Plaintiff v Defendants

(a) pay to the Commissioner the amounts of the estimates;

(b) make an agreement with the Commissioner under section 222ALA in relation to the company's liability to pay the estimates;

(c) appoint an administrator of the company under section 436A of the Corporations Act 2001;

(d) begin to be wound up within the meaning of that Act.

Section 222APB is complied with when any of these events happen or when an administrator is appointed under s 436B or s 436C of the Corporations Act 2001, even if the directors did not cause the event to happen: s 222APB(2). However, in the present case s 222APB was not complied with within the 14 day period, ie by 19 May 2005.[2] As a result, by virtue of s 222APC, on 19 May 2005 Mr and Mrs Craddock each became liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the estimates. Section 222APC provides:

"222APC Penalty for directors in office within 14 days after notice of estimate

If section 222APB is not complied with before the end of the 14 days, each person who was a director of the company at any time during the 14 days is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the estimate."

Since nothing had been paid against the estimates by 19 May 2005, the Craddocks each became liable immediately after that date for penalties in the total amount of $248,259 (albeit with further protections against double payment).

10 However, because of s 222APE, the Commissioner was not entitled to recover the penalties until the end of 14 days after giving the Craddocks notices under that section. The precise language of s 222APE is important, so I will set it out in full:

"222APE Commissioner must give 14 days' notice before recovering penalty

The Commissioner is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice ( the penalty notice ) that:

(a) sets out details of the unpaid amount of the estimate; and

(b) if the penalty notice is given within 14 days after the Commissioner sent to the company notice of the estimate--states that at the end of those 14 days the person will become liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount unless:

(i) the company's liability to pay the estimate has been discharged; or

(ii) an agreement relating to that liability is in force under section 222ALA; or

(iii) the company is under administration within the meaning of the Corporations Act 2001 ; or

(c) if the penalty notice is given more than 14 days after the Commissioner sent to the company notice of the estimate--states that the person is liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount; and

(d) states that the penalty will be remitted if, at the end of 14 days after the penalty notice is given:

(i) the company's liability to pay the estimate has been discharged; or

(ii) an agreement relating to that liability is in force under section 222ALA; or

(iii) the company is under administration within the meaning of the Corporations Act 2001 ; or

11 The Commissioner gave notices under s 222APE to Mr and Mrs Craddock on 26 May 2005. In accordance with s 222APE(1)(d), each notice informed the recipient that the penalty would be remitted if, at the end of 14 days, one or more of the four circumstances referred to in that paragraph existed. This was in accordance with s 222APF, which provides:

"222APF Remission of penalty if section 222APB complied with before notice period ends

(a) a penalty is payable by a person under this Subdivision; and

(b) section 222APB is complied with at a time when the Commissioner has not yet given the person a notice under section 222APE, or within 14 days after the Commissioner gives the person such a notice;

the penalty is remitted because of this section."

12 The 14 day period expired on 10 June 2005. Section 222APB was not complied with by that date.

13 On 10 and 11 June 2005 the company lodged business activity statements in respect of some, though not all, of the relevant months.

14 On 13 July 2005, in reliance on the newly lodged statements and in the exercise of a discretion conferred by s 222AGC(2), the Commissioner made a decision to reduce the amount of some of the estimates. The total of the estimates as reduced was $201,467. As required by s 222AGC(3) the Commissioner sent the company a notice of the reduced estimates accordingly.

15 On the next day, 14 July 2005, the Deputy Commissioner commenced the present recovery proceedings in this Court seeking penalties under s 222APC of the Act in the total sum of $201,467 against each of Mr and Mrs Craddock.

16 Administrators were appointed to the company on 20 July 2005.

Section 222AKA and the contentions of the parties

17 As indicated above, the plaintiff sues the Craddocks to recover $201,467, not $248,259. The lower figure represents the total of the reduced estimates. The plaintiff says that the lower figure is the appropriate figure to sue for because of the operation of s 222AKA of the Act (in combination with s 222APC). Indeed, both sides rely on s 222AKA, for different purposes. So I will set it out in full:

"222AKA Liabilities adjusted with effect from when they arose

(1) If the amount of an estimate is reduced, or an estimate is revoked, section 222AHA, Subdivision E and Division 9 have effect, and are taken always to have had effect, as if:

(a) the original amount of the estimate had been the reduced amount, not the amount set out under paragraph 222AGB(2)(c); or

(2) If because of subsection (1) an amount is taken to have been overpaid by a person, the Commissioner must either refund it or:

(a) apply it against any liability of the person to the Commonwealth that arises under or because of an Act of which the Commissioner has the general administration; and

(b) refund so much of it as is not applied under paragraph (a).

