case. I've been unable to do so, so what I'm going to do is I'm going to send them an email as well as an escalation activity advising them that you've called. Could I get a preferred contact telephone number? Caller: [Telephone number redacted]. Are you able to tell me if the payment arrangement I made in November is in place or? ATO Staff: No there's no payment arrangement in place at this point in time. Caller: Who was the lady I spoke to… and I've got a full record of the conversation… ATO Staff: Yeah that's fine if you've got… when did you call, the last time you called? Caller: Um, I spoke to a gentlemen because there was an issue with one of my accounts, I tried to make another payment and some of the accounts had been locked for some reason which is another issue… yeah, um so I tried to make another payment… anyway. So I've resolved that, but I've just got to um… I'm just surprised it's not in place."
The common theme running through these conversations is the defendant's asserted belief that there was a payment arrangement in place. There is no mention of DPN liabilities at all. His statement on 8 November 2017 that he was calling "to sort out a payment plan" was followed by his assertion on 6 December 2017 that "I thought I'd already done a payment arrangement and I was working towards it" and that if one was not in place as he had believed to be the case, he would "need to set it up again", as the extracts from the conversations set out in the preceding paragraphs demonstrate. All of this was repeated in the call of 19 January 2018.
All of this changed in the telephone conversation of 23 January 2018, which is the conversation principally relied upon by the defendant. This telephone conversation is set out in full detail further below, but it needs to be seen in the context of these prior conversations.
It should also be noted that the first attempt to serve the plaintiff with the statement of claim the subject of these proceedings occurred on 23 January 2018 and, as is acknowledged in the defendant's own affidavit material (see below), there appears to have been an attempt at service shortly before his telephone conversation with the ATO officer on 23 January 2018.
The statement of claim the subject of these proceedings was served on the defendant on 6 February 2018. On 19 February 2018 the defendant sent an email blaming the delay in payment on "late payment from clients", adding that "we are more than confident about recovering all the monies" and putting forward another payment plan.
On 7 March 2018 the defendant sent the following email to the ATO: "From: Nathan Kedwell [Email address redacted] Sent: Wednesday, March 07, 2018 10:20 AM To: Donegan, Emma Subject: RE: Payment Arrangement Proposal - Synergy HR (Aust) Pty Ltd [DLM=Sensitive:Legal] [AGSDMS-DMS.FID3391586] Importance: High Sensitivity: Confidential Hello Emma, I wanted to ensure clarity in relation to a number of inaccuracies contained within your below response as I move forward to address the manner in which this matter has been handled. In reference to your points: 1. We have already submitted BAS statements for the current financial year and the ITR you speak of isn't even due yet. Using the previous year's submission as a guide, which your client routinely does to determine potential liabilities, they know full well the debt is unlikely to increase substantially. 2. We have already submitted the Tax return for FY15/16 and all BAS information is up-to-date. They are completely aware of the financial situation. 3. In spite of your client's repeated unwillingness to enter into a debt arrangement we have continued to make large regular payments in order to reduce to amount owing and continued to engage in regular contact in order to resolve the matter. 4. The debt has not increase substantially We submitted a BAS for the final quarter which I advised we likely over what we owed. 5. What do you mean by continual debt? All companies, unless they are forward paying all taxes, are in debt to the tax office until the submission of their reports and subsequent payment. You have made a point about concerns over our ability to maintain a payment proposal however I noted the following factual statements: - Your client has actively avoided entering into a payment arrangement for over 6 months on repeated occasions This has manifested itself in various manners such as failing to record the details of attempts to enter into an arrangement, hanging up on phone calls during payment proposal discussions and failing to reconcile payments made against the correct debts in line with PS LA 2011/20 Taking all conduct into consideration it is clear these are deliberate acts aimed to manufacture a scenario whereby the taxpayer falls into default and remains personally liable for certain amounts owing - We have previously and continue to make regular large payments over and above those suggested in the payment plan - Your client has been provided our receivables outstanding report clearly detailing monies owed well in excess of the tax owed - We have had not [sic] business go under and only one previous payment arrangement which was paid early and in full My phone call on the 8th of November 2017 was approximately 30 mins in duration I discussed and verbally agreed to a payment plan in detail There was nothing more I could have done to complete the process as, for the final 5 to 10 mins of the call I was sitting on hold waiting for the ATO representative to complete the internal admin In my view we entered into an arrangement and I subsequently commenced payments under the arrangement only to be later informed no arrangement was recorded on file Given this and subsequent conduct I've come to the conclusion this was a deliberate act aimed at ensuring the matter would proceed to a litigated resolution and ensure damage to me personally and professionally. The allocation of payments already made is not a recent issue, rather payments from over 6 months ago have still not been applied in line with PS LA 2011/20 In terms of the relevant note: Director penalty liabilities Where a payment is received (in full or in part) in relation to a director penalty liability, you must allocate the payment to reduce the penalty on the director's account, and the corresponding parallel liability on the company's account If the payment is for less than the full amount, it will reduce the penalty on the director's account, and will be allocated against the company's earliest parallel liability In accordance with the order of allocation (see Attachment C), parallel SGC liabilities will be cleared first and then PAYG withholding. I have made repeated calls to your client requesting that this maladministration be corrected, something I shouldn't have had to do Payments we made from as far back as September 2017, after the DPN notice was issued, remain unreconciled in the above manner I subsequently received a statement of claim, containing a deliberately false and misleading affidavit, lodged on the 11th of January 2018 claiming I still owed the amounts listed on the DPN in full Along with the other conduct detailed, I can only conclude this was a deliberate attempt to damage me personally and pursue legal action in clear violation of your client's obligations to act as a model litigant. I remain deeply disturbed by the manner in which this matter has been dealt with and the apparent abuse of power and process which appears to have gone on I have tried to ensure a persecution complex didn't develop to overtake rational thought however when all the events and conduct are viewed objectively it is clear an individual or group within your client has targeted myself and/or the industry for harassment and used their unfettered power and resources to manipulate engagements with taxpayers in order to cause maximum damage to the individuals concerned and related entities. I note with interest the Plutus Payroll debacle which came to light in 2017 and helped explain why we were unduly targeted over the past few years however we are nothing like that scenario, have always charged for our services and did not engage in sham contracting or directors I also note that Plutus Payroll made contact numerous customers of mine prior to their collapse and after I had been audited by the ATO which is a matter I feel now requires further investigation into who was privy to the data held by the ATO in relation to market competitors of Plutus Payroll. We will not be opposing the wind up application as the pattern of behaviour and malicious intent with which they have engaged with me to date leads me to the conclusion that would be an exercise in futility I will work with whomever the court appoints to resolve the issue which will no doubt result in a far worse return to your client than the full repayment I have repeatedly proposed It is clear now however that recovery of the monies owed was likely not the aim of the actions taken to date. Regards Nathan"
I next set out the defendant's evidence as to whether the first four payments, made between 19 October 2017 and 19 January 2018, were paid in reduction of the DPN liability, as opposed to the other tax liabilities which Synergy owed to the plaintiff (there is no dispute that the final payment of $5,000 made on 23 January 2018 was made towards the DPN, as the conversation of 23 January 2018 confirms). These payments were not made by either the plaintiff or by Synergy but by Minerva, as is set out in paragraph 8 of the Defence.

