Robertson v Deputy Commissioner of Taxation

Income Tax Assessment Act 1936 (Cth) Corporations Act 2001 (Cth) Acts Interpretation Act 1901 (Cth) LEGISLATION CITED: Evidence Act 1995 Bankruptcy Regulations 1996 (Cth) Corporations Regulations 2001 (Cth) The Australian Securities and Investments Commission Act 2001 (Cth)

Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354; (2007) 69 ATR 876 Deputy Commissioner Taxation v Keck [2006] NSWSC 677; (2006) 63 ATR 310 Deputy Commissioner of Taxation v Flanagan [2007] NSWSC 304; (2007) 66 ATR 293 Jones v Dunkel (1959) 101 CLR 298 CASES CITED: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Condon v Commissioner of Taxation [2004] NSWSC 481; (2004) 207 ALR 676 Drake v Stanton [1999] FCA 1635 Magafas v Carantinos (2008) 222 FLR 185 Deputy Commissioner of Taxation v Nercessian [2006] NSWCA 268; (2006) 67 NSWLR 215 Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271

PARTIES: Lesley Frances Robertson (Appellant) Deputy Commissioner of Taxation (Respondent)

COUNSEL: P Rodionoff (Appellant) Dr M Perry QC (Respondent)

SOLICITORS: Kilmurray Lawyers (Appellant) Australian Government Solicitor (Respondent)

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 11304/2004

LOWER COURT MEDIUM NEUTRAL CITATION: Deputy Commissioner of Taxation v Lesley Frances Robertson [2009] NSWSC 597

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40370/09

ALLSOP P HANDLEY AJA GZELL J

TUESDAY 13 APRIL 2010 LESLEY FRANCES ROBERTSON v DEPUTY COMMISSIONER OF TAXATION Judgment 1 ALLSOP P: I agree with Gzell J. 2 HANDLEY AJA: I agree with Gzell J. 3 GZELL J: The Income Tax Assessment Act 1936 (Cth) contains a regime enabling the Commissioner of Taxation to recover a penalty from a director of a company that fails to remit PAYG deductions made from the salary or wages of its employees in an amount equal to the non-remitted deductions. 4 Harrison J found that all the elements of this regime were established with respect to Lesley Frances Robertson, the appellant, and the company of which she was a director, First Direct Private Security Pty Ltd. Ms Robertson submits his Honour's judgment should be set aside because one of the elements was missing. 5 Before the Commissioner can recover a penalty 14 days' notice must be given. Ms Robertson submits the notice that was given did not comply with the statute with the consequence that the penalty did not become payable. 6 Section 222AOE of the 1936 Tax Act specified the notice that must be given. It was in the following terms: "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 that: (a) sets out details of the unpaid amount of the liability referred to in subsection 222AOC(1), (1A) or (2) (whichever relates to the penalty); and (b) states that the person is liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount, but that the penalty will be remitted if, at the end of 14 days after the notice is given: (i) the liability has been discharged; or (ii) an agreement relating to the liability is in force under section 222ALA; or (iii) the company is under administration within the meaning of the Corporations Act 2001; or (iv) the company is being wound up." 7 Ms Robertson submits that she was not given notice for the purpose of that provision because it was sent to the wrong address and she did not receive it. 8 Section 222AOF of the 1936 Tax Act prescribed a method of service. It was in the following terms: "(1) If it appears from ASIC documents that a person is, or has been within the last 7 days, a director of the company, the Commissioner may give the person a notice under section 222AOE by leaving it at, or sending it by post to, an address that appears from such documents to be, or to have been within the last 7 days, the person's place of residence or business. Note: Sections 28A and 29 of the Acts Interpretation Act 1901 are also relevant to giving a notice