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PANAYI v DFC of T

Judges: Meagher JA

Leeming JA
Simpson JA

Court:
Supreme Court of New South Wales, Court of Appeal

MEDIA NEUTRAL CITATION: [2017] NSWCA 93

Judgment date: 10 May 2017

Leeming JA

62. I agree with Meagher JA that the appeal should be dismissed with costs, and with his Honour ' s reasons. In particular, I agree with what his Honour has said at [ 59 ] - [ 60 ] about the conduct of the appeal. Without detracting from any aspect of those reasons, I wish by way of elaboration, to provide further reasons on the question of the operation of the Amending Act.

Construction of the Amending Act

63. Ground 6 asserted error in the conclusion of the primary judge, in conformity with what had been held in
Roche v Deputy Commissioner of Taxation [ 2015 ] WASCA 196 , that the amendments effected to the Taxation Administration Act 1953 (Cth) by the Tax Laws Amendment (2012 Measures No 2) Act 2012 (Cth) (the Amending Act) applied to the penalties incurred by Mr Panayi in 2011. Meagher JA has reproduced the relevant provisions.

64. Mr Panayi ' s written submissions made no mention of the operation of the Amending Act. The oral submissions made on his behalf contended that it was unfair for the primary judge to have relied upon the amendments effected by the Amending Act for two reasons.

65. The first was that:

" if, as is our case, the primary judge treated the 2012 amendment as retroactive, that was unfair because the 2012 amendment was never pleaded in the statement of claim. "

66. There is, with respect, nothing to that part of the complaint. The Company at all times was obliged to pay amounts of withheld tax. Mr Panayi, who for the purposes of resolving this ground must be taken to have been a director in accordance with the finding of the primary judge, was in breach of his obligation to cause the Company to pay the tax withheld. The Act

ATC 19722

imposed a penalty upon a director in breach of his or her obligation. The Commissioner sued to recover that penalty. It was for the Commissioner to allege the material facts on which his claimed entitlement to sue to recover the penalty imposed by statute was based.

67. But it was not for the Commissioner to allege in his statement of claim that any possible defence was not made out. Still less was the Commissioner obliged in his statement of claim to deny that the Amending Act did not apply. To the contrary, it was for the defendant to allege the defences upon which he relied, which included in this case (although only in the amended defence) that he maintained that the Amending Act did not apply and that the Company had commenced being wound up within 21 days of the giving of the director penalty notice.

68. And in any event, the amended defence was served more than a year before the trial. Mr Panayi ' s amended defence crystallised an issue as to the law which applied to the penalty on which the Commissioner sued. That issue was indeed determined by the primary judge, and after full argument. There was no suggestion of any surprise. The submission based on the Commissioner ' s pleading must be rejected.

69. The second reason was that:

" it was unfair in the sense relevantly used in the cases on restrospectivity for Parliament to alter the nature and content of debts then due and owing and which merely because of the failure of the respondent to bring proceedings until after the amendments were made gave it a case which it otherwise didn ' t have. "

70. This submission is distinct from the first. It is not based on an alleged technical failure to plead an element of the cause of action, or a denial of procedural fairness. Instead it is rhetoric directed to a submission as to statutory construction. Mr Panayi claimed that the legal proposition which flowed was that the Amending Act " had no operation with respect to debts due prior to the commencement of the 2012 measure " . It was said:

" It ' s our respectful submission, having regard to the observations of the High Court in the well known passage in Maxwell v Murphy regarding amendments and the operation of retrospectivity, that there was constituted, prior to the amendment of 29 June 2012, complete debts owing by both the company and the directors so that if the 2012 measure altered that position, it necessarily operated retrospectively in the true sense. That is to say, it altered a debt relationship based upon either moneys had and received or, alternatively, an action on the statute which itself falls within s 14 of the Limitation Act, accruing as at the due days referred to at para 5 of the statement of claim. "

71. He submitted that it would be wrong to construe the amendment in a way which fixed upon the general purpose in a tax act of raising revenue, being the danger against which the joint judgment had warned in
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 ; [ 2009 ] HCA 41 at [ 51 ] . He submitted that there was a particular purpose manifested by the Amending Act, which was to ensure notification of the company ' s indebtedness to the Commissioner. He submitted that item 9 was to be construed together with the other provisions of the Act, and that it was to be given the meaning such that:

" item 9 operates on and after the commencement of this item, that is to say on or after 30 June 2012, and does not operate with respect to existing indebtedness in respect of either the company or the directors, in this case as pleaded at para 5 of the statement of claim, a position from which the respondent never departed. "

72. In light of the elaborate way in which Mr Panayi ' s submissions as to purpose were made, it is as well to recall that the danger to which the joint judgment in Alcan pointed at [ 51 ] was " the danger that the text did not receive the attention it deserves " . Especially in a case like this, where the legislation is carefully and precisely drafted, the starting point is the statutory text, which Meagher JA has reproduced.

73.

ATC 19723

The point of item 9 is to delineate the facts and circumstances to which the amendments effected by the Amending Act apply. Item 9 is described as " Application of amendment " . The criterion governing the application of the amendment turns upon the time at which the directors of a company " stop being under the relevant obligation under s 269-15 " of Schedule 1 to the Taxation Administration Act. If that time precedes 30 June 2012, then the amendment does not apply. If that time occurs on or after 30 June 2012, the amendment does apply. The relevant obligation under s 269-15 applies when a company becomes liable to pay certain amounts of withheld tax to the Commissioner. Under s 269-15(2), directors of that company " continue to be under their obligation " until the company complies with its obligation, an administrator is appointed or the company begins to be wound up.

74. It is clear that the criterion selected is not the time at which the Company is required to make a payment. The item is expressed in terms to be " in relation to a penalty under Div 269 " (emphasis added). The penalty is that imposed on the director.

75. Moreover, and more importantly, the criterion selected by item 9 is not when the director becomes liable to pay a penalty. To the contrary, Parliament has selected a later time as the criterion of the application of the Amending Act, namely, whether a director has stopped being under his or her obligation. That legislative choice presupposes that the director has been, but has subsequently ceased to be, under an obligation to cause the Company to comply with its obligations.

76. Thus, not only does the statutory language provide no support for a construction that the criterion for operation of the Amending Act is the time at which the Company became obliged to pay withheld amounts to the Commissioner, but it is in the teeth of any such construction, once it is seen that a director can only stop being under a relevant obligation after he or she has earlier come under that obligation.

77. There is no difficulty in fixing a legal meaning to the critical words " stop being under the relevant obligation " . Section 269-15 was unamended by the Amending Act. Although that section does not use the language of " stop being under the relevant obligation " , it uses the functionally equivalent language of " continue to be under their obligation until " . There is no other circumstance which could satisfy the words " stop being under the relevant obligation " . Mr Panayi made no submission to the contrary.

78. It is not disputed that throughout almost the entirety of 2012, Mr Panayi continued to be under the obligation to ensure that the company would comply with its obligation to pay the withheld tax. In particular, he did not stop being under that obligation before 30 June 2012.

79. There is nothing in the context or purpose to suggest any different legal meaning should be given to item 9. I would not accept that there is any substance in the invocation by Mr Panayi of unfairness. It is to be recalled that at all times, Mr Panayi was in breach of his obligation to cause his company to pay tax which had been withheld from its employees and not paid to the Commissioner.

80. Independently of what was held in Roche , I would form the same view that no alternative reading is available. There is no basis for the construction for which Mr Panayi contended. Still less is there any substance in the submission to which Mr Panayi was forced, in accordance with
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492, namely, that the decision of the Court of Appeal of Western Australia was plainly wrong.


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