(3) If the amount of an estimate is reduced again, or an estimate is revoked after its amount has been reduced on one or more occasions, subsections (1) and (2) apply again accordingly."

18 Both sides point to the reference in s 222AKA to "Division 9", and both contend, and emphasise, that this is a reference to the whole of Division 9, including s 222APC and s 222APE.

19 The plaintiff says that s 222AKA affects the operation of s 222APC in such a way that, viewed from the moment immediately after the reduction of an estimate, s 222APC has effect and is taken always to have had effect as if the original amount of the estimate had been the reduced amount. Hence, in the present case, s 222APC is taken to have imposed a penalty of $201,467 - rather than $248,259 - as the "unpaid amount of the estimate" within the meaning of s 222APC.

20 So far, the Craddocks do not disagree. Nor do I.

21 However the plaintiff says, next, that whenever an estimate is reduced, s 222AKA affects the operation of s 222APE also, and that it does so by deeming the penalty notice previously sent under s 222APE to have referred to the reduced estimate. Therefore, according to the plaintiff, there is no need for a further penalty notice in order to permit the Commissioner to recover a penalty after an estimate is reduced. The penalty notice previously given "has effect as if the original amount of the estimate had always been the reduced amount", the plaintiff submits. So, in the present case, according to the plaintiff, the notice under s 222APE which was sent to the Craddocks on 26 May 2005 is deemed to have referred to a total amount of $201,467, rather than $248,259.

22 In support of the Commissioner's construction of the relevant provisions, it was submitted, in reliance on s 15AA of the Acts Interpretation Act 1901 (Cth), that that construction promoted the purposes or objects of Divisions 8 and 9 of the Act (and that the Craddocks' contrary interpretation, to which I will come, did not.) In particular, reliance was placed on the purpose of Division 8 as stated expressly in s 222AFA, namely "to enable the Commissioner to take prompt and effective action to recover amounts not remitted"; and on the purpose of Division 9 as stated expressly in s 222ANA, namely "to ensure that a company either meets its obligation ... or goes promptly into voluntary administration ... or into liquidation". The Commissioner's interpretation of the provisions directly in question was said to be consistent with certain other particular provisions and with the scheme as a whole, whereas the Craddocks' interpretation, the plaintiff said, was not. The plaintiff relied in particular on Kolistasis v DFCT in which Giles JA stated, in relation to a notice under a comparable provision of the Act, s 222AOE,[3] that such a notice gives the director a "last chance to negate [the] liability".[4]

23 The Craddocks dispute the plaintiff's analysis. They say that the Commissioner has failed to satisfy the requirement in s 222APE(1)(a) to serve a notice that "sets out details of the unpaid amount of the estimate". They say that s 222AKA(1) treats the reduction of an estimate as taking effect as if it were the original estimate. In the present case, they say, one reads Division 9, including s 222APE, as if the original estimate had been $201,467. This means, according to the Craddocks, that the notice served under s 222APE failed to satisfy the requirements of that section, because it stated that the "unpaid amount of the estimate" (and, correspondingly, the amount of the penalty) was $248,259, not the "correct" amount of $201,467. Moreover, because s 222AKA provides that Division 9 is to be taken always to have had effect as if the original estimate had been the reduced estimate, the non-compliance dates back to the time when the notice was given, ie the non-compliance is retrospective, the Craddocks say.

