JOHN SHEAHAN AS LIQUIDATOR OF ATSIKBASIS NOMINEES PTY LTD (IN LIQUIDATION) (ACN 007 769 557) and ATSIKBASIS NOMINEES PTY LTD (IN LIQUIDATION) (ACN 007 769 557) v ATSIKBASIS NOMINEES NO. 2 PTY LTD

REASONS FOR JUDGMENT 1 On 8 August 2013 I listed this proceeding for trial commencing on 2 December 2013 with 15 days set aside. On 10 September 2013 the first to thirteenth defendants and first to fourteenth cross-plaintiffs issued an interlocutory application in which they sought, among other orders, an order pursuant to Rule 30.01(1) of the Federal Court Rules 2011 (Cth) that the Court hear a separate question being whether the amount of the second plaintiff's liability to the Commissioner of Taxation is as claimed by the Commissioner in his proof of debt dated 29 November 2010 calculated in accordance with the Deed of Settlement (described below), or in the amount of his post liquidation new claim dated 29 October 2012. 2 Rule 30.01(2) provides that an application for the hearing of a separate question must be made before a date is fixed for trial of the proceeding. The Court has the power to dispense with the requirement in that Rule in an appropriate case (Rule 1.34). 3 On or about 24 September 2013, the first plaintiff, who is the liquidator of the second plaintiff (Atsikbasis Nominees Pty Ltd (In Liquidation)), accepted an amended proof of debt from the Commissioner of Taxation (I include within that description Deputy Commissioners of Taxation) dated 24 September 2013. That caused the applicants for a separate question to revise their proposed separate question so that it raised the issue of whether the amount of the second plaintiff's liability to the Commissioner of Taxation was as claimed by him in his proof of debt dated 29 November 2010 calculated in accordance with the Deed of Settlement, or in the amount of his post liquidation third proof of debt dated 24 September 2013, or some other and, if so, what amount. 4 Before the application for a separate question could be heard, the defendants made a second, and on one view, alternative application. They issued an Interlocutory Application dated 1 October 2013 and they later amended that application by an Amended Interlocutory process filed on 15 October 2013. In their Amended Interlocutory process the defendants appealed against the liquidator's admission of the Commissioner's third proof of debt under s 1321 of the Corporations Act 2001 (Cth). 5 Rule 14.1(1) of the Federal Court (Corporations) Rules 2000 (Cth) provides that all appeals to the Court authorised by the Corporations Act must be commenced by an originating process or an interlocutory process. The Amended Interlocutory process was issued in this proceeding. On 11 October 2013, I made an order that the Commissioner of Taxation be joined as a respondent to the defendants' interlocutory application. 6 The defendants' (and cross-plaintiffs') application for the hearing of a separate question came on for hearing on 21 October 2013. I had also listed the defendants' appeal under s 1321 for consideration at that time. In essence, the plaintiffs and the Commissioner of Taxation submit that the Commissioner's third proof of debt represents the second plaintiff's liability to him. The defendants (and cross-plaintiffs) and the cross-defendants submit that the second plaintiff's liability to the Commissioner is for a substantially lower amount. 7 There are a number of procedural issues which need to be addressed. As far as the application for the hearing of a separate question is concerned, at present the Commissioner of Taxation is not a party to that application. Consideration should be given as to whether he needs to be a party. Furthermore, having heard the submissions of the parties I think the questions to be determined can be more precisely defined as follows: (1) Is the second plaintiff liable to the Commissioner of Taxation for a general interest charge from 8 January 2007 to the date of default under the Deed of Settlement made between the second plaintiff and others and the Deputy Commissioner of Taxation on or about 30 April 2008 (Deed of Settlement)? (2) Subject to the answer that may be given to Question 1, is the second plaintiff liable to the Commissioner of Taxation for the general interest charge from 19 February 2004 in the case of the assessments made in 2004 and 10 June 2005 in the case of the assessments made in 2005 to the date of default under the Deed of Settlement at the statutory rate fixed in accordance with Part IIA of the Taxation Administration Act 1953 (Cth), or at the concessional rate of 4.72%? 8 I make one observation about these questions because of a submission made by the Commissioner of Taxation. Question two is made subject to question one because if there is an interest free period, it is in effect a carve out of the period identified in question two. In no way is it intended to suggest that question one might not be answered against the Commissioner's submissions, but question two in accordance with them. 9 As far as the purported appeal under s 1321 of the Corporations Act is concerned, the interlocutory process should have been issued in the winding up proceeding (Federal Court action number SAD 140 of 2010): Re Jay-O-Bees Pty Ltd (in liq); Rosseau Pty Ltd (in liq) v Jay-O-Bees Pty Ltd (in liq) [2004] NSWSC 818; (2004) 50 ACSR 565 at 576 - 579 [50] - [62]. It may also be necessary for the existing parties to the appeal to consider joining the cross-defendants so that they are bound by the decision on the appeal. 