Deputy Commissioner of Taxation v Trimcoll Pty Ltd

(iv) The parties be at liberty to approach the Court for any different or special order as to costs. Such approach to be made to my Associate within seven days' of the publication hereof.

CATCHWORDS : PRACTICE AND PROCEDURE - leave to amend statement of claim - lapse of time - exercise of discretion - objection for lack of material facts - facts either evidence or particulars - amendment allowed

LEGISLATION CITED : Civil Procedure Act 2005 Income Tax Assessment Act 1936 (Cth)

Buzzle Operations Pty Ltd (In Liquidation) v Breirl [2008] NSWSC 746 Darbyshire v Leigh [1896] 1 QB 554 H.S.D. Co Pty Ltd v Masu Financial Management Pty Ltd [2008] NSWSC 1279 CASES CITED : Kirby v Sanderson Motors Pty Limited [2002] NSWCA 44; (2001) 54 NSWLR 135 Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 R v Williams; Ex parte Australian Building Construction Employees' & Builders Labourers' Federation [1982] HCA 68; (1982) 153 CLR 402 Ritz Hotel Ltd v Charles of the Ritz Ltd (No 20) (1988) 14 NSWLR 124 Tim Barr v Narui Gold Coast Pty Ltd [2007] NSWSC 1306

PARTIES : Deputy Commissioner of Taxation (Plaintiff) Trimcoll Pty Ltd (Defendant)

COUNSEL : D B McGovern SC/ M P Cleary (Plaintiff) M L Brabazon SC (Defendant)

SOLICITORS : Australian Taxation Office, Legal Services Branch (Plaintiff) Charles G. Roth & Co Solicitors (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11920/2003 Deputy Commissioner of Taxation v Trimcoll Pty Ltd

JUDGMENT 1 HIS HONOUR: The Deputy Commissioner of Taxation seeks to amend her statement of claim in this matter. The amendment is opposed. This judgment resolves that issue. 2 Trimcoll Pty Ltd (the defendant) carries on business activities in the building and construction industry. According to the Deputy Commissioner of Taxation ("the Commissioner"), Trimcoll entered into a number of subcontracts with unnamed third-party subcontractors to carry out building and construction work. As a consequence of that, Trimcoll was required, pursuant to the Income Tax Assessment Act 1936 (Cth) and the Income Tax Regulations, to deduct taxation payments from the moneys paid to the subcontractors. It did not. The Commissioner seeks enforcement of the Income Tax Assessment Act ("the Act") and the Regulations made pursuant thereto ("the Regulations"). 3 For the purpose of enforcing the Act and Regulations, the Commissioner filed a statement of claim on 31 July 2003. Trimcoll filed a defence on 11 November 2003. There have been a number of interlocutory hearings and appeals therefrom. 4 On 21 February 2008, the Commissioner filed a motion to amend the statement of claim, with which motion the Court must now deal. The issue raised by the motion is whether the Commissioner should have leave to amend her statement of claim, which involves the details necessary to plead in order to establish a failure to deduct amounts under the Prescribed Payment Scheme (PPS). The relevant provisions are those of s 221YHDA of the Act, which is in the following terms: "221YHDA(1) Section applies where no payee declaration or reporting exemption number etc. This section applies if an eligible paying authority makes a prescribed payment to a payee and: (a) no payee declaration made to the eligible paying authority by the payee is in force when the payment is made; and (b) the eligible paying authority is not a householder in relation to the prescribed payment; and (c) the payee has not quoted a reporting exemption number to the eligible paying authority before the payment is made, or has done so but the eligible paying authority reasonably believes the approval to quote it is not in force when the payment is made. (2) Non-declaration percentage to be deducted. If this section applies, the eligible paying authority must deduct the non-declaration percentage of the payment. If working out that percentage of the payment results in an amount of dollars and cents, the cents are to be disregarded. (3) Offence. An eligible paying authority, other than a government body, that contravenes this section is guilty of an offence punishable on conviction by a maximum fine of $1,000." 5 Some of the terms contained within the above provision are defined. Such definitions are contained, generally, within s 221YHA of the Act. 6 Subject to a contrary intention evidenced by the context, the following definitions apply to s 221YHDA: "'contract' means a contract, whether express or implied, whether or not in writing and whether or not enforceable, or intended to be enforceable, by legal proceedings."

