Deputy Commissioner of Taxation v Jones [2015] QDC 215

DISTRICT COURT OF QUEENSLAND CITATION: Deputy Commissioner of Taxation v Jones [2015] QDC 215 PARTIES: DEPUTY COMISSIONER OF TAXATION (plaintiff) v CHRISTINE AMANDA JONES (defendant) FILE NO/S: D 4604/14 DIVISION: Civil PROCEEDING: Application for summary judgment ORIGINATING COURT: District Court at Brisbane DELIVERED ON: 10 September 2015 DELIVERED AT: Brisbane HEARING DATE: 3 September 2015 JUDGE: McGill SC DCJ ORDER: Application dismissed. CATCHWORDS: INCOME TAX – Collection and recovery – director penalties – whether defendant was a director of the relevant company – whether shown to have acted as a director – whether matter to be decided summarily. Taxation Administration Act 1953 (Cth) Schedule 1, ss 269- 25, 269-30(1)(b), 269-35(2). UCPR 1999 r 292. Agar v Hyde (2000) 201 CLR 552 – applied. Bolton Properties Pty Ltd v JK Investments (Aust) Pty Ltd [2009] 2 Qd R 202 – cited. Deputy Commissioner of Taxation v Austin (1998) 28 ACSR 565 – applied. Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 – applied. Deputy Commissioner of Taxation v Solomon (2003) 199 ALR 325 – applied. Edwards v Santos Ltd (2011) 85 ALJR 464 – applied. General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 – cited. Grimaldi v Chamelion Mining NL (2012) 287 ALR 22 – applied. -- 1 of 8 -- 2 Queensland University of Technology v Project Construction (Aust) Pty Ltd [2003] 1 Qd R 259 – cited. RB Lease Pty Ltd v Heron [2013] QCA 181 – cited. Swain v Hillman [2001] 1 All ER 91 – cited. Re Valleys Rugby League Football Club Ltd [1997] 2 Qd R 645 – considered. Willmott v McLeay [2013] QCA 84 – cited. COUNSEL: K S Cameron (solicitor) for the plaintiff D A Skennar for the defendant SOLICITORS: ATO Dispute Resolutions for the plaintiff Morgan Conley Solicitors for the defendant [1] By this action the plaintiff seeks to recover director penalties in respect of amounts withheld by the company Mud Men Labour Hire Pty Ltd (“the company”) during 2013 but not remitted to the Commissioner.1 The plaintiff alleges that the defendant was, at the relevant time, a director of that company, and the company had not, at the relevant time, paid the amount withheld to the Commissioner, nor had an administrator of the company been appointed nor the company begun to be wound up. The Commissioner had sent notices to the defendant as to the director penalty pursuant to s 269-25 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (“the Act”).2 A claim was filed on 26 November 2014, and a notice of intention to defend was filed on behalf of the defendant on 16 February 2015. An amended statement of claim was filed on 26 June 2015 and an amended defence was filed on 2 September 2015. The plaintiff has now applied for summary judgment under r 292 of the UCPR. The penalty remains unpaid.3 Applicable law [2] In order to obtain summary judgment, it is necessary for the plaintiff to show that the defendant has no real prospect of successfully defending all or part of the plaintiff’s claim, and that there is, in respect of the claim or part of the claim, no need for a trial of the proceeding: r 292. The application of the rule was considered in Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232. In that case Williams JA, with whom the other members of the Court agreed, cited with approval passages from an English decision4 dealing with the wording of English rules on which the wording of r 292 was said to be based, as follows: “The words ‘no real prospect of succeeding’ do not need any amplification, they speak for themselves. The word ‘real’ distinguishes fanciful prospects of success or … they direct the court to the need to see whether there is a ‘realistic’ as opposed to a ‘fanciful’ prospect of success. … [The rule] saves expense; it achieves expedition; it avoids the court’s resources being used up on cases 1 Affidavit of Das paras 18-23. For five months this was based on the company’s self-assessment in BAS lodged, and for two months this was estimated liabilities of which notice was given to the company: affidavit of Flanagan, para 4. 2 Both dated 11 November 2013: affidavit of Flanagan paras 10, 12, 13. 3 Affidavit of Gee. 4 Swain v Hillman [2001] 1 All ER 91 at 92, 94. -- 2 of 8 -- 3 where this serves no purpose, and I would add, generally, that it is in the interests of justice. If a claimant has a case which is bound to fail, then it is in the claimant's interests to know as soon as possible that that is the position. Likewise, if a claim is bound to succeed, a claimant should know that as soon as possible.” [3] His Honour went on to note that the Court of Appeal had previously5 held that the level of satisfaction required by the rule was not that required to meet as high a test as that posited by Barwick CJ in General Steel.6 Since that decision it has been accepted that the rule is to be applied according to its terms, and does not require the imposition of a more strenuous test.7 Summary judgment may be given even