42As foreshadowed earlier in this judgment, the Defendant advanced three submissions upon which the DPNs were said to be invalid under s.269-25. Each will be considered in turn.
Submission 1: Failure To Distinguish Between Current And Past Obligations
43The parties agreed that the Defendant ceased his role as a director of Oakdale on 23 May 2011. An ASIC search conducted on 24 January 2012 (Annexure "H" to the affidavit of Chaya Shettar) confirms this fact.
44The final DPN ("DPN 4") was served on 25 May 2011 - two days after the Defendant ceased his role. Consequently, it was argued by the Defendant that DPN 4 was required to stipulate that he was liable to pay a penalty because of a past obligation he had when a director of Oakdale. At paragraph 12 of the Defendant's written submissions, Mr Beazley contended that, "[i]n respect of a former director, the obligation should be stated in the past".
45Mr Jay, counsel for the Plaintiff, made oral submissions in response to this argument, referring to both the evidence and the governing legislation.
46Firstly, the Plaintiff directed the Court to the affidavit of Myrl Baker. At Annexure "A" to that affidavit was an ASIC search conducted by Ms Baker on 24 May 2011, one day after the Defendant ceased his role as director. The search indicated that the Defendant was still a director at that time (it appears that the ASIC database had not yet been updated). The Court was informed that it is usual practice for changes to not appear on the ASIC database for a period of time (T14.31). On this basis, the Plaintiff submitted that, to the knowledge of Ms Baker, the Defendant was a director of Oakdale as at the date on which she conducted the search, and that it was appropriate for DPN 4 to be expressed in the present tense.
47The Plaintiff directed the Court to the decision of the Court of Appeal in Robertson v Deputy Commissioner of Taxation [2010] NSWCA 58; 239 FLR 29. This was a case concerning the service of a notice under the former provisions of the ITAA 1936 to an address which the ASIC database indicated to be the current address of a director, in circumstances where that address was no longer correct. The Court rejected a submission that the ATO officer should not have relied solely upon the ASIC database. Gzell J (Allsop P and Handley AJA agreeing) (at 36-37 [49]-[60]) observed that ASIC was required to receive, store, and make available to the public, information given to it under the Corporations Act 2001 (Cth), and that a parliamentary intention is evinced that the ASIC database is a reliable source of information.
48The Plaintiff submitted that, therefore, a person who conducts an ASIC search is entitled to rely and act upon the accuracy of the information obtained. I accept that submission. The wording of DPN 4 reflected the status of the Defendant as then disclosed in the ASIC database. Ms Baker was entitled to act upon those records for the purpose of issuing DPN 4. The submission of the Defendant does not demonstrate any defect in DPN 4, let alone a defect which affects its validity.
49Secondly, the Plaintiff pointed to the nature of the obligations on directors under s.269-15, and submitted that the obligation is a continuing one that exists not by reference to whether or not a person is a director, but by reference to the company's obligation to withhold and remit.
50A number of observations ought be made in this regard:
(a)Section 269-15 uses the phrase "from time to time" when referring to directors of a company, thereby implying (understandably) that the directorship of a company may change;
(b)The effect of s.269-15(1) is that, if a person becomes a director at any time on or after the initial day as defined, that person inherits the obligation to cause the company to comply;
(c)Section 269-15(2) provides that, once a person acquires the obligation, he or she continues to be subject to it until one of a given list of events occurs (which list includes the company complying with its obligation).
(d)According to s.269-20(1), a director will become liable to a penalty if, at the end of the due day, the company has not complied with its obligations, and that person was under an obligation to cause the company to comply by reason of having the status of director "at any time prior to the due day". This interpretation is supported by the note to s.269-20(1) which adds that a person is liable to pay, notwithstanding that the person may have stopped being a director before the end of the due day. I note, in accordance with [40] above, that s.269-20(1) does not apply to the first of the periods in respect of which DPNs were issued by the Plaintiff. In my view, however, the predecessor to that section, s.222AOC ITAA 1936 (which is applicable to the first period), is not materially different.
51Accordingly, a proper construction of the legislation indicates that the obligation is indeed a continuing one, and that it survives any renunciation of directorial duty.
52I accept the Plaintiff's submission on this aspect. As the Defendant's obligation is a continuing one, there was no need to express the obligation in the past tense, notwithstanding that he was no longer a director of Oakdale at the time of receipt.
53It follows that there was no reason why the ATO ought to have made changes to DPN 4 upon learning that the Defendant was no longer a director.
54I reject this challenge to the validity of DPN 4.
Submission 2: Failure to State in the DPNs that the Defendant Was Liable to Pay a Penalty Because of an Obligation He Was Under
55The second submission constituted the core of the Defendant's resistance to the relief sought against him. It was submitted that the DPNs failed to comply with the content requirements in s.269-25(2)(b).
