The respondent's submissions on the proper construction of the Transitional Provisions
58The respondent submitted that there was no textual basis in the Transitional Provisions to support the Commissioner's argument. Rather, the text of those provisions made it clear that Division 269 was to be applied to the respondent's penalty for the following reasons:
(a) Item 64 clearly states that subject to item 65, Division 269 applies in relation to an amount payable by a company to the Commissioner before, on or after 1 July 2010. Sub-item 65(4) applies in relation to a penalty that, just before 1 July 2010, was payable under Division 9. The penalty owed by the respondent was such a penalty. Hence the respondent's penalty is governed by Division 269.
(b) Sub-item 65(4) provides that, with the exception of the imposition of a penalty pursuant to s 269-20, the balance of Division 269 has effect from 1 July 2010 as if the penalty were payable under the new provisions. Accordingly, for all purposes other than the imposition of the penalty, the new provisions are to apply.
(c) By virtue of s 13(2) of the AI Act, the subheading immediately before sub-item 65(3) (which states "New provisions apply to existing penalties") is part of the 2010 Act and supports the application of the new provisions to the respondent's penalty.
(d) The cumulative effect of the foregoing is that the text of the Transitional Provisions requires all directors' penalties existing as at 1 July 2010 to be dealt with under Division 269.
(e) Furthermore, the matters referred to indicate a strong contrary intention within the meaning of s 8 of the AI Act indicating that Division 269 was to apply to all aspects of the director obligation regime from 1 July 2010 (except for the actual imposition of the penalty).
59The respondent then dealt with the judgments in Reardon. He submitted that the approach of Phillip McMurdo J would lead to a great deal of ambiguity as to what provisions were and were not affected by the plain text of sub-items 65(3) and (4) where those provisions did not differentiate between penalties depending on whether or not a DPN had, or had purported to have, been given. Reference was made to the defences available to a director sued by the Commissioner or by fellow directors seeking contribution to their penalty. There were some differences between the defence provisions under s 222AOJ of the former Division 9 and those under the new s 269-35. Phillip McMurdo J's approach to the statutory interpretation issue would lead to ambiguity as to which defence provisions would be applicable.
60I would interpose that I do not accept this last submission. If, as his Honour held, and as the Commissioner submitted, sub-item 65(3) has no application to proceedings by the Commissioner to recover a penalty where the right to recover that penalty has crystallised prior to 1 July 2010, then in my view the effect of s 8(c) of the AI Act would permit the director against whom proceedings are brought to rely on the defences provided by s 222AOJ upon the basis that the defendant director had acquired the right to those defences under the repealed Division 9.
61Further submissions were advanced by the respondent criticising the approach of Phillip McMurdo J upon the basis that the text of sub-item 65(3) was clear and contained no ambiguity so that the consequences of the construction of that provision contended for by his Honour should not detract from the clear meaning of the text.
62With respect to the reasons of McMeekin J, it was submitted that his Honour's finding that "payable" in the Transitional Provisions should be limited to penalties that were payable but not recoverable because time to comply with a DPN had not yet expired, had no textual basis in the Transitional Provisions.
63Finally, reference was made to the reasons of Holmes JA who acknowledged (at [33]), after considering arguments for and against the Transitional Provisions requiring a new notice to be served, that such "an attempt to discern an intent in the transition provisions [would seem] at odds with their plain effect...". It was submitted that her Honour was acknowledging that the plain meaning of those provisions led to the effect contended for by the respondent.
64Again I interpose that I do not accept this last submission. Certainly, Holmes JA was reluctant to adopt the construction of the Transitional Provisions contended for by the Commissioner. On the other hand it is apparent that her Honour did not consider that the terms of those provisions were so unambiguous that she could with confidence adopt the construction now contended for by the respondent. For that reason, she took a different course, albeit leading to the same conclusion as that of her colleagues, namely, that the Transitional Provisions did not require the Commissioner to comply with the 21 day notice provisions of s 269-25 in respect of directors in the position of the respondent.
The Commissioner's submissions should be accepted
65It will be apparent from the foregoing that the respondent's submissions are very much dependant upon the proposition that the text of sub-items 65(3) and (4) is so clear and unambiguous, notwithstanding their generality, that no other construction is open other than that those provisions apply to any penalty payable by a director as at 1 July 2010, irrespective of whether as at that date the Commissioner's entitlement to recover that penalty has crystallised into an accrued right.