24 The asserted non-compliance is, according to the Craddocks, fatal to the plaintiff's claim. They rely on Deputy Commissioner of Taxation v Gruber,[5] another case concerned with the abovementioned s 222AOE. Section 222AOE relates to the recovery of penalties based on actual amounts, rather than estimates, of tax withheld by a company. It provides in effect that the Commissioner is not entitled to recover such a penalty until the end of 14 days after giving the director a notice that sets out details of the unpaid amount of the relevant liability. In Gruber, the New South Wales Court of Appeal held that a notice under s 222AOE will be invalid if (apart from de minimis errors) it misstates the actual amount of the liability; and that, while a single document may be used to give notice of multiple monthly penalties and of the total of the liabilities, an error as to any single month or an error as to the total will invalidate the notice completely[6]; and that the same applies whether the recipient was actually misled or not. The Court also held that a notice under s 222AOE will be invalid if it does not set out the date or dates on which the unpaid amounts were due. The Craddocks acknowledge that in Deputy Commissioner of Taxation v Woodhams[7] the High Court overruled Gruber in this latter respect, ie insofar as Gruber held that a notice under s 222AOE was required to set out the due dates of amounts to be remitted. However the Craddocks maintain that Gruber is still good law insofar as it held that the statement of the amount(s) of the penalty must be accurate. They say that this holding is fully applicable to the corresponding case of a notice under s 222APE. They submit, in reliance on Gruber, that the notice sent to them on 26 May 2005 under s 222APE is now seen to be invalid, and that therefore it does not permit the plaintiff to bring the present recovery action.

25 The Craddocks take their argument a step further. They assert that because the company went into administration on 20 July 2005 without their receiving any further notices under s 222APE, any penalties for which they might have been liable were remitted on that day by force of s 222APF of the Act (see above at paragraph 11). If that contention is correct, it is now too late for the position of the Commissioner to be improved by the sending of a further notice under s 222APE. The plaintiff accepts that this consequence would follow if the Craddocks' interpretation of the provisions in question is correct.

26 The Craddocks also submitted that because the provisions in question are penal in nature any ambiguity in the legislative scheme should be resolved in their favour, citing Beckwith v R,[8] Trade Practice Commission v TNT Management Pty Ltd,[9] Rich v ASIC,[10] and Pearce and Geddes, Statutory Interpretation in Australia.[11]

27 The question I must decide is whether, if the Commissioner gives a penalty notice to directors under s 222APE of the Act and later reduces an estimate, the Act requires the Commissioner to give a fresh penalty notice specifying the lower figure as the "unpaid amount of the estimate", and to allow the directors a further 14 days within which s 222APB might be complied with (and the penalty remitted) before seeking to recover the penalty.

28 I have concluded that the answer is no.

29 While the interpretation advanced by the Craddocks is open on a literal reading of the words used in ss 222AKA and 222APE, it is not the only, nor even the most appealing, literal interpretation; and it is out of harmony with the scheme and purpose of Divisions 8 and 9 as a whole. On balance, the principles of statutory interpretation point away from it and in favour of a different interpretation.

30 On its face s 222APE contemplates, and provides for, the giving of only one penalty notice and the providing of only one additional opportunity for the directors to escape a penalty. Section 23(b) of the Acts Interpretation Act 1901 (Cth) provides that unless the contrary intention appears words in the singular number include the plural; and s 33(1) of that Act provides that where an Act contains a power or imposes a duty, then, unless the contrary intention appears the power may be exercised and the duty shall be performed from time to time as occasion requires. However, in my opinion, to the extent that those provisions would otherwise be applicable, the "contrary intention" does appear in Divisions 8 and 9 of the Act.

31 That the concession to directors afforded by s 222APE should be seen as a limited one is consistent with the stated purpose of Division 9 "to ensure that a company either meets its obligations ... or goes promptly into voluntary administration ... or into liquidation": s 222ANA(1).[12] The impression that Parliament envisaged that only one notice would be given under s 222APE, and that the notice would usually be given at an early stage, is fortified by paragraphs (b) and (c) of the section, each of which refers to the period of 14 days after the sending to the company of the notice of the (original) estimate. Penalties are imposed on the directors as soon as the period of 14 days provided for in the notice of estimate expires without compliance: see s 222APC. Indeed, penalties are imposed on directors at an even earlier stage in relation to actual amounts: see s 222AOC. Presumably, Parliament considered that, in the ordinary course, directors would themselves have caused, or would at least be aware of, the failure of the company to remit sums as required; and that therefore the immediate imposition of penalties was appropriate. Consistently with that view, ss 222AOJ and 222API provide that it is a defence for a director to prove that, because of illness or other good reason, he or she did not take part in the management of the company at the relevant time. Accordingly, I believe that Giles JA was, with respect, correct in Kolistasis, supra, in referring to a notice under s 222AOE as giving a director a "last chance" to negate the liability, and that the same comment can be made about s 222APE.

