Deputy Commissioner of Taxation v Di Florio [No 2]

[2012] WADC 70

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(Judgment by: Scott DCJ)

Deputy Commissioner of Taxation
vDi Florio [No 2]

Court:

Judge:
Scott DCJ

Legislative References: - Income Tax Assessment Act 1936; Taxation Administration Act 1953; Tax Law Amendment (Transfer of Provisions) Act 2010

Case References:
Australian Can Co Pty Ltd v Levin and Co Pty Ltd - [1947] VLR 332
Canty Commissioner of Taxation - (2005) 63 NSWLR 152
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd - (1997) 143 FLR 18
Deputy Commissioner of Taxation v Gruber - 43 NSWLR 271
Deputy Commissioner of Taxation v Woodhams - (2000) 199 CLR 370
Eng Mee Yong v Letchumanans O Velayutham - [1980] AC 331
Fancourt v Mercantile Credits Ltd - (1983) 154 CLR 89
Miller v Deputy of Taxation - (1997) 98 ATC 4059
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd - [1976] WAR 109
Re Scobie; Ex parte Commissioner of Taxation - (1995) 59 FCR 177
Simpson v Deputy Commissioner of Taxation - (1996) 132 FCR 459
Wallingford v The Mutual Society - [1885] APP CAS 685
Webster v Lampard - (1993) 177 CLR 598

Hearing date: 30 March 2012
Judgment date: 16 May 2012

Perth

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Judgment by:
Scott DCJ

1 By chamber summons filed 8 September 2007 the plaintiff (respondent) sought summary judgment against the defendant (appellant) for pecuniary penalties imposed on the appellant by reason of the failure by Tida Investments Pty Ltd (company) a company of which the appellant was the sole director, to remit to the respondent amounts withheld from wages paid to employees pursuant to the provisions of the Tax Administration Act 1953 (TAA).

2 On 4 November 2011 Deputy Registrar Hewitt gave judgment for the respondent from which judgment the appellant has appealed.

3 By r 15 of the District Court Rules 2005 (DCR) the appeal is by way of re-hearing such that the matter is heard afresh on the evidence presented on the appeal.

4 Relevantly the respondent has filed a writ of summons and amended statement of claim. The evidence for consideration by me on this appeal comprises:

(a)

for the respondent, the affidavit of Linda Nawavakaca affirmed 6 September 2011 and annexures;

(b)

for the appellant, the affidavit sworn by the appellant on 29 March 2012.

5 The parties have filed submissions and supplementary submissions.

Summary judgment - principles

6 The principles governing an application for summary judgement are settled. On the application the respondent has the burden of persuading the court that the claim is good, and that there is no defence to it such that leave to defend ought not be granted and that judgment should be given for the respondent Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd [1997] 143 FLR 18, 23.

7 The power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried Fancourt v Mercantile Credits Ltd [1983] 154 CLR 89, 99.

8 Summary judgment will not be ordered if there is real uncertainty without full argument or further investigation of the facts as to the respondents right to judgment Australian Can Co Pty Ltd v Levin and Co Pty Ltd [1947] VLR 332, 335.

9 An action should not be disposed of summarily when the facts are in dispute. This court should proceed on the basis that the appellant's version of the facts will ultimately be accepted at trial Webster v Lampard [1993] 177 CLR 598, 608.

10 However the court is not bound to accept uncritically every statement in an affidavit as raising a dispute of fact calling for further investigation however equivocal or lacking in precision Eng Mee Yong v Letchumanans O Velayutham [1980] AC 331, 341.

11 In order to obtain unconditional leave to defend the burden on the appellant is to establish an arguably good defence or that the case ought to be heard. In this case it is to be borne in mind that at trial the appellant would bear the ultimate burden of proving the statutory defences upon which he relies.

12 With respect to any affidavits sworn by the appellant in opposition to this application for summary judgment it is incumbent upon the appellant to condescend to particulars. In Lewkowski v Bergalin (Unreported; WASC; Library 8488; 26 May 1989) the court said

... affidavits in opposition should condescend to particulars and should so far as possible deal with the plaintiff's claim and state clearly what the defence is and what facts are relied upon as supporting it. However, the requirement is for a condescension to the particulars of an arguable defence, and not the defence in its complete form and a statement of the facts which go to show that it is arguable and not the facts which would be necessary to establish it at trial.

13 The affidavit should state clearly and precisely what the defence is and what facts are relied upon as supporting it. It should not contain bare allegations unsupported by material facts. In Wallingford v The Mutual Society [1885] APP CAS 685 Lord Blackburn said (701):

I think that when the affidavits are brought forward to raise that defence they must... condescend upon particulars. It is not enough to swear 'I say I owe the man nothing'. Doubtless if it was true, that you owed the man nothing, as you swear, that would be a good defence. But that is not enough. You must satisfy the judge that there is reasonable ground for saying so ...