if it involves the determination of questions of law which require some consideration and reflection, so long as adequate submissions and assistance as to authority have been forthcoming: Willmott v McLeay [2013] QCA 84 at [24]. [4] In RB Lease Pty Ltd v Heron [2013] QCA 181 the Court at [22] cited, as applicable to an application under the current Queensland rules, a passage from Agar v Hyde (2000) 201 CLR 552 where four members of the Court said at 575-6: “Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.” [5] One of the features of the formulation of the rule is that it looks forward to the outcome of a future hypothetical trial. For that reason the terms of the current pleadings are not vital to the outcome, since it has been recognised that one of the things that may occur prior to the hypothetical trial is that the pleadings may be amended.8 As well, there is the prospect that a party may call additional evidence at the trial apart from that currently available. This does not mean that a judge hearing such an application would speculate about the existence of additional evidence not foreshadowed, but there may be material to show that at least some evidence should be available, even if that evidence is not immediately before the court, or before the court in an admissible form: RB Lease Pty Ltd (supra) at [22]-[25]. [6] There were a number of matters raised by the defendant in response to the application for summary judgment. First, the defendant says that she is not and never has been a director of the company, not having given her consent to be a director and not being properly appointed, and not having acted as a director. Background [7] The material indicates that in 2012 a Mr McGinn was the director and his company the shareholder of the company,9 but in November 2012 the business was taken over 5 Queensland University of Technology v Project Construction (Aust) Pty Ltd [2003] 1 Qd R 259 at 264-5. 6 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125. 7 Bolton Properties Pty Ltd v JK Investments (Aust) Pty Ltd [2009] 2 Qd R 202 at 216. 8 Edwards v Santos Ltd (2011) 85 ALJR 464 at [52]. 9 Affidavit of Das, Exhibit PD1. -- 3 of 8 -- 4 by Mr Eckhardt, who has deposed to having been in effect the sole director of the company since February 2013.10 He said that he employed a consulting firm, CGA Consulting, to prepare the necessary paperwork, and in particular to transfer the shares to him, to remove the former director of the company and to appoint him as the director.11 The defendant has deposed that she was working as a bookkeeper for the company, and that at one time she was contemplating entering into the business with Mr Eckhardt12 and it was in this context that she signed an ASIC form 484 which however she said she never gave permission to be sent to ASIC: para 7. [8] The general manager of the consulting firm, Mr Bell, has deposed that an inexperienced employee of the firm prepared some documents including two forms 484 which she had had signed by the defendant and Mr Eckhardt but not lodged, and he told her not to lodge them.13 The form 484 signed by the defendant certified that she signed it in the capacity of director and company secretary, with her signature being dated 8 August 2013 at 11.27 am.14 The form declared that Mr McGinn ceased to be a director and secretary on 1 March 2013 and that she was appointed director and secretary on that day. The form that she signed was in fact lodged with ASIC, and given document number 1F0417100. [9] The defendant said that she ultimately decided not to go into the business. She did not realise that the form had been sent to ASIC and that she was recorded as a director of the company until late August 2013.15 The manager of the consulting firm said that in August 2013 he discovered that a form signed by Mr Eckhardt had not been lodged with ASIC and that after taking instructions from Mr Eckhardt he dated the form and lodged it with ASIC.16 ASIC requisitioned the form on the basis that the former director, Mr McGinn, had already been removed by the earlier form, as a result of which Mr Bell searched the records and found that the defendant was recorded as a director of the company.17 [10] Mr Bell said he informed the defendant of this in early September 2013, and was asked to correct the records and remove her as a director immediately.18 He said he asked ASIC what to do and was told to lodge a form 106 to withdraw the earlier document, after which the later document would be processed.19 He said he prepared such a form and sent it to the defendant for signing, and subsequently mailed it to ASIC.20 The form, which is completed by hand, sought the withdrawal of document 1F0510470, said to have been appropriate for withdrawal because it duplicated a previously lodged document, 1F0417100.21 It was signed by the defendant in the capacity of a director on 30 September 2013 and subsequently lodged. 10 Affidavit of Eckhardt paras 3, 4, 13. 11 Affidavit of Eckhardt paras 5, 10. 