32 It is true that Gruber holds that a notice under s 222AOE is invalid if it overstates (or otherwise misstates) the amount of the (actual) liability. If that be correct the Commissioner would be obliged, in the event of such a misstatement, to give a further, accurate notice under s 222AOE before being able to recover the penalty from a director. However, a later decision of the Queensland Court of Appeal appears to be inconsistent with Gruber in this regard. In DFCT v McArdle[13] the Court held that the relevant purpose of a s 222AOE notice is to inform the director of the unpaid amount of the company's liability under the remittance provisions, as then known to the Commissioner or as then asserted by the Commissioner. Accordingly, the Court ruled that the defendant, who was the relevant company's sole director, could not complain about discrepancies in the notice that were due to errors in the information supplied by the company itself to the Commissioner. Gruber was not referred to.[14] In Forsyth v Deputy Commissioner of Taxation[15], the New South Wales Court of Appeal referred to the relevant passages in McArdle with apparent approval.[16] It distinguished Gruber on the basis that Gruber was concerned with actual mathematical errors on the face of the s 222AOE notice, whereas in Forsyth the complaint was that the notice was misleading because it failed to refer to all of the company's accumulated liabilities as at the time of the notice. The Court of Appeal held that the notice was not required to do so.[17] However, for the purposes of the argument, I will assume, without deciding, that Gruber was correctly decided in relation to the need for accuracy as to the amounts stated in a notice under s 222AOE. The Craddocks say that there is a direct parallel with s 222APE. Once again, I will assume, without deciding, that if a notice to a director under s 222APE overstated the amount which had been specified in the notice of estimate previously sent to the company under s 222AGB, the purported notice to the director would be invalid, because it would have failed properly to "set out details of the unpaid amount of the estimate" for the purposes of s 222APE(1)(a). However, if the notice to the director were correct when given, I do not think that it would be rendered invalid by a subsequent reduction of the estimate. By definition, the notice would have been perfectly in accord with the relevant statutory provisions when it was issued. It would have answered fully the statutory description in s 222APE. As was said in McArdle, in a passage that is probably not affected by any inconsistency with Gruber, "the validity of the notice must be determined as at the time it was given". In this regard, at least, the present case, too, is distinguishable from case.

33 The Craddocks might protest that they need not go so far as to establish that the notice was invalid; merely that, because of s 222AKA, the notice had become irrelevant, insufficient or inoperative for the Commissioner's purposes once the estimate was reduced. But even that contention pushes s 222AKA too far, in my view.

34 Section 222AKA is a deeming provision. In FCT v Comber, Fisher J said:[19]

"In my opinion deeming provisions are required by their nature to be construed strictly and only for the purpose for which they are resorted to: Re Levy; Ex parte Walton (1881) 17 Ch D 746 per James LJ at 756. It is improper in my view to extend by implication the express application of such a statutory fiction."

This passage was cited with approval by Hill J in East Finchley v FCT.[20] A striking example of the courts refusing to apply a deeming provision literally and comprehensively is supplied by another tax case which also happens to be one of the leading Australian cases on statutory interpretation generally, namely Cooper Brookes (Wollongong) Pty Ltd v FCT.[21] Immediately after their well known discourse on the general principles of statutory interpretation[22], Mason and Wilson JJ pointed out that the function of the deeming provision in that case (which, like s 222AKA, used the expression "as if") was similar to that of a statutory definition[23]:

"As such, it is subject to any contrary intention, though the qualification is not expressed in [the provision]."

Their Honours confined the broad language of the deeming clause in such a way that it applied only to a particular kind of situation, because to do otherwise appeared to conflict with the Parliamentary intention.[24] Their Honours observed[25] that this was unquestionably what both Deane J and Fisher J had in mind when, in the court below, each had said[26] that the deeming clause should be read and applied as though it contained the words "where appropriate" or "mutatis mutandis".