under section 222AOE. (2) In this section: ASIC document means a return: (a) lodged with the Australian Securities and Investments Commission under section 205B or 345 of the Corporations Act 2001; or (b) lodged with a person under a law that, for the purposes of the Corporations Act 2001 , is a previous law corresponding to section 205B or 345 of that Act." 9 The Corporations Act 2001 (Cth), s 205B required a company to provide ASIC with prescribed personal details of directors, alternate directors and secretaries and to provide notice of changes in those personal details. Section 345(1) required a company to lodge an annual return with ASIC. 10 This Court has decided that the Commissioner will satisfy this pre-condition to entitlement to recover a penalty by the act of posting a notice to such address of a director as is found in ASIC records (Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354; (2007) 69 ATR 876 at 892-893 [75], 895 [86]). 11 An officer of the Commissioner sent a notice to an address of Ms Robertson by pre-paid post on 28 February 2003. Ms Robertson had ceased to be a director of First Direct Private Security on 17 February 2003. The Commissioner could not rely on s 222AOF(1) of the 1936 Tax Act because the date of postage was more than 7 days after Miss Robertson ceased to be a director of First Direct Private Security. 12 But s 222AOF of the 1936 Tax Act does not prescribe the only method of service of a notice under s 222AOE. It is permissive in form. The point of the note to the section is to draw attention to another mode of service. The Commissioner is entitled to rely upon the Acts Interpretation Act 1901 (Cth), s 28A (Meredith at 881 [17], 890 [65]. See also Deputy Commissioner Taxation v Keck [2006] NSWSC 677; (2006) 63 ATR 310 at 314 [20]; Deputy Commissioner of Taxation v Flanagan [2007] NSWSC 304; (2007) 66 ATR 293 at 304 [38]). 13 The Acts Interpretation Act, s 28A was in the following terms: "(1) For the purposes of any Act that requires or permits a document to be served on a person, whether the expression "serve", "give" or "send" or any other expression is used, then, unless the contrary intention appears, the document may be served: (a) on a natural person: (i) by delivering it to the person personally; or (ii) by leaving it at, or by sending it by pre-paid post to, the address of the place of residence or business of the person last known to the person serving the document; or (b) on a body corporate - by leaving it at, or sending it by pre-paid post to, the head office, a registered office or a principal office of the body corporate. (2) Nothing in subsection (1): (a) affects the operation of any other law of the Commonwealth, or any law of a State or Territory, that authorizes the service of a document otherwise than as provided in that subsection; or (b) affects the power of a court to authorize service of a document otherwise than as provided in that subsection." 14 The sole question for determination on this appeal is whether the notice that was sent by prepaid post by the officer of the Commissioner was sent to the address of the place of residence of Ms Robertson last known to the Commissioner for the purpose of s 28A(1)(a)(ii) of the Acts Interpretation Act. 15 Ms Robertson became a director of First Direct Private Security on 18 March 1999. The company lodged a change to officeholders notification with ASIC on 24 March 1999. It noted the new appointment of Ms Robertson as a director and gave her residential address at Botany. 16 Ms Robertson and her then husband moved to an address in Glenning Valley in mid 2000. 17 Section 205B(4) of the Corporations Act was in the following terms: "The company must lodge with ASIC notice of any change in the personal details of a director, alternate director or secretary within 14 days after the change. The notice must be in the prescribed form."