The defendant's explanation for the first four payments not being made correctly

The defendant did not use his own personal bank account to make payments. His explanation is set out at paragraphs 28-33 as follows: "28. As I describe above, each of the Payments were made using funds advanced by Minerva to me for the purpose of meeting the debt the subject of the DPN. 29. As I have described above, I borrowed the necessary funds from Minerva and I caused Minerva to loan to me the funds so the Payments could be made. I did that on the basis that the Payments ware solely for and to be applied solely to my debt the subject of the DPN. 30. When I caused the Payments to be made to the ATO I did not intend them to be applied to any other tax debt of mine or any other person or entity, including Synergy. 31. I did not make the Payments from my personal bank account as, as at those dates, my personal bank accounts had daily transaction limits of $5,000. Having regard to the size of the Payments, it was impractical for Minerva to advance funds to me by making payment to my personal bank account and for that account to then make the Payments daily in $5,000 increments in satisfaction of the DPN. It was for this reason that the Payments were made from Synergy's bank account. 32. In making the Payments I was not using Synergy funds. I was using my own funds that I had obtained from Minerva. Synergy and Minerva did not enter into any agreement for Minerva to loan funds to Synergy. Minerva did not make any loans to Synergy in the period 20 October 2017 to 24 January 2018. At that time Minerva did not otherwise owe Synergy any money. I did not loan to Synergy, or otherwise makes available to Synergy for its purposes, any funds in the period 20 October 2017 to 24 January 2018. 33. It Is my recollection that when I physically transacted the Payments referred to in Paragraphs 20 arid 23 above I did so via internet banking and using the BPAY function, it Is my recollection that I did as follows: a) I logged on to internet banking for Synergy, in the case of the Payments referred to in Paragraph 20, and for Minerva in the case of the Payments referred to in Paragraph 23; b) I then selected a tab titled something similar to "Transfers, payments & BPAY"; c) I then selected the option "Pay a bill via BPAY"; d) I was then taken to a screen ("BPAY Screen"). The BPAY Screen looked something similar, although perhaps not identical, to that set out in the payment receipts at Tab 6 of NK-1. I recall that the BPAY Screen requested me to select: (a) the account the payment is to be made from; (b) the person to whom the payment is to be made; (c) a reference number for the payment; and (d) the amount being paid. e) I selected from a drop-down menu the relevant Synergy or Minerva account, as the case was, to make the payment from; f) I selected the "Payee" being something like "ATO" or "tax Office Payments" from a drop-down menu of potential payees; and g) I entered the amount to be paid, for instance, in the case of the payment on 19 January 2018, I entered the amount of "$65,000.00"; h) It is my recollection that once I selected the ATO or "Tax Office Payments" as the payee the box titled "Customer reference number" automatically prefilled on the screen with the last "Customer reference number" for a payment made to the ATO. I do not now recall whether in transacting the Payments I overrode the automatically prefilled "Customer reference number" by entering a different number or whether I simply left the pre-filled "Customer reference number" untouched. I know that in making the Payments on 19 and 23 January 2018 I did not quote the "Reference number" [reference number redacted] set out on page 3 of the DPN. I did not know it was there. In making the Payments I made a mistake in not entering the "Reference number" [reference number redacted] into the "Customer reference number" on the BPAY Screen and either leaving the pre-filled number untouched or by entering a different reference number. That does not mean that I intended to pay a bill or debt other than the DPN In making the Payments. I did not. In making each of the Payments I only ever intended to pay down my debt set out in the DPN."
The defendant's claim is that in the course of carrying out this procedure, he "came to, unknowingly, quote the wrong payment reference number in making the payments" (defendant's written submissions, paragraph 24), and I note that he opens his conversation on 23 January 2018 with an explanation of this kind.
This was not a case where the defendant only owed PAYG payments to the plaintiff. There were substantial other sums owing as well, and the defendant was having discussions with the plaintiff's staff about entering into a payment arrangement, as the conversations described in more detail below confirm.
The defendant was, however, less than frank with the ATO officer he spoke to on 23 January 2018, in that at no time did he make it known to the ATO officer that any of the payments were payments from him in reduction of his DPN liability from funds loaned from Minerva and that there had been no direction to put these four previous payments towards the DPN liability. This was despite the defendant being familiar with the process involved and having read the relevant documentation: "Q. And you knew that at no time prior to 23 January had you indicated to the ATO that any of the four payments that had been made previously were to be allocated towards your DPN liability"? A. I hadn't expressly indicated that, no. I had not expressly indicated that, no Q. You had not, sorry, I don't‑‑ A. Expressly indicated that, no. Q. You've agreed with me that you hadn't told the ATO to allocate any of those payments towards your DPN liability? A. No." (T 86-87)
He gave the same evidence at T 88 lines 20-34: "Q. You agree, don't you, that at no time prior to that, this conversation, 23 January, had you asked the ATO to allocate any of those full payments that had been made prior to 23 January towards your DPN liability? A. No, and that's correct, yes. I thought I'd answered that one. Q. And that was neither done by way of telephone, or by correspondence? A. Correct. Q. There's no letters attached to any of your affidavits, where you advised the ATO that any of those four payments were payments towards your DPN liability? A. No. Q. And there's no note of you asking any ATO officer to allocate those payments to your DPN liability? A. No. Before the 23rd, no."
I note the defendant repeated this evidence again at T 95 line 49 to T 96 line 2 and T 103 lines 19-48.
The plaintiff admitted that there was nothing in the payments suggesting that the payments came from him, as opposed to some other entity, namely Minerva, the existence of which was not revealed to the ATO: "Q. There is certainly nothing in those payment descriptions which suggest that those payments are a payment from you? A. Correct. Q. Or that those payments were to be paid towards your DPN liability? A. No. Q. If you wanted to make it clear to the ATO those payments were payments that were made by you that should be allocated towards the DPN why didn't you put in the description Kedwell DPN payment? A. Because the descriptions on the top line are auto generated? On the bottom line I use a general description so I can allocate it. There's no inference in terms of so I can know to track it. There's no inference whatsoever in terms of my intention with it. Q. Well I'll ask any questions about your intention, I asked you why you didn't put the description Kedwell DPN payment? A. Because it was not relevant. Q. Why did you transfer the money to Synergy in circumstances where the last payments were straight transfers from Minerva? A. Why did I transfer it? Q. Yes, why did you transfer the money from Minerva to Synergy then to the ATO? A. Speed. I wanted to get the money to the ATO as quickly as possible." (T 93-94)
However, if speed was the issue, there were other ways in which the money could have been transferred just as quickly: "Q. There's nothing in your affidavit is there which suggests that you contacted the bank to talk about whether you could increase your own personal limit? A. No. Q. Your BPay limit? A. No. Q. There's nothing in your affidavit which suggests that you went to the bank and tried to do any of these transactions over the counter? A. No. Q. Likewise the same for the two payments made by Minerva? A. No it would have been inefficient." (T 94)
The defendant claims that he intended and caused Minerva to loan him funds which he then used to discharge his liabilities to the plaintiff. However, there is no documentation to support this assertion. In particular, there is no evidence of the existence of any alleged loan agreement between Minerva and the defendant, let alone the terms of that alleged loan. Not only is there no loan agreement, but there are no minutes of meeting of directors recording any such resolution by the directors to that effect, no evidence of consideration and no financial records beyond bank records. The only objective evidence, as summarised by Mr Narayan in his submissions in reply, concerning the defendant's intention is: 1. the 2017 Payments were funds transferred from Minerva to Synergy with the description in Minerva's bank statements, such as "Payment Synergy HR" and "SHRA ato deposit" and in Synergy's bank statements with descriptions such as "pymt Minerva BPO Pty" and "ATO Dep 200K"; and 2. the 2018 Payments made in January went from Minerva's bank account to the ATO directly and carried such descriptions as "Shra payment", which the defendant admitted in cross examination stood for Synergy: T 92 lines 25-27.
Mr Narayan goes on to point out that the 2017 payments were paid into the Synergy's RBA, the fourth payment (made on 19 January 2018) having been received on 23 January 2018 and made by Minerva to Synergy's income tax account. When the defendant contacted the plaintiff on 19 January 2018 (and again on 23 January 2018) he said that the payments had been made towards Synergy's income tax liability and that $65,000 was to be allocated towards Synergy's RBA debts, requesting that the payment be transferred to Synergy's RBA (see the Ms Alam's affidavit of 9 May 2019 at paragraph 17(j) to 17(l)).
The plaintiff has disclosed all its files and records in its affidavit material. The defendant acknowledges that there is no documentation produced by the plaintiff capable of evidencing any loan (such as contract from Minerva or other documents).
The 2017 payments were paid into Synergy's RBA while the fourth payment (19 January 2018), received on 23 January 2018, was made by Minerva to Synergy's income tax account.
It was in these circumstances that the defendant contacted the plaintiff on 19 and 23 January 2018 in the circumstances described by Ms Alam in her affidavit of 9 May 2019 (at p. 7): "(i) "Inbound call from Nathan Kedwell in relation to SYNERGY HR (Aust) PTY LTD Nathan wished to confirm receipt of payments made to the CAC account - confirmed these for him Nathan wished to further discuss the account - as per previous notes advised that he will need to contact the solicitor handling the case and provided the details No systems updated" (ii) "Full payment transfer request $65,000.00 from IT to CAC. Receipt number: 15574. Receipt dated: 19/01/2018, Requested by: Nathan Kedwell" (iii) "Urgent action required for transfer request due to Wind up litigation in progress"."
A description of "Urgent action required for transfer request due to Wind up litigation in progress" is not a description of a DPN. Given the central role played by the defendant in terms of keeping records and holding a sole directorship, he was not depending upon other persons. He acknowledged in re-examination that it was his job "to track where the money is being sent" (T 93).