12 Affidavit defendant para 6; affidavit of Eckhardt para 8. 13 Affidavit of Bell paras 6, 11, 12. 14 Affidavit of Bell Exhibit ACB1 p 1. He said this was sent to ASIC on about 9 May 2013: para 14. I suspect it was actually sent in August 2013. 15 Affidavit of defendant paras 8, 10. 16 Affidavit of Bell para 17, 19; affidavit of Eckhardt para 11, Exhibit TCE1. 17 Affidavit of Bell paras 20, 21. 18 Affidavit of Bell para 22. 19 Affidavit of Bell para 24. 20 Affidavit of Bell paras 25, 26; Exhibit ACB1 p 10, 11. 21 This was in fact quite wrong; it was 1F0417100 which should have been withdrawn, on his version. -- 4 of 8 -- 5 [11] The defendant said that after she received a director’s penalty notice from the ATO she telephone Mr Bell, and it appears that as a result Mr Bell consulted a solicitor and was told to lodge forms 484 to correct the record immediately.22 On 5 December 2013 Mr Bell prepared and subsequently lodged three forms 484.23 The first, signed by the defendant in her capacity as director, notified the appointment of Mr Eckhardt as director and secretary as at 1 November 2012. The second, again signed by the defendant in her capacity as director, notified the change in the shareholding from Mr McGinn’s company to Mr Eckhardt as at 1 November 2012. The third, certified by Mr Eckhardt in his capacity as director, advised that the defendant had ceased to be a director and secretary on 1 March 2013. All of these documents were lodged electronically. The company was subsequently put into liquidation by Mr Eckhardt: para 14. Director - analysis [12] Whether a person is a director for the purposes of the Taxation Administration Act 1953 depends on whether the person falls within the definition of “director” in the Corporations Act 2001, s 9. This defines a director of a company as meaning a person who is appointed to the position of a director, and (unless the contrary intention appears) a person who is not validly appointed as a director but acts in the position of a director. Commonly a constitution will provide a method of appointment of a director, although it was submitted for the plaintiff that a person can be informally appointed, and I should draw an inference from the evidence in the present case that the defendant had been informally appointed. Alternatively, the plaintiff relies on the proposition that the defendant was acting as a director, said to be shown by her certifying documents stating that she had the capacity of a director. I need not consider the question of informal appointment further, since I do not consider that the evidence is consistent only with the proposition that there had been such an informal appointment, essentially for the reasons set out below. I should say as well that sections 129(2) and 1274B of the Corporations Act do not assist the plaintiff, in view of the other evidence before the Court, relied on by the defendant. [13] The question of whether a person was acting in the position of a director was considered by Williams J in Re Valleys Rugby League Football Club Ltd [1997] 2 Qd R 645. After a full analysis of the authorities, his Honour concluded at p 657 that the respondent met that test because she had performed acts which could only be done by a director in accordance with the articles when she was asked to do so, and was prepared to hold herself out as a director when for example giving instructions to the club’s solicitor. She had purported to act as a director when executing a notice of appointment of administrators on a particular day. Accordingly she was within the definition of “director” in the then Act. [14] In Deputy Commissioner of Taxation v Austin (1998) 28 ACSR 565 Mr Austin had held himself out as a director by signing on behalf of the company an agreement to pay outstanding tax debts by instalments, and by undertaking other tasks which suggested continuing involvement with the management of a company after he had formally resigned as a director. Madgwick J said at p 570: “The extent to which and the circumstances in which the person has so acted will nevertheless be of importance.” 22 Affidavit of defendant para 11, affidavit of Bell para 29, 31. 23 Affidavit of Bell para 32: Exhibit ACB1 pp 13-18. -- 5 of 8 -- 6 [15] In the present case, it does seem strange that the defendant, while claiming that she was not a director, signed or otherwise certified a series of forms for submission to ASIC which denoted her expressly in the capacity as director. On the other hand, the defendant argues that these forms were prepared by someone else and that she was signing them because she understood that by doing so she would achieve the correction of the ASIC records which had incorrectly recorded her as a director. In effect, she was not deliberately acting as a director by doing this. She did not originally deliberately act as a director by signing the form certifying to her appointment as a director, because that form was signed on a precautionary basis in circumstances where