Deputy Commissioner of Taxation v Soong

Deputy Commissioner of Taxation v Soong - [2009] NSWSC 495 - NSWSC 2009 case summary — Zoe

[12]

The parties' cases 4 The plaintiff's case was that Palmarac, Entarmi and Dimpara did not make the payments due in relation to PAYG deductions withheld from employees' salary and wages, on the due dates. The Income Tax Assessment Act imposes an obligation on directors to ensure that such payments are made, or to take other specified action (see Div 9 of Part VI). Non compliance automatically renders directors 'liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the company's liability' (s 222AOC(1)). There is a continuing obligation imposed by s 222AOB(3) to bring about compliance, if the payment required by s 222AOB(1) is not made. 5 Recovery of the penalty requires the Commissioner to give a director notice of the 'details of the unpaid amount of the liability' and the alternatives available (s 222AOE). If the company meets its obligations or takes other remedial action within fourteen days after the notice is given, the penalty is automatically remitted. This is the last chance a director has, to negate the liability for the penalty (see Kolistas v DCT (2005) 59 ATR 551 at [26].) 6 In this case, the required notices were given, but the administrator was not appointed within fourteen days of the notice being posted on 29 November 2007, with the result that the penalties were not remitted. 7 The plaintiff relied on both the provisions of s 255-50 of Schedule 1 of the Taxation Administration Act to establish a prima facie case and s 255-45 of Schedule 1 of that Act, to establish a prima facie case in relation to the matters stated in certain certificates, which were in evidence. There was no issue between the parties as to these matters, or as to the address to which the notice was posted, or that it was there received. 8 As to service of the notices, the plaintiff relied on the provisions of s 222AOF of the Income Tax Assessment Act, submitting that where service is so effected, a notice is deemed to have been given (see DCT v Meredith [2007] NSWCA 354; 69 ATR 876.) Evidence of non receipt is irrelevant, as is evidence that the address obtained from relevant ASIC records is no longer current, or is inaccurate (see Kavanagh v Federal Commissioner of Taxation (2007) 157 FCR 551.) 9 The defendant's case was that while the Court as presently constituted was bound by the judgment of the majority in Meredith, in this case, what was in issue was the date from which the fourteen day period specified in s 222AOG commenced, a matter not in issue in Meredith. What arose for consideration in this case, namely the construction of s 222AOG, that is, whether the period commenced from the date the notice was posted, or the date it was received, showed that the majority in Meredith had erred, by failing to have proper regard to the ordinary meaning of the word 'give' where used in s 222AOF. When the factual circumstances which had here arisen were considered, it was apparent that the approach of Giles J, in dissent in Meredith, was correct, with the result that the notices were not given to the defendant until they were received on 1 December 2007. The appointment of the administrator on 14 December, was therefore within the time specified.

[24]

B . Signification. General sense: To make another the recipient of (something that is in the possession, or at the disposal, of the subject). 17 Undoubtedly the defendant may have understood that the notices were only 'given' to him, as the letters and notices provided, once they were received and that accordingly, he had fourteen days from that date, to take action, so that the penalty would be remitted. 18 For the plaintiff, however, it was argued that in the scheme of this part of the Income Tax Assessment Act, the word 'give' has a different meaning, as the majority in Meredith concluded. The crucial sections are s 222AOE, s 222AOF and s 222AOG, which provide: 222AOE Commissioner must give 14 days' notice before recovering penalty The Commissioner is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice that: (a) sets out details of the unpaid amount of the liability referred to in subsection 222AOC(1), (1A) or (2) (whichever relates to the penalty); and (b) states that the person is liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount, but that the penalty will be remitted if, at the end of 14 days after the notice is given: (i) the liability has been discharged; or (ii) an agreement relating to the liability is in force under section 222ALA; or (iii) the company is under administration within the meaning of the Corporations Act 2001; or (iv) the company is being wound up. 222AOF How notice may be given (1) If it appears from ASIC documents that a person is, or has been within the last 7 days, a director of the company, the Commissioner may give the person a notice under section 222AOE by leaving it at, or sending it by post to, an address that appears from such documents to be, or to have been within the last 7 days, the person's place of residence or business. Note: Sections 28A and 29 of the Acts Interpretation Act 1901 are also relevant to giving a notice under section 222AOE. (2) In this section: ASIC document means a return: (a) lodged with the Australian Securities and Investments Commission under section 205A, 205B or 346C of the Corporations Act 2001; or (b) lodged with a person under a law that, for the purposes of the Corporations Act 2001, is a previous law corresponding to section 205A, 205B or 346C of that Act. 222AOG Remission of penalty if section 222AOB, 222AOBAA or 222AOBA complied with before notice period ends If: (a) a penalty is payable by a person under this Subdivision; and (b) section 222AOB, 222AOBAA or 222AOBA (whichever relates to the penalty) is complied with at a time when the Commissioner has not yet given the person a notice under section 222AOE, or within 14 days after the Commissioner gives the person such a notice; the penalty is remitted because of this section.