Should an inference be drawn from the non-production of Minerva and/or Synergy books and records?

The defendant could have produced the books or records of Minerva, just as he could have produced the books and records of Synergy, or other company records which would have objectively supported the existence of a loan to him, even if there was no written agreement: see Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191 at [156]; see also s 1305(1) Corporations Act 2001 (Cth) and the observations of Nettle J in VL Finance Pty Ltd v Legudi (2003) 54 ATR 221 at [30]. He has not done so.
I have been asked to draw an inference that an experienced company director such as the defendant, who is well aware of this obligation to keep and maintain books and records under s 286 Corporations Act 2001 (Cth) has failed to produce those books and records in circumstances where the only inference that can be drawn is an inference that it would not have assisted him: Jones v Dunkel (1959) 101 CLR 298. The facts set out above would support the drawing of such an inference. That leaves the court with the defendant's statement of intention. That is all that can support the terms of the alleged loan. However, I note the warning of the High Court of Australia in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd at [35] and [40]. I also note the warning of Finkelstein J in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2005) Aust Contract R 90-213 that it will only be in very clear cases that courts will infer a contract from conduct in the absence of written or oral communication that evidences the exchange of mutual promises (at [45]) (see also Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499).
The conduct relied upon to establish the existence of a contract or agreement, whether oral or written, must, on an objective assessment, evince a contract with sufficiently clear terms. The mere coincidence in financial terms between the sum asserted to have been loaned and the amount of the DPN is insufficient for the present purposes. This is particularly the case given the objective evidence which is available demonstrating that, at all relevant times in 2017 and 2018 (apart from the fifth payment), these payments were being made by Synergy in respect of its debts as opposed to the DPN.

Conclusion: No evidence of a loan

I am satisfied that the objective evidence as outlined by Mr Narayan (see above) and the admissions of the defendant in both cross-examination and re-examination make clear that there is no evidence capable of establishing any alleged loan between Minerva and the defendant for any purpose, let alone the purpose of discharging the DPN.
All of the evidence points to urgent action because of the transfer request due to the wind up litigation being in process. I have noted above the defendant's consistent evidence that at no time did he make known to the plaintiff that any of these payments were in reduction of his DPN liability. The defendant acknowledged at the commencement of the 23 January 2018 conversation that he had received recent information about DPN liability; his attempts to introduce the topic of his liabilities under the DPN for the first time must be construed in light of the sudden and recent knowledge he received to this effect.

Allocation of payments

However, if Synergy had made payments to which a direction was attached to the effect that these be allocated towards the DPN, the defendant would still not be entitled to succeed. This is for the following reasons: 1. The defendant acknowledged failure to advise the plaintiff that each payment was in fact a payment towards his DPN liability (see in particular T 86-88, 95 and 103). 2. The defendant had opportunities to make it clear that these payments were to be made towards the DPN liabilities in the course of his four conversations between 8 November 2017 and 23 January 2018. When he did not do so, the plaintiff was entitled to apply the payments in accordance with the plaintiff's internal practice guidelines as set out in Ms Alam's 9 May 2019 affidavit at paragraphs 14 to 15: "14. As the payments were received from Synergy on its RBA without any instruction as to their appropriation, they were allocated to the earliest debt on Synergy's RBA in accordance with the published Practice Statement Law Administration 2011/20 - Payments and Credit Allocation (PSLA 2011/20). PSLA 2011/20 provides, at paragraph 5, that that the "policy for allocating a payment for which no direction is received is all payments will be allocated to the earliest (oldest) debts within an account except where the payment relates to a 'Listed Payment'". 15. At pages 9 to 19 of Exhibit JA-1 is a copy of PSLA 2011/20 Payment and Credit Allocation." (See also s 8AAZLA of the TAA: Deputy Commissioner of Taxation v Falzon (2008) 74 ATR 76 at [29]-[41])

Mistaken payments?