10 These procedural difficulties can no doubt be overcome by appropriate orders. It may be sufficient to deal with the issues in dispute in the appeal proceedings providing the cross-defendants are bound. I doubt whether the type of difficulties considered in Duke Group Ltd (in liq) v Arthur Young (Reg) & Peat Marwick Hungerfords (Third Party) & Ors (1991) 4 ACSR 355 at 369 per Matheson J and 391 and 397 per Olsson J arise where the outcome of a proof of debt is determined by a superior court. In any event, these are matters for the parties and, in particular, for the defendants and cross-plaintiffs as applicants to address. I propose to consider whether there should be a separate question(s) and the merits of the respective arguments. 11 The plaintiffs oppose the hearing of a separate question and, as I have said, seek to uphold the first plaintiff's admission of the third proof of debt. The Commissioner of Taxation also sought to uphold the first plaintiff's admission of the third proof of debt. The first to third cross-defendants made submissions in support of the defendants' proposed answers to the separate question and the fourth cross-defendant indicated that it supported the hearing and determination of the separate question. 12 In support of their application for the hearing of a separate question, the defendants submit that they have pleaded that the first defendant was liable to indemnify the second plaintiff for its tax liability as determined pursuant to the Deed of Settlement and they submit that they are ready, willing and able to pay this liability to the second plaintiff once the relevant sum is determined. They submit that the Commissioner of Taxation is the only creditor of the second plaintiff and that the determination of the separate question will result in a significant reduction in the time required for trial. It is also likely to facilitate resolution of the entire matter without the need for a lengthy and expensive trial involving all parties. 13 The plaintiffs submit that in addition to the liability of the second plaintiff to the Commissioner of Taxation there are unpaid costs in the liquidation of the second plaintiff. The plaintiffs' evidence is that the liquidator's fees are currently approximately $700,000 plus GST of which an amount of $336,747 plus GST for the period to 5 December 2012 was approved at a meeting of creditors on 18 December 2012. The plaintiffs' evidence is that the liquidator's legal costs are currently approximately $420,000 plus GST and that the liquidator's disbursements are currently approximately $85,000 plus GST. The plaintiffs also submit that the relief the second plaintiff seeks is the enforcement of an equitable lien or charge securing its right to be indemnified and exonerated for liabilities it has incurred while acting as trustee of the Atsikbasis Family Settlement, including a liability to the Commissioner of Taxation, and liabilities incurred in or about the administration of the company in liquidation, including among other things, the costs of the within proceedings. The plaintiffs submit that they claim by way of further and secondary relief orders that each of the defendants be jointly and severally liable to discharge the company's liabilities pursuant to s 197(1) of the Corporations Act insofar as the transfer of assets back to the second plaintiff proves to be insufficient to discharge all of the liabilities of the second plaintiff. 14 The principles which apply to an application for the hearing of a separate question are well known. They are summarised by Stone J in University of Sydney v ResMed Ltd (No 5) [2012] FCA 232 (at [40] - [47]) and I will not repeat them. 15 In this case it is true that: (1) the application for the hearing of a separate question was not made before the date fixed for the trial; (2) the nature of the plaintiffs' claims against the defendants, particularly the first defendant, differ in a number of respects from the nature of the Commissioner's claim in the liquidation of the second plaintiff; (3) the separate question essentially relates to the quantum of the plaintiffs' claim against the defendants; and (4) there is the prospect of an outstanding appeal while the trial is running. 16 On the other hand, the Court has the power to dispense with the requirement in Rule 30.01(2) and the quantum of the Commissioner's claim will at some stage have to be determined. Further, I accept that the determination of the separate question will resolve the major issues between the plaintiffs and the defendants. In addition, I think that even if I did not hear the separate question, the defendants would be entitled to an early determination of their appeal under s 1321 and that raises essentially the same issues. Finally, although there is no certainty about these things, I accept that the hearing of the separate question will materially improve the prospects of settlement, not only as between plaintiffs and defendants, but also as between cross-plaintiffs and cross-defendants. 