there was a prospect of her becoming a director, which did not eventuate, and where she says she did not intend that the form would be used. [16] There was argument advanced during the hearing that the defendant’s material should not be accepted at face value. For example, it was submitted that the defendant’s evidence about the form 106 which purported to withdraw the wrong earlier form should not be accepted because the form was in the defendant’s handwriting. There was however no evidence that the handwriting on the form was actually that of the defendant, and on the face of the affidavit evidence the form was prepared by Mr Bell and merely signed by the defendant. Neither of those witnesses was cross-examined about whether the form was in fact filled in by the defendant personally, and in those circumstances I do not consider it is open to the plaintiff to contend for a finding to that effect. Indeed, it is not open to the plaintiff to contend that aspects of the evidence for the defendant should not be accepted, in circumstances where the relevant witnesses have not been cross-examined. In any case, a court will only rarely go behind the face of an affidavit on an application for summary judgment. [17] More importantly, in my opinion the question of whether the Court should draw an inference that the defendant was actually appointed director, even if informally, or whether the defendant should be characterised as acting as a director, are questions which ought to be assessed in the light of the evidence about those matters at a trial. At the present time I really have very little information about the defendant’s role with this company, and a conclusion that a particular individual was acting as a director is one which would ordinarily require evidence of all the relevant circumstances so as to make a proper assessment of the matter.24 It is apparent that the authorities that I have looked at have made that assessment in the context of a full hearing. Although it does appear that to some extent at least the defendant has acted as a director in certifying forms purportedly in the capacity of a director, the particular circumstances surrounding the execution of those documents referred to earlier do indicate that this is not simply an ordinary case where a person is holding him or herself out to the world, or even to another person, as being a director of the company. [18] I do not consider that the situation is such that I could now be reasonably confident that, regardless of what evidence on the point might be called at trial, the defendant would have no real prospect of avoiding a finding that she was acting as a director of the company. In some cases it may be possible to say that the effect of undisputed actions of the defendant was such that, regardless of any evidence or explanation offered by the defendant, there was no real prospect of an outcome of a trial other than a finding that the defendant was acting as a director of the company, but on the material that I have seen this is not such a case. 24 Grimaldi v Chamelion Mining NL (2012) 287 ALR 22 at [66], [70]. -- 6 of 8 -- 7 Other matters – Validity of notice [19] In these circumstances the application for summary judgment must fail. It is not necessary for me to deal with the other matters raised by the defendant, though, in case this matter goes on appeal, I should say something about them on a precautionary basis. It was submitted that the penalty notice served on the defendant was defective because it did not comply with the requirement in s 269-25 of schedule 1 to the Act that the notice must explain the main circumstances in which the penalty will be remitted. This is set out in s 269-30(1)(b) that “the penalty will be remitted if the directors of the company stop being under the relevant obligation within 21 days after the Commissioner gives you notice of the penalty under [s 269-15]”. The penalty notice sent to the defendant in fact stated that the penalty would be remitted if “at the end of 21 days after the date of this notice” one of the matters referred to in s 269- 15(2) had occurred.25 The notice was dated 11 November 2013. The point made was that the notice specified the 21 day period as 21 days after the date of the notice rather than 21 days after the notice was given, which is the period identified in the Act. This is a point which I considered and rejected in Deputy Commissioner of Taxation v Redmond,26 so long as the plaintiff proved that the notice had been posted, and hence given for the purposes of the Act,27 on the date it bore. For the reasons given in that matter, to which I adhere, the notice in this case was not defective.28 - Proof of sending [20] It was also argued that the plaintiff’s evidence did not prove that the relevant notice had been “given”, that is, had been posted, in that it was not shown that the ATO mail including this notice had come into the custody of Australia Post. The evidence from the plaintiff’s witness is that the