Although not pleaded, a claim of mistaken payment appears to be set out in the defendant's submissions (paragraph 54). However, the evidence before the court is that all five payments were made towards Synergy's RBA debts and references to "misunderstanding, accident, oversight etc" (at paragraph 58) cannot advance this argument further.
I am satisfied from the plaintiff's submissions concerning his conversation on 8 November 2017 that he was in fact aware of there being separate accounts (see T 67). He acknowledged in cross-examination that the ATO officer clearly identified that there were different reference numbers to be used for the different accounts (line 38). In those circumstances, any submission that his failure to seek that the first four payments be allocated towards the appropriate liabilities was some sort of mistake is without foundation.
In addition, I note that there is no assertion that the plaintiff received these funds knowing of the mistake; to the contrary, the defendant intended to make payments and the plaintiff received them in circumstances where the defendant clearly intended to make the payments. If there were any mistake, it could only be as to the identity of the payee, as Mr Narayan points out in his written submissions in reply (paragraph 34, citing Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589 at [36]-[37]; see also David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353).
Finally, if there were to be a pleading of mistake, I note Mr Narayan's submission that the appropriate pleading would have been by way of cross-claim under s 134 of the District Court Act 1973 (NSW) (T 126).

The alternative defence of estoppel

The primary defence, namely that the defendant via his payment agents Synergy and then Minerva was playing the his debt the subject of the DPN on his behalf, has failed. The alternative defence is that the plaintiff is estopped from denying that the amounts were to be paid in reduction of the DPN.

The relevant elements of estoppel

The elements necessary for the defendant to be successful in establishing his defence pursuant to an estoppel have been helpfully summarised by counsel as follows: 1. There was a promise or sufficiently clear and unambiguous representation, which is either express or implied: Legione v Hateley (1983) 152 CLR 406. 2. The plaintiff created or encouraged "an assumption that a contract will come into existence or a promise be performed or an interest granted" to the defendant by the plaintiff: Austotel Pty Ltd & Anor v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 610; DHJPM Pty Limited v Blackthorn Resources Limited [2011] NSWCA 348 at [52]. 3. The defendant was induced to adopt the assumption: Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 413-414. 4. The defendant acted, or refrained from acting, in reliance on the assumption. Any reliance on the assumption must be reasonable: Waltons Stores (Interstate) Ltd v Maher. 5. The plaintiff knew, or intended, that the defendant act or refrain from acting in reliance on the assumption: Waltons Stores (Interstate) Ltd v Maher. 6. The defendant has, or will, suffer a detriment if the assumption is not fulfilled: Commonwealth v Verwayen (1990) 170 CLR 394 at 429. 7. The plaintiff has failed to act to avoid the detriment by fulfilling the expectation or otherwise: Waltons Stores (Interstate) Ltd v Maher.
The representation pleaded in paragraph 12 of the Defence appears to have undergone a metamorphosis in the submissions and is now put as being an "unequivocal representation to the Defendant that there was "currently" $3,223.46 left on his DPN debt and that the Payments were received by the ATO for the DPN debt".
The defendant was cross-examined on the representation pleaded, not upon this representation, and the plaintiff takes objection to this change in the case. Nevertheless, I have determined this issue in relation to both asserted representations.

Estoppel and the ATO - A preliminary issue

A preliminary issue is whether, even if elements of estoppel may be made out, estoppel lies against the plaintiff at all, on the basis that an authority cannot be prevented from carrying out its public duties passed upon it by legislation: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105; Federal Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466; Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax (1997) 98 ATC 5051; Bellinz Pty Ltd v Federal Commissioner of Taxation (1998) 84 FCR 154. The principle was explained by Hill J in AGC (Investments) Ltd v Federal Commissioner of Taxation (1991) 21 ATR 1379 at 1396 as follows: "The Income Tax Assessment Act imposes obligations upon the Commissioner and creates public rights and duties, which the application of the doctrine of estoppel would thwart."
Counsel for the defendant challenges the applicability of this general principle on the basis that no assertion of estoppel against the operation of any statute is involved, but rather the limited estoppel by representation which has been recognised by the authorities as being "potentially available" (written submissions, paragraph 75, citing Federal Commissioner of Taxation v Winters (1997) 97 ATC 4967 and Deputy Commissioner of Taxation v Roget [No 2] [2014] WADC 25 at [91] and [96]-[98]). The defendant submits that this requires a consideration of the continuing distinction between common law estoppel and equitable estoppel and the different form that each of these remedies takes.
The defendant's primary estoppel argument is estoppel by representation as to an existing fact which, when certain conditions are fulfilled, establishes a state of affairs by reference to which the legal relations between the parties is to be governed (Walton Stores (Interstate) Ltd v Maher at 400). Once the plaintiff comes to the court to commence proceedings for debt, the plaintiff stands in the same position as any other litigant (Greenslade v Federal Commissioner of Taxation (1978) ATC 4625 at 4629) and this means that common law estoppel is available.
The defendant's common law estoppel argument is on the basis of an evidentiary rule. By doing so, the plaintiff is subject to and bound, so far as the proceedings are concerned, to the same rules of evidence as any other litigant (written submissions, paragraph 84).
As I noted in Deputy Commissioner of Taxation v Scarf [2013] NSWDC 114 at [93]-[97], any estoppel set up by the defendant must be directed to either or both of preventing the Commissioner from asserting the existence of liabilities established by a statute and/or preventing the Commissioner from exercising a discretion conferred upon him by a statute.