"'eligible paying authority' has the meaning given by subsection (4) of this section."

"221YHA(4) [Eligible paying authority] For the purposes of this Division, a person who is a paying authority in relation to a prescribed payment is an eligible paying authority in relation to the prescribed payment if: (a) the person is not a natural person; or (b) the person is a natural person and: (i) the person is a householder, or an owner-builder, in relation to the payment; or (ii) the payment is not wholly or principally of a private or domestic nature."

"'non-declaration percentage' means 48.25% or any other percentage that may be prescribed in substitution by regulations for the purposes of this definition."

"'paying authority' means a person who makes, or is liable to make, a prescribed payment."

"'payment' means a payment that is made, or is liable to be made, under a contract the performance of which, in whole or in part, involves the performance of work (whether or not by the person to whom the payment is made or is liable to be made), but does not include: (a) a payment of salary or wages within the meaning of section 221A, other than salary or wages to which paragraph (a) of the definition of salary or wages in subsection 221A (1) applies; (b) a payment of exempt income; or (c) a payment made to or by a trustee, being the trustee of the estate of a bankrupt or the liquidator of a company that is being wound up."

"'prescribed payment' means a payment of a kind declared by the regulations to be a prescribed payment for the purposes of this Division."

"'work' includes: (a) services; and (b) work of a professional, technical, skilled or artistic kind; and, without limiting the generality of the foregoing, includes activities of a kind referred to in subparagraph 221A(2)(c)(i) or (ii)." 7 It is also necessary, in order to understand more fully the PPS arrangements, to recite the terms of s 221YHB of the Act, which is in the following terms: "221YHB(1) Payee may give payee declaration form to eligible paying authority. Subject to subsection (2), a payee who becomes entitled to receive a prescribed payment from an eligible paying authority may, for the purposes of this section, at any time before the payment is made give a payee declaration form, completed and signed by the payee, to the eligible paying authority.

221YHB(2) Form not to be given to householders or where reporting exemption number quoted. Subsection (1) does not apply if: (a) the eligible paying authority is a householder in relation to the prescribed payment; or (b) the payee has quoted a reporting exemption number to the eligible paying authority and the approval to quote it is in force when the declaration form would otherwise be given.

221YHB(3) Meaning of 'payee declaration form'. A 'payee declaration form' is a document, in a form approved by the Commissioner for the purposes of this subsection, that (in addition to anything else that it requires or permits): (a) requires the payee completing the form: (i) to state his or her tax file number; or (ii) to state that an application by the payee for a tax file number is pending; or (iii) to state that the payee has a tax file number but does not know what it is and has asked the Commissioner to inform the payee of the number; and (b) permits the payee completing the form: (i) to state a deduction variation certificate number and deduction variation certificate percentage; or (ii) to state a deduction exemption certificate number.

221YHB(4) Meaning of 'payee declaration'. If the payee gives the form to the eligible paying authority, the payee is said to make a 'payee declaration' to the eligible paying authority.

221YHB(5) When declaration in force. A payee declaration made to an eligible paying authority is in force at all times after it is made until any of the following happens: (a) 1 year passes after the eligible paying authority makes a prescribed payment to the payee (being a payment made when the declaration is in force) without the payee again becoming entitled to receive a prescribed payment from the eligible paying authority; (b) the payee makes another payee declaration to the eligible paying authority; (c) the payee quotes a reporting exemption number to the eligible paying authority; (d) the Commissioner, by notice in the Gazette , determines that: (i) all payee declarations cease to be in force; or (ii) a specified class of payee declarations that includes the particular payee declaration ceases to be in force; (e) subsection (6) or (8) applies.

221YHB(6) Tax file number not provided. Subject to subsection (7), a payee declaration ceases to be in force if: (a) the payee declaration form concerned contained a statement of a kind mentioned in subparagraph (3) (a) (ii) or (iii) in relation to a tax file number; and (b) 28 days have passed since the payee declaration was made without the payee having informed the eligible paying authority of his or her tax file number.