relevant notice was placed in a designated mail collection point on level 9 of the ATO Townsville office.29 I also have an affidavit from an Australia Post employee who works at the office, who deposed to having collected the mail from that internal mailbox and having placed it in a tub for collection by an Australia Post delivery officer as part of the ordinary Australia Post mail collection services.30 She deposes to the ordinary practice being that an Australia Post delivery officer collects the tub on the same afternoon, and having searched the records of Australia Post has not found any record indicating that did not occur on the relevant dates. In my opinion that proves that the letter was “given”, that is to say, posted by being put into the custody of Australia Post by the ATO office in Townsville on the day specified when she emptied the internal mail box. Accordingly the relevant notice has been served for the purposes of the Act. - All reasonable steps [21] Finally it was argued that the defendant has a defence under s 269-35(2) of schedule 1 to the Act in that there were no reasonable steps that could have been taken to ensure that any of the things specified in paragraph (a) happened. It was submitted that, in circumstances where the person who actually ran the company was Mr Eckhardt, 25 Affidavit of Flanagan Exhibits JF6, JF7. 26 (District Court, D1270/2014, McGill DCJ, 19 November 2014, unreported). 27 See the Act s 269-25(4). 28 I am told that an appeal from my decision has been argued before the Court of Appeal and the decision is reserved. That in itself is not a reason for me not to follow my earlier reasoning. 29 Affidavit of Flanagan paras 2, 13. 30 Affidavit of Quinn para 8. -- 7 of 8 -- 8 there was no practical possibility of the defendant doing anything to ensure either that the company pay the money that had been withheld, or that the directors of the company cause an administrator of the company to be appointed or the company to begin to be wound up within the relevant time. This is a matter on which the onus is on her. It did initially appear to me that, given the respective positions of her and Mr Eckhardt, there was no reasonable step which she could have taken to ensure that any of those things happened. [22] The plaintiff however relies on the decision of the New South Wales Court of Appeal in Deputy Commissioner of Taxation v Solomon (2003) 199 ALR 325, where it was held that it was open to one director to commence proceedings for the winding up of the company on the ground of insolvency, and that such a proceeding could be brought by a director who had not been validly appointed so long as the director was, as a person acting as a director, within the definition of “director” in the Corporations Act. Hence where a particular defendant had failed to take that step, there was a reasonable step open to that defendant which the defendant had not taken, so that the defendant could not make out that defence. I am not aware of any contrary decision by the Queensland Court of Appeal, and although that decision was actually on earlier legislation the relevant parts were in materially the same terms. I should follow that decision unless there is a good reason for not doing so, and I am not persuaded of that. Accordingly I would also reject the argument that there is some real possibility at a trial of the defendant making out a defence under that section. Conclusion [23] In short therefore if I were satisfied that there was no real possibility that at trial the defendant would not be found to be a director of the company at a relevant time as defined, I would give summary judgment against the defendant. In the circumstances however where I am not satisfied of that, the plaintiff’s application is dismissed. [24] With regard to the question of costs, this is a matter raised in the defence of the defendant filed with the notice of intention to defend on 16 February 2015, before the application for summary judgment was filed. The plaintiff assembled material in the form of forms lodged with ASIC signed by the defendant as the director, which formed the basis of the argument that the defendant was acting as a director, and that may have justified the plaintiff in bringing the application, although in such circumstances it was brought without any knowledge of what explanation the defendant would offer for that material. The defendant has now offered an explanation, but if the matter goes to trial presumably the question of whether that explanation is correct will be tested. The defendant has in a practical sense avoided summary judgment on the basis of matters deposed to in her affidavit. If it emerges at the trial that material matters in the affidavit were not correct, the view could be taken that it would not be right for the defendant to recover the costs of successfully resisting this application for summary judgment. Hence the appropriate course is to reserve the costs of this application to the trial. -- 8 of 8 --