Factual examples of estoppel arising from the ATO's statutory role

Counsel for the defendant refers me to two authorities which are asserted to support such a finding: 1. Deputy Commissioner of Taxation v Roget [No 2] [2014] WADC 25; and 2. Federal Commissioner of Taxation v Winters (1997) 97 ATC 4967.
However, the highest that these decisions can be put is that they permitted directors to resist a summary judgment application rather than determining the issue on a final basis. The unattractiveness of this proposition is noted by Mukhtar ASJ in Deputy Commissioner of Taxation v Simone [2019] VSC 346 at [79]: "[79] It is convenient but not impressive for the defendant in this case to instil Winters and assert the presence of an available estoppel in the face of a statute. That case is very much confined to its peculiar facts, as estoppels are. Courts apply the doctrine as called for to prevent unconscionable conduct in particular circumstances. The species of estoppel here is estoppel by representation. The underlying principle is frequently taken from this statement of Dixon J in Thompson v Palmer (omitting citations): The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct … ; or because the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of assumption; or because he directly made representations upon which the other party founded the assumption. But, in each case he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted.
A helpful consideration of this issue is set out by Black J in In the matter of Precise Training Pty Limited [2018] NSWSC 1383, where his Honour, referring to both these decisions, sets out at [29]-[30], states: "29. Mr O'Mahoney recognises that Courts have generally concluded that estoppel does not lie against a fiscal authority on the basis that it cannot be prevented from pursuing a statutory duty to assess tax in accordance with law and refers to Federal Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466 at 479; Bellinz v Federal Commissioner of Taxation (1998) 84 FCR 154. Mr Krochmalik, who appears for the Commissioner, in turn draws attention to the statutory provisions in the Taxation Administration Act which provide that, regardless of pending objections or a review of the assessment, the Commissioner may recover tax debts that are due. Mr Krochmalik also submits that no estoppel can lie, on the face of the statute, to prevent the Commissioner from enforcing tax debts, where the legislation provides for that to occur. Mr Krochmalik also draws attention to the observations of Barrett J in ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue [2003] NSWSC 697; (2003) 59 NSWLR 196 at [70]-[76], where his Honour reviewed the relevant case law and held that no estoppel precluded the Commissioner from making, by means of the notices purportedly issued under s 37(1) of the Stamp Duties Act 1920 (NSW), the claims for payment challenged by the plaintiff in those proceedings. In Smith v Bone, In the Matter of ACN 002 864 002 Pty Ltd (in liq) [2015] FCA 319; (2015) 104 ACSR 528 at [44], Gleeson J similarly referred to authority for the proposition that no conduct on the part of the Commissioner of Taxation could operate as an estoppel against the operation of the tax legislation. 30. Mr O'Mahoney submits that this general principle does not prevent PTPL from raising a limited estoppel of the kind for which PTPL presently contends. Mr O'Mahoney referred to several decisions in which Courts have declined to grant summary judgment and allowed claims for estoppel against fiscal authorities to proceed to trial: Deputy Commissioner of Taxation v Winters (1997) 37 ATR 209; Remuneration Planning Corporation Pty Ltd v Commissioner of Taxation (2001) 46 ATR 400; Deputy Commission of Taxation v Roget (No 2) [2014] WADC 25; BBLT Pty Ltd v Chief Commissioner of the Office of State Revenue (NSW) (2003) 54 ATR 323. I accept that that principle suggests, by analogy, that such an estoppel may be sufficiently arguable against a fiscal authority, in a proper case, to give rise to a genuine dispute. However, the several matters to which I refer below, which undermine the factual basis of the asserted estoppel, and displace any suggestion that the Commissioner has departed from the alleged representation, are such that that principle does not assist PTPL." [Emphasis added]
I respectfully adopt Black J's reasoning and, for these reasons, do not accept the argument made by the plaintiff that if the defendant did establish the elements of estoppel, and if those elements were capable of giving raise to "a genuine dispute" (to use Black J's terms), the estoppel could not arise, although only in the very clear and limited circumstances both Black J and Mukhtar J outline.
As it happens, that is not the case here, as there other issues for determination in relation to the defendant's claim for estoppel, which I now propose to consider, have all been determined in the plaintiff's favour, as I now set out.

What was the representation?

The alleged representation pleaded by the defendant is set out in paragraph 12(a) of the Defence filed in October 2018 and the particulars which are attached (the full text of this is set out at paragraph [3] above).
The date of 23 January 2018 coincided with the final payment of $5,000. What, then, is the representation relied upon for the previous four payments which constitute the lion's share of the sum paid by the plaintiff between 19 October 2017 and 23 January 2018?
The submission put in the defendant's written submission at paragraph 38(g) is that: "(g) In context, words could scarcely be clearer, that the ATO Officer, reviewing the ATO systems re the Defendant as they stood at that time, made a clear and unequivocal representation to the Defendant that there was "currently" $3,223.46 left on his DPN debt and that the Payments were received by the ATO for the DPN debt." (Paragraph 38(g) of the defendant's written submissions)
The plaintiff complains (written submissions, paragraph 42) that this was neither pleaded nor particularised but, as already indicated, I intend to approach the determination of this issue on both this basis and on the basis as pleaded in paragraph 12 of the defence.