17 I would be prepared to dispense with the requirement in Rule 30.01(2) and to order the hearing of a separate question(s). 18 I turn now to the merits of the separate question(s) and of the appeal. 19 The dispute as to the tax liability of the second plaintiff to the Commissioner has a long history. The liability relates to tax, the Medicare levy, penalties and the general interest charge ("GIC") for the five years of income ending 30 June 1996, 1997, 1998, 1999 and 2000. The Commissioner issued assessments for those five years on 15 January 2004. He issued amended assessments for the years ending 30 June 1996, 1997 and 1998 on 5 May 2005. The due date for the assessments issued on 15 January 2004 was 19 February 2004, and the due date for the assessments issued on 5 May 2005 was 10 June 2005. The second plaintiff disputed those assessments and with parties who had related disputes with the Commissioner of Taxation it brought applications in the Administrative Appeals Tribunal. Ultimately, the second plaintiff and the other parties on the one hand, and the Commissioner on the other, resolved the disputes by a Deed of Settlement dated 30 April 2008. 20 The Deed of Settlement consisted of a number of recitals, settlement terms and schedules. The relevant settlement terms are as follows: 1. Settlement Terms 1.1 The Commissioner will amend assessments to income tax in respect of the income years 1996 to 2000 inclusive as requested by Messarius and the Employers evidenced in Schedules 1 to 16 inclusive which are duly annexed and form an operative part of this Deed. 1.2 The total tax shortfall penalty imposed under Part VII of the Income Tax Assessment Act 1936 ("the 1936 Act") in respect of the income years 1996 to 2000 inclusive as per Schedules 1 to 16 inclusive will be remitted to 5%. 1.3 The parties agree, subject to clauses 1.4, 1.5, 1.6 and 1.8, that interest (General Interest Charge, "GIC" from 1 July 1999) in relation to the 1996, 1997, 1998, 1999 and 2000 income tax assessments is to be calculated and paid by Messarius and the Employers at the rate of 4.72%. 1.4 The parties agree that there will be no pre-assessment interest imposed in relation to the income tax assessments issued pursuant to section 99A of the 1936 Act to the Employers. 1.5 The parties agree that GIC in relation to income tax assessments issued to Messarius Pty Ltd will be as follows: 1.5.1 in relation to income year 1996 for the period 24 August 2000 to 18 February 2004 - nil; 1.5.2 in relation to income year 1997 for the period 24 August 2000 to 11 April 2003 - nil; 1.5.3 in relation to income year 1998 for the period 24 August 2000 to 25 February 2004 - nil; 1.5.4 in relation to income year 1999 for the period 24 August 2000 to 25 February 2004 - nil; and 1.5.5 in relation to income year 2000 for the period 24 August 2000 to 27 February 2004 - nil. 1.6 The parties agree that GIC in relation to the all income tax assessments to be issued pursuant to this Deed of Settlement for the period 8 January 2007 to the due and payable dates of the said assessments or amended assessments, as the case may be, will be nil. 1.7 The amount payable in respect of this dispute will be paid:- 1.7.1 by the due date shown on notices of amended assessments, issued per Schedules 1 to 16 inclusive evidencing the acceptance by the Commissioner of the settlement of this dispute, or if the notices of amended assessments issued per Schedules 1 to 16 inclusive do not specify a future due date, within 14 days of the date of issue of the amended assessments, or 1.7.2 within 14 days of this settlement, or 1.7.3 as indicated in the Payment Arrangement, as outlined in Schedule 17 whichever is applicable. 1.8 Where any amount of tax and/or penalty and/or GIC is not paid as specified in clause 1.7 above GIC will accrue compounded daily pursuant to s 204 of the 1936 Act on any amount of tax and interest in respect of the 1996, 1997, 1998, 1999 and 2000 income tax assessments and shall be payable at the rate prescribed in s 8AAD of the Taxation Administration Act 1953. … 21 There are a number of schedules to the Deed of Settlement but only the first five schedules are relevant for present purposes. They relate to the second plaintiff and the five years in issue between it and the Commissioner. It is sufficient to set out by way of example the terms of the first schedule: Schedule 1 EMPLOYEE BENEFIT TRUST ARRANGEMENTS SETTLEMENT OFFER 1 1. To disallow tax deductions in the sum of $309,372 being the amount claimed by the trustee for the Atsikbasis Family Trust ("the Taxpayer") for a contribution made to the special purpose trust in the year of income ended 30 June 1996. 