14 This passage was cited with approval in Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 [113].

Legislation

15 It is necessary to set out the relevant legislation governing the matters in issue in this appeal.

Income Tax Assessment Act 1936 (Cth) (ITAA)
Division 9-Penalties for directors of non-remitting companies

Subdivision A - Object and interpretation

222ANA Object and outline

(1)

The purpose of this Division is to ensure that a company either meets its obligation under Division 8 of this Act, or under Subdivision 16-B in Schedule 1 to the Taxation Administration Act 1953, or goes promptly into voluntary administration under Part 5.3A of the Corporations Act 2001 or into liquidation.

(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.

(3)

A penalty recovered under this Division is applied towards meeting the company's obligations under the relevant Division. Conversely, amounts paid by the company reduce the amount of a penalty.

...

Subdivision B - Company failing to remit deductions, amounts withheld etc

222AOA Application

(1)

This Subdivision applies if a company incorporated under the Corporations Act 2001 has:

...

(b)

withheld one or more amounts having a particular due date, for the purposes of Division 12 in Schedule 1 to the Taxation Administration Act 1953; or

...

(2)

The earliest day on which the company, for the purposes of one of those Divisions (other than Division 13 or 14 in Schedule 1 to the Taxation Administration Act 1953):

...

(b)

withheld an amount that has that particular due date;

is called the first deduction day.

(3)

That due date is called the due date

...

222AOB Directors to cause company to remit or to go into voluntary administration or liquidation - deductions and amounts withheld

(1)

The persons who are directors of the company from time to time on or after the first deduction day must cause the company to do at least one of the following on or before the due date:

(a)

comply with its obligations in relation to deductions (if any) and amounts withheld (if any) whose due date is the same as the due date;

(b)

make an agreement with the Commissioner under section 222ALA in relation to the company's liability under a remittance provision in respect of such deductions (if any) and amounts withheld (if any);

(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.

...

(2)

This section is complied with when:

(a)

the company complies as mentioned in paragraph (1)(a); or

(b)

the company makes an agreement as mentioned in paragraph (1)(b); or

(c)

an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or

(d)

the company begins to be wound up within the meaning of that Act;

whichever first happens, even if the directors did not cause the event to happen.

(3)

If this section is not complied with on or before the due date, the persons who are directors of the company from time to time after the due date continue to be under the obligation imposed by subsection (1) until this section is complied with.

222AOC Penalty for directors in office on or before due date

(1)

If section 222AOB is not complied with on or before the due date, each person who was a director of the company at any time during the period beginning on the first deduction day and ending on the due date is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the company's liability under a remittance provision in respect of deductions or amounts withheld:

(a)

that the company has deducted for the purposes of Division 1AAA, 3B or 4 of this Act, or withheld for the purposes of Division 12 in Schedule 1 to the Taxation Administration Act 1953 (as the case requires); and

(b)

whose due date is the same as the due date.

...

222AOE 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 that:

(a)

sets out details of the unpaid amount of the liability referred to in subsection 222AOC(1) 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.

222AOG Remission of penalty if section 222AOB, 222AOBAA or 222AOBA complied with before notice period ends

If:

(a)

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

(b)

section 222AOB, 222AOBAA or 222AOBA (whichever relates to the penalty) is complied with at a time when the Commissioner has not yet given the person a notice under section 222AOE, or within 14 days after the Commissioner gives the person such a notice;

the penalty is remitted because of this section.

222AOJ Defences

(1)

This section has effect for the purposes of:

(a)

proceedings to recover from a person a penalty payable under this Subdivision;

...:

(3)

It is also a defence if it is proved that:

(a)

the person took all reasonable steps to ensure that the directors complied with subsection 222AOB(1), 222AOBAA(1) OR 222AOBA(1) (whichever is relevant); or

(b)

there were no such steps that the person could have taken.

(4)

In subsection (3):

reasonable means reasonable having regard to:

(a)

when, and for how long, the person was a director and took part in the management of the company; and

(b)

all other relevant circumstances.

The Amendment Act

16 The Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) (the Amendment Act) commenced on 1 July 2010. Section 2, sch 1 of the Amendment Act repealed pt VI of the ITAA including div 8 and div 9. Division 9 contained s 222ANA et seq being the provisions relating to penalties for directors of non-remitting companies.

17 The Amendment Act added div 269 in sch 1 to the Taxation Administration Act 1953 (TAA).

Division 269 - Penalties for directors for non-complying companies

Table of Subdivisions

Guide to Division 269

269-A Object and scope

269-B Obligations and penalties

269-C Discharging liabilities

269-D Miscellaneous

Guide to Division 269

269-1 What this division is about

The directors of a company have a duty to ensure that the company either:

(a)

meets its obligations under Subdivision 16-B (obligation to pay withheld amounts to the Commissioner) and Division 268: or

(b)

goes promptly into voluntary administration under the Corporations Act 2001 or into liquidation

The directors' duties are enforced by penalties.