The conversation of 23 January 2018

I set out the conversation of 23 January 2018 in full: "Telephone conversation between Nathan Kedwell and an ATO Representative on 23 January 2018 ATO Representative: Hello, your speaking with Hannah, how can I help you today? Nathan Kedwell: Yeah hi, I was wanting to speak with someone about a director penalty notice matter ATO Representative: Yes sure, Nathan Kedwell: So I can talk to you about that? ATO Representative: Yep, Nathan KedwelI: Okay great, so just in relation to it, obviously it went to an old address, that's fine I appreciate I have got a copy of it now. We've made payments to the account and I just realised reading through the letter it's a different BPAY code to resolve this matter, I'm not sure why but we've made payments to the account of well over that amount. Now can you determine for me where it's at, at the moment, because I talked to someone a week or two ago and they were telling me no payments have been applied to the PAYG. ATO Representative: Okay I can certainly have a look and see what's gone on with that one. Do you have the ABN or TFN for the entity? Nathan Kedwell: ACN? Is ACN alright? ATO Representative: I can't actually… Nathan Kedwell: ABN? ATO Representative: ABN yes Nathan Kedwell: I'm in one of these screens in the business portal, hold on, bear with me, try to open it It is, sorry just bear with me, ok, it is 57 604 859 001. My name is Nathan Joel Kedwell. ATO Representative: Okay, and the name of the entity? Nathan Kedwell: Synergy HR (Aust) Pty Limited, ATO Representative: Okay I do just need to verify your identity before I can access the companies accounts for you. Sorry my system is being a little bit slow to pull up the information I need. Nathan Kedwell: You're right. ATO Representative: Okay can 1 get you to confirm your date of birth for me? Nathan Kedwell: 28th of the first 78 ATO Representative: And if you attended an Australian university, which university did you attend? Nathan Kedwell: University of Newcastle ATO Representative: And if you declared dependents on your most recent tax return, how many did you declare? Nathan Kedwell: Umm... 2015… Two ATO Representative: If you have a self-managed super fund, who is the auditor? Nathan Kedwell: Oh actually, hold on, I have got a letter here, I have no idea who audits it, I haven't done anything with it, Sorry It was organised by the accountant ATO Representative: That's fine I can ask something else if you don't have that one Nathan Kedwell: Sugarloaf Accounting and Taxation, is that them? Sugarloaf. ATO Representative: It would be the name of the specific auditor. Nathan Kedwell: Oh okay. ATO Representative: Yeah, if you don't have that one I can ask something else instead. Nathan Kedwell: Janet Haywood is that it? ATO Representative: Okay and how would you have lodged your most recent income tax return? Nathan Kedwell: Via I think my account did it, TJC Accounting ATO Representative: Okay let's sea Okay so do you know what the total is of the amounts that have been paid? Nathan Kedwell: Well actually up until yesterday, I paid 5 yesterday, I'm just looking at the business portal, Since the letter, since 28 September. Is that what you're asking? ATO Representative: We have received a total of $65,000 Nathan Kedwell: That was a recent just transfer into the account ATO Representative: Yes but we did receive the payment for that one but it came through to the wrong account. Nathan Kedwell: Yeah that went through to the income and they just transferred it over because I requested them to put it into the integrated. ATO Representative: We have received a series of other payments as well. Nathan Kedwell: Have they been applied against...because I understand from the practice statement they are supposed to be applied against PAYG because we don't have any SGC liability, so they should to be applied against the PAYG liability against the director's liability notice. I just want to make sure it happened because I'm starting to fear that hasn't been done correctly. ATO Representative: Okay well I'll just start with the most recent payment that we have received and you can take notes and tell me if there are any missing? Nathan Kedwell: Yep. ATO Representative: Okay we received one on 13 November for $30,000. Nathan Kedwell: Ah, there were two before that. ATO Representative: This is just the most recent one that we've received. Nathan Kedwell: Oh okay sorry yeah. ATO Representative: We're going backwards chronologically. Nathan Kewell: Okay, yeah, yeah. So there was $65,000 which went in which was re-transferred today. ATO Representative: Yes that's been applied to the correct account now. Nathan Kedwell: 5 which will probably be recognised sometime today probably. ATO Representative: It's on our system immediately Nathan Kedwell: Till tomorrow probably ATO Representative: Yep so the $30,000 was received by us on the 13th. Nathan Kedwell: Yep. ATO Representative: Then there was $85,000 that was received on the 1st November, Nathan Kedwell: Hmmm ATO Representative: $200,000 which was received on 20 October. Nathan Kedwell: Yep. ATO Representative: $1,379.31 which came on 22nd September. Let's see Nathan Kedwell: That's fine, that's before the letter, so what I'm principally concerned about obviously is expunging the, ensuring this is addressed and making sure the rest of it is paid. ATO Representative: Okay so were there any payments that you've made other than the $5,000 one from today? Are there any other payments that have been made that have not appeared on the account? Nathan Kedwell: No, no. I don't think there is a discrepancy in terms of payments, ATO Representative: Oh good. Nathan Kedwell: What I'm saying in terms of allocation or where they are being allocated, When I spoke to a guy the other day... ATO Representative: We do give first priority to any amounts that are for PAYG withholding or superannuation just because those are amounts for employees as opposed to... Nathan Kedwell: When 1 spoke to a guy the other day he got confused. He said there's something for $300,000 and something for $500,000.1 said mate I'm pretty sure they are the same amount ATO Representative: Oh okay so there's two accounts technically. One is for the standard account where everything goes. Nathan Kedwell: I didn't realise that I assumed. ATO Representative: And we create a separate account that just has the PAYG withholding amounts in and how it works is. Nathan Kedwell: And that runs in parallel does it? ATO Representative: Yes. Nathan Kedwell: I didn't realise that, I was just making payments to the same account. Sorry about that. ATO Representative: That's fine, that's what you're meant to do with that one. Nathan Kedwell: Yeah, so what I want to make sure is, cause what he said to me was... ATO Representative: Once the balance reaches zero we escalate for a reconciliation. Nathan Kedwell: What he inferred to me was there had only been $1,000 payment applied to that $300,000. ATO Representative: Yeah, no, we give priority to PAYG withholding as opposed to... let's see what else is on this one..."
It is clear from the above conversation that the ATO officer is following the defendant's lead, not initiating a new proposal for an agreement that these sums will be credited to the DPN. This is relevant because it is at this point that the term "directors penalty matter" is mentioned for the first time. Once again, it is put to the ATO officer as a "done deal" that is just a question of maths, not a new proposition: "Nathan Kedwell: Okay so in terms of the directors penalty matter, has that been resolved or not? ATO Representative: No because the total amounts that have been paid are not as much as the... Nathan Kedwell: So how much is to go? Is it a running balance? ATO Representative: Okay I have to go do maths now. Nathan Kedwell: You're right okay. ATO Representative: I don't really like maths, it's not my friend. Nathan Kedwell: I think it's just like the 5 ATO Representative: It won't be too far off Nathan Kedwell: It's just under, like 5 or something ATO Representative: Let's see."
Although this is put by the defendant to the ATO officer on the basis of a mathematical sum to be performed, the real reason for his concern is next explained: "Nathan Kedwell: I just had someone turn up at an old address of mine with a writ, I assume it's related to this and I thought it had been resolved so... ATO Representative: Okay let's see Nathan Kedwell: Sorry what's, what is, what's going to be, do you have, I don't have a copy of the writ. What's on the writ? I assume it's related to this? ATO Representative: I can double check that for you in a minute. Nathan Kedwell: Okay great thanks. So all up, not for the 5 that hasn't been recognised, its 285 plus 30 plus 65 its 380 and the total of these two is like 381 or something ATO Representative: Okay so yeah it really won't be very far off being paid in full. Nathan Kedwell: Nope. ATO Representative: Being paid in full. Nathan Kedwell: I paid 5 yesterday. My concern is that it hadn't been correctly applied and therefore they were continuing down the path in terms of the directors penalty notice. That's my concern. ATO Representative: Yeah so once we receive payment for this one we escalate to the accounts team and they do what is called a reconciliation and they credit any payments that have been made to the separate director penalty account. Nathan Kedwell: Okay. So it is a running balance? Can you see how exactly, like I said I paid 5, Is there like a thousand or two thousand outstanding on that separate account ATO Representative: Okay so there is currently $3,223.46 left on the other one but- if you've made a payment of $5,000, then that will cover it, so once that one clears we can then escalate that for reconciliation Nathan Kedwell: Okay, good, I'm glad, so yeah okay so that was different to the information. ATO Representative: So you will need to address the remainder of the account. Nathan Kedwell: Oh that's fine I am addressing that, I rang up in Oct… it's none of your concern but I rang up in November and made a debt arrangement and now people claiming it wasn't made. Good times, good times. ATO Representative: I understand."