2. Subject to the statutory time limit of section 170(2) and section 177F of the 1936 Act to disallow tax deductions in the sum of $27,870 being the amount claimed by the Taxpayer for expense or costs paid in relation to the Taxpayer's participation in the Arrangement. Taxpayer Details: Name of the Taxpayer: Trustee of the Atsikbasis Family Trust Taxpayer's Tax File Number: ** *** *** (8 digit number omitted) For the 1996 year of income the deduction (for contributions) claimed by the Taxpayer named above, at label 1 is to be reduced by $309,372 For the 1996 year of income, subject to the statutory time limit of section 170(2) and section 177F of the 1936 Act the deduction (for expenses or costs) claimed by the Taxpayer named above, at label 1 is reduced by $27,870. Issue an assessment to the Taxpayer pursuant to section 99A of the 1936 Act for the additional income. Name: Menios Atsikbasis Signature: Date: 14/3/08 Should you make the above offer: • We will apply 5% penalty to the tax shortfall for the 1996 year of income; • We will impose interest on the tax shortfall (GIC from 1 July 1999) at the rate of 4.72% from the due date of the original assessment in accordance with Clause 1.3 of this Deed; • We will remit GIC to nil for the period 8 January 2007 to the due and payable dates of the income tax assessment to be issued pursuant to this Schedule in accordance with Clause 1.6 of this Deed; • You will make payment in full of the tax assessed and the interest due by the due date in accordance with Clause 1.7 of this Deed; (Failure to do so will result in GIC accruing on that amount after that date.) • The parties to this deed acknowledge that nothing in this deed shall operate to deny the Commissioner from claiming amounts of tax properly assessable to either or both the trustee of the special purpose trust ("the Special Purpose Trust Trustee") or the beneficiaries of the special purpose trust ("the Beneficiaries") under and pursuant to Australian taxation laws in respect of any assessable income derived by the Special Purpose Trust Trustee or the Beneficiaries from the special purpose trust. Taxpayer signature: ATO signature: 22 Finally, I mention schedule 19 which is the form of the Payment Arrangement referred to in the Deed of Settlement (clause 1.7.3 is in error in referring to schedule 17). 23 Following the Deed of Settlement, the Commissioner issued amended assessments for the five years in issue on 3 October 2008. 24 On 21 October 2008 the Commissioner wrote to the second plaintiff stating that the Australian Taxation Office ("ATO") accepted the second plaintiff's arrangement for payment by instalments. The Commissioner said that the arrangement was for the amount of $1,007,485.63 and that that figure included the adjusted GIC amount which reflected the terms of settlement. The letter set out the conditions of the arrangement and it provided that payment should be made by using the payment slips that would be sent to the second plaintiff separately. It stated that GIC would continue to accrue for the period of the arrangement. The Commissioner advised the second plaintiff that the then rate of GIC was 14.75% per annum compounding daily. That was the statutory rate under s 8AAD of the Taxation Administration Act 1953 (Cth) ("TAA"). 25 The second plaintiff defaulted under the terms of the Payment Arrangement almost immediately and, on 6 January 2009, the Commissioner wrote to it stating that an amount of $1,032,135.72 remained outstanding from the second plaintiff's income tax account. A further letter was sent by the Commissioner to the second plaintiff on 3 April 2009. On 7 July 2010, the Commissioner served a creditor's statutory demand for payment of debt on the second plaintiff claiming an amount of $1,211,983.03. On 10 November 2010, the second plaintiff was wound up on the petition of the Commissioner and the Commissioner then lodged a proof of debt in the amount of $1,262,279.98. As I understood the evidence, that was the amount payable under the Settlement Deed and a GIC at the statutory rate from the date of default under the Deed of Settlement and Payment Arrangement. I have to say, however, that that is not entirely clear because the Commissioner's figure (assuming, contrary to his submissions, that the defendants are correct) is $1,371,317.26. What is important for present purposes is that the defendants accept that the Commissioner is entitled to charge the GIC at the statutory rate from the date of default to the date of liquidation of the second plaintiff. 26 Under the Deed of Settlement the second plaintiff agreed to pay to the Commissioner, tax, the Medicare levy, penalty and GIC at the concessional rate from 19 February 2004 (or, in the case of the amended amounts in the 2005 Assessments, 10 June 2005) to 8 January 2007. However, as I have said, the second plaintiff defaulted under the Deed of Settlement and Payment Arrangement and it is the Commissioner's case that in those circumstances he is entitled to claim the GIC at the statutory rate from 19 February 2004 or 10 June 2005, as the case may be, and during the period from 8 January 2007 to the date of default under the Deed of Settlement and Payment Arrangement. Accordingly, the Commissioner's third proof of debt which is in the sum of $1,998,665.71 includes the GIC at the statutory rate from 19 February 2004 or 10 June 2005, as the case may be, to the date of liquidation and includes the period from 8 January 2007 to the date of default under the Deed of Settlement and Payment Arrangement. 