221YHB(7) Section 202BD notice in force. If, within the 28 days, a notice in relation to the payee given to the eligible paying authority under section 202BD comes into force, the payee declaration does not cease to be in force until no notice in relation to the payee given to the eligible paying authority under section 202BD is in force.

221YHB(8) Payee has no tax file number. A payee declaration ceases to be in force if: (a) the Commissioner is satisfied that the tax file number stated in the payee declaration form has been cancelled since the form was given or is for any other reason not the payee's tax file number; and (b) the Commissioner is not satisfied that the payee has a tax file number; and (c) the Commissioner, by written notice given to the eligible paying authority and the payee, informs them accordingly and states that the declaration ceases to be in force on a specified day (which must not be earlier than the day on which the notice is given to the payee). In such a case, the payee declaration ceases to be in force on the day specified in the notices.

221YHB(9) Statement of reasons to payee. The Commissioner must, together with the notice to the payee, give the payee a written statement of the reasons for the decision to give the notice.

221YHB(10) Payee's tax file number incorrectly stated. If: (a) the Commissioner is satisfied that the tax file number stated in the payee declaration form has been cancelled since the form was given or is for any other reason wrong; and (b) the Commissioner is satisfied that the payee has a tax file number; the Commissioner may give the eligible paying authority written notice of the incorrect statement and of the payee's tax file number. If the Commissioner does so, the eligible paying authority must, in any form under this Division requiring the payee's tax file number that the eligible paying authority completes after that time (before another payee declaration is made by the payee to the eligible paying authority), state that tax file number." 8 The terms of s 221YHD are as follows: "221YHD(1) Section applies where payee declaration. This section applies if: (a) an eligible paying authority makes a prescribed payment (in relation to which the eligible paying authority is not a householder) to a payee; and (b) a payee declaration made to the eligible paying authority by the payee is in force when the payment is made.

221YHD(2) Ordinary percentage to be deducted. In such a case, the eligible paying authority must, subject to this section, deduct the ordinary percentage of the payment. If working out that percentage of the payment results in an amount of dollars and cents, the cents are to be disregarded.

221YHD(3) Deduction variation certificates. Subject to subsection (5), if: (a) a deduction variation certificate number and deduction variation certificate percentage are stated in the payee declaration form; and (b) the eligible paying authority reasonably believes the certificate is in force; the eligible paying authority must deduct the deduction variation certificate percentage of the payment. If working out that percentage of the payment results in an amount of dollars and cents, the cents are to be disregarded.

221YHD(4) Deduction exemption certificates. Subject to subsection (5), if: (a) a deduction exemption certificate number is stated in the payee declaration form; and (b) the eligible paying authority reasonably believes the certificate is in force; the eligible paying authority must not deduct anything under subsection (2) from the payment.

221YHD(5) Higher deduction percentage elections. If a higher deduction percentage election made to the eligible paying authority by the payee is in force in relation to the payment when it is made, the eligible paying authority must deduct the percentage of the payment stated in the higher deduction percentage election form. If working out that percentage of the payment results in an amount of dollars and cents, the cents are to be disregarded.

221YHD(6) Offence. An eligible paying authority, other than a government body, that contravenes this section is guilty of an offence punishable on conviction by a maximum fine of $1,000." 9 In order to understand fully the issues raised by the parties on the motion, it is necessary to set out the amended statement of claim, in its relevant respects. I omit the schedule of payments to particular "Nominees" that are set out as particulars to clause 5(g). Otherwise the amended statement of claim is, relevantly, in the following terms: "[4] The defendant at all material times carried on a business that consisted wholly or principally of activities carried out within the building and construction industry and therefore was a prescribed person within the meaning of Regulation 126 of the Income Tax Regulations.

[5] During the period 1 June 1994 to 30 September 1999:

a. the defendant entered into various subcontracts with various unnamed third parties to carry out building and construction work ('Subcontracts'); b. the unnamed third parties performed the building and construction work pursuant to those Subcontracts; c. the unnamed third parties requested that the defendant direct any payments for the work performed be made to certain Nominees ('Payments'); d. the Nominees were entities which did not own any plant or equipment; e. the Nominees were entities which did not carry on any subcontracting business themselves in the building and construction industry; f. the unnamed third parties were not employees of the Nominees; g. the Nominees received the Payments on behalf of the unnamed third parties; and h. the Nominees did not receive the Payments pursuant to any contract to carry out building and construction work.