35 As for s 222AKA, it is plain that, despite the reference to "Division 9" in its opening words, the section is not intended to affect every provision in Division 9. For example, it cannot have any application at all to the provisions of Subdivision B of Division 9, because that Subdivision relates only to actual amounts of tax withheld, rather than estimates. This alone indicates a need for caution in determining what impact, if any, s 222AKA is intended to have on other particular provisions of Division 9, even those directly concerned with estimates.

36 In my opinion the principal purpose, if not the sole purpose, of s 222AKA is to make provision, in combination with other provisions of the Act, to ensure that the estimate system does not unreasonably cause the company or the directors to be liable for a greater amount than the amount of the underlying liability.[27] Accordingly, Subdivision F, which comprises s 222AKA and one other section, is headed: "Effect on liabilities under this and other Divisions if estimate reduced or revoked". Subdivision headings are part of the Act and fall for consideration as part of the context like any other provision.[28] Similarly, the heading to s 222AKA itself, to which reference may be made as an aid to interpretation[29], reads: "Liabilities adjusted with effect from when they arose".

37 Section 222AKA can fully achieve the purpose of adjusting the relevant liabilities (including liabilities for penalties) where estimates are reduced or revoked, without any need for the section to alter the effect of s 222APE. Section 222APE itself does not bring about the creation, adjustment or remission of any liabilities. It merely provides for a compulsory notice before action.[30]

38 In my view, all references to "the estimate" in s 222APE are references to the original estimate, notice of which was sent under s 222AGB. Notwithstanding s 222AKA, it was simply not intended by the Parliament that the meaning of the expression "the estimate", or the meaning of the phrase "the unpaid amount of the estimate", in s 222APE could change with reductions of the original estimate. Section 222APE is "anchored" by reference to the time of the original estimate. This is shown by the abovementioned[31] references in paragraphs (b) and (c) of s 222APE(1) to the "notice of the estimate". In context, each such reference is plainly a reference to the notice sent under s 222AGB. There can only be one such notice while the estimate to which it relates is in force: see s 222AGG.[32] Moreover, the "notice of the estimate" under s 222AGB will necessarily have set out the original amount of the estimate. So, at least two of the references to "the estimate" in s 222APE must be references to the original estimate. Those two references, at least, cannot accommodate any impact from s 222AKA. In construing an Act, it is assumed that words are used consistently, especially within the same section.[33] It follows that, even after the reduction of an estimate, the reference in s 222APE(1)(a) to "the unpaid amount of the estimate" should be read as a reference to the unpaid amount of the original estimate. Hence there is no occasion to send another s 222APE notice merely because an estimate has been reduced.

39 It is true that, because of s 222AKA, the phrase "the estimate" as occurring in some other sections within Division 9 will cover a reduced estimate as well as the original estimate. Indeed the two sections which appear immediately before s 222APE - ss 222APC and 222APD - are examples. However, they are different sections with different work to do, and the assumption of consistent usage is more readily rebuttable where different sections are concerned.[34]

40 I accept that the provisions in question are penal provisions within a taxing Act. However in Cooper Brookes, Mason and Wilson JJ said in relation to taxing Acts:[35]

"The fact that the Act is a taxing statute does not make it immune to the general principles governing the interpretation of statutes. The courts are as much concerned in the interpretation of revenue statutes as in the case of other statutes to ascertain the legislative intention from the terms of the instrument viewed as a whole."

Similarly, in relation to penal provisions, in the very passage principally relied on by the Craddocks, it was said by Gibbs J that in determining the meaning of a penal statute "the ordinary rules of construction must be applied". It is only if the statute remains ambiguous or doubtful after that process has been engaged in that the ambiguity or doubt may be resolved in favour of the subject. His Honour said that the rule is "perhaps one of last resort".[36] Although the interpretation of the relevant provisions is by no means easy, I am satisfied that on a careful reading of the legislation and on a proper application of the principles of statutory interpretation, the construction advanced by the Craddocks is not appropriate.

41 On the other hand, it will be apparent from the above that I do not fully accept the reasoning urged by the plaintiff. In my view, after the reduction of an estimate, s 222AKA does not deem the penalty notice previously sent under s 222APE to have referred to the reduced estimate. The language of the two sections is simply inapt to achieve that result.