Subdivision 269-A - Object and scope

Table of sections

269-5 Object of Division

269-10 Scope of Division

269-5 Object of Division

The object of this Division is to ensure that a company either:

(a)

meets its obligations under Subdivision 16-B (obligation to pay withheld amounts to the Commissioner) and Division 268; or

(b)

goes promptly into voluntary administration under the Corporations Act 2001 or into liquidation.

Note: The directors duties are enforced by penalties on the directors. A penalty recovered under this Division is applied towards meeting the company's obligation.

269 - 10 Scope of Division

(1)

This Division applies as set out in the following table:

Obligations that directors must cause company to comply with

This Division applies, if on a particular day ... a company registered under the Corporations Act 2001 ...

(1)

Withholds an amount under Division 12 ... and the company is obliged to pay to the Commissioner on or before a particular day (the due day) ... that amount in accordance with Subdivision 16-B ...

Subdivision 269-B - Obligations and penalties

Table of sections

269-15 Directors' obligations

269-20 Penalty

269-25 Notice

269-30 Remission of penalty before end of notice period

269-35 Defences

269-15 Directors obligations

Directors' obligations

(1)

The directors (within the meaning of the Corporations Act 2001) of the company (from time to time) on or after the initial day must cause the company to comply with its obligation.

(2)

The directors of the company (from time to time) continue to be under their obligation until:

(a)

the company complies with its obligatio n; or

(b)

an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or

(c)

the company beings to be wound up (within the meaning of that Act).

...

269-20 Penalty

Penalty for director on or before due day

(1)

You are liable to pay to the Commissioner a penalty if:

(a)

at the end of the due day, the directors of the company are still under an obligation under section 269-15; and

(b)

you were under that obligation at or before that time (because you were a director).

Note: Paragraph (1)(b) applies even if you stopped being a director before the end of the due day: see subsection 269-15(2).

(2)

The penalty is due and payable at the end of the due day.

Note: The Commissioner must not commence proceedings to recover the penalty until the end of 21 days after the Commissioner gives you notice of the penalty under section 269-25

...

Amount of penalty

(5)

The amount of a penalty under this section is equal to the unpaid amount of the company's liability under its obligation.

Note 1: See section 269-40 for the effect on your penalty of the company discharging its obligation, or of another director paying his or her penalty.

Section 269-25 Notice

Commissioner must give notice of penalty

(1)

The Commissioner must not commence proceedings to recover from you a penalty payable under this Subdivision until the end of 21 days after the Commissioner gives you a written notice under this section.

Content of this notice

(2)

The notice must:

(a)

set out what the Commissioner thinks is the unpaid amount of the company's liability under its obligation; and

(b)

state that you are liable to pay the Commissioner, by way of penalty, an amount equal to that unpaid amount because of an obligation you have or had under this Division; and

(c)

explain the main circumstances in which the penalty will be remitted.

(3)

To avoid doubt, a single notice may relate to 2 or more penalties, but must comply with subsection (2) in relation to each of them.

When notice is given

(4)

Despite section 29 of the Acts Interpretation Act 1901, a notice under subsection (1) is taken to be given at the time the Commissioner leaves or posts it.

Note 1: Section 28A of the Acts Interpretation Act 1901, may be relevant to giving notice under subsection (1).

Note 2: Section 2669-50 of this Act is also relevant to giving a notice under subsection (1).

269-30 Remission of penalty before end of notice period

A penalty of yours under this Division is remitted if the directors of the company stop being under the relevant obligation under section 269-15:

(a)

before the Commissioner gives you notice of the penalty under section 269-25;

(b)

within 21 days after the Commissioner gives you notice of the penalty under that section.

269-35 Defences

Scope

(1)

This section applies in relation to:

(a)

proceedings to recover from you a penalty payable under this Division; or

...

All reasonable steps

(3)

It is a defence in the proceedings if it is proved that:

(a)

you took all reasonable steps to ensure that the directors complied with their relevant obligations under section 269-15; or

(b)

there were no such steps that you could have taken.

(4)

In determining what are reasonable steps for the purposes of subsection (3), have regard to:

(a)

when, and for how long, you were a director and took part in the management of the company; and

(b)

all other relevant circumstances.

...

18 The Amendment Act also contained some transitional provisions relating to the recovery of directors penalties.

Division 5 - Directors' obligations

64 Application - Division 269 in Schedule to the Taxation Administration Act 1953

Subject to item 65, Division 269 in Schedule 1 to the Taxation Administration Act 1953, as added by this Schedule, applies in relation to an amount payable by a company to the Commissioner before, on or after the commencement time.

65 Transitional - penalties

No doubling up of penalties

(1)

Subsection 269-20(1) in Schedule 1 to the Taxation Administration Act 1953, as added by this Schedule, does not apply if the due day referred to in that subsection occurs before the commencement time.

...

New provisions apply to existing penalties

(3)

Sub item (4) applies in relation to a penalty that, just before the commencement time, was payable under Division 9 or Part VI of the Income Tax Assessment Act 1936.

