The defendant/director failed in his arguments that the Director’s Penalty Notices (DPN’s) issued were invalid or not relevantly served.
The defendant was the sole director of a company, which failed to pay PAYG withholding amounts to the ATO and as a result, it was alleged that he was personally liable for the company’s debt of almost $635,000 plus interest (under s269-20 in Sch 1 to the TAA).
There were two DPN’s.
- They were both posted to the defendant/director at his residential address disclosed by ASIC searches.
- He received one of the DPN’s shortly after it was posted.
- He did not receive the other letter/DPN, which was subsequently returned to the ATO two months after it was originally posted.
- The ATO then posted a further letter to the defendant, with the returned DPN
- The defendant/director did receive this subsequently posted DPN.
The defendant argued that the DPN that did not arrive until resent was not served on him. The NSW Supreme Court disagreed, stating that the ATO need only establish that a correctly addressed stamped envelope containing the DPN was placed in a post box (as happened in this case).
The Court also rejected a submission that both DPNs were invalid because they failed to explain the main circumstances in which the penalties would be remitted. The Court decided there was no material difference between the words is being wound up (as used in the DPN) and begins to be wound up (as used in the legislation).
(DCT v Tannous [2016] NSWSC 1654, NSW Supreme Court, Hall J, 24 November 2016.)
[LTN 229, 25/11/16]
Catchwords from Austlii report
TAXES AND DUTIES – proceedings relate to the defendant’s liability for director penalties in respect of Pay As You Go (PAYG) withholding amounts – Two Director Penalty Notices (DPNs) issued in respect of the PAYG amounts owed by the Company to the ATO – As to the giving of notice under s269-25 of Schedule 1 of the Taxation Administration Act 1953 (TAA53) the defendant did not admit receiving the first DPN – Pursuant to s255-45 and s269-50 of the Taxation Administration Act 1953, the plaintiff does not need to satisfy the Court that a notice was actually received by the defendant so long as the Court is satisfied that a stamped envelope with the DPN was placed in a post box with the correct address – DPNs alleged to be defective as the Notices failed to explain the circumstance in which the penalty will be remitted and misstated the main ways in which the penalty may be remitted, namely, “if the company is being wound up” – Notices sufficiently stated relevant circumstance and ways in which the penalties may be remitted
Took reasonable steps to get the company to comply with its obligations
[Despite this defence being dropped, the Court noted that] the plaintiff submitted that the ambit of the defence has been construed narrowly with the Courts taking a rigorous stand on directors who fail to remit withholding tax: Deputy Commissioner of Taxation v George (2002) 55 NSWLR 511; [2002] NSWCA 336; Deputy Commissioner of Taxation v Stenner (2003) 53 ATR 316; [2003] QDC 53; Deputy Commissioner of Taxation v Moss (2003) 53 ATR 442; [2003] VSC 294; and Canty v Deputy Commissioner of Taxation (2005) 63 NSWLR 152; [2005] NSWCA 84.
Submission that first posting of notice was not effective service
- In relation to the submission that the first DPN was not served, the defendant noted that s 269-25 displaces the effect of s 29 of the Acts Interpretation Act so that notice is deemed effected at the time of posting rather than at the time it would be delivered in the ordinary course of post. The defendant submitted at [12] DWS that:
“…As a displacement of s.29 of the Interpretation Act, s.269-25 of the TAA53 only operates to the same extent as the section it displaces. It is a service-deeming provision but, like any deeming provision, it only has operation in the absence of evidence to the contrary and it is liable to be rebutted by actual proof of service or non-service. The words “taken to be given” confirms that service is deemed in the absence of better proof of actual service or non-service. Otherwise it would have been clearer and more economical to simply say ‘service is effected when the Commissioner leaves or posts it…’”
- The defendant submitted that while courts have often commented that proof of non-receipt is insufficient to rebut the presumption of service by post, courts have consistently held that proof of non-delivery [viz: in this case the letter was returned] is sufficient: [13] DWS. In support of this submission, the defendant cited: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 at 95, 96; [1983] HCA 25; Deputy Commissioner of Taxation v Contract Synergies Administration Pty Ltd (2011) 292 ALR 713; [2011] FCA 743 per Jacobsen J at [10]; In the matter of Leasing Holdings Pty Ltd (formerly Charlie Lovett Pty Ltd) [2015] NSWSC 771 per Black J at [32]; Re Rustic Homes Pty Ltd (1988) 49 SASR 41 per von Doussa J; Jones v Superannuation Complaints Tribunal (2011) 198 FCR 71; [2011] FCA 1255 per Besanko J at [44]; Deputy Commissioner of Taxation v Healy [2014] WADC 35 at [43]; and Repatriation Commission v Gordon (1990) 100 ALR 255; [1990] FCA 619 per Spender J at 265.
- The defendant submitted that in this case “there is proof of non-service by way of the DCT’s admission that the DPN was returned to on 24 October 2013”: [15] DWS.
Court’s consideration of the service issue
[The Court resolved whether s269-25 only raised a presumption of service (capable of being disproved) or conclusively established that all that must be established is proof of posting the DPN to the address on the ASIC records, by reference to the following.]
- As noted by Tobias AJA in Zammitt, supra, the majority in Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354 decided that a DPN which was proven to have been posted but found not to have been received or delivered, was nevertheless “given” for the purposes of s222AOE of the 1936 Act on the date it was posted.
- Meredith was overruled by a five judge bench of the Court of Appeal in Soong v Deputy Commissioner of Taxation (2011) 80 NSWLR 226; [2011] NSWCA 26. The Court unanimously held that a DPN was “given” under s222AOF for the purposes of s222AOE when it was delivered rather than when it was posted. Special leave to appeal to the High Court from the decision in Soong was refused.
- On 29 November 2011, the Commonwealth Parliament, in response to the decision in Soong, enacted the Tax Laws Amendment (2011 Measures No. 7) Act 2011 (Cth) which inserted Schedule 7 into the TAA53 in the following terms:
(1) This item applies if the Commissioner gave (or purported to give) a notice under former section 222AOE on or after 10 December 2007 by sending it by pre-paid post in accordance with section 28A of the Acts Interpretation Act 1901.
(2) For the purpose of former section 222AOE, treat the notice as having been given at the time the Commissioner sent it by pre-paid post in accordance with section 28A of the Acts Interpretation Act 1901.
(3) This item applies despite section 29 of the Acts Interpretation Act 1901.
(4) This item does not affect rights or liabilities arising between parties to proceedings heard and finally determined by a court on or before the commencement of this item, to the extent that those rights or liabilities arose from, or were affected by, a notice referred to in subitem (1).