42 Section 222AKA provides that, if an estimate is reduced, s 222AHA, Subdivision E and Division 9 have effect, and are taken always to have had effect, "as if the original amount of the estimate had been the reduced amount, not the amount set out under paragraph 222AGB(2)(c)". I accept that, for the purposes of s 222AHA, the effect of the application of s 222AKA is, probably, that the notice of the original estimate (sent under s 222AGB) is deemed to have referred to the reduced amount. But that is because that very notice is referred to in s 222AKA itself, albeit clumsily and indirectly.[37] However, s 222AKA does not operate by reference to any other kind of notice, such as a notice under s 222APE. It says nothing about such a notice. Rather, it requires that certain other statutory provisions be read as if a certain thing had happened. It alters the past and present effect of those provisions. One must accord those provisions the effect they would have had, and would now have, if the original estimate had been at the lower figure. So, if, contrary to my conclusion set out above, s 222APE is touched by s 222AKA, and if the "accuracy" holding in Gruber is correct and if (contrary to my view) that holding is applicable to the present case, then the Craddocks would be right to say that s 222APE is deemed never been to have been complied with by the Commissioner.

43 In arguing about whether s 222AKA deemed the penalty notices themselves to have referred to the lower amount, both parties referred to s 222AIA(1)[38], which provides:

"222AIA Effect on statutory demand if estimate reduced or revoked

(a) the Commissioner serves on a company a statutory demand relating to the company's liability to pay the unpaid amount of an estimate; and

(b) the amount of the estimate is later reduced or the estimate is later revoked;

(c) this subsection changes the statutory demand accordingly; and

(d) the demand is taken to have had effect (as so changed) from the time when it was served on the company."

The plaintiff submitted that the Commissioner's interpretation of s 222AKA would maintain consistency with s 222AIA. However, I agree with the Craddocks that s 222AIA contrasts strikingly with s 222AKA. Section 222AIA does to statutory demands the very thing that s 222AKA does not do to penalty notices. It uses the kind of language that Parliament could easily have used if it intended that, after the reduction of an estimate, an existing penalty notice should be read as though it referred to the lower amount. On the other hand, I infer that this is because Parliament envisaged, correctly in my view, that s 222AKA would not be read as having any application to s 222APE at all.

44 To accept the Craddocks' interpretation of ss 222AKA and 222APE would open up the provisions of Division 8 and 9 to undue delay and abuse. A company aware that one or more of the Commissioner's monthly estimates exceeded the true underlying liability (even if only by a small amount) could remain in control of the company's assets for an undue time without payment and with little or no risk of the directors being precluded from achieving the remittal of penalties. This could be done by obtaining repeated reductions of estimates by belatedly releasing information, especially by way of affidavits filed in court under s 222AHC(3) (which, if filed within time, produce automatic reductions of estimates: see s 222AHD(3)), or by seeking extra time for the giving of statutory declarations under s 222AGC(1) (which also produce automatic reductions), or by lodging business activity statements (perhaps in dribs and drabs) with the expectation that the Commissioner will exercise the Commissioner's discretionary power to reduce the estimates: see s 222AGC(2). The Craddocks argued that the latter was not a serious concern because, under s 222AGC(2), the Commissioner is under no obligation to even consider whether to reduce an estimate, and because in exercising a power under s 222AGC(2) the Commissioner is required by s 222AGE(d) to take into account the effects of Subdivision F (which includes s 222AKA). However, I doubt whether it would be proper for the Commissioner to treat the effects of Subdivision F as a reason not to exercise the power. In any event, the Commissioner is certainly obliged to take into account, as a factor in favour of reducing the estimate, the fact that "the purpose of reducing the amount of the estimate is to bring it closer to the unpaid amount of the underlying liability": see s 222AGE(b).