(4)

Division 269 in Schedule 1 to the Taxation Administration Act 1953 (other than section 269-20) has effect, from the commencement time, as if the penalty were payable under Subdivision 269-B in that Schedule.

...

Respondents claim

19 The sums withheld by the company for the purposes for div 12 in sch 1 of the TAA are pleaded in the amended statement of claim and are as follows:

20 Against that sum a credit of $3,289 was applied leaving a balance withheld by the company of $71,745.

21 The respondent then pleads that by reason of the provisions of s 222AOC of the ITAA the appellant as a director of the company (in fact the sole director) became liable to pay to the respondent a penalty in that sum i.e., in a sum equal to the unpaid amount of the sum withheld.

22 After 1 July 2010 the liability of the company and any penalties payable by a director consequent upon monies withheld from employees but not remitted by the company were dealt with pursuant to the provisions of div 269 in sch 1 to the TAA.

23 To that end the respondent pleads that the company withheld the sum of $8,024 under div 12 in sch 1 to the TAA and failed to pay that amount to the respondent. Details of that sum are as follows:

24 The respondent pleads that the appellant as a director of the company became liable to pay to the respondent a penalty in respect of and in the same amount as that sum.

25 The respondent pleads that the total sum due by the appellant is $79,769.

26 In Nawavakaca's affidavit the respondent verifies the claim and Nawavakaca affirms that the appellant has no defence to the respondent's claim or any part thereof.

27 Nawavakaca's affidavit annexes a notice to the appellant pursuant to s 269-25 in sch 1 of the TAA dated 17 November 2010 (notice) and a copy of the letter bearing the same date under cover of which the notice was sent to the appellant. (covering letter).

28 The notice was in the following terms:

Section 269 25 in Schedule 1

Taxation Administration Act 1953

NOTICE OF DIRECTORS LIABILITY TO PAY A PENALTY TO THE COMMISSIONER OF TAXATION

PAYG WITHHOLDING AMOUNTS

TO: Luciano Di Florio
214 Kingway
Darch WA 6065

In exercise of the powers and functions conferred on me as a Deputy Commissioner of Taxation by a delegation from the Commissioner of Taxation under the provisions of the Taxation Administration Act 1953 (TAA1953), I give you notice under section 269-25 in Schedule 1 to the TAA 1953 that you, as a director of the company, are liable to pay the Commissioner by way of penalty an amount equal to the unpaid amount of each liability of TIDA INVESTMENTS PTY LTD, ACN 097 643 813, ('the company') pursuant to subsection 16-70(1) in Schedule 1 to the TAA 1953 in respect of amounts withheld by the company for the purposes, of Division 12 in Schedule 1 to the TAA 1953, details of which are set out in the following table:-

Table

Column 1	Column 2	Column 3
Particular withholding period	Amount withheld	Unpaid amount of company's liability
	$	$
1 October 2007 to 31 December 2007	6,478.00	4,463.00
1 January 2008 to 31 March 2008	7,492.00	7,492.00
1 April 2008 to 30 June 2008	7,381.00	7,381.00
1 July 2008 to 30 September 2008	7,922.00	4,633.00
1 October 2008 to 31 December 2008	8,140.00	8,140.00
1 January 2009 to 31 March 2009	9,140.00	9,140.00
1 April 2009 to 30 June 2009	8,542.00	8,542.00
1 July 2009 to 30 September 2009	9,810.00	9,810.00
1 October 2009 to 31 December 2009	7,736.00	7,736.00
1 January 2010 to 31 March 2010	8,871.00	8,871.00
1 April 2010 to 30 June 2010	8,024.00	8,024.00

The penalty in respect of each unpaid amount of the company's liability as detailed in the above table will be remitted if, at the end of 21 days after the date on this notice:-

(a)

the company's liability in respect of that unpaid amount has been discharged; or

(b)

the company is under administration within the meaning of section 436A, 436B or 436C of the Corporations Act 2001; or

(c)

the company is being wound up.

Dated this 17th day of November 2010

Paul Duffus
Deputy Commissioner of Taxation and
Delegate of the Commissioner of Taxation
Per

29 The covering letter included the following paragraph:

...

The penalty will be remitted if:

(a)

the company's liability has been discharged; or

(b)

the company is under administration within the meaning of section 436A, 436B or 436C of the Corporations Act 2001; or

(c)

the company is being wound up

within 21 days from the date on which the enclosed notice is given to you; that is, 21 days from the issue date of this letter.

You should keep in mind that you will continue to be liable to a penalty unless one of the three options described above has been adopted by the end of 21 days after the date of this letter.

30 The issues raised by the appellant in this appeal which the appellant submits give rise to an arguable defence against the respondent's claim are as follows.

Notice is deficient

31 It is common ground that it is a pre-requisite to the respondent's entitlement to commence proceedings against the appellant to recover a penalty payable pursuant to div 269 of the TAA that the respondent first gives the appellant written notice under s 269-25 of the TAA.