27 In essence, those are the two areas of dispute between the plaintiffs and the Commissioner of Taxation on the one hand, and the defendants on the other. Those areas of dispute call for a consideration of the Deed of Settlement and in particular, as to the first point, clause 1.8 and, as to the second point, clause 1.6. 28 The starting point is to address the effect of default under the Deed of Settlement and the relationship between the Deed and the assessments made by the Commissioner in 2004, 2005 and 2008 respectively. The assessments made in 2008 were made pursuant to the provisions of the Deed of Settlement (clause 1.1). 29 The Deed of Settlement remained on foot after the second plaintiff's default in complying with the Deed and Payment Arrangement. There was no attempt by the Commissioner to rescind the Deed of Settlement and in fact, his claim is said to be made in accordance with its provisions. In other words, the Deed of Settlement provides for the consequences of the default by the second plaintiff. 30 The assessments are not determinative of the present issues. It is true that by reason of ss 175 and 177(1) of the Income Tax Assessment Act 1936 (Cth) ("ITAA 1936") the grounds upon which an assessment may be challenged in judicial review proceedings are very limited: Commissioner of Taxation of the Commonwealth of Australia v Futuris Corporation Limited (2008) 237 CLR 146; Roberts v Deputy Commissioner of Taxation [2013] FCA 1108. However, those principles do not bear on the issues in this case. The assessments made in 2004 and 2005 do not and cannot by reason of the nature of the GIC contain any reference to the GIC. As far as the assessments made in 2008 are concerned, counsel for the Commissioner told me and I accept that the GIC is not part of those assessments. I would add, although I do not think it is strictly necessary to do so, that in any event the Commissioner submits that the only amounts given what he described as conclusive evidentiary force by s 177(1) of the ITAA 1936 are the amount of taxable income, the amount of tax payable on that taxable income, the amount of the Medicare Levy and the understatement penalty and interest. 31 The issues raised by the separate questions are to be decided by reference to the provisions of the Deed of Settlement, although it is necessary to consider the relevant statutory context because the parties referred to it and because the Deed of Settlement itself refers to some of the relevant statutory provisions. 32 Part IIA of the TAA makes provision for the GIC. In broad terms, it is a charge on amounts not paid to the Commissioner on time and as I have said, the rate of the charge is specified in s 8AAD. 33 Section 204 of the ITAA 1936 provided for when tax became due and payable by a taxpayer. It was in the following terms: 204 When tax payable (1) Subject to the provisions of this Part, the tax payable by a taxpayer other than a full self-assessment taxpayer for a year of income becomes due and payable: (a) if the taxpayer's return of income is lodged on or before the due date for lodgment - on the later of: (i) 21 days after the due date for lodgment of that return specified in the Gazette under section 161 for the year of income; or (ii) 21 days after a notice of assessment is given to the taxpayer; or (b) in any other case - 21 days after that due date for lodgment. Note 1: The Commissioner may defer the time at which the tax is, or would become, due and payable: see section 255-10 in Schedule 1 to the Taxation Administration Act 1953. Note 2 The Commissioner may defer the due date for lodgment: see section 388-55 in that Schedule. (1AA) To avoid doubt, the reference in subparagraph (1)(a)(ii) to an assessment does not include a reference to an amended assessment. (1A) Subject to the provisions of this Part, the tax payable by a full self-assessment taxpayer for a year of income becomes due and payable as follows: (a) if the taxpayer's year of income ends on 30 June - on 1 December of the following year of income or on such later date as the Commissioner allows by notice published in the Gazette; (b) if the taxpayer's year of income ends on a day other than 30 June - on the first day of the sixth month of the following year of income, or on such later date as the Commissioner allows by notice published in the Gazette. (2) An amount of tax that a taxpayer is liable to pay because the Commissioner amends the taxpayer's assessment is due and payable on the 21st day after the day on which the Commissioner gives the taxpayer notice of the amended assessment. (2A) An amount of shortfall interest charge that a taxpayer is liable to pay is due and payable on the 21st