66In my view, concentration on the text and only the text of those provisions results in too narrow an approach to their proper construction. The text must be placed in context and, in particular, considered against the policy of the legislature in seeking to substitute the new for the old without any substantive or policy, as distinct from linguistic, changes.
67One of the most recent, if not the most recent, statements in the High Court of the relevant principles of statutory construction was articulated by French CJ and Hayne J in Certain Lloyd's Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [23]-[25] where their Honours made the following observations (omitting citations and footnote references):
Some basic principles
[23] It is as well to begin consideration of this issue by re-stating some basic principles. It is convenient to do that by reference to the reasons of the plurality in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue:
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
[24] The context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky Inc v Australian Broadcasting Authority, "[t]he primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute". [Emphasis added.] That is, statutory construction requires deciding what is the legal meaning of the relevant provision "by reference to the language of the instrument viewed as a whole", and "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed".
[25] Determination of the purpose of a statute or of particular provisions in a statute may be based upon an express statement of purpose in the statute itself, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose of a statute resides in its text and structure. Determination of a statutory purpose neither permits nor requires some search for what those who promoted or passed the legislation may have had in mind when it was enacted. It is important in this respect, as in others, to recognise that to speak of legislative "intention" is to use a metaphor. Use of that metaphor must not mislead. "[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have". [Emphasis added.] And as the plurality went on to say in Project Blue Sky:
Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.
To similar effect, the majority in Lacey v Attorney-General (Qld) said:
Ascertainment of legislative intention is asserted as a statement of compliance with the rules of construction, common law and statutory, which have been applied to reach the preferred results and which are known to parliamentary drafters and the courts. [Footnote omitted.]
The search for legal meaning involves application of the processes of statutory construction. The identification of statutory purpose and legislative intention is the product of those processes, not the discovery of some subjective purpose or intention.
See also at [68]-[70] per Crennan and Bell JJ; and at [88]-[89] per Kiefel J.
68Consistently with the foregoing statements of principle and as was recently observed by Bathurst CJ, with whom Beazley and Basten JA agreed, in Rail Corporation New South Wales v Brown [2012] NSWCA 296; (2012) 82 NSWLR 318 at [39], the process of construction commences with the construction of the ordinary and grammatical meaning of the words in question, having regard to their context and legislative purpose.
69It is axiomatic that care should be taken in considering the purpose of a statute divorced from the words of the statute itself. Bearing that caveat in mind, the present case is one where the proper construction of the Transitional Provisions requires, in my view, that the text of sub-items 65(3) and (4), be considered in the context of the whole of so much of the 2010 Act as comprises Division 269 as well as the Transitional Provisions. Both are part of the same statute. Furthermore, the purpose of the Transitional Provisions in a statute which is said in the Explanatory Memorandum to be substituting new for old by way of a rewrite generally without any change in policy so as to ensure a smooth transition between the old and new law, must also be kept in mind.
70In light of the foregoing principles the following factors need to be taken into account. First, it must be assumed that the legislature was aware of the four scenarios referred to at [42(a)] above. Secondly, and in particular, it must have been aware that on the basis of the decision of this Court in Meredith, the right of recovery of a penalty by the Commissioner may have crystallised prior to 1 July 2010 upon the expiry of 14 days from the date of posting of the relevant DPN where the recipient of the notice has failed to take one or other of the four steps referred to in s 222AOE(b). Thirdly, in reliance on that failure the Commissioner may have commenced recovery proceedings which may have reached an advanced stage by 30 June 2010. Fourthly, the legislature must have been aware of the effect of s 8(c) of the AI Act.
71In the foregoing circumstances one asks, given the desire for a smooth transition between the old and new law and where the right of the Commissioner to recover a penalty has accrued before 1 July 2010, why the legislature would consider it necessary for the Commissioner to, in effect, re-establish her right of recovery by the giving of a new notice under s 269-25 thus setting at nought the processes which had preceded that date? What in the text of the Transitional Provisions mandates such a result? Is such a consequence plain and unambiguous upon a consideration of the text alone? In my view the answer to the last question is in the negative.