32 The appellant says that the notice was deficient in the following ways:

(1)

pursuant to subsection (2) (b) the notice must state that the appellant is liable to pay to the respondent, by way of penalty, an amount equal to that unpaid amount because of an obligation the appellant has or had under this division (i.e. div 269). The appellant submits that the respondent failed to state in the notice that the appellant was liable because of an obligation he had, as a director, under div 269 and instead the notice only makes reference to the facts giving rise to the liability of the company;

33 Counsel were unable to refer me to any cases relating to the provisions of s 269-25 of the TAA and nor was I able to locate any cases relating to that section. Nonetheless, save for the period of notice the provisions of that section are identical to s 222AOE of the ITAA. Counsel for the appellant says that looked at objectively, if the notice is capable of being misleading to the recipient as to what is required to be done by the recipient to comply, the notice is invalid and cites Deputy Commissioner of Taxation v Gruber 43 NSWLR 271 [276E].

34 It needs to be said however, that that case dealt with notices in which the amount of the penalty which was to be paid by the director was inaccurately stated. Stein JA said:

While a notice does not have to be absolutely correct (and one can well imagine some de minimis mistakes) the notice must fulfil its statutory purpose. That purpose is not merely to give the recipient the opportunity to check the accuracy of the penalties sought to be imposed by the notice. Rather it is to accurately set forth the amount of the penalty the recipient is to pay within 14 days or be sued by the Commissioner for that civil penalty. It seems to me that to any recipient the amount of the liability for the penalty is the most important aspect of the notice. It needs to be correct ...[276 B]

35 In Deputy Commissioner of Taxation v Woodhams (2000) 199 CLR 370 the High Court said:

A requirement, whether in a statute or elsewhere, to provide 'details', or 'particulars', without further specification, may give rise to uncertainty as to the nature and extent of the information to be furnished. The resolution of such uncertainty calls for a consideration of the context in which the requirement is made, and the purpose for which it exists (par 2).

36 The court said [36]:

The first purpose of the notice is to inform the recipient of the unpaid amount of the company's liability under the remittance provisions, and of the recipient's liability to a penalty in the same amount. The second purpose ... is to inform the recipient of the alternative courses available, as set out in s 222AOE(b), which will result in remission of the penalty, the object being to encourage the recipient to take such steps as are necessary to bring about the result that one or other of those courses is followed

... The section does not require that the notice state details of the fact relevant to the director's liability (par 37).

37 The appellant does not contend that he was mislead.

38 The respondent says that as the notice does not impose a liability or create a right of action but is merely a requirement for a notice before action, it was not intended that the notice explain the legal basis of the asserted liability but rather was designed to serve the specific purposes, namely those referred to in Woodhams.

39 I agree. The notice sets out the detail of the sums for which the respondent contended that the appellant as a director of the company was liable by way of a penalty. The notice in the present case is couched in the same terms as that considered by the High Court in Woodhams.

40 In my view there is no merit in the appellant's submission.

(2)

pursuant to subsection (2) (c) the notice must explain the main circumstances in which the penalty will be remitted. In this regard the notice refers to three methods by which the appellant can have the penalty remitted in respect to which option (c) is that 'the company is being wound up'. By s 269-15(2)(c) the obligation of the appellant continues until 'the company begins to be wound up' (within the meaning of the Corporations Act 2001). The Corporations Act sets out in pt 5.6, div 1A (s 513A - s 513D) when a winding up is taken to begin which is generally:

(a)

if the company was under administration when a winding up order was made or a resolution was passed by creditors - the date of appointment of the administrators; or

(b)

if the company was not under administration at the time the court order was made to wind it up - then the date of the court order; or

(c)

if the company was not under administration at the time it resolved to be wound up - then at the date of the resolution that it be wound up

These are not the only events referred to in the Corporations Act as to the date on which winding up is taken to begin but are the most common.

Counsel for the appellant submits that the use of the words 'the company is being wound up' is liable to mislead the recipient of the notice. Those words are not the same as 'the company begins to be wound up'.

41 Counsel says that the difference in wording is misleading and inaccurate leading to the notice being invalid. The appellant does not contend that he was, in any way, mislead.

42 The respondent submits that there is no material difference in the meaning of the words the company 'is being wound up' as stated in the notice and 'begins to be wound up' referred to s 269-15(c) of sch 1 of the TAA.

43 In my view there is no material difference in the wording. As the High Court said in Woodhams [36] the purpose of the notice

is to inform the recipient of the alternative courses available ... which will result in remission of the penalty, the object being to encourage the recipient to take such steps as are necessary to bring about the result that one or other of those courses is followed.

44 Reference to 'the company is being wound up' necessarily includes the occasion by which 'the company begins to be wound up' and the difference in wording could not in my view reasonably mislead the recipient of the notice as to one of the alternative courses to be pursued which would entitle the director to a remission of the penalty.

45 There is no merit in the appellant's contention.

(3)

One of the matters which requires explanation in the notice pursuant to s 269-25(2)(c) is the timeframe within which one of those three matters may be attended to so as to avail a director of a remission in penalty.