day after the day on which the Commissioner gives the taxpayer notice of the amount of the charge. (3) If any of the tax or shortfall interest charge which a person is liable to pay remains unpaid after the time by which the tax or charge is due to be paid, the person is liable to pay the general interest charge on the unpaid amount for each day in the period that: (a) started at the beginning of the day by which the tax or shortfall interest charge was due to be paid; and (b) finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid: (i) the tax or shortfall interest charge; (ii) general interest charge on any of the tax or shortfall interest charge. Note 1: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953, and the shortfall interest charge is worked out under Division 280 in Schedule 1 to that Act. Note 2: For provisions about collection and recovery of income tax and related amounts, see Part 4-15 in Schedule 1 to the Taxation Administration Act 1953. 34 In the context of when tax became due and payable, the Commissioner referred to authorities which make it clear that an amended assessment does not alter the date upon which the tax under an original assessment was due and payable: The Federal Commissioner of Taxation v Trautwein (1936) 56 CLR 211 at 220 per Evatt J. That seems to me to have been the effect of s 204 (especially subsections (1AA) and (2)) even without reference to authority. 35 The Commissioner placed a good deal of reliance on subs 204(3) submitting that the amounts under the 2004 and 2005 Assessments remained due and payable and that it followed from the terms of the subsection that the GIC was to be paid at the statutory rate. This argument depends on the "general interest charge" meaning and only meaning GIC at the statutory rate and not including GIC at an agreed or concessional rate. Even if this point is overcome, the Commissioner's argument proves too much. It cannot be that subs 204(3) has some sort of automatic operation because if it did then the Commissioner could not have agreed to accept the GIC at the concessional rate. The Commissioner did not argue that even if the second plaintiff had made payments in accordance with the Deed of Settlement and the Payment Arrangement, that nevertheless it would remain liable for the difference between GIC at the concessional rate and GIC at the statutory rate. Finally, I do not think that it is appropriate to analyse the Deed of Settlement as preserving in an unconditional way the due and payable dates for the 2004 and 2005 Assessments. It does do that but only on terms that the GIC is paid at the concessional rate (see clause 1.3 and the second dot point in the Schedule). 36 The Commissioner also referred to s 255-15 in Schedule 1 of the TAA and submitted that he had acted under this power in entering into the Deed of Settlement and Payment Arrangement and not the power in s 255-10. At the times relevant to this case, those sections were in the following terms: 255-10 To defer the payment time Deferrals for particular taxpayers (1) The Commissioner may, having regard to the circumstances of your particular case, defer the time at which an amount of a *tax-related liability is, or would become, due and payable by you (whether or not the liability has already arisen). If the Commissioner does so, that time is varied accordingly. Note: General interest charge or any other relevant penalty, if applicable for any unpaid amount of the liability, will begin to accrue from the time as varied. See, for example, paragraph 5-15(a) of the Income Tax Assessment Act 1997. (2) The Commissioner must do so by written notice given to you. Deferrals for classes of taxpayers (2A) The Commissioner, having regard to the circumstances of the case, may, by notice published on the Australian Taxation Office website, defer the time at which amounts of *tax-related liabilities are, or would become, due and payable by a class of taxpayers (whether or not the liabilities have already arisen). (2B) If the Commissioner does so, that time is varied accordingly. Note: General interest charge and any other relevant penalties, if applicable for any unpaid amounts of the liabilities, will begin to accrue from the time as varied. See, for example, paragraph 5-15(a) of the Income Tax Assessment Act 1997. (2C) A notice published under subsection (2A) is not a legislative instrument. Deferral does not affect time for giving form (3) A deferral under this section does not defer the time for giving an *approved form to the Commissioner. Note: Section 388-55 allows the Commissioner to defer the time for giving an approved form. 255-15 To permit payments by instalments (1) The Commissioner may, having regard to the circumstances of your particular case, permit you to pay an amount of a *tax-related liability by instalments under an *arrangement between you and the Commissioner (whether or not the liability has already arisen). (2) The *arrangement does not vary the time at which the amount is due and payable. Note: Despite an arrangement under this section, any general interest charge or other relevant penalty, if applicable for any unpaid amount of the liability, begins to accrue when the liability is due and payable under the relevant taxation law, or at that time as varied under section 255- 10 or 255-20. 