45 The Craddocks' interpretation of the relevant provisions is rendered all the more unlikely when one takes into account the sections of the Act just mentioned which provide for automatic reductions of estimates. These reductions occur by virtue of action taken by the company, rather than by virtue of a discretionary exercise of power on the part of the Commissioner. There is no provision for the Commissioner to confirm these automatic reductions by notice to the company or otherwise. Yet, on the Craddocks' argument, the Commissioner would be obliged to send an elaborate notice under s 222APE to the directors referring to the reduced amount of the estimate, and to hold off from recovery action for a further period of 14 days each time such a reduction occurred. Moreover, the opportunity to achieve a remittal of all penalties would arise again on each occasion. This would enable the directors to take advantage of their own wrong, contrary to a longstanding rule of construction of statutes.[39]

46 Finally, I consider that the language of s 222APF (set out above) is strongly suggestive of a Parliamentary intention that a director served with a valid notice under s 222APE will have one last chance (and no more) to achieve the remittal of any penalties to which he or she may be exposed. By that stage, if not earlier, the company of which, by definition, the directors are in control will have had a substantial opportunity to take the appropriate steps to avoid or negate the personal liability imposed by s 222APC. If within 14 days after the company receives the notice of estimate or within 14 days after the directors receive the penalty notice, the directors consider that the original estimate is too high, they can take steps to have it reduced; and they can cause the company either to pay the reduced amount, or enter into an instalment agreement, or go into external administration or liquidation. The language of s 222APF seems to envisage that if the directors fail to take any of these steps within 14 days of receiving the penalty notices, then, whatever the ultimate amount of the penalty may be, the penalty will not be subject to remittal. If that is correct, then a further notice under s 222APE could not appropriately be issued. It would be unable truly to state that the penalty will be remitted if s 222APB is thereafter complied with. In the event of a later reduction, s 222AKA will ensure that the directors gain a commensurate reduction in the quantum of their ultimate liability, but, in my view, the section will not give the directors another chance to negate personal liability altogether.

47 I appreciate that my conclusion means that a director may have to pay a penalty in an amount which differs from the amount set out as the estimate and as the penalty in the only penalty notice he or she will have received. This may seem out of kilter with the interpretation of s 222AOE adopted in Gruber. But, even assuming the correctness of Gruber in the relevant respect, the difference is more apparent than real. In both cases, on my understanding of the legislation, the Commissioner is required to give only one valid notice. To the extent that there is any difference between the two situations, the Parliament's approach may perhaps be explained, at least in part, by the elaborate provision made in the Act for estimates to be challenged, whereas there is no corresponding provision for challenging the assertions of the Commissioner reflected in a notice under s 222AOE. In any event, I note that in Deputy Commissioner of Taxation v Woodhams the High Court, having characterised a notice under s 222AOE as a "notice before action", said[40]:

"A notice before action is not intended to serve the purpose of a statement of claim."

Conclusion

48 My conclusion is that the Commissioner complied with s 222APE by giving the Craddocks the penalty notices dated 26 May 2005, and does not need to comply with that section again before being entitled to recover the penalties referred to in the statement of claim.

Orders

49 There will be judgment for the plaintiff. I will hear counsel as to the appropriate form of orders.

[1] In cases where the Commissioner brings recovery proceedings based on estimates, the party concerned can achieve the same result by filing an appropriate affidavit: s 222AHC, 222AHD.

[2] The obligations of the directors continued thereafter: s 222APB(3).

[3] See paragraph 24 below.

[4] 2005 ATC 4507 at paras 25, 26.

[5] [1998] NSWSC 64; (1998) 43 NSWLR 271.

[6] The plaintiff accepts that, in the present case, the notice under s 222APE on which she relies is either wholly effective or wholly ineffective. The plaintiff does not submit in the alternative that the notice would permit recovery in respect of those particular monthly estimates that were not reduced.

[7] [2000] HCA 10; (2000) 199 CLR 370 at 385.

[8] [1976] HCA 55; (1976) 135 CLR 569 at 576.

[9] (1985) 6 FCR 1 at 47-48.

[10] [2004] HCA 42; (2004) 220 CLR 129.

[11] Sixth ed. 2005, at [9.9].

[12] See also s 222ANA(2) which provides:

(2) The Division imposes a duty on the directors to cause the company to do so. The duty is enforced by penalties. However, a penalty can be recovered only if the Commissioner gives written notice to the person concerned. The penalty is automatically remitted if the company meets its obligations, or goes into voluntary administration or liquidation, within 14 days after the notice is given."

[13] [2003] ATC 4632.

[14] In McArdle an application was made for special leave to appeal to the High Court on the ground of the apparent inconsistency with Gruber. However the High Court refused special leave to appeal in McArdle on 8 October 2004 on the basis that the case raised no question of general principle sufficient to warrant the grant of special leave and that the Court was not satisfied that the actual decision of the Court of Appeal constituted a miscarriage of justice in the particular circumstances of the case.