Personal details were defined in s 205B(3) to include a director's address. Section 205C(2) required Ms Robertson to give First Direct Private Security any information it needed to comply with s 205B(4). 18 First Direct Private Security did not give ASIC notice of Ms Robertson's new address. 19 Ms Robertson lodged her income tax return for the year ended 30 June 2001 on 10 September 2002. It gave her Glenning Valley address. Similarly, Ms Robertson's income tax return for the year ended 30 June 2002 gave her Glenning Valley address. It was lodged on 11 September 2002. 20 First Direct Private Security lodged its 2002 annual return with ASIC. It was dated 16 December 2002 but was received by ASIC on 30 January 2003. The return had pre-printed Ms Robertson as a director at her Botany address. There was provision on the return for notification of a change of address and a date of the change but that was not filled in. Ms Robertson signed the return. 21 Param Srikanthan was the officer of the Commissioner who posted the notice to Ms Robertson. He swore an affidavit. He had posted an earlier notice to Ms Robertson on 4 December 2002. On that date he obtained an extract from ASIC's national database called MASCOT for First Direct Private Security. It showed Ms Robertson as a director at her Botany address with her appointment date of 18 March 1999. Mr Srikanthan deposed that the Botany address appeared to be the place of residence of Ms Robertson according to the company extract. 22 Mr Srikanthan followed the same procedure with respect to the penalty notice of 28 February 2003. He had obtained a company extract from the MASCOT database on 27 February 2003 with respect to First Direct Private Security. It recorded that Ms Robertson had ceased to be a director on 17 February 2003. It recorded her address at Botany. 23 Mr Srikanthan deposed that the Botany address appeared to be the place of residence of Ms Robertson according to the company extract. He placed the notice and a letter in an envelope addressed to Ms Robertson at the Botany address, affixed a postage stamp to the envelope and posted it in an Australia Post box. 24 Mr Srikanthan was not cross-examined. Nor was any further evidence taken from him in chief. 25 Counsel for Ms Robertson submitted that the rule in Jones v Dunkel (1959) 101 CLR 298 applies equally to a failure to adduce evidence in chief. In Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 it was held that a court should not draw inferences on a relevant issue favourable to a party whose counsel refrained from asking crucial questions of a witness who could have answered them. It was submitted that this principle applied to the Commissioner's failure to adduce further evidence from Mr Srikanthan. 26 But Mr Srikanthan could not have said that in his opinion the Botany address was the place of residence of Ms Robertson last known to the Commissioner. That is a question of fact to be determined by the court. Mr Srikanthan deposed to the facts upon which that finding will or will not be made. Mr Srikanthan's opinion on the subject was inadmissible under the Evidence Act 1995, s 76(1) which provides that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. 27 That answers the further submission that, in using the wording of s 222AOF(1) of the 1936 Tax Act, Mr Srikanthan wrongly thought he was acting under that section and not under s 28A of the Acts Interpretation Act. Mr Srikanthan's subjective intent is not relevant to the task before the court. 28 The primary submission made in Ms Robertson's behalf was that the address to which reference is made in s 28A(1)(a)(ii) of the Acts Interpretation Act is an address in the records of the person serving the document. The secondary argument was that if recourse may be had to other records, the address must have sufficient certainty and be from a reliable source. 29 Underlying both contentions was the submission that the records of ASIC are inherently unreliable and there is a need to know how recent was the information upon which the ASIC extract was based. 30 As to the unreliability of the ASIC extracts, both recorded a superseded address for Ms Robertson. 31 Reference was made to the observation of Barrett J in Condon v Commissioner of Taxation [2004] NSWSC 481; (2004) 207 ALR 676 at 685 [36]. It was an application to strike out the Commissioner's claim to an indemnity under s 588FGA(2) of the Corporations Act from de facto directors of a company with respect to which the liquidator alleged that the Commissioner had received an unfair preference. His Honour was not satisfied that an ASIC extract would preclude the argument that the indemnity extended to de facto directors. His Honour said: "The Commissioner's response is that s 588FGA pays attention to the definition of "director" in s 9 and therefore extends to the species of de facto director referred to in para (b) of that definition. The Commissioner will attempt to prove that the first respondent is such a de facto director, relying, in part, on matters that emerged at a s 596A examination. To that one would add the observation that the ASIC search is reflective of no more than the information filed with ASIC and cannot be taken to be determinative of anything. A certificate of ASIC under s 1274C, if issued, would be proof that a person was a director at a time stated in the certificate unless and until evidence to the contrary was adduced. It would not preclude the de facto director case that the Commissioner intends to run." 32 The observation was made in a context quite different from the instant circumstances. The question was whether the absence of identification of a de facto director in an ASIC extract was determinative of the question whether he was a de facto director. Here the question is whether recourse may be had to an ASIC extract to establish an address last known to the person making the search. The dissimilarity of context makes the observation of Barrett J of little assistance in the resolution of this appeal. 33 Reference was made to Drake v Stanton [1999] FCA 1635 and Magafas v Carantinos (2008) 222 FLR 185. 34 Both cases considered the Bankruptcy Regulations 1996 (Cth), reg 16.01(1)(c) which provided: "Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be: … (c) left, in an envelope or similar packaging marked with the person's name, at the last-known address of the person." 35 In the former case at [8], Tamberlin J said the language referred to that address made known by the applicant at the time closest to the date in question. In the latter at 191 [15], Raphael FM answered the question who was to be the recipient of the intelligence? as the world at large rather than the creditor. 