[6] As the Payments were not received by the Nominees pursuant to any contract to carry out building and construction work, and as the Nominees therefore were not entitled to receive a prescribed payment from the defendant within the meaning of Division 3A of Part VI ITAA, any payee declaration given to the defendant was not properly made for the purposes of s 221YHB(1) of the ITAA 1936.

[7] The Payments made to the unnamed third parties were prescribed payments for the purposes of Division 3A of Part VI ITAA 1936 and therefore each of the unnamed third parties were respectively a payee within the meaning of s 221YHDA(l) of the ITAA 1936.

[8] At no time did any of the unnamed third parties make any payee declaration to the defendant within the meaning of section 221 YHDA (1)(a) of the ITAA 1936, or hold any deduction variation certificates with a variation certificate percentage of zero under Part VI of Division 3A of the ITAA 1936.

a. an eligible paying authority that made prescribed payments to a payee within the meaning of section 221 YHDA(1)(a) of the ITAA 1936, being the unnamed third parties; and b. obliged to deduct the non-declaration percentage as defined in section 221 YHA(1) of the ITAA 1936 (being the percentage amount of 48.25%) as required by section 221 YHDA(2) of the ITAA 1936.

[10] The defendant, as an eligible paying authority that made prescribed payments to a payee, failed to deduct from the payments the amount required to be deducted under section 221 YHDA (2) of the ITAA 1936 (' prescribed payment deductions ')." 10 The amended statement of claim identifies the parties in paragraphs 1 and 2 of the proposed amended statement of claim (hereinafter also referred to as "the amendment"). Paragraph 3 alleges that the defendant was an eligible paying authority (a matter which, for present purposes, is not in dispute). 11 Paragraph 4, set out above, alleges that the defendant was a corporation wholly or principally carrying out activities within the building and construction industry, as a consequence of which Trimcoll, it is alleged, is a prescribed person within regulation 126 of the Regulations, i.e. a person required to deduct payments under the PPS. 12 Paragraph 5 of the amendment alleges that the defendant entered into subcontracts with "various unnamed third parties". It does not name (as the above description makes obvious) the subcontractors who, it is alleged, performed work and to which payments were made (directly or indirectly), resulting in the consequence that deductions were required under the PPS provisions. It is alleged that the Nominees, to whom moneys were paid, were receiving payments on behalf of the unnamed subcontractors. 13 Paragraph 6, and following, of the amendment alleges non-deduction, non-payment of any deduction and the failure to make a payee declaration. In other words, paragraph 6, and following, of the amendment alleges the legal basis for the requirement to deduct at the higher prescribed rates, being the non-declaration percentage and other such matters. 14 The defendant opposes the amendments on the basis that, as a matter of discretion, the Commissioner ought not now be entitled to amend. This is a matter that depends upon the history of the litigation and the "delay", since the initiation of the litigation and since the alleged requirement to deduct tax occurred. Secondly, Trimcoll opposes leave to amend being granted on the basis that the amendment would be futile and/or does not disclose the necessary elements to establish the cause of action. Relevant Principles for Amendment of Pleadings 15 Any exercise of discretion by the Court to amend pleadings must be informed by the statutory purposes expressed in ss 56, 57, 58, 59, 60 and 64 of the Civil Procedure Act 2005: see Buzzle Operations Pty Ltd (In Liquidation) v Breirl [2008] NSWSC 746 at [43], [67]; H.S.D. Co Pty Ltd v Masu Financial Management Pty Ltd [2008] NSWSC 1279 at 11; Tim Barr v Narui Gold Coast Pty Ltd [2007] NSWSC 1306 at [3]. 