37 Whilst it was submitted by the Commissioner that he acted under one power rather than another, I did not understand him to submit that he did not have the power to agree to the payment of the GIC at the concessional rate. 38 It seems to me that the power the Commissioner considered he was acting under is irrelevant. He exercised whatever power the Deed of Settlement properly construed indicates that he was exercising. If the Commissioner was advancing a more limited lack of power argument then it must be rejected. It would have to be an argument to the effect that although he had the power to enter into an agreement to accept payment of the GIC at the concessional rate, he did not have the power to accept payment of the GIC at the concessional rate where a taxpayer had defaulted in the payment of instalments under a Payment Arrangement. Such a lack of power argument cannot be gleaned from the provisions of sections such as 255-15 or 255-10 of the TAA. 39 I turn then to the words of the Deed of Settlement. 40 In my opinion, clause 1.8 makes provision for the payment of the GIC at the statutory rate from the date of default under (in this case) a Payment Arrangement. It is not dealing with the payment of the GIC prior to default under the Payment Arrangement. 41 Clause 1.8 is linked to clause 1.7. It is triggered when an amount of tax and/or penalty and/or GIC is not paid as specified in clause 1.7. In this case under clause 1.7 payment is to be made as indicated in the Payment Arrangement as set out in Schedule 19. Clause 1.8 provides that GIC "will accrue" and those words are suggestive of events in the future occurring at defined or regular intervals and not the imposition at one time of an amount calculated by reference to an extended period in the past. I do not think the reference to s 204 of the ITAA 1936 and s 8AAD of the TAA advances either party's case for the reasons I have already given. 42 Any doubt about the proper construction of clause 1.8 is removed when regard is had to the fourth dot point in the Schedule: You will make payment in full of the tax assessed and the interest due by the due date in accordance with Clause 1.7 of this Deed; (Failure to do so will result in GIC accruing on that amount after that date.) (Emphasis added.) 43 It is true that this note appears in a Schedule to the Deed of Settlement and it is a note as distinct from what might be described as an operative clause. Furthermore, the note might be described as advice to the party making the Settlement Offer as to the consequences of default by it of the terms of the agreement. On the other hand, clause 1.1 provides that the Schedules are not only annexed to the Deed of Settlement, but they also form an operative part of the Deed of Settlement. 44 Even if the note is to be accorded some type of subordinate status, it is not irrelevant. It strongly supports the construction of clause 1.8 which limits the operation of the clause to GIC at the statutory rate in the future. 45 The Commissioner referred to the fact that clause 1.3, which provides for the GIC at the concessional rate is made subject to, among other clauses, clause 1.8. I agree with counsel for the defendants' submission in response that this is neutral because on either construction of clause 1.8, clause 1.3 would have to be made subject to its provisions. Reference was also made to the fact that clause 1.8 contains the words "in respect of the 1996, 1997, 1998, 1999 and 2000 income tax assessments" suggesting, as I understood the argument, a timeless quality in the clause. That argument has some attraction, but in my opinion it is not sufficient to outweigh the powerful factors pointing in the other direction. 46 In my opinion, subject to the answer to the other question, the GIC payable prior to default under the Deed of Settlement and Payment Arrangement is GIC at the concessional rate of 4.72% and not the statutory rate. After default under the Deed of Settlement and Payment Arrangement, the GIC payable is GIC at the statutory rate. 47 The other question is whether, in light of clause 1.6, any GIC is payable from 8 January 2007 to the date of default under the terms of the Deed of Settlement and Payment Arrangement. I think that the answer to this question is that no GIC is payable for this period. It seems to me that the clause is quite clear and it is part of the overall settlement or compromise and it is not expressed to operate only if the terms of settlement or compromise are carried out by the second plaintiff. 48 The defendants and cross-plaintiffs are to bring in draft minutes of order which address the procedural issues and which reflect the conclusions in these reasons. I will then relist the matter for the making of appropriate orders. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

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