Clause 1.6 of the Deed of Settlement
3 The Commissioner submits that clause 1.6 did not operate to reduce to nil the general interest charge ("GIC") for the period from January 2007 to the date of default because it only "operated" with respect to additional tax imposed or arising by reason of the assessments issued by the Commissioner on 3 October 2008. In other words, it only operated in relation to income tax assessments "to be issued pursuant to this Deed of Settlement". As a matter of law, GIC only begins to accrue when the amount becomes due and payable to the Commissioner. The effect of the Commissioner's construction of clause 1.6 is to give it no practical operation because GIC would not otherwise be payable for the period referred to in the clause on additional amounts payable under assessments issued pursuant to the Deed of Settlement. The Commissioner submits that in the circumstances, and having regard to my previous reasons, the proper amount of his proof of debt is $1,370,970.06.
4 The defendants submit that this construction of clause 1.6 is not correct. The defendants submit that January 2007 was when the parties to the Deed began negotiating and this assertion was accepted by the Commissioner. The effect of clause 1.6 was to give the taxpayers a complete holiday from any form of GIC for the period from January 2007 to the date the taxpayers were liable to make payments under the agreed terms of settlement. The defendants submit that the correct amount of the Commissioner's proof of debt is $1,262,279.98. The Commissioner in fact contends that if the defendants' construction is correct, the figure is slightly lower ($1,261,398.96) and as the Commissioner is in effect the "claimant", I will take the Commissioner's lower figure.
5 The Commissioner's construction of clause 1.6 gives the clause no effective work to do and should be avoided unless the words are intractable. The clause, like other clauses in the Deed, is not a model of clear drafting. However, when read in context, I think the meaning of clause 1.6 is clear.
6 I think clause 1.6 does provide for a holiday from all GIC during the period identified and that the defendants' construction is correct. The Deed itself embodies a compromise on the part of both the taxpayers and the Commissioner and the agreement was that the compromise was in part to be embodied in amended assessments to be issued (clauses 1.1, 1.11, 1.12 and 1.13). Clause 1.3 is subject to clause 1.6 (among other clauses) because it provides an exception or qualification to the otherwise general obligation in clause 1.3. The third dot point in the Schedule (set out in my previous reasons at [21]) I think makes it clear that the intent of clause 1.6 was that the taxpayers were not to pay any GIC between two points in time being Janaury 2007 and the date of default under the assessments issued in 2008.
7 The proper amount of the Commissioner's proof of debt is $1,261,398.96.