46 By s 269-30 the penalty is remitted if the directors of the company stop being under the relevant obligation pursuant to s 269-15 within 21 days after the commissioner gives notice of the penalty under that section.

47 The appellant submits that the statement in the notice that the 21 day period runs from the date of the notice as opposed to the date of service of the notice is inaccurate because pursuant to s 269-25(4) a notice is taken to be given at the time the commissioner leaves or posts it and as a result the date of the leaving or posting of a notice is not necessarily the date on the notice. The appellant does not say that he was mislead.

48 The respondent says that in this case the evidence is that the date upon which the notice was posted with the covering letter is the same date as the notice bears. The result is that the 21-day period is the same whether the date is referred to as the date of the notice or the date upon which the notice is taken to be given.

49 In my view the objective is for the notice to make clear the timeframe within which and the date by which one of the three options needed to be undertaken by the recipient of the notice so as to result in a remission of the penalty.

50 Whilst it might well be that there will be cases where a date on a notice may not be same as the date upon which the notice is taken to be given resulting in that notice being rendered invalid, that is not the case here. The dates are the same. The appellant would be clearly notified of the date by which the relevant action would need to be taken for the penalty to be remitted. The covering letter further clarified the position. There is no merit in the submission that on this basis the notice was invalid.

51 The result is that the submission by the appellant that the notice was invalid is not arguable and has no prospect of success.

Defence on the merits

52 Although it was not raised by the appellant before the deputy registrar, the appellant on this appeal submits that he has a defence to the proceedings for recovery of the penalties pursuant to Section 269-35(3) of the TAA namely that;

1.

he took all reasonable steps to ensure that the relevant obligations under section 269-15 cast upon directors were complied with; or

2.

there were no such steps that he could have taken to ensure that compliance.

53 To that end counsel for the appellant submits that the only relevant obligation cast on the appellant as the sole director of the company pursuant to s 269-15 (1) was to cause the company to pay the sums withheld by it.

54 He submitted that the obligation is more limited than that cast upon the appellant pursuant to s 222AOB(1) of the ITAA. Pursuant to that section the appellant was required to cause the company to do at least one of the four matters referred to on or before the due date with those obligations continuing until such time as one of those matters was satisfied. Those matters being to cause the company to:

(a)

comply with its obligations in relation to amounts withheld (i.e. to remit them to the commissioner);

(b)

make an agreement with the commissioner under s 222ALA;

(c)

appoint an administrator of the company;

(d)

begin to be wound up.

55 Counsel for the appellant says that the effect of s 65(3) and s 65(4) of the Amendment Act is that as from 1 July 2010 the only obligation was that imposed under s 269-15(1) and was no longer the obligation imposed under s 222AOB of the ITAA.

56 Counsel said that the effect of these provisions is that div 269 has effect from 1 July 2010 as if the penalties were payable under subdivision 269-B pursuant to which the only obligation cast on the directors of a company is to 'cause the company to comply with its obligation' which on a proper construction can only be the obligation to remit sums withheld by it under div 12 before the due day.

57 Counsel for the appellant submits that both the obligation cast on the appellant and the defences available to him with respect to all of the penalties claimed by the respondent are to be dealt with pursuant to subdivision 269-B.

58 On the other hand counsel for the respondent submits that for a number of reasons that contention is simply not arguable. He says that having regard to the provisions of s 15AA of the Acts Interpretation Act 1901 (Cth) (AIA) and the explanatory memorandum to the Tax Laws Amendments (Transfer of Provisions) Bill (EM) principally pars 2.12, 2.16, 2.69 - 2.91 the proper construction of and/or the intention of the Amendment Act, as set out in the EM and reflected in the scheme and text of subdivision 269-B of the TAA is that subsection 269-15(1) refers to the directors obligations to cause the company to pay the withheld amounts as previously imposed by s 222AOB(1)(a) of the ITAA and the other obligations on the director which were previously imposed by par 1(b) - par 1(d) of s 222AOB.

59 The respondent says that the stated objects of div 9 of the ITAA and div 269 of sch 1 of the TAA are the same. That is to ensure that a company either meets its obligations or goes promptly into voluntary administration or into liquidation and that the obligations imposed on the directors and the defences provided to such conduct must be interpreted in light of that object and purpose.

60 Alternatively, the respondent relies on s 8(c) of the AIA which provides (relevantly):

Where an Act repeals in the whole or in part a former Act then unless the contrary intention appears the repeal shall not:

...

(c)

affect any ... liability ... incurred under any Act so repealed.

61 Counsel for the respondent says that s 8(c) of the AIA preserves rights accrued and liabilities incurred at the time of the legislative amendment because the amending legislation does not exclude its operation.

62 The respondent says that the result is that with respect to the liabilities incurred prior to 1 July 2010 (i.e. the penalties) the effect of repeal does not alter the nature of the respondent's liability incurred under the ITAA.