This paints a picture of the defendant as having not only made a debt arrangement that the ATO had reneged on, but also having told the ATO, in relation to each of these four previous payments, that these were by way of reduction of the PAYG liability. These assertions (or inferences) are, at best, misleading.
It is at this stage that the second mention of the "writ" (namely the process server who had attempted to serve the defendant shortly before the call), but the information given to the ATO officer is the suggestion that all that is missing from the DPN is the last small payment: "Nathan Kedwell: Anyway I just want to make sure obviously that this is resolved because I don't want to be... and in terms... was the writ about this issue I am not sure. Nathan Kedwell: I'd assume if they're turning up a personal address of mine. ATO Representative: I'll just double check, it depends, there are various legal documents and it is very strict as to which address we provide them to. Nathan Kedwell: Sure. ATO Representative: We do often provide courtesy copies to extra addresses just so it can be sure that it has been received. Nathan Kedwell: Sure. ATO Representative: So, okay. It looks like that one has been referred to our legal team. Nathan Kedwell: Hmmm ATO Representative: Has anyone previously advised you with the contact details for the solicitor that's handling this one going forward? Nathan Kedwell: No, not relating to the... Are you, or would he be able to give me a copy of the writ? ATO Representative: So the AGS Solicitor is a she, her name is Emma Donegan and her contact number is [redacted] Nathan Kedwell: Donegan is it? ATO Representative: Hmmm, which is D-O-N-E-G-A-N Nathan Kedwell: Yep, [redacted]. ATO Representative: Yep, [redacted]. Nathan Kedwell: [Redacted]… Alright cool, and can you tell from your system whether a writ has been issued or something that's on her side? ATO Representative: So Chat will be something that will be...everything now other than basic account explanation would go through that solicitor. Nathan Kedwell: Can you just make a note to check tomorrow if it doesn't go through today and have that escalation resolved, umm because like I said the 5...it might turn up today, I'm not sure. ATO Representative: If it was made by BPAY it can take up to two working days, so if it was made today… probably… it looks like previous ones have shown up the following working day so it should show up later today Nathan Kedwell: Hopefully today. Alright, so if you can just make a note to have a quick check tomorrow and then escalate to have it resolved… correlated and resolved... that would be good and I'll resolve the rest of it ATO Representative: Yes sure. Nathan Kedwell: Great stuff, alrighty, thank you for your assistance."
The defendant draws my attention to the following issues: 1. The defendant and the ATO officer are talking about the DPN debt. 2. The defendant refers to having payments "well over that amount" in circumstances where there are "different BPAY codes" and expresses concern that "no payments have been applied to the PAYG." 3. The ATO officer makes the following statements which are asserted to be in relation to full payment of the DPN: 1. "It won't be too far off"; 2. "Okay so yeah it really won't be very far off being paid in full"; 3. "Being paid in full"; 4. "Okay so there is currently $3,223.46 left [as at 23 January 2018 at about 3.11pm]" 5. "Okay so there is currently $3,223.46 left [as at 23 January 2018 at about 3.11pm] on the other one but if you've made a payment of $5,000, then that will cover it." 1. The ATO officer must have had both the defendant's and Synergy's account details on the screen before her. 2. There is a reference to "currently $3,223.46 left" which must be the defendant's DPN debt. 3. As at 23 January 2018, Synergy's RBA outstanding balance was $505,103.85, so Synergy's RBA did not "currently" have $3,223.46 left (as it "currently" had $505,103.85) and Ms Alam accepted the payment of $5,000 could not "cover it". The DPN was for $384,301, so the amount left for the DPN would be $3,223.46.
The defendant submits, in those circumstances, that there was a clear and unequivocal representation that payments were being allocated to the DPN and there was "currently" only $3,223.46 left.
I do not accept this submission. The context of the conversation was that the ATO officer, upon being told by the defendant that the sums were directed towards the DPN, was simply adding them up, not making a representation about the ATO's past or future conduct in relation to these sums. The defendant well knew, although the ATO officer did not, that none of those payments made prior to 23 January had been credited to the separate DPN account, as the defendant admitted in cross-examination (T91). What is more, the defendant acknowledged in cross-examination that there was nothing in the conversation that suggested that the payments would have been allocated to his DPN liability (T 91) and even agreed that there was no representation that the plaintiff would take no further action against him (T 91). There is thus no representation of any kind at all, as well as no assumption or expectation by the defendant, who well knew that the process server was on his way with the statement of claim in these proceedings.
In arriving at this conclusion I adopt the observations of Mukhtar AsJ in Deputy Commissioner of Taxation v Simone at [80]-[82]: "[80] Although this formulation speaks of assumptions, and later estoppel cases speak of expectations, the principle remains that any representation on which an estoppel is said to exist must be clear and unambiguous, and is not to be taken by argument or inference. Further, the principles of estoppel have evolved largely in the context of private law and not legal relations arising from legislation. Depending on the nature and construction of the enactment, and the purpose of the relevant provision, an estoppel cannot be used to render a statutory provision nugatory. In the legislative context, and depending on the nature and construction of the enactment, the connection between estoppel and the doctrine of ultra vires means that the statute is supreme, and depending on a construction of the relevant statute and its purpose, it is generally not possible to hold a public officeholder to a representation that exceeds the powers or defeats the duties given under the statute. [81] In this case s 222AOE prescribes that the Commissioner is not entitled to bring penalty proceedings until the end of 14 days after giving a director's a notice of the unpaid amount and notice that the director will be liable to pay a penalty unless any one or more of the four statutory steps are taken. That section is a precondition to action. There is no statutory or operational discretion in the face of the statute to extend the 14 day time limit. The Commissioner is the person charged to administer that law, and bound to do so in accordance the statute. In that situation, an argument that there is nevertheless room for the operation of any doctrine of estoppel has no real prospects of success. I think what is left to the Commissioner is an unstated discretion to forbear or defer commencing legal proceedings after the statutory expiration of the statutory notice, possibly to allow discussions with the liable party and an agreement for payment over time or some other concession. [82] Apart from that legal matter, I think the estoppel argument flounders at the threshold anyway as the defendant's evidence does not show a clear and unambiguous representation for something as significant as adherence to a particular statutory process with time limits. The evidence of a putative representation that the notice would be put on hold is, I think, of little to no weight. It is hearsay upon hearsay. It is non-specific. It is inadequate for the defendant to asseverate that 'the ATO agreed', without the defendant giving proper and precise attribution on such a significant matter. The only evidence which is put forward to sustain the asserted estoppel is a conversation by telephone with an unnamed person that the time for compliance of the notice would be extended until the return of an ATO officer. Elsewhere, there is no identification of the person through whom it is said an estoppel should be visited on the Deputy Commissioner. There was said to be a meeting in May 2009, but by then the 14 day period had expired. It is said that one Tyrone Smit from the ATO 'agreed the matter should be dealt with in Melbourne and the DPNs were on hold pending resolution.' But, the DPNs had already expired. No estoppel can run on a mistaken or constructed assumption by a defendant." (Footnotes omitted)
The defendant's estoppel claims fail at the first hurdle, in that there was no representation of any kind. The ATO officer was responding to the facts as given to him by the defendant and was, as he put it, "doing the maths" in accordance with that information. The information the defendant was giving to the ATO officer was, I am satisfied, misleading; the true situation about what information the ATO had been given by the defendant was in fact as conceded by the defendant in cross-examination.
There is thus no representation by the ATO officer capable of amounting either to the representation pleaded in the defence or the reformulated representation put forward in the defendant's written submissions (paragraph 38(g)). The need for such a representation to be sufficiently clear or unambiguous has been repeatedly stated since first explained in Legione v Hately, and I note Mr Narayan's reference to authorities to this effect set out at paragraphs 38 and 39 of his submissions.
As to the evidence in relation to this finding, I note that I am asked to make a Jones v Dunkel inference concerning the failure to call this ATO officer. The basis for this submission was not identified with any clarity. The terms of the conversation are not in dispute. I decline to make any such finding.