16 There is no doubt that there is power to grant leave to amend the statement of claim. The issue is one of discretion, the exercise of which requires a balancing of justice and injustice to each of the plaintiff and defendant. That balancing exercise is informed by the overriding purpose expressed in s 56 to facilitate the just, quick and cheap resolution of the real issues in the proceedings. These statutory injunctions qualify the broad application of the principles otherwise established that case management is not an end in itself, but rather must be balanced against the justice to the parties: Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 154-155. 17 Notwithstanding the lapse of time that has occurred between the years in which, it is alleged, deductions of tax should have occurred, the commencement of proceedings and this proposed amendment, there is little or no prejudice to Trimcoll, if the amendment were allowed. In the current circumstances, assuming, hypothetically, that the amendment were disallowed, the Commissioner could commence separate proceedings forthwith, there being no time-limit relevant to the commencement of proceedings for the Commissioner. 18 Further, any prejudice that is suffered by Trimcoll can be properly compensated by an appropriate order for costs. Trimcoll submits that the Commissioner is recasting her case. I accept, without deciding, that the case, as pleaded in the amendment, is different, at least in detail and probably in substance, from the case as pleaded earlier, or as notified in correspondence. Nevertheless, the prejudice is able to be compensated by costs and there is no good reason why, if there be an arguable case disclosed by the pleading, the Commissioner ought not be allowed to plead it and proceed with it. 19 Further, Trimcoll was on notice at an early stage that the Commissioner claimed that PPS deductions should have been made and remitted. It is the detail of the basis of that claim that may have changed. Trimcoll would have known that it was required to obtain and maintain its records. Whether a Cause of Action is Disclosed 20 Subject to issues associated with the exercise of discretion based upon the delay, and other discretionary criteria, that may have been caused by the moving party, an amendment to pleadings, sought by a party, ought to be allowed, because it will, almost by definition, better facilitate the Court and parties dealing with the real issues between the parties. The issues of delay go to the balancing of the interests of the plaintiff and defendant and the achievement of justice between the parties. Where any prejudice suffered by a party is capable of compensation through an appropriate order for costs, the amendment to a pleading, to state more clearly or to re-state, or to re-cast, the case of the parties seeking to amend, will necessarily facilitate the more expeditious achievement of justice, while allowing the Court to concentrate on the real issues between the parties. 21 One exception to the above principle is a situation where the amendment, if allowed, would be futile. This is, essentially, the submission of Trimcoll in these proceedings. Trimcoll submits that the amendment raises a number of aspects to which Trimcoll objects on the basis that it does not disclose a proper cause of action or does not state all of the material facts necessary for the determination of the issues and necessary in order for Trimcoll to answer the amended pleading. 22 The objections are that:

(a) There is a reference to "various subcontracts", "various unnamed third parties";

(b) That the "unnamed third parties" performed building and construction work that is unspecified pursuant to subcontracts that are unspecified;

(c) That the "unnamed third parties" requested the defendant to direct any payments to certain named entities;

(d) That the named entities received payments on behalf of the "unnamed third parties";

(e) That the named entities did not receive those payments pursuant to any contract to carry out building and construction work;

(f) That the pleadings refer to the carrying out of building and construction work and not work that expressly satisfies the factual criteria in regulation 126(1) of the Income Tax Regulations; and

(g) That paragraphs 5(d)-(f), 6 and the second part of paragraph 8 do not allege any material fact and/or are mere argument. Regulation 126(1) of the Income Tax Regulations 23 It is not necessary to set out the terms of regulation 126. It is sufficient to summarise the regulation by noting that sub-regulation 126(1) renders a payment, made by a person in the position of Trimcoll, to be a prescribed payment from which deduction is made, if it were to involve the performance of work to which sub-regulations 126(2) or 126(3) applies. 24 Sub-regulations 126(2) and 126(3) refer to activities that include "the construction, erection, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling, or removal of any structure, road works or thoroughfare" and then specifies certain aspects of what ordinarily may or may not be included within the general words, but includes painting, installation of fixtures, air-conditioning and refrigeration, internal and external cleaning carried out in connection with the construction of structures, and any activity carried out on a structure that forms an integral part of, or is preparatory to, or for, rendering complete such a structure or the construction work on it. There are exceptions. Sub-regulation 126(3) then applies to other work, not presently relevant, except perhaps the construction of joinery which is referred to in sub-regulation 126(3)(f). 25 The term used in the amended statement of claim was that the activities were "within the building and construction industry". The above recited provisions of sub-regulation 126(2) is at least as wide as the term "building and construction industry". It would include all building operations (R v Williams; Ex parte Australian Building Construction Employees' & Builders Labourers' Federation [1982] HCA 68; (1982) 153 CLR 402), all building work, and all work on any "structure" (a term normally broader in scope than the term "building"). It would include, for example, electricity transmission towers, buildings and the like. The term "building and construction industry" is a subset, or at least no wider than, the description of "work" in sub-regulation 126(2), particularly in light of the specific inclusions in that term that are thereafter specified in that sub-regulation and in sub-regulation 126(3). 26 As a consequence of the foregoing, reference to the activities being in the "building and construction industry" is a reference to work that is included within the terms of regulation 126(2), which words should be given their ordinary meaning, and therefore is a description that, necessarily, brings the activities, if the allegation is proved, within the terms of the regulation. 27 The term "structure", where used in regulation 126(2), is a term broader than "building" and refers, at least, to anything "built-up" or "constructed", at least, on land. There is no validity in this criticism of the amendment. The Necessary Elements to be Pleaded 28 In order to deal with the remaining aspects of the criticism of the amended statement of claim, it is necessary to deal more generally with the construction of the legislation. The remaining aspects, like the aspect relating to reference to "building and construction industry" are intended to show that the amended statement of claim does not disclose the material facts necessary to be pleaded and would, if originally pleaded in that form, be struck-out or require directions for its amendment. Trimcoll submits that, if that be the case, the amendment ought not be allowed. 29 The statement of claim seeks a penalty under s 221YHH of the Act because, relevantly, Trimcoll did not deduct the amount required by the Act and Regulations. 30 Liability to pay the penalty under s 221YHH depends upon the non-deduction of the prescribed amount required to be deducted under Part VI Division 3A of the Act in circumstances where such a deduction is required. Trimcoll has, it is alleged, made a prescribed payment to a payee. 31 Relevantly, s 221YHDA requires an eligible paying authority to deduct the non-declaration percentage, when it makes a prescribed payment to a payee and the payee has no payee declaration in force at the time of the payment. 32 As earlier stated, regulation 126 includes, within the term "prescribed payment", a payment made (or a liability to make a payment) under a contract for the performance of work in the building and construction industry. When regulation 126 is read with s 221YHDA and the allegation that Trimcoll is the payer (and therefore an eligible paying authority: see s 221YHAAF of the Act), then the essential elements for the penalty are the failure to make deductions from prescribed payments. 33 The elements necessary to plead are:

(i) that Trimcoll carries out work that falls within the provisions of regulation 126 (alleged in paragraph 4 of the amended statement of claim);

(ii) that Trimcoll entered into subcontracts for the performance of work that falls within regulation 126 (amendment, paragraph 5(a));

(iii) the subcontractors performed work that falls within the provisions of regulation 126 (paragraph 5(b));

(iv) that payment was made (directly or indirectly) for the work performed by the aforesaid subcontractors, by Trimcoll, otherwise than to the "subcontractors" as employees of Trimcoll, or paid through an interposed company, which did not, itself, carry on any subcontracting in the building and construction industry (paragraphs 5(c), (d), (e) and (f) of the amendment);