63 Accordingly, counsel for the respondent says that even if after 1 July 2010 the appellant ceased to be under an obligation to cause the company to make an agreement under s 222ALA, go into administration or into liquidation, the appellant was still required to and has failed to demonstrate that he took reasonable steps to comply with his obligations as they stood prior to 1 July 2010 which were to cause the company:

(a)

to comply with its obligations in respect to the first - tenth amounts withheld;

(b)

make an agreement under s 222ALA;

(c)

appoint an administrator or the company; or

(d)

begin to be wound up.

64 It seems to me that the appropriate starting point is to consider the case put by the appellant in its most favourable light. That is that the right to recover the ten penalties imposed prior 1 July 2010 and the penalty imposed thereafter fall to be determined in accordance with div 269 and that the only obligation cast on the appellant pursuant to s 269-15(1) was to cause the company to remit to the commissioner the amounts withheld by it. That obligation being common to both s 222AOB and s 269-15.

65 The matter then falling for my determination is whether the appellant has raised an arguable defence which, in this case, involves a consideration of s 269-35(3)(a) and (b). It involves consideration as to whether the appellant has raised an arguable defence that:

(a)

he took all reasonable steps to ensure that he caused the company to comply with its relevant obligation namely to pay the withheld sums; or

(b)

there were no such steps he could have taken to ensure compliance.

66 That issue is the one most favourable to the appellant because pursuant to s 222AOB(1) what the appellant would need to do to comply with that section is to cause the company to do at least one of the four matters. If none of the four matters occurred there would have been non-compliance. The taking by the appellant of all reasonable steps to ensure compliance requires that each option be addressed, either in the sense of taking reasonable steps to bring it about or declining to do anything on the basis that there were no such steps he could have taken. See: Miller v Deputy of Taxation (1997) 98 ATC 4059 [33].

67 Counsel for the appellant accepts that there is no evidence that he did so.

Law

68 The appellant was the sole director of the company during the period within which the company failed to remit the sums for which the penalties claimed by the respondent were imposed. It appears clear from the schedule in the amended statement of claim that over the period of time that the 11 sums were withheld there was no occasion upon which a sum withheld by the company was paid on the due date for payment or thereafter.

69 The combined defences under s 269-35(3)(a) and (b) must cover the whole of the period between (at least) the breach of the obligation to remit on the due date and the expiry of the notice. Proof that nothing could have been done at various times during this period would not establish that nothing could have been done at other times. Proof that the director took all reasonable steps at various times would not establish that he or she took all reasonable steps at other times Canty Commissioner of Taxation [2005] 63 NSWLR 152 [45] and [46].

70 The defence is concerned with steps which might or might not have been taken to ensure compliance. That is compliance with the company's obligation to pay amounts withheld by the respective due date. The obligation imposed on directors may well arise from the first deduction day that is before the relevant due date in order to force directors to address the issue of compliance before the due date and take whatever action is appropriate to bring about compliance. Simpson v Deputy Commissioner of Taxation (1996) 132 FCR 459, 464; Re Scobie; Ex parte Commissioner of Taxation (1995) 59 FCR 177, 184.

71 The appellant, in order to make out an arguable case raising that defence relies upon the affidavit sworn by him on 29 March 2012 (appellant's affidavit).

72 During the hearing of this appeal I enquired of counsel for the appellant whether that affidavit was the only affidavit material upon which the appellant proposed to rely in respect to those defences and counsel confirmed that it was.

73 Objection was taken by counsel for the respondent to pars 4, 5 and 6 of the appellant's affidavit on the basis that the matters raised in pars 4 and 5 were conclusions not facts and that the matters raised in par 6 comprised no more than a statement of opinion in respect to which there was no factual basis stated.

74 When I reserved my decision I invited counsel to make any further written submissions they wished to make with respect to that affidavit.

Appellant's affidavit

75 Paragraphs 3 to 7 of the appellant's affidavit are not lengthy and for ease of reference can conveniently be recited:

3.

The Company has now been wound up at the application of the Deputy Commissioner of Taxation. As a result the liquidator has been given the books and records of the Company. I will need access to those books and records to prepare a full affidavit for the purposes of my defence.

4.

Unfortunately the Company was not trading profitably and was unable to pay all its debts on or before their due dates.

5.

To the extent I was reasonably able to do so, I ensured that the debts to the Commissioner of Taxation were paid. The Company entered into repayment arrangements with the Deputy Commissioner of Taxation and I made every effort to ensure those payment arrangements could be kept.

6.

I believe that I took all steps I could have reasonably taken to ensure the debt to the Commission of Taxation was paid. I believe there was no other step I could reasonable [sic] have taken that I did not take.

7.

I will need access to the records of the Company to set out in more detail the steps I took to ensure payment to the DCT.

76 As to par 4 the respondent says that the words 'Unfortunately the company was not trading profitably' amounts to a conclusion and is not a statement of fact. Counsel for the appellant says that the appellant as the sole director of the company is in a position to give evidence that the company was not trading profitably and that the concept of profitability is a well known concept in the community.