36 But, as counsel for Ms Robertson said, the wording of the regulation differs from s 28A(1)(a)(ii) of the Acts Interpretation Act and there is no requirement analogous to s 205B(4) of the Corporations Act for a debtor to keep his creditor informed of his current address. These differences render the cases of little assistance in the resolution of the matter before the court. 37 It was submitted that there would have been no need to enact s 222AOF of the 1936 Tax Act if the address revealed in an ASIC extract satisfied s 28A(1)(a)(ii) of the Acts Interpretation Act. It was an understanding of the inherent unreliability of ASIC extracts that led Parliament to enact s 222AOF it was submitted. 38 Section 222AOF of the 1936 Tax Act places the entire risk stemming from non-receipt of a notice on the person served. It is highly unlikely that Parliament would enact such a facultative provision if the information in returns lodged with ASIC were known to be inherently unreliable. 39 As to the currency of information in the ASIC extracts, reference was made to the document number with respect to Ms Robertson in each of the extracts obtained by Mr Srikanthan. Going behind the extract from the MASCOT database to the document itself, would have revealed that it was a notification of change to officeholders upon the new appointment of Ms Robertson dated 18 March 1999. 40 It was submitted that there was no relevant information in either extract after that date and that the last information available to the Commissioner was the address change notified in Ms Robertson's 2002 income tax return on 11 September 2002. 41 But there was more current information in the second extract. It revealed that Ms Robertson had ceased to be a director of First Direct Private Security. The source of this information was stated to be a document received and processed on 24 February 2003, but three days before the extract was obtained. 42 The fact that the Botany address for Ms Robertson was stated in both extracts was due to the failure of to comply with s 205B(4) of the Corporations Act. Until a notice of change in the personal details of Ms Robertson was lodged with ASIC, the MASCOT database would continue to record her address at Botany. 43 In any event, there was no reason for the Commissioner to go behind the extracts and search the document related to Ms Robertson. Mr Srikanthan had obtained two extracts that stated Ms Robertson's address at Botany. The second extract indicated a very recent change in Ms Robertson's status. He was entitled to take at face value the Botany address. He was entitled to assume that if there had been a change of address it, like the termination of her directorship, would have been notified to ASIC and stated in the extracts. 44 As a director of First Direct Private Security, Ms Robertson had a duty to ensure that the company lodged a notice of change in personal details when she moved to Glenning Valley. And she was obliged under s 205C(2) of the Corporations Act to give First Direct Private Security any information it needed to comply with s 205B(4). In failing to cause First Direct Private Security to give the notice, Ms Robertson represented to anyone who sought an extract from the MASCOT database with respect to the company that her address was at Botany. 45 In Deputy Commissioner of Taxation v Nercessian [2006] NSWCA 268; (2006) 67 NSWLR 215 it was held that when the Commissioner sent a director a penalty notice at his address appearing in the MASCOT database, that satisfied the requirements of s 222AOF of the 1936 Tax Act notwithstanding that the Commissioner had not searched the return or notice from whence the address was extracted. At 222 [29] Santow JA, with whom the other members of the court agreed, said: "Moreover, when the interaction between the facultative provisions of either version of s 222AOF are read with the provisions of (relevantly) s 205B of the Corporations Act , there is simply no warrant in the words of s 222AOF to require the Commissioner to actually search beyond the MASCOT database. This must be so, even were such a search practicable. To require a search beyond the standard procedure of searching the relevant database (MASCOT or earlier ASCOT) would entail at the very least considerable inconvenience to the point of impracticability. What is the point of having a national ASIC database, accessible by remote search, if one must go to the original filed document?" 46 A similar conclusion was reached in Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271 at 277 with respect to an extract from the Australian Securities Commission database, ASCOT. 47 If it is appropriate for the Commissioner to have recourse to an extract from the MASCOT database to ascertain the address of the place of residence of a director of a company last known to him for the purposes of s 28A of the Acts Interpretation Act, the same considerations apply. What is the point of having a national ASIC database available to the public to search and to obtain extracts therefrom if one must go to the original document from which the information was extracted? 48 On behalf of the Commissioner a secondary argument was put that if the Commissioner went behind the extracts and examined the 2002 annual return for First Direct Private Security he would have discovered that the return was signed by Ms Robertson on 16 December 2002 and confirmed her address at Botany and that information was subsequent to her giving the Glenning Valley address in her 2001 and 2002 income tax returns on 10 September 2002 and 11 September 2002 such that the Glenning Valley address could not be the address of Ms Robertson last known to the Commissioner. 49 This argument only arises if it was necessary for the Commissioner to go behind the extracts from the MASCOT database. I have concluded that it was not. It is therefore unnecessary for me to deal with it. 50 ASIC is required to receive, store and make available to the public information given to it under the Corporations Act. The Australian Securities and Investments Commission Act 2001 (Cth), s 1(2) contains the following: "In performing its functions and exercising its powers, ASIC must strive to: … (e) receive, process and store, efficiently and quickly, the information given to ASIC under the laws that confer functions and powers on it; and (f) ensure that information is available as soon as practicable for access by the public." 51 The Corporations Act, s 1274(1) requires ASIC, subject to the Act, to keep such registers as it considers necessary in such form as it thinks fit. Section 1274(2)(a) entitles a person to inspect any document lodged with ASIC with exceptions irrelevant for present purposes. Section 1274(2)(c) permits a person to require a copy of or extract from any document that the person is entitled to inspect pursuant to s 1274(2)(a). 