(v) that the relevant PPS deduction was not made (paragraphs 6, 7, 8, 9 and 10 of the amendment). 34 Each of the material facts, sufficient to establish the above elements, is pleaded in the paragraphs outlined above. Further, the plaintiff, in the proposed amended statement of claim, nominates the payments to each Nominee that were made on behalf of the subcontractors, performing the relevant work, and received on their behalf, and that the payments were not received by the Nominees to carry out work within the definition in regulation 126. The Commissioner claims that the Nominees were not entitled to exemption or to lodge a payee declaration because, relevantly, they were not payees under these provisions. 35 The difficulty for Trimcoll is that, because the persons who are alleged to have carried out the work are "unnamed", Trimcoll says, amongst other things, that it is unable to prepare and defend the case against it. Trimcoll, amongst other things, submits that it is necessary for the "unnamed third parties" to be named, in order for it to prepare properly and to present its case, or to defend adequately against the claim. 36 At all times, the Commissioner bears the onus, on the civil standard, in relation to any proceeding that eventuates. 37 The principles that apply to that which is necessary to be in pleadings (as distinct from that which may be required by way of further and better particulars) are easily stated, but applied with greater difficulty. Pleadings allege facts, not evidence, and must allege all of the material facts upon which the cause of action depends: Darbyshire v Leigh [1896] 1 QB 554; Kirby v Sanderson Motors Pty Limited [2002] NSWCA 44; (2001) 54 NSWLR 135. 38 Pleadings must be brief, and, while sometimes this principle is honoured more in the breach than in the observance, nothing the courts should do should discourage such an approach. 39 The case presented by the Commissioner is an unusual one. It relies on the proposition that the nominated entities to whom Trimcoll made the relevant payments are not engaged in the building and construction industry and did not contract with Trimcoll for building and construction work (as I have defined it, namely, work within the description in regulation 126). Further, it alleges that building and construction work was done (by the unnamed parties) for Trimcoll and the payments made to the nominated entities by Trimcoll, were, in truth, payments to the unnamed third-party subcontractors. 40 For Trimcoll to be found liable of an offence, assuming all other relevant factors, it must have been engaged in work described in regulation 126 (hereafter building and construction work), the work must have been carried out by other than employees, and payments must have been made for that work without deducting the relevant deduction. 41 Because the persons to whom payment was made (i.e. the Nominees) by Trimcoll were not themselves engaged in building and construction work, or liable to perform that work under a contract with Trimcoll, Trimcoll was not required to deduct an amount, because the amount paid to them was not a prescribed payment within the meaning of the Act. "Contract" and "work" are defined terms within the meaning of s 221YHA of the Act. 42 Relevantly, the proposed amended statement of claim alleges sufficient facts to establish, if proved, that Trimcoll was an eligible paying authority. Further, the proposed amended statement of claim alleges that work was performed, which is within the terms of regulation 126, therefore, a deduction (to the extent not otherwise exempt) is required to be made. 43 Further, it alleges sufficient to show that the deduction ought not be made in relation to the Nominees described in the proposed amended statement of claim. And it alleges sufficient to understand why payment should have been deducted, namely, because it was, in truth, a payment to the unnamed subcontractors. This allegation may or may not be correct, but involves a construction of the Act on the basis of facts that are alleged. 44 Section 221YHD of the Act requires a deduction of a particular amount, if a payee declaration has been made to the eligible paying authority. Since Trimcoll is the eligible paying authority (on the allegation in the proposed statement of claim), it can easily deny the Commissioner's assertion (or disprove i.e. meet a case) that deductions were not made, should have been made, or that payee declarations were not received at a time when the payee declaration was in force. Since the penalty that is sought is a penalty under s 221YHDA (relating to a higher percentage in circumstances where there is no payee declaration), any one of the foregoing would be within the knowledge of Trimcoll and capable of being met on the pleadings as they exist. Trimcoll is told, in the proposed amended statement of claim, all that is necessary to know the case against it. 45 In other words, while the Commissioner may have difficulty proving that the "unnamed third parties" requested Trimcoll to direct any payments, for building and construction work performed, to be made to the "Nominees", the allegation is not difficult to meet and is an allegation of material fact which, together with the other facts alleged, amounts to all of the material facts necessary to make out the cause of action and necessary to enable Trimcoll to defend the cause of action. 46 That is not to gainsay that there may be, validly, a request for further and better particulars. But the allegation in the statement of claim is not, necessarily, that the payment to the "Nominees" on behalf of the unnamed third parties is a sham. All that is necessary to be proved is a direct contract (other than a contract of employment) between Trimcoll and the unnamed third parties, payment to the nominees on their behalf and the failure to deduct that which is required under s 221YHDA, because there was not, in force and presented to Trimcoll, a relevant and effective payee declaration. 