56Paragraph 8(b) of the Amended Defence stated that the DPNs issued to the Defendant in respect of Oakdale's failure to remit withheld deductions:
"... failed to state - as required by s.269-25(2)(b) - that the defendant was so liable because of an obligation the defendant then had, or had had, under Division 2 [sic] of Chapter 2 in schedule 1 to the [TAA 1953]."
57The Defendant did not put in issue the validity of the service of the DPNs. So much is clear from his Amended Defence at paragraph 8(a). Furthermore, it was not contended by the Defendant that the Plaintiff failed to set out what the ATO perceived to be the quantum of his liability in accordance with s.269-25(2)(a). Nor was issue taken with regard to the requirement in s.269-25(2)(c) that the Plaintiff explain the circumstances in which the penalty may be remitted. Such circumstances, and the Commissioner's perceived quantum of the Defendant's liability, are plainly set out both in the DPNs themselves and in the respective covering letters.
58Therefore, attention ought be directed solely to the requirements of s.269-25(2)(b) of the TAA 1953, and whether the DPNs satisfied these requirements.
59Section 269-25(2)(b) TAA 1953 has not been considered by the Supreme Court of a State or Territory, or an appellate court. Accordingly, there is no decision which binds this Court or which the Court should follow, as a matter of comity, unless convinced that the interpretation is plainly wrong: Australian Securities and Investment Commission v Marlborough Gold Mines Limited [1993] HCA 15; 177 CLR 485 at 492.
60However, the provision was considered by the District Court of Western Australia in Deputy Commissioner of Taxation v Di Florio [No 2] [2012] WADC 70. This case involved an analogous defence whereby a director argued that DPNs served upon him were deficient on the grounds that they failed to state that he was liable because of an obligation he had as a director.
61In that case, Scott DCJ noted at [33]:
"Counsel were unable to refer me to any cases relating to the provisions of s 269-25 of the TAA and nor was I able to locate any cases relating to that section. Nonetheless, save for the period of notice the provisions of that section are identical to s 222AOE of the ITAA. ..."
62It should be observed at the outset that s.222AOE was not strictly identical to the current s.269-25 in the respects identified by Scott DCJ. Section 222AOE did not include the phrase "because of an obligation you have or had under this Division", a phrase which is pertinent to the submissions advanced in this case.
63The High Court of Australia considered the validity of notices under s.222AOE of the ITAA 1936 in Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; 199 CLR 370. The notices served in Deputy Commissioner of Taxation v Woodhams were virtually identical in form to those served in the present case (see 380-381 [24] of the Court's judgment for the relevant extract). It should be noted, however, that the question of the validity of the notices in that case related to the absence of dates at which time the amount withheld by the respondent fell to be remitted to the Commissioner.
64Relevantly for present purposes, the High Court, in a unanimous judgment, made general statements about the construction of notices in the context of the predecessor legislation. The Court stated that it is the legislative purpose behind the requirement to give a notice that determines the nature and extent of the information necessary to satisfy the statutory requirements (at 384 [33]).
65As to the legislative purpose of the provision in question, the Court stated (at 384 [35]-[37]) (emphasis added):
"[35] The notice in question is addressed to a director of the company. Such a person will ordinarily have access to information concerning the company's liabilities. The notice does not create a liability to pay a penalty, and if there is to be action to recover the penalty under s 221R it will be taken in the appropriate civil jurisdiction. In that event, the rules of court will require the elements of the cause of action to be pleaded and particularised in the ordinary way. A notice before action is not intended to serve the purpose of a statement of claim.
[36] The first purpose of the notice is to inform the recipient of the unpaid amount of the company's liability under the remittance provisions, and of the recipient's liability to a penalty in the same amount. The second purpose, consistently with s 222ANA, is to inform the recipient of the alternative courses available, as set out in s 222AOE(b), which will result in remission of the penalty, the object being to encourage the recipient to take such steps as are necessary to bring about the result that one or other of those courses is followed.
[37] In a number of respects, the due date for remittance of a deducted amount is relevant to a director's liability to pay a penalty, but that is not the liability to which s 222AOE is referring. The section does not require that the notice state details of the facts relevant to the director's liability. That is a function to be served by the pleadings and particulars, if and when action is taken to recover the penalty. Nor does the section require details of all facts relevant to the company's liability. ..."
66In Deputy Commissioner of Taxation v Di Florio [No 2], Scott DCJ observed that the notice served in that case was couched in the same terms as that considered in Deputy Commissioner of Taxation v Woodhams (which, as stated above, was the same in all relevant respects to the DPNs under present consideration). His Honour held that the notice was not invalid, stating:
"38 The respondent says that as the notice does not impose a liability or create a right of action but is merely a requirement for a notice before action, it was not intended that the notice explain the legal basis of the asserted liability but rather was designed to serve the specific purposes, namely those referred to in Woodhams.