[15] [2004] NSWCA 474; (2004) 62 NSWLR 132.

[16] [2004] NSWCA 474; (2004) 62 NSWLR 132 at [42] per Spigelman CJ, with whom Giles and Gzell JA agreed.

[17] [2004] NSWCA 474; (2004) 62 NSWLR 132 at [44].

[18] DFCT v McArdle [2003] ATC 4632 at 4635. This observation is included in the passages from McArdle quoted with apparent approval in Forsyth at [42].

[19] (1986) 64 ALR 451 at 458. See also Rheem Australia Ltd v Collector of Customs (NSW) (1988) 78 ALR 285 at 301 per Burchett J.

[20] (1989) 90 ALR 457 at 478.

[21] [1981] HCA 26; (1981) 147 CLR 297.

[22] [1981] HCA 26; (1981) 147 CLR 297 at 319-321. That discourse significantly informs my consideration of this case. I have also given particular attention to the equally well known observations in Project Blue Sky Inc v ABA [1998] HCA 28; (1998) 194 CLR 355 at 381-382, about the manner of reconciling apparently conflicting provisions; to the broad-ranging remarks of Spigelman CJ in R v Young [1999] NSWCCA 166; [1999] 46 NSWLR 681 at 685-691, which include a pointed reminder that interpretation must be "text-based"; and to the very recent observations of Eames JA (with whom Neave JA and Bell AJA agreed) in Pope v WS Walker and Sons Ltd [2006] VSCA 227 at [29]- [30] concerning the importance of context.

[23] [1981] HCA 26; (1981) 147 CLR 297 at 321-322.

[24] Compare the observations of Hill J in East Finchley Pty Ltd v Commissioner of Taxation (1989) 90 ALR 457 at 478 concerning Hunter Douglas Australia Pty Ltd v Perma Blinds [1970] HCA 63; (1968) 122 CLR 49 and East End Dwellings Co Ltd v Finsbury Borough Council [1952] AC 109 at 132-3. See also the remarks of Kearney J in Loizos v Carlton and United Breweries (1994) 94 NTRI at 32-33 as to the problems created by "asifism".

[25] [1981] HCA 26; (1981) 147 CLR 297 at 322.

[26] [1979] FCA 45; (1979) 25 ALR 511 at 516, 529.

[27] I think that this can fairly be said even of a revocation (as distinct from a reduction) of an estimate.

[28] Acts Interpretation Act 1901 (Cth) s 13(1). See Pearce and Geddes, Statutory Interpretation in Australia, 6th edition at [4.38], and at [1.33].

[29] Acts Interpretation Act 1901 (Cth) s 15AB. See Pearce and Geddes, op cit at [4.49].

[30] See DCT v Woodhams [2000] HCA 10; (2000) 199 CLR 370 at 384 [34]- [36]; Forsyth v Deputy Commissioner of Taxation [2004] NSWCA 474; (2004) 62 NSWLR 132 at 142 [47].

[31] See paragraph 31.

[32] A notice that informs the company of a (discretionary) reduction of an estimate by the Commissioner is a different thing: see s 222AGC(3).

[33] Pearce and Geddes, op cit at [4.6]. See especially the quotation therein from Craig Williamson Pty Ltd v Barrowcliff [1915] VicLawRp 66; [1915] VLR 450 at 452. Compare Pearce and Geddes, op cit at [4.7].

[34] Pearce and Geddes, op cit, at [4.6]-[4.7].

[35] [1981] HCA 26; (1981) 147 CLR 297 at 323.

[36] Beckwith v R [1976] HCA 55; (1976) 135 CLR 569 at 576.

[37] For the same reason, in its application to Subdivision E (which provides for the imposition of the general interest charge in respect of the late payment of an estimate), s 222AKA probably, once again, deems the "notice of estimate" to have referred to the reduced amount.

[38] Section AIA is not within Division 9.

[39] See Thompson v Groote Eylandt & Mining Co Ltd [2003] NTCA 5 (3 March 2003) at [31] per Mildren J (with whom Thomas J agreed and with whom Martin CJ was in general agreement).

[40] (2000) 1999 CLR 370 at 384 [35].