47 The clear purpose of the legislative scheme is to deal with "cash-in-hand" payments in the building and construction industry. Reference has been made to the nominees being "bodgie subcontractors", a malapropism that refers to subcontractors who, themselves, do not undertake building and construction work, but are used as a conduit for the payment of persons that do: a practice that facilitates the avoidance of any regulatory scheme, if the parties are so inclined. 48 There is no doubt that the Commissioner has evidentiary difficulties. The Commissioner must prove that each of the persons who carried out the work was not an employee of Trimcoll or of any of the "Nominees" referred to in the proposed amended statement of claim. Further, it must prove that there is, or was, a request by these third parties to Trimcoll to direct any payments for work to the said Nominees. 49 Let us assume that Trimcoll has some employees. Let us also assume that Trimcoll has a number of requests (or evidence of a number of requests) from persons to direct payment for work they perform to the Nominees. In either case, which, relevantly, are the only matter that would depend upon the identity of the unnamed third parties, Trimcoll would be able to prove that the payments to any one of the Nominees was for its employees, if that be the case, and/or that the payments to any one of the Nominees were for, or on behalf of, persons who had provided a payee declaration. 50 In other words, Trimcoll is more than capable of defending the matter on any basis that Trimcoll chooses and has been given sufficient material facts to enable any such defence to be agitated. Trimcoll is capable of denying payments to the Nominees. It is capable of denying that third persons requested payments for building and construction work to the Nominees. These are matters peculiarly within its knowledge. Trimcoll is capable of denying that the Nominees are not engaged in the building and construction industry, and it is capable of denying that the work performed, for which payments were made to the Nominees, was work within the description of regulation 126. Further, if Trimcoll is in receipt of payee declaration forms (and even if it were not), it is capable of denying that any payments were made to the Nominees on behalf of persons in circumstances that s 221YHDA applied. Trimcoll is certainly able to argue that the Nominees were, for the purposes of the Act, payees. 51 None of the foregoing suggests that Trimcoll is not entitled to seek and obtain further and better particulars. That is not a matter before the Court. It is sufficient, for my purposes, to remark that such particulars would not be material facts necessary to allege the entirety of the cause of action against Trimcoll and to enable Trimcoll to know the case that it must meet. 52 Having said that, the allegations are broad and it is to be remembered that it is for the Commissioner to prove that there is a direction by these unnamed third parties to Trimcoll, for payment of moneys, due to it or them, to these Nominees. It may, as already stated, present some significant evidentiary problems for the Commissioner. There may be other significant evidentiary problems for the Commissioner. But none of those evidentiary problems amount to a failure by the Commissioner to plead all material facts necessary for the cause of action to succeed. It is unnecessary, and impermissible, to plead evidence. 53 If all of the matters alleged in the proposed amended statement of claim were admitted, the cause of action would have been made out and there would be judgment for the Commissioner. As a "rule of thumb", that will generally suffice to show that all of the material facts have been pleaded: Ritz Hotel Ltd v Charles of the Ritz Ltd (No 20) (1988) 14 NSWLR 124 at 126. Conclusions 54 For the above reasons, the Court is of the view that the proposed amended statement of claim alleges all of the material facts necessary to disclose the cause of action. Whether there should or should not be further and better particulars is a matter for the parties and/or the Court on further application. 55 Further, while the chronology of these proceedings discloses a significant effluxion of time from its commencement to the application to file this proposed amended statement of claim, which time is a matter of some concern in the balance of justice between the Commissioner, on the one hand, and Trimcoll, on the other, given the early notification to Trimcoll of the issues in dispute (however unclearly and confusingly), the balance of justice as between the parties is to allow the proposed amended statement of claim. While the chronology of the proceedings discloses that they were commenced on 21 July 2003, the lapse of time has not been a delay brought about by the "fault" of the Commissioner. 56 Further, the absence of a limitation period and the capacity of the Deputy Commissioner to discontinue and file fresh proceedings is an added reason why the lapse of time should not be conclusive in this matter. 57 For the foregoing reasons, the Court makes the following orders:

(i) Leave be granted to the Deputy Commissioner of Taxation to amend the statement of claim in accordance with the proposed amended statement of claim, Exhibit B in the proceedings;

(ii) The aforesaid amended statement of claim is to be filed and served within seven days' of the date hereof;

(iii) Costs of the notice of motion shall be costs in the cause;

(iv) The parties be at liberty to approach the Court for any different or special order as to costs. Such approach to be made to my Associate within seven days' of the publication hereof.

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