What would the defendant have done had the representation not been made?

There is a further difficulty with the estoppel claim, in that the defendant fails to establish reliance and/or detriment: Walton Stores (Interstate) Ltd v Maher at 428-429.
At paragraph 51 of his affidavit, the defendant sets out the steps he would have taken had the "representation" (to use his word) not been made by the plaintiff: "51. Had the ATO informed me, prior to 7 March 2018, that the amount the subject of the DPN was outstanding and that the Payments had not been applied to the DPN, I would have taken steps to avoid Synergy being wound up so that funds could be paid to the DCT in satisfaction of the DPN from funds owing to Synergy by its debtors. The steps I would have taken are as follows: a) engaged legal representation to defend the winding up application made against Synergy; b) caused Synergy in the meantime to vigorously pursue its debtors for payments of the amounts outstanding by them to Synergy; c) paid the amount said to be outstanding and the subject of the DPN from funds received by Synergy from its debtors; d) sought or explored the possibility of entering into a payment plan with the ATO in respect of the DPN, while I explored my legal rights in respect of my Payments not being applied by the DCT in reduction of the amount owing in the DPN; e) considered the possibility of Minerva providing a loan to Synergy for the purpose of Synergy paying the liability the subject of the Statutory Demand; f) sought or explored obtaining loans from family and/or friends to pay the DPN."
In fact the defendant actually had already taken, and continued to take, some of these steps, without success: 1. As to the payment plan, the conversations between the defendant and the ATO officers prior to 23 January made it clear that the defendant did not merely seek the possibility of entering into a payment plan, but tried to persuade ATO officers that he did in fact already have a payment plan on foot. In fact, the plaintiff was not willing to accept the payment proposal made on 19 February 2018, as Synergy had a number of outstanding obligations, a poor compliance history, increasing debt, aged debt and a lack of supporting financial information, as Ms Alam sets out in paragraph [17(r)(ii)] of her 9 May 2019 affidavit. 2. As to seeking to recover debts, the defendant told ATO officers in his emails, in support of his payment plan proposals, that he was vigorously seeking to recover funds from company debtors and was confident that these would be recovered. 3. As to seeking legal advice, the defendant did not contact the solicitors for the plaintiff in relation to the winding up proceedings until 19 February 2018, two days prior to the first return of the proceedings.
Additionally, in practical terms it was all too late, as the statement of claim in these proceedings was filed on 11 January 2018 and, according to the affidavit of service of Mr Moore sworn on 15 February 2018, an attempt was made to serve the defendant at his home address. At paragraph 34 of his affidavit of 26 March 2019, the defendant sets out on 23 January 2018 he "became aware that the DCT was attempting to effect service of documents on me" which I note refers to the attempt made by the process server to serve a document on his father at 3:00pm that day (the affidavit of service) and he telephoned the ATO in respect of the DPN at 3:11pm on the same day (paragraph 35 of the plaintiff's affidavit of 26 March 2019).
The plaintiff was served with the statement of claim on 6 February 2018 and he would certainly have been aware on that date that the plaintiff proposed to seek recovery of the DPN from him. The plaintiff acknowledges as much in his email of 7 March 2018, set out above, and it is clear that he had decided not to take any steps to prevent the winding up of Synergy as at that date. Whatever the date in question, if the defendant is relying upon the representations of 23 January 2018, he had a very narrow window in which to take the steps in question.
There is an additional problem. The defendant has failed to establish that the winding up of Synergy could have been prevented in that it could rebut the presumption of insolvency. There is no material before me to assist me in making that assessment apart from the information that there were at least two creditors owed approximately $962,959.37 as at 20 February 2018. Synergy was not trading and had debtors owing approximately $216,275.87. The balance of the DPN as at 15 February 2018 (which remains unchanged) is $331,783.61. I also note that a supporting creditor filed a notice of appearance in the winding up proceedings, in relation to debts owed to it by Synergy in the sum of $238,902.11 (Ms Alam's affidavit at paragraph [17(p)]).
Accordingly, even if estoppel could be established, it was simply too late for the defendant to take any of the steps he deposes to at paragraph 51 of his affidavit.
It was open to the defendant to provide evidence of the availability of further funds from Minerva and/or family and/or friends, but there is no evidence put before me.
By the time of the 23 January 2018 visit of the process server, or by 20 February 2018, and certainly no later than 6 March 2018, all of which are before the hearing of the winding up application, the defendant was well aware that the plaintiff had not allocated the payments made by Synergy and Minerva to his DPN liabilities: see affidavit of Ms Alam dated 8 May 2019 at paragraphs [17(o) and (r)]. I am satisfied from the defendant's own evidence that he knew a process server was looking to serve him with the claim based on the DPN earlier on the day he had the 23 January conversation with the ATO officer.
Therefore, at the time of the winding up proceedings, the representation said to have been made by the Commissioner could not have had continuing effect on the defendant: Walton Stores (Interstate) Ltd v Maher at 418-419.
This means I cannot accept that, had he not relied on the plaintiff's purported representation, the defendant would have taken various steps to prevent the winding up of Synergy.
The balance on the DPN as at 15 February 2018, which balance remains unchanged is $331,783.61. Accordingly, Synergy's debtors would not have been sufficient to satisfy the DPN liability.
Accordingly, if I have erred in holding that there is no estoppel of any kind, I am satisfied that the defendant would not have been successful in preventing the winding up of Synergy or taking any of the other steps listed in paragraph 51 of his affidavit. There is thus no detriment as a result of the plaintiff's purported representation or representations.

Conclusions

The defendant is liable for the amount claimed as the defendant has failed to establish the defences pleaded.
I was not addressed on costs, or in relation to any claim for interest. Costs should follow the event, but I have granted liberty to apply which may be sought in relation to any of the orders made.

Orders 1. Judgment for the plaintiff for $332,531.61. 2. Defendant pay plaintiff's costs. 3. Liberty to apply in relation to these orders and any claim for interest. 4. Exhibits retained for 28 days.

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: 31 October 2019

Stamp Duties Act 1920(NSW)

Deputy Commissioner of Taxation v Kedwell

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Judgment (22 paragraphs)

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Cases Cited (22)

Cited By (2)