52 Section 1274A(2) provides that ASIC may permit a person to search otherwise than by using a data processor a prescribed register. Section 1274A(3) enables ASIC to permit a person to make such a search using a data processor and s 1274A(4) provides that ASIC may make available to a person prescribed information in the form of a document or otherwise that ASIC has obtained from a prescribed register by using a data processor. 53 A prescribed register was defined in the Corporations Regulations 2001 (Cth), reg 9.1.01(a) for the purposes of those provisions as the register of companies registered under s 118 or s 601BD of the Corporations Act or the registration of which was continued by s 1378 of the Act. For the purposes of s 1274A(3) and s 1274A(4) prescribed information was defined in reg 9.1.02 with respect to each company registered under the above provisions to include its officers. 54 That provision should not be given a narrow interpretation limited to the naming of company officers. It should embrace the personal details required to be provided to ASIC under s 205B of the Corporations Act and that includes their address. This must be so as a person is entitled to an extract from any document lodged with ASIC, subject to exceptions, under s 1274(2)(c). 55 Section 1274B of the Corporations Act deals with the reception in court proceedings of information from ASIC's MASCOT database. Section 1274B(2) was in the following terms: "In a proceeding in a court, a writing that purports to have been prepared by ASIC is admissible as prima facie evidence of the matters stated in so much of the writing as sets out what purports to be information obtained by ASIC, by using a data processor, from the national database. In other words, the writing is proof of such a matter in the absence of evidence to the contrary." 56 That provision did not apply when Mr Srikanthan obtained the company extract with respect to First Direct Private Security from the MASCOT database on 27 February 2003 because he was not then involved in a court proceeding. 57 But in these proceedings it became necessary to prove that the penalty notice of 28 February 2003 was posted to the address of the place of residence of Ms Robertson last known to the Commissioner. There is no reason why the provision should not have applied at that stage to facilitate that proof. 58 It was submitted that the provision revealed the unreliability of information on the MASCOT database because that information was only prima facie evidence. 59 To the contrary, the requirement that ASIC keep the database with information from the prescribed registers to be made available for search by the public and the prima facie status given to any extract from the national database by s 1274B(2) evinces a parliamentary intention that MASCOT is a reliable source of information. 60 To return to the primary submission on behalf of Ms Robertson, that the address of the place of residence of a person last known to the person serving the document in s 28A(1)(a)(ii) of the Acts Interpretation Act is limited to information in the records of the person serving the document, there is no such limitation expressed in the provision. 61 Nor is it readily obvious that as a matter of construction such a limitation should be implied. It was put that the knowledge should arise from the relationship between the person to be served and the person serving the document and that would indicate a limitation to information supplied to the person serving the document by the person to be served. But there is no reason to infer that there must be a relationship between those two persons. The person to be served may be a total stranger to the person serving. 62 And even if there was a relationship, there is no reason to confine knowledge to that provided by the person to be served. The Commissioner may be aware from media reports that a taxpayer had acquired a home at a new address. If he finds the address from the electoral roll is he required nonetheless, to found his knowledge on earlier information supplied to him by the person to be served? 63 In my view the source of the information upon which the address of the place of residence of the person to be served last known to the person serving the document in s 28A(1)(a)(ii) of the Acts Interpretation Act is not restricted to information in the records of the person serving the document or to information provided to that person by the person to be served. 64 With respect to the secondary submission that the source of information for the purposes of 28A(1)(a)(ii) of the Acts Interpretation Act must be a reliable one I have already indicated my view that ASIC's MASCOT database answers that description. 65 Did Mr Srikanthan's recourse to the two ASIC extracts from the MASCOT database provide the Commissioner with the address of the place of residence of Ms Robertson last known to him? 66 The specification of the Botany address in both extracts represented that there had been no change in Ms Robertson's address. Particularly is this to be inferred because her change of status with respect to the company was reported in the second extract. The Commissioner was entitled to assume that First Direct Private Security had complied with its obligation under s 205B(4) of the Corporations Act or, at least, the Commissioner was not required to question the accuracy of the address. There was nothing to put him on notice that the information in either extract might be inaccurate. 67 The position was aptly stated by Harrison J at [33] of his reasons for judgment: "However, that argument disregards the fact that the state of the ASIC record is made known by the defendant to the extent that she did not take steps to correct it when she changed her address. The uncorrected state of the ASIC record meant that until corrected the defendant continued to make known her old address to the plaintiff which, when searched, became her address last known to the plaintiff. The defendant was no less able passively to make her address known, by choosing to do nothing or by neglecting to do anything, as she was able actively to do so." 68 In my view, Ms Robertson's Botany address was the address of the place of residence of Ms Robertson last known to the Commissioner within the meaning of s 28A(1)(a)(ii) of the Acts Interpretation Act and the Commissioner gave Ms Robertson proper notice under s 222AOE of the 1936 Tax Act. 69 I would dismiss the appeal with costs. 70 The order of the Court is that the appeal is dismissed with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.