[25]

19 The plaintiff argued that the notion of receipt is not comprehended in these sections. It is the act of posting the notice, not its receipt, which has the result that the notice has been given by the plaintiff, as the Act requires. As the defendant accepted, that is certainly the import of the judgment of the majority in Meredith. 20 Nevertheless, while the advice given in the letters and notices sent to the defendant in this case, was undoubtedly advice given in accordance with the words used in the statutory scheme, in their terms the letters and notices did not clearly indicate to the defendant when the 14 day notice period expired. Nor did they indicate that the 14 days had to be calculated from the date that the notice was posted, rather than the date on which it was received. 21 Indeed, what date the documents were posted, would certainly not have been apparent to the defendant. They might have been posted when the letters and notices were dated, but it could have been later, although obviously, it must have been before they were received on 1 December. It is, it seems to me, understandable in the circumstances, that the defendant proceeded on the basis that the 14 day notice period ran from the date on which he received the notices. That, however, is not sufficient to dispose of what here lies between the parties. 22 It was common ground that the Court as here constituted is bound by the decision in Meredith, with the result that the orders sought by the Commissioner must be made. Nevertheless, it was argued to be relevant that the circumstances in Meredith were different to those which arose here for consideration. In that case, the defendant had led evidence that the notice had never been received. In this case, the evidence was that the notice had been received, with the result that the question to be decided is the date from which the 14 days specified in s 222AOG must be calculated - the day that the notice was posted by the plaintiff, or the date on which it was received by the defendant. 23 The meaning of words in issue are those appearing in s 222AOG(b), namely if the applicable section is complied with 'within 14 days after the Commissioner gives the person such a notice'. It is in s 222AOF, that the legislature has specified how a notice may be given and s 222AOE, which provides that the Commissioner may not recover a penalty until 'the end of 14 days after the Commissioner gives to the person a notice'. 24 It was argued for the defendant that in Meredith, in considering the meaning of s 222AOF, no account was taken by the Court of Appeal of the ordinary meaning of the word 'give'. If that word, which is also used in s 222AOG, is given its ordinary meaning, which includes receipt, then the 14 days there specified would be calculated from the date that the notice was received by the defendant, not the date that it was posted by the plaintiff. That this was a possibility, was hinted at by the majority in Meredith, Basten AJ observing at [86]:

[27]

25 Like in Meredith, in this case there was also no issue as to the date that the notice was posted. What was here in issue was the time available to the defendant to take the action provided for in s 222AOG, if the penalty which flowed from s 222AOE, was to be remitted. 26 Despite what Basten JA observed at [86], given the conclusions his Honour earlier reached as to the meaning of s 222AOF, it was accepted that the conclusion here urged for the defendant, as to the meaning of s 222AOG, was not available. Nor could the provisions of s 160 of the Evidence Act 1995 (Cth) lead to the result urged. 27 Certainly, it is apparent that neither in the judgment of Basten JA, nor that of Giles JA, was any reference made to the ordinary meaning of the word 'give', where used in s 222AOF, or how it was used in s 222AOG. Presumably no submissions were directed at questions such as this, given the factual situation which arose for consideration in Meredith. 28 For the plaintiff it was argued that the word 'give' was not used in its ordinary meaning in these provisions. Section 222AOF contemplated that the act of giving a notice was complete, once the notice was left at, or was sent by post to, a particular address. In that statutory context, the word 'give' did not permit of the concept of receipt, as the majority concluded in Meredith, even where used in s 222AOG. While, undoubtedly, the statutory scheme was a harsh one, giving a director, in reality, less than 14 days in which to take one of the steps available under s 222AOG, which would result in the remission of the penalty, if the notice was posted, rather than left at the relevant address, that was the consequence of the approach which the legislature had adopted. 29 That outcome, it has to be observed, appears to be somewhat curious. It was accepted for the plaintiff that there was another means of service of a notice available to the Commissioner, namely service in accordance with the provisions of s 28A and s 29 of the Acts Interpretation Act 1901 (Cth) (see the note to s 222AOF(1)). It was further accepted for the plaintiff that if the notice was served in accordance with those provisions, then the question of delivery would be relevant. In such a case, the time from which the 14 days provided in s 222AOG ran, would be calculated from the date the notice was delivered to the relevant address. 30 That result flows from the provisions of s 28A and s 29 of the Acts Interpretation Act, which provide:

[41]

36 Because this mode of service was not relied upon in argument below beyond passing references to s 29 of the Acts Interpretation Act (Cth), and because this matter involves a factual dispute that could not now be resolved on appeal, I make no finding as to the application or otherwise of s 28A. Dealing only with the legal arguments for or against the potential application of s 28A, I would express the provisional view that s 28A (and s 29) are capable of application as alternative modes of satisfying s 222AOF of the Income Tax Assessment Act 1936 (Cth) where the notices are posted in conformity with those provisions to the last-known place of address. 38 Support for the conclusion of the majority in Meredith was also found in the judgment in Kyogle Shire Council v Muli Muli Local Aboriginal Land Council (2005) 62 NSWLR 361, which was also concerned with the question of whether service was effected by the act of posting a notice, there required by the Local Government Act 1993. 39 As I have noted, in this case, it is not a question of non receipt of the notices, but rather a question of the time from which the period specified in the notices ran, when the notices were posted, a mode of service contemplated by s 222AOG. 40 In Meredith, Basten JA referred to the provisions of the Evidence Act and their potential impact at [86], the relevant provisions providing: 160 Postal articles (1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted. (2) This section does not apply if: (a) the proceeding relates to a contract; and (b) all the parties to the proceeding are parties to the contract; and (c) subsection (1) is inconsistent with a term of the contract. (3) In this section: working day means a day that is not: (a) a Saturday or a Sunday; or (b) a public holiday or a bank holiday in the place to which the postal article was addressed.

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