72As the Commissioner submits, when read in context the provisions of sub-items 65(3) and (4) do not indicate a legislative intention to destroy rights and obligations already accrued under the repealed Division 9. The following factors lead, in my view, to that conclusion:
(a) Item 64 of the Transitional Provisions provides that Division 269 applies to an amount payable by a company to the Commissioner before, on or after 1 July 2010. Item 64, therefore, draws a distinction between an amount payable by a company and a penalty payable by a director. They are two different liabilities. There is also a distinction between a penalty payable by a director which is dependant upon a failure by the company to, amongst other things, pay, and a right to recover the penalty which is dependant on the giving of a DPN and the director's non-compliance with the notice at the expiry of the notice period.
(b) Division 269 applies where a penalty is payable by a director under the former Division 9 immediately prior to 1 July 2010: sub-item 65(3).
(c) Where a penalty becomes payable after 1 July 2010, Division 269 applies to it. In such a case the penalty is only payable if the provisions of s 269-20 apply, and the penalty is only recoverable by the Commissioner if s 269-25 is complied with.
(d) Where the Commissioner's right to recover a penalty payable under the former Division 9 accrued under that Division prior to 1 July 2010, s 8(c) of the AI Act permits that right to be enforced as if Division 9 had not been repealed, absent a contrary intention.
(e) Transitional provisions usually are enacted to preserve existing rights rather than to destroy them; to preserve existing causes of action, not to extinguish them.
(f) There is nothing in sub-items 65(3) and (4) which manifests a legislative purpose to extinguish a right or cause of action of the Commissioner to recover a penalty acquired by her before 1 July 2010; a fortiori, where proceedings have been instituted and have reached an advanced stage by 1 July 2010. Why should such proceedings then become ineffective and, as suggested in argument, retrospectively non-justiciable, particularly in the context of a legislative intention not to effect a change in policy?
(g) Although the text of sub-item 65(3) concentrates on the concept of payability by the director rather than the recoverability of the penalty by the Commissioner, no reason exists to construe that provision so that it applies the whole of Division 269 (other than s 269-20) and, in particular, s 269-25, to a penalty which is not only payable by a director under Division 9 but also the subject of a right of recovery which has accrued prior to 1 July 2010.
(h) Sub-item 65(3) speaks only of a penalty "payable" under Division 9 just before 1 July 2010. The primary judge's conclusion would have more force if the sub-item referred to a penalty which was "payable, whether or not recoverable".
(i) The process of recovery of penalties payable would not be smooth and involve a potential waste of time and resources if the Commissioner had to comply with s 269-25 notwithstanding that she had an accrued right of recovery prior to 1 July 2010.
(j) Accordingly, sub-item 65(3) should be construed as applying only to a penalty that, just before 1 July 2010, was payable but not recoverable. Such a construction is consistent with the legislative purpose of doing no more than rewriting the penalty provisions so as to provide a smooth transition from Division 9 of the 1936 Act to Division 269 of the 1953 Act.
(k) It follows that no contrary intention which has the effect of negating s 8(c) of the AI Act is manifested by sub-item 65(3) and (4) of the Transitional Provisions.
73The fact that sub-item 65(4) provides that Division 269 (other than s 269-20) has effect from 1 July 2010 as if the penalty were payable under the new regime does not, in my view, mandate a construction of that provision to the effect that the Commissioner cannot recover a penalty that is both payable and recoverable prior to 1 July 2010 unless and until she has given a new DPN to the relevant director that complies with s 269-25.
74The foregoing analysis finds clear support in the judgments of Phillip McMurdo and McMeekin JJ in Reardon and I see no reason to depart from their Honours' reasoning and conclusion. For the reasons advanced by the Commissioner and reflected in the reasons of Phillip McMurdo and McMeekin JJ in Reardon, the legislative objective of the relevant provision of the 2010 Act, when read in conjunction with the Transitional Provisions and Explanatory Memorandum, reveals that the intention of the legislature in enacting sub-items 65(3) and (4) was not to disturb existing accrued rights.
75Accordingly, it follows in my view that the primary judge was in error in finding that before the Commissioner could recover the penalty sum from the respondent, she was required to serve upon him a new notice that conformed with s 269-25 of Division 269.
76In the circumstances it is unnecessary to consider and determine the Commissioner's alternative ground of appeal seeking to uphold the approach of Holmes JA in Reardon whereby her Honour held that Schedule 7 of the 2011 Act impliedly repealed the Transitional Provisions.