The better construction of s 222AOJ(3) is that the test is an objective one, corresponding to that of Scott LJ. There is nothing in any of the relevant sections suggesting that all that matters is the actual knowledge of the director or that a director who is ignorant of the law or of any fact of which he ought to know is in a better position than a director aware of the law and aware of facts which he found out. In other words, there is nothing in the legislation to displace the prima facie meaning of "reasonable" in s 222AOJ(3) which adoption of Scott LJ's approach would ascribe to it. Hence, on its true construction, s 222AOJ(3) gives a defence to a defendant to proceedings for the recovery of a penalty imposed by s 222AOC if the defendant proves that he or she took all steps which were reasonable, having regard to the circumstances of which the defendant, acting reasonably, knew or ought to have known, to ensure that the directors complied with s 222AOB(1). It is not necessary to decide in this case whether the qualification to the test propounded by the appellant, namely that it was legitimate to take into account the knowledge and abilities of a particular director which were superior to those of an ordinary reasonable director: Mr Saunig did not have knowledge and ability superior to those of an ordinary reasonable director.
26 The evidence before the trial judge was tendered in a jumbled and confused way. It was difficult for the trial judge, in her ex tempore judgment, to reduce it to order, and it remains difficult to do so. Indeed, it was one of the appellant's themes that Mr Saunig bore the burden of proof in relation to the defence relied on, and the unsatisfactory nature of the evidence in point of chronology and precision alone rendered it impossible for that burden to be discharged.
27 However, for the purposes of deciding this case it is not necessary to seek complete precision, because Mr Saunig's case proceeded on various assumptions. One assumption was that for some time he took no part in the management of the company in the sense of being abreast of its taxation position. Another assumption is that once he did become aware of its taxation position, he made attempts to remedy the problem, but these attempts were constantly obstructed by the failure of the other directors to attend meetings he called, or, when they did attend them, to respond rationally to the company's taxation predicament. He saw these assumptions as favourable to his case, and no other assumptions even approaching conformity with the evidence could have been more favourable to his case. It is possible to dispose of this appeal by accepting these assumptions for the sake of argument.
28 Let it be assumed that for some period which included the early months of the seventeen month period in relation to which the appellant sued Mr Saunig, he was not attending to the company's taxation affairs, was trusting one or other or both of the other two directors to handle those affairs properly, and was ignorant of the fact that that role was not being satisfactorily performed. Even on that assumption, it cannot be said that during that period Mr Saunig established that he took all reasonable steps to ensure that the directors complied with s 222AOB(1). While even in a relatively small organisation like the company in this case it may not be right to require each director to take personal steps to ensure compliance with s 222AOB(1)(a), it was incumbent upon Mr Saunig to ascertain what the company's duties in relation to tax instalments deducted from employees' wages were and to ensure that some system was in place which would produce compliance. There was no evidence of any such system. There may have been an issue between the parties as to whether the s 222AOB(1) duty arose from the day each deduction for employees' wages was made (which the appellant favoured) or whether it only arose from the 7th day of the next month (which Mr Saunig appeared to favour at an early stage, though not at a later stage, of the argument below). The better construction is the former, but on either view Mr Saunig has not demonstrated that the s 222AOJ(3) defence has been made out. Applying the construction of s 222AOJ(3) adopted above, Mr Saunig's conduct must be judged not only by a reference to what he knew, but also by a reference to what he ought to have known. He ought to have known that there were deduction payments, that the deduction payments should have been passed to the Taxation Office and that they were not being passed to the Taxation Office.
29 There is a certain harshness in the speed of action which s 222AOB(1)(b)-(d) calls for because in the case of a company which cannot pay the deduction under paragraph (a), the time allowed within which to arrive at an agreement with the Commissioner, appoint an administrator, or commence the winding up of the company is very short. The harshness was no doubt seen as appropriate, because the evils of tax payers deducting taxation payments from employees' wages and not passing them to the authorities are considerable and perhaps widespread. The evils are not limited to the tax avoided: they extend to the use made of the money, namely either theft or use as working capital, thereby permitting companies to continue to trade which in truth are not capable of continuing to trade lawfully. To adopt the language of Gzell J in Deputy Commissioner of Taxation v George [2002] NSWCA 336 at [33], an "early sign of problems in a company is its living on the false reserves of non-remitted" deductions from employees' wages. The harshness is to some extent ameliorated by the fact that the directors cannot be sued until a s 222AOE notice is served, and by the time it has been served and a further fourteen days have passed, the director will have had a period sufficient to procure the company to take one of the four steps referred to in s 222AOB(1). If one of the steps is taken, the director ceases to be liable. Harsh or not, however, the legislative scheme is in this respect clear. By the time the notice was issued in this case, Mr Saunig had had an ample period within which to take the s 222AOB(1) steps for the months before he was aware of the problem. However, he sought to answer that difficulty by contending that by then the other directors were not cooperating.
30 Let it be assumed, then, secondly, that at all material times after he found out the facts Mr Saunig was receiving no cooperation from the other two directors. On that assumption, it was not open to Mr Saunig acting alone to cause the company to carry out the first step contemplated by s 222AOB(1)(a), namely to pay the deductions, because the company cheque required the signatures of two directors.
31 Nor was it open to Mr Saunig acting alone to cause the company to carry out the second step contemplated by s 222AOB(1)(b), namely to make an agreement with the Commissioner. To do that would have been an act of management in relation to the business of the company, and hence something committed by Article 66 to the directors. The non-cooperation of the other two directors would mean that either no quorum would be achieved at a directors' meeting pursuant to Article 73, or no unanimity could be achieved for the purpose of Article 77.
32 Nor was it open to Mr Saunig acting alone to cause the company to take the third step contemplated by s 222AOB(1)(c), namely to appoint an administrator under s 436A of the Corporations Law. Section 436A provided:
"(1) A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that:
(a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and
(b) an administrator of the company should be appointed.
(2) Subsection (1) does not apply to a company that is already being wound up."