77 In my view reference to the company not trading profitably is a bare conclusion in respect of which the facts upon which it is based ought to be stated. That phrase is not admissible. Even if it was admissible, reference to the profitability of the company's trading and to its expressed inability to pay all its debts on or before their due dates is of no weight. This is because:

(a)

there is no reference to the dates upon which or between which the company was said to not be trading profitably;

(b)

what is meant by 'trading profitably' is unknown. For example does it mean that the company in a particular (but unstated) period had a trading loss? If it did, when and to what extent?

(c)

there is no reference to the dates upon which or between which the company was said to not be able to pay all its debts on or before their due dates;

(d)

the fact that reference is made to an inability to pay all its debts indicates that the company was able to pay some of its debts. Without articulating the amount of debt which the company was unable to pay when amounts withheld were not paid when due and why it was that the debts or any part of the debts due to the commissioner on the respective dates that each withheld sum fell due for payment were not paid, the paragraph is meaningless.

78 As to par 5, whilst in my view the paragraph is admissible, it again is of no weight. It suffers from a lack of particularity as to what it was that the appellant did so as to be considered reasonable, what debts due to the commissioner were paid and whether the debts which were paid formed part of any of the amounts withheld about which penalties were imposed. Further, reference to the appellant making 'every effort to ensure those payment arrangements could be kept' is meaningless and of no weight without condescension as to particulars as to what the efforts were and what the payment arrangements were.

79 As to par 6 this is a conclusion or opinion without any factual basis stated to support it. It is inadmissible. Even if it was admissible it is of no weight without particulars upon which the conclusions or opinions were based.

80 The appellant has entirely failed to condescend as to particulars. In order to raise an arguable defence it is incumbent upon him to adduce facts relating to the financial position of the company over the period when each withheld sum fell due for payment and why it was that any such sum was not paid. Further, facts relating to the steps taken or the reason why no step could be taken, to endeavour to pay those sums should have been deposed to. This is particularly so given the length of time over which the amounts withheld were not paid.

81 In the circumstances the appellant has failed to adduce evidence of facts giving rise to an arguable defence about which, at trial he would have the burden of proof.

82 In those circumstances the respondent is entitled to judgment for the sum claimed.

83 Given my finding with respect to this appeal which I have determined on the basis of the position most favourable to the appellant, it is not necessary for me to deal with the matters of statutory construction about which the parties spent a good deal of time and effort in this appeal.

84 Be that as it may it is perhaps helpful to briefly express my views on those matters. On the proper construction of s 65(3) and s 65(4) of the Amendment Act I consider that the obligations on the part of the appellant pursuant to s 222AOB(1) are preserved. My reasons are as follows.

85 The provisions of s 269-15 are in my view unambiguous. The only obligation which the directors of a company have pursuant to that section, are to cause a company to remit the withheld amounts by the due date. That seems to me to be in accord with s 269-10 if any support is needed.

86 It is true that s 269-5 specifies the objects of the division as being to ensure that a company either meets its obligation (to pay withheld amounts) or goes promptly into voluntary administration or into liquidation. That objective however is achieved by the provisions of s 269-15(2) by the directors of the company continuing to be under their obligation (to cause the company to pay the withheld amounts) and being subject to a penalty which may remitted under certain circumstances.

87 Given that the construction of s 269-15(1) and (2) is unambiguous there is no warrant for a consideration of the AIA as the respondent contends.

88 Section 65(4) does not make specific reference to the defences available to a director if sued for penalties (imposed prior to 1 July 2010) or to the extinction of the obligations contained in s 222AOB(1) which are different from those in s 269-15(1). The defences in s 269-35 are said to be referrable to the 'relevant obligations under s 269-15' which, as I say are different to those under the earlier legislation.

89 To construe these transitional provisions as the appellant contends would result in a director of a company being relieved of his obligations to cause the company to undertake at least one of the four matters referred to in s 222AOB(1) and afford him or her a defence in not doing so without there being a clear intention expressed in the transitional provisions to that effect.

90 That being the case there is in my view scope for the application of s 8(c) of the AIA and the EM particularly par 2.85 which provides that 'penalties that remain unpaid as at 1 July 2010 under the old law are taken to have been payable under the new law for the purposes of the machinery provisions.' (my underlining).

91 On their proper construction the operation of s 65(3) and (4) is, in my view, restricted to the provisions relating to the mechanism for the recovery of penalties imposed prior to 1 July 2010 - such as the notice provision under s 269-25 in which the time period is 21 days rather than 14 days under the repealed provisions.

92 That would in my view leave the directors' obligations under s 222AOB and the defences to recovery proceedings under s 222AOE in force.

93 As to the matter of recovery of interest there is in my view no reason why the respondent ought not be entitled to interest at the rate of 6% per annum pursuant to s 32 of the Supreme Court Act 1935 (as amended) as and from the respective dates upon which each penalty was imposed on the appellant.

94 I will hear the parties on the final orders to be made having regard to these reasons.