39 I agree. The notice sets out the detail of the sums for which the respondent contended that the appellant as a director of the company was liable by way of a penalty. The notice in the present case is couched in the same terms as that considered by the High Court in Woodhams."
.
67The decision in Deputy Commissioner of Taxation v Di Florio [No 2] is a helpful example of the construction of the current provisions by application of the principles in Deputy Commissioner of Taxation v Woodhams. Although not attracting the rule of comity, it remains useful to this Court in determining the issues raised in the present case.
68It can be accepted that the legislative purpose of the notice required under s.269-25(1) of the current legislation is the same as the legislative purpose in respect of the former notice under s.222AOE of the ITAA 1936. Such an assumption is made on the basis that the amended legislation was designed as a rewrite of the previous Act, and not a major change to legislative policy: Explanatory Memorandum, Tax Laws Amendment (Transfer of Provisions) Bill 2010, [1.8]-[1.9].
69That legislative purpose was made clear by the High Court in Deputy Commissioner of Taxation v Woodhams and can be said to comprise two elements:
(a)to inform the recipient director of the quantum of the company's unpaid liability under the remittance provisions, and of the recipient's personal liability for a penalty in the same amount; and
(b)to inform the recipient of the courses of action available which will result in the remission of the penalty.
70Moreover, the object of Division 269 informs any interpretation of the legislative purpose of that Division. The relevant object is stated in s.269-5 TAA 1953:
"The object of this Division is to ensure that a company either:
(a)meets its obligations under Subdivision 16-B (obligation to pay withheld amounts to the Commissioner) and Division 268; or
(b)goes promptly into voluntary administration under the Corporations Act 2001 or into liquidation."
71This object is consistent with the second arm of the legislative purpose of notices of this sort as referred to above, being to promote the discharge of a company's obligation to remit withheld deductions.
72This interpretation is supported by the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, introducing the 2010 Amending Act:
"[2.13]The penalty regime reflects the public duty on directors to ensure that amounts withheld from payments to third parties are promptly forwarded to the Commissioner. The public duty arises because withheld amounts are similar in nature to amounts held on trust. That is, the directors are in a position of trust and have a duty to protect those monies until they have been forwarded to the Commissioner."
73Extrinsic material of this type is an available aid to construction: s.15AB Acts Interpretation Act 1901 (Cth). Further, the construction that I favour best achieves the purpose and object of the Act: s.15AA Acts Interpretation Act 1901 (Cth).
74It follows that directors ought be held to high standards as regards their duty to ensure compliance on the part of the companies that they control.
75Attention is now directed to the DPNs in this case. As noted above, each of the four DPNs were identical in form. An example of the body of one of the DPNs is as follows:
"In exercise of the powers and functions conferred on me as a Deputy Commissioner of Taxation by a delegation from the Commissioner of Taxation under the provisions of the Taxation Administration Act 1953 (TAA 1953), I give you notice under section 269-25 in Schedule 1 to the TAA 1953 that you, as a director of the company, are liable to pay the Commissioner by way of penalty an amount equal to the unpaid amount of each liability of OAKDALE NEWCASTLE FORMWORK PTY LIMITED, ACN 132 546 546, ("the company") pursuant to subsection 16-70(1) in Schedule 1 to the TAA 1953 in respect of amounts withheld by the company for the purposes of Division 12 in Schedule 1 to the TAA 1953, ..."
76The DPNs then set out the periods in respect of which notice was being given and the sum of the unpaid liability for each period.
77At this point, the following observations ought be made:
(a)The DPNs clearly pointed the recipient to the provision pursuant to which notice was given: "I give you notice under s.269-25 in Schedule 1...".
(b)The DPNs stated that "you, as a director of the company, are liable to pay ...", thereby addressing the particular source of the recipient's liability by reference to his status as a director of Oakdale.
(c)The DPNs then stated that this liability was "pursuant to subsection 16-70(1) in Schedule 1 to the TAA 1953". Section 16-70(1) requires entities that withhold PAYG deductions to remit those amounts to the Commissioner. That section is located within Subdivision 16-B of Schedule 1 to the TAA 1953, which is caught within the scope of Division 269, as provided for by s.269-10 (see [33] above). That is, the director obligations contained in Division 269 apply to directors whose companies have obligations to remit withheld PAYG amounts under s.16-70(1). Therefore, the DPNs addressed the particular provision that was said to give rise to Oakdale's (and, consequently, the Defendant's) liability to make payments to the Commissioner.
78The Defendant, in his written submissions, contended that the DPNs referred only to obligations of Oakdale and not to any obligation of the Defendant. When asked during the hearing to identify the specific form of words which (in the Defendant's submission) were necessary in order to satisfy the requirements of s.269-25(2)(b), Mr Beazley submitted that the following words, or words to the following effect, were required (T22.1):
"Pursuant to 269-10, the company of which you are a director, between 1 January 2010 and 31 March 2010 withheld amounts under division 12, and the company is obliged to pay the Commissioner on or before the due date, and pursuant to 269-15 you as a director of the company, on the date the amounts were withheld, had an obligation to cause the company to pay that amount."
79Mr Beazley did not submit that this was the only formulation which could satisfy what he submitted was required by the statute. However, he contended that wording of this type was necessary to meet the strictures of the legislation.
80It is true that Mr Beazley's formulation would have satisfied the legal criteria. However, the question is whether these words, or words to a similar effect, represent the minimum lawful standard required under s.269-25(2)(b), or whether something less will suffice (and, in particular, whether the contents of the DPNs will suffice).
81The DPNs did not specifically refer to the obligations of directors under s.269-15. However, in my view this does not mean that the DPNs failed to inform the Defendant that he was liable because of an obligation which he had. The DPNs made clear that it was by reason of the Defendant's status as a director that he incurred the penalties. As a director, the Defendant would have had access to information concerning Oakdale's liabilities and the amounts being withheld on behalf of employees for the purpose of remittance to the ATO. Further, as a director, the Defendant ought reasonably to have known of his obligations to ensure Oakdale remitted the withheld monies.
82The DPNs also clearly fulfilled the legislative purpose of notices of this type. They informed the Defendant of the quantum of Oakdale's unpaid liability and of his liability to a penalty in an equal amount, and they made clear what he was required to do to avoid the penalty (allowing 21 days for him to comply).
83The DPNs did not create the liability to pay a penalty: Deputy Commissioner of Taxation v Woodhams at 384 [35]. Such liability accrued automatically upon the failure of Oakdale to remit withheld monies by the due date, of which it ought to have been aware were required to be remitted.
84Furthermore, the DPNs were not designed to serve as a statement of claim, setting out pleadings and particulars: Deputy Commissioner of Taxation v Woodhams at 384 [35], [37]. Instead, they had the simple object, as outlined in s.269-5, of ensuring that Oakdale discharged its obligations to remit withheld monies, by putting the recipient on notice that he would be liable to pay a penalty if such obligations were not performed within 21 days.
85In Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; 165 CLR 71, Mason CJ and Wilson, Brennan and Gaudron JJ affirmed, in the context of bankruptcy notices, that such a notice is invalid if it fails to meet a requirement made essential by the legislation, or if it could reasonably mislead a debtor as to what that person must do in order to comply with the notice.
86Section 269-25(2)(b) does not expressly require the notice to state that the recipient is liable to pay "because of an obligation you have or had under s.269-15". Instead, it refers to an obligation "under this Division".
87By stating that notice was being given pursuant to s.269-25 (a provision located within the Division in question) and by stating that the Defendant was liable to pay because Oakdale had failed in its obligations (in respect of which the Defendant was consequently liable), I am satisfied that the DPNs met the essential requirements of s.269-25(2)(b).
88Furthermore, it cannot be said that the Defendant could reasonably have been misled as to what course of action he was required to take in response to the DPNs. The courses of action were plainly set out.
89I am satisfied that the DPNs complied with the requirements of s.269-25(2)(b). I make this finding in light of the object of the Division (as provided in s.269-5) and the legislative purpose of notices of this sort as outlined by the High Court in Deputy Commissioner of Taxation v Woodhams.
Submission 3: Failure to Provide Separate DPNs for Each Period
90This submission was ancillary to the Defendant's second submission, and was based on the requirements of s.269-25(3).
91The Defendant contended (at [14] of his written submissions) that "[w]here there are two amounts claimed, there is an obligation to inform the Director of the obligation in respect of each amount".
92Section 269-25(3) TAA 1953 provides:
"To avoid doubt, a single notice may relate to 2 or more penalties, but must comply with subsection (2) in relation to each of them."
93In submissions, Mr Beazley asserted that the form of words required to satisfy s.269-25(2)(b) ought be repeated after each period to which the respective notice applied (T22.1-T22.13).
94On a proper construction of these DPNs, one observes that the "notice" is contained in the body of each respective document, being the paragraph commencing "In exercise of the powers and functions conferred on me ...". The periods and penalties to which each DPN applies are then listed thereafter. I am satisfied that this structure complies with s.269-25(3).
95Any recipient would read the operative part of the DPN as applying to each listed period.
96The Defendant's construction would require unnecessary duplication, which would not aid a fair reading of the document or promote an understanding of it. The legislation does